Shanghai Exchange Seeks Foreign Nickel to Help Ease Shortage (Bloomberg News – May 8, 2015)

The Shanghai Futures Exchange plans to allow delivery of foreign-made nickel into its futures contracts as it seeks relief from a shortage of domestic supply to the bourse.

Russia’s OAO GMK Norilsk Nickel, the world’s largest producer, is among suppliers the exchange plans to authorize, SHFE said Friday in an e-mailed response to questions. Six brands made by six domestic companies are currently deliverable into the SHFE futures, which started trading in March. That compares with 59 brands for its copper contract and 23 for the London Metal Exchange.

“Shanghai Futures Exchange has been actively seeking to proceed with registration of foreign nickel supply,” the exchange said. Prices below the cost of production for some companies are “the reason they are reluctant to sell, therefore reducing market supply.”

Rules limiting the origin of nickel allowed for delivery in China’s new futures prompted speculation prices may extend gains as sellers seek sufficient supplies to meet the requirements. The metal on the SHFE is up 11 percent since trading started March 27, outpacing the 7.5 percent advance on the LME.

“Because there are only a few domestic brands allowed by SHFE, there’s a real danger people won’t be able to find enough domestic nickel cathode by the first delivery date in July,” Peter Peng, a Beijing-based consultant at CRU Group, a research company, said this week.

‘Golden Camel’

Among the six brands approved for delivery into the SHFE nickel contract is “Golden Camel” by Jinchuan Group Co., China’s largest maker of the metal. The company produces about 130,000 metric tons annually, accounting for the bulk of China’s 200,000 tons of output, according to Yi Zhu, an analyst with Bloomberg Intelligence.

SHFE’s nickel rules are stricter than those for its copper contract. The exchange accepts 59 brands of copper supplied by 42 companies in 14 countries, including Chile’s state-owned Codelco, Phoenix-based Freeport McMoRan Inc., and Glencore Plc, according to the bourse’s website.

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