Reporter Wang Haiying and editor Wu Yongyong

Recently, the "epic" market of nickel futures on LME (London Metal Exchange) has attracted extensive attention.



When the market expected that the short positions represented by Qingshan group might encounter the risk of closing positions, LME decided to suspend the trading of nickel futures on March 8 and postpone the delivery of all spot nickel contracts originally scheduled to be delivered on March 9.



So far, LME nickel futures have been suspended for three trading days. At present, the market is expected to believe that LME nickel futures are expected to resume trading this week.



If the transaction is really resumed, how will LME nickel go after a sharp shock? Will Castle Peak, once exposed to the risk of closing positions, accelerate the closing of positions? What other potential risk factors deserve attention in the future? How will the medium and long-term nickel price operate? On this kind of conjecture, the reporter of the daily economic news conducted a deduction with a number of people in the futures industry.



IC Photo of laterite nickel ore is being unloaded at the port terminal in Lianyungang, Jiangsu (601008)



Impact 1: is it expected to resume trading this week?



On March 8, LME nickel ushered in a crazy moment, hitting the $100000 / ton mark at one time, with a maximum increase of nearly 110% during the day. However, after 2 p.m. that day, nickel prices in LME period once plunged rapidly. After 4 p.m. of the same day, LME announced to suspend nickel trading at least for the rest of Tuesday. In addition, LME also announced that it would cancel all nickel transactions executed on the OTC and LME select screen trading system on or after 0 a.m. local time on March 8, and would postpone the delivery of all spot nickel contracts originally scheduled to be delivered on March 9, 2022.



This series of operations also brought breathing opportunities to Qingshan group, which was forced by the strong position.



Wang Yanqing, senior researcher of CSC futures nonferrous metals, whose research interests include nickel industry chain, said in an interview with reporters that LMEs suspension of trading and postponement of contract delivery are not so much to protect short positions as to protect LME itself, "Because the futures market implements a daily debt free system, that is, it has to settle once a day, and then the money you earn will be paid to your account, and the money you lose will be deducted from your account. Recently, because LME nickel has risen too fast and short losses are too serious, there is a great risk of default. If there are a large number of defaults, this mechanism will fail, and this mechanism is futures The market is a relatively low-level mechanism. If this mechanism fails, LME will collapse, and many parties may even claim against LME. "



According to media reports, LME recently said that the preconditions to be met for reopening LME nickel Trading: first, safe operating procedures can be realized after reopening; Second, carefully evaluate the possibility of safe closing of long positions and short positions before reopening. At present, there is still uncertainty whether these conditions can be achieved.



Wang Yanqing believes that if LME nickel is to resume trading this week, the problems caused by the abnormal surge in nickel price must be solved at least first, "Either the long and short sides go to negotiate to close their positions, or they go to delivery. In addition, LME also announced that they can transfer their positions. My understanding is that it is equivalent to moving the expiration date of the contract back, but it still needs the agreement of the long and short sides." At the same time, he also believes that "if the opening can be resumed this week, it will prove that the risk of this event is basically over."



Impact 2: how will LME nickel market go?



If LME nickel futures can resume normal trading this week, can the previously volatile market return to a relatively stable state?



According to Wang Yanqing, the price of LME nickel futures is too high recently. If the risk is resolved, it should still return to its fundamentals. It is expected that after the reopening of the market, the short-term LME nickel price may fall by a large margin. "Now LME has cancelled the nickel trading result on March 8, and even the closing price of $50000 on March 7 is still too high, because the previous price of LME nickel was only about $25000 / ton. There has not been such a significant fundamental change in the near future. Although the supply is tight, it is difficult to understand such a large increase in the short term."



The research director of nonferrous metals of a futures company believes that the short-term volatility may still be large, "I think the best result of this LME nickel event is that the long and short sides can reach an agreement to close their positions. According to the domestic closing calculation, based on the 200000 tons of nickel rumored in the market, the short side will lose about US $2 billion. We can understand that LME nickel will resume trading, and the long and short sides may have reached an agreement to close their positions. In this way, the domestic market fluctuation may stabilize, but for LME, the opening price of US $50000 It is still on the high side. Based on the current domestic price, there may be at least two consecutive limit falls, and the volatility is not low. "



In an interview with reporters a few days ago, the relevant person in charge of a domestic futures company said: "I think it is actually impossible to judge at present (the short-term trend of LME nickel after the resumption of trading) , because at present, the futures price has been divorced from the supply and demand pattern of nickel itself. In fact, what we are trading now is the mood and uncertainty of the market. We can only wait until the closing event is over and wait for it to change. " "In addition, after the conflict between Russia and Ukraine has come to an end, or after the impact of the conflict has been eliminated, nickel will be priced again, but at least from the current fundamentals, the inventory of nickel is still gradually decreasing."



Impact 3: what is the impact on Shanghai nickel market?



Wang Yanqing analyzed the possible impact of the resumption of LME nickel trading on the domestic futures market, "(the resumption of LME nickel trading) will certainly have an impact on Shanghai nickel. The two markets are linked. If LME nickel does not fall significantly after the resumption of trading this week, the price of nickel in the previous period may rise. It is just that the price in the previous period should be lower than the converted price of LME nickel, because the domestic supply is expected to be better than that in foreign countries."



It is worth noting that at present, the price difference of nickel futures at home and abroad is at a historically high level. "Assuming that the price of LME nickel after the resumption of trading is US $40000, the price difference between LME nickel and Shanghai nickel is tens of thousands of yuan. In the previous long time, the relatively balanced price difference between LME nickel and Shanghai nickel is generally in the range of one or two thousand yuan."



Impact 4: will Castle Peak Group accelerate the liquidation?



Recently, due to the abnormal sharp rise in nickel price, Qingshan group fell into a position pressing crisis. In this regard, there are many views in the market that this is mainly due to the fact that Qingshan group has not moved or closed a large number of empty orders in time recently.



In Wang Yanqings view, the outbreak of the conflict between Russia and Ukraine has put Qingshan group in a dilemma, "Because if a large number of positions are closed, the price will be raised, and then the rest of his short positions have to make up the margin, which in turn will cause a lot of losses to himself, so it is a relatively uncomfortable situation. Even if the positions are closed, they can only be leveled bit by bit to minimize the fluctuation to the market."



If LME nickel resumes trading this week, will the "terrified" Castle Peak Group accelerate the liquidation? Wang Yanqing believes that Qingshan group will not close its positions quickly. Even if it wants to close its positions, it will only be carried out slowly, because if it closes a large number of positions in the short term, it will certainly have a great impact on the market price; In the case of good spot profit and no problem with liquidity, Castle Peak Group can even choose not to close its position.



Impact 5: what are the potential risks?



It is undeniable that there are still some potential risks before the situation of LME is eased. Although there is no real possibility of LME landing, there are still many risks.



In the opinion of the research director of nonferrous metals of the above futures company: "the next possible risk is that the long and short sides have not reached an agreement to close their positions, and the LME nickel price will still fluctuate disorderly. Although the short may raise enough inventory for delivery, they should also worry that the long will get the full support of international financial capital and maintain the momentum of vicious position squeeze."



The situation in Russia and Ukraine is an important variable affecting the nickel price in the near future. Wang Yanqing believes that this is the fuse of the sharp rise in the international nickel price, but the core impact is the U.S. sanctions. In the future, even if the situation in Russia and Ukraine eases, the United States may still sanction Russia. Therefore, it is necessary to observe in the follow-up what direction the U.S. sanctions against Russia will develop.



Impact 6: how does the suspension affect the domestic market?



If LME nickel does not resume trading this week or longer, what impact will it have on the domestic nickel market (futures and spot)? Wang Yanqing predicted that the futures pricing function of Shanghai nickel will be strengthened, and the spot trade will recover to a certain extent, but the spot international trade may continue to stagnate.



The research director of nonferrous metals of the above-mentioned futures company told reporters: "If LME nickel fails to resume trading this week, it means that the long and short sides have failed to reach an effective agreement. Due to the strong correlation between the domestic and foreign metal markets and the pricing power is still in the LME market, the LME price pushed back in China is about US $30000 ~ us $35000 / ton, which is lower than the opening price of LME. Therefore, the domestic futures and spot prices may be close to the LME nickel price, but it is not important for the industrial chain It must be acceptable that trade may still be wait-and-see and wait for the incident to subside, which may seriously affect the normal production and operation of the industrial chain. "



Impact 7: how will the medium and long-term nickel price operate?



Although the short-term sharp fluctuation of nickel price may be unavoidable after the resumption of LME nickel trading, the market will eventually return to rationality. From a medium and long-term perspective, where is the "anchor" of nickel price? Wang Yanqing predicted: "nickel should still have strong fundamentals this year, because the whole supply is tight. In fact, the main impact is still in Russia. If Russia can release this supply, the tight situation of nickel supply in the second half of the year can be alleviated. If the shipping channel in Russia is always poor, (nickel supply) There will be a shortage throughout the year, because the new production capacity is not released so quickly, and the old production capacity still needs to support the supply. "



In the opinion of the relevant person in charge of a domestic futures company mentioned above, the reason why the market is relatively optimistic about the future market expectation of nickel at the recent stage is actually taking into account the new demand for new energy, "In the past, nickel was mostly used in stainless steel, but the growth space of stainless steel is still very limited, but now nickel is equivalent to finding an emerging demand growth point, and new energy is developing rapidly. Although the proportion of new energy in the overall demand for nickel is relatively small, the market is developing rapidly. Later, if the demand share of new energy is gradually expanded, and the production of nickel If we cant keep up, it may lead to a mismatch between supply and demand. "



However, he also pointed out that although it is difficult to predict the medium and long-term performance of nickel prices, the extreme prices in the LME market must be falsely high.