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The key to China's fight for the right to speak in the nickel metal market is to make good use of financial market tools

Aug. 13, 2020

According to statistics, in 2019, China imported 188,000 tons of pure nickel and exported 36,600 tons of pure nickel. The annual net import of pure nickel was 151,400 tons. It is understood that the vast majority of China's pure nickel exports are logistics goods in special customs supervision areas, totaling 34,000 tons, which are mainly used for delivery in Asian warehouses of the London Metal Exchange (LME), and for processing and processing with imported materials. , The total volume of general trade is less than 2,400 tons.


From the perspective of the nickel terminal consumer market, the steel industry accounts for an absolute proportion of nickel consumption. The development and demand of the steel industry, especially the stainless steel industry, will directly determine the trend of nickel prices. From the perspective of stainless steel consumption, China's apparent consumption of stainless steel was 22.095 million tons in 2018, an increase of 1.2146 million tons year-on-year, an increase of 5.82%. The strong demand for stainless steel stimulates production, thereby driving the industry's strong demand for nickel, stimulating the price of nickel to go up with the price of steel, and making nickel the most dazzling variety of non-ferrous base metals after 2018. In this sense, the pattern of nickel application determines the close positive correlation between nickel prices and the steel industry. The price of stainless steel and market changes directly determine the fluctuations of nickel prices to a certain extent.

The key to China's fight for the right to speak in the nickel metal market is to make good use of financial market tools

After stainless steel futures are listed, the impact of the futures market on the price of stainless steel will become an important factor in determining market prices on the basis of supply and demand fundamentals. Nickel accounts for a relatively high proportion of stainless steel production costs, which will create price differences between different markets and different varieties, which brings opportunities for financial arbitrage. At the same time, Lun Nickel and Shanghai Nickel represent the demand for nickel in the global market and the Chinese market respectively. The inventory difference between the two and the lack of synchronization with market expectations will also bring opportunities for market operations. If the three are used in combination, the chances of speculative arbitrage will increase.


Judging from the nickel price trends in the Shanghai Futures Exchange and the London Metal Exchange since 2019, the price of the Shanghai Futures Exchange has been stronger than the London Metal Exchange in more than half of the trading hours, which fully shows that China’s Driven by the strong demand for nickel resources, capital is keen on China's nickel futures trading. At the same time, China's futures market started late, and compared with mature foreign exchanges, the degree of market completeness is lower, and financial speculation is more likely to occur. The launch of stainless steel futures may stimulate financial capital speculation with a high probability, which will affect the trend of nickel prices.


Therefore, how to make good use of financial market tools is the key to China's fight for the right to speak in the nickel metal market in the future.


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