SHFE nickel price reaches new all-time high on possible short squeeze

The price of nickel on the Shanghai Futures Exchange (SHFE) shot up during trading on Friday January 14 and closed at a new all-time high amid a potential short squeeze on the exchange’s nickel contract, underpinned by bullish downstream market dynamics.

The active rolling nickel cathode SHFE price closed at 167,000 yuan ($26,238) per tonne on Friday, up by 3,800 yuan per tonne from a closing price of 163,200 yuan per tonne on Thursday. This was the highest since the contract was launched in 2015.

Many market participants pointed out that a short squeeze was sending nickel prices to an all-time high because of the low availability of deliverable full plate nickel.

Short squeezing reflected a rush to cover short positions on the cash month, either by buying back the position or delivering physical metal onto the exchange.

“The arbitrage window was previously closed for few months so traders’ import interest was really low, leading to a low supply of nickel full plate in the Chinese domestic market,” a Shanghai-based trader told Fastmarkets.

“Besides,” she added, “with the domestic stainless steel market recovering since the beginning of this year, they also need to pile-up some stocks before the lunar new year [holiday, January 31-February 4]. Demand for nickel full plates is growing, leading to a tightness [in nickel full plate] in the spot market.”

Fastmarkets assessed the nickel, min 99.8%, full plate premium, cif Shanghai, at $330-350 per tonne on January 11, up by $20-30 per tonne (7.9%) from $300-330 per tonne a week earlier.

The low inventory of nickel globally also supported the surging price on the SHFE, Fastmarkets heard.

“It is hard for people to find nickel full plates due to the low stocks, and even the brokers are silent now because they can’t find any in the LME warehouses, especially for deliverable full plate materials,” a second trader said.

Nickel stocks in LME warehouses totaled 98,364 tonnes on January 12, down by 2,131 tonnes from 100,494 tonnes a week earlier. The inventory level was at its lowest for more than two years, since November 2019.

Nickel stock in SHFE warehouses stood at 4,711 tonnes on January 14, down from 4,895 tonnes a week earlier.

Fastmarkets’ research team has forecast that there will be a 78,000-tonne supply shortfall for nickel in 2022.

From the downstream side, bullish sentiment in both the stainless steel and new energy vehicle (NEVs) markets in China was favorable for the metal’s fundamental outlook, Fastmarkets heard.

With decarbonization a top priority for China, stainless steel – due to its durability and full recyclability – stands out as a sustainable material that is set to become more popular in the coming years, and this will bring more demand for nickel materials such as nickel pig iron.

Fastmarkets assessed the price of nickel pig iron, high-grade NPI content, 10-15%, spot, ddp China, at 1,360-1,390 yuan per tonne on January 14, up by 60-70 yuan per tonne (5.0%) from 1,300-1,320 yuan per tonne a week earlier.

Meanwhile, the outstanding performance of NEVs continued, and the consequent growing demand for nickel sulfate – for use in batteries – will further underpin the nickel price.

In December alone, China’s NEV sales increased by 11.1% month on month and by 113.9% year-on-year to 531,000 units, while output rose by 6.7% month on month and by 120% year-on-year to 518,000 units, according to data from the China Association of Automobile Manufacturers (CAAM) released on January 12.

China’s automobile sales were expected to maintain their growth in 2022, increasing by about 5% from 2021 to 27.5 million units, while NEV sales will rise by 42% to 5 million units, accounting for more than 18% of market share, CAAM added.

Fastmarkets assessed the price of nickel sulfate, min 21%, max 22.5%; cobalt 10ppm max, exw China, at 36,000-37,000 yuan per tonne on January 14, up by 1,000 yuan per tonne from 35,000-36,000 yuan per tonne a week earlier.