Nickel-bearing briquettes get regulatory nod in China

Traders will soon be allowed to deliver briquettes to SHFE warehouses.

May 19, 2020

The Shanghai Futures Exchange (SHFE) has made changes to its nickel futures contract policy, one of which includes allowing the delivery of nickel briquettes against SHFE nickel futures contracts.

According to a May 18 online report from London-based information services provider Roskill, the SHFE changes were announced May 8 but will not take effect until mid-October. In addition to permitting briquettes, the SHFE also has:

  • removed a requirement that refined nickel should only be delivered in the form of plate-shape nickel cathode; and
  • expanded the range of deliverable refined nickel from “registered brands only” to “registered and designated brands.”

China’s nickel and stainless steel producers have long shown a preference for nickel pig iron produced in other parts of Asia, with little nickel-bearing scrap playing a smaller role compared to scrap in the aluminum and copper sectors. The nation’s battery producers have largely relied on electro-winning nickel cathode.

The introduction of nickel ore export bans followed by the COVID-19-related idling of mining activities in nations such as Indonesia and the Philippines, however, could be altering the scrap landscape at stainless mills, provided regulations allow it.

An analysis by Lu Ying of Roskill points to reasons for a shift in the battery market also. Since SHFE’s nickel futures contract was launched in March 2015, only electrolytic (or electro-winning) nickel cathode has been deliverable against that contract, she writes.

That has restricted trading to products made by Norilsk Nickel and two or three Chinese producers. “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,” adds Lu.

She says 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 and containing over 99.8 percent nickel, the nickel briquette [is] seen as a suitable feedstock for production of nickel sulphate used in electric vehicle batteries and has been used extensively by domestic refineries.”

Concludes Lu, “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 is offering a “Nickel: Outlook to 2029” report, information about which can be viewed on this web page.