By Hongmei Li, Pratima Desai and Lewis Jackson
HONG KONG/LONDON (Reuters) - The Shanghai Futures Exchange (ShFE) is considering opening its domestic nickel futures contract to foreign investors this year, instead of launching a separate contract on its International Energy Exchange (INE), two sources with knowledge of the matter said.
ShFE has been exploring a more internationally-accessible nickel contract since at least 2023 as part of broader plans to build its global presence and challenge the dominance of rival the London Metal Exchange (LME).
Industry sources have said ShFE also wants to offer the market an alternative to LME nickel after a trading debacle in March 2022 when the LME contract was suspended for eight days, leaving the industry without a global pricing benchmark for the metal used in stainless steel and electric vehicle batteries.
ShFE is organising a two-day meeting in Shanghai on Thursday and Friday for the metals industry where the nickel contract plans among other topics will be discussed, two other attendees speaking on condition of anonymity told Reuters.
Much of the global metals industry is currently only a short flight away in Hong Kong attending the LME Asia Week conference, which ends on Wednesday.
Plans under consideration would see ShFE open up its existing domestic nickel futures contract to foreign investors registered under China’s Qualified Foreign Institutional Investor (QFII) programme, the sources with knowledge said.
QFII status permits the international market to trade Chinese markets. China has about 900 QFIIs, a broker source said, adding that about 200-300 of the companies which have registered since September 2022 were mainly interested in commodities.
In February ShFE opened several futures products to QFII investors including stainless steel and fuel oil.
A senior ShFE official declined to answer questions on the topic when called by Reuters. ShFE did not immediately respond to questions emailed after hours.
The China Securities Regulatory Commission (CSRC) would need to approve any launch by the domestic exchanges. It has been pushing exchanges to internationalise futures contracts to attract overseas investors, according to another source familiar with the commission’s thinking.
Market confidence was shaken in 2022 when the nickel price rocketed to a record above $100,000 a metric ton and the LME cancelled all nickel trades on March 8, for which it was sued by hedge fund Elliott Associates.
Others including CME and ICE have looked at creating cash-settled derivatives for nickel, while Abaxx Technologies launched a nickel sulphate futures this year.