Nickel, nickel sulphate: Briquettes to be deliverable against nickel futures contracts in China

The Shanghai Futures Exchange (SHFE), one of the biggest commodities bourses in China, announced in a statement on 8 May that the following changes have been made to its nickel futures contracts and trading rules:

  • Removal of the requirement that refined nickel should only be delivered in the form of plate-shape nickel cathode  
  • Allowing delivery of nickel briquettes against nickel futures contracts 
  • Expansion to the range of deliverable refined nickel from ‘registered brands only’ to ‘registered and designated brands’ 

These changes will be implemented from 16 October 2020 for contracts with November delivery onwards. Details such as the deliverable brands and discount/premium for nickel briquettes had not been released at the time of writing.  

Roskill View

Since the launch of the first nickel futures contract in March 2015, only electrolytic (or electro-winning) nickel cathode can be deliverable against nickel contracts on SHFE, with brands limited to Norilsk Nickel and a couple of domestic brands such as Jinchuan and Jien. Nickel cathode has been the main type of Class I nickel consumed and traded in China, whilst other metal forms like briquettes, powder and pellets have been consumed mainly overseas and traded through the LME.

In recent years, however, the liquidity of briquettes has been rising in the Chinese market, benefitting from the increased use of such material in both the battery and stainless steel sectors. Formed as a brick shape, containing over 99.8% of nickel, the nickel briquette has an excellent dissolving ability in sulphuric acid. It is, therefore, seen as a suitable feedstock for production of nickel sulphate used in EV batteries and has been used extensively by domestic refineries and Li-ion precursor producers since 2017. Furthermore, the increased cost of imported nickel cathode after the rise of the import tariff in 2018 (from 1% to 2%) has also encouraged stainless steel mills in China to try alternative forms of Class I nickel to balance melt chemistry during the melting process, especially some duty-free nickel briquettes.

With briquettes becoming another deliverable refined nickel product on the SHFE, Roskill expects to see additional consumption of such material in both battery and stainless steel applications. However, consumption is still likely to be limited to certain duty-free brands. More importantly, this change can offer a new opportunity for downstream consumers to hedge their spot positions in the futures market, which has been a pain point for battery consumers for a long time, especially in the Chinese market.

Roskill’s NEW Nickel Sulphate: Outlook to 2029, 3rd Edition report will be published soon and include forecast trends in supply, demand and pricing over the next decade. The report will provide detailed profiles for new potential producers and extensive analysis of the availability of various feedstock types, including Class I nickel. Click here to download the brochure for the report, or to access further information.

Roskill’s NEW Nickel: Outlook to 2029, 16th Edition report was published in April 2020 and provides detailed analysis of nickel demand from the stainless steel industry; click here for more information.

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This article was written by Ying Lu. Please get in touch below if you wish to discuss further:

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