Shanghai Futures Exchange cuts margin requirement for nickel, other metals

THE Shanghai Futures Exchange (SHFE) will lower margin requirements and trading limits for base metals, stainless steel and silver from Apr 6, it said on Tuesday (Apr 4), in a move analysts said would improve trading liquidity, in particular for nickel.

Margin requirements for nickel will be lowered to 12 per cent from 19 per cent after the close of trading on Apr 6, according to the exchange, which also tightened daily movement limits in nickel and other metals in a move to lessen volatility.

“The lowered margin will attract more participation and improve trading activity, so that the contract prices can better reflect the market supply and demand picture,” said Zhang Yuan, a Shanghai-based metals analyst at Citic Futures, referring to nickel.

Global nickel futures trading has been significantly hampered in the aftermath of unprecedented price volatility in March 2022, when the benchmark nickel contract on the London Metal Exchange (LME) doubled within hours to over US$100,000 per tonne.

The crisis damaged market confidence and traders’ willingness to participate in trading on both the LME and SHFE.

The most-traded SHFE nickel contract saw volumes fall 81 per cent last year. Trading volume in the first quarter in 2023 is also down 39 per cent compared with the same period a year ago, according to Refinitiv data.

BT in your inbox

Start and end each day with the latest news stories and analyses delivered straight to your inbox.

Sign Up

Sign Up

The London Metal Exchange (LME) last week launched sweeping measures to revive its flagging nickel contract, including plans to cut waiting times and scrap fees for new brands of the metal that can be delivered against its contract.

The most-traded SHFE nickel contract ended day trading on Tuesday 0.8 per cent lower at 176,860 yuan (S$34,091) a tonne, while the benchmark LME price gained 0.8 per cent at US$23,575 a tonne as of 1042 GMT.

SHFE also said margin requirements for copper and aluminium will be lowered from 12 per cent to 9 per cent and those for zinc and lead will ease from 14 per cent to 9 per cent, according to the exchange. The exchange will also move margin requirements for stainless steel from 14 per cent to 10 per cent, and from 12 per cent to 11 per cent for silver.

It tightened the upper and lower daily trading movement limits for nickel to 10 per cent from 17 per cent previously, while limits for copper and aluminium were narrowed to 7 per cent from 10 per cent, and for zinc and lead to 7 per cent from 12 per cent. REUTERS