After the crazy rise of LME nickel, it is having a great impact on relevant enterprises in China’s nickel industry chain.
“For Chinese enterprises that need to import raw materials, the rise of nickel price increases the purchase end cost. In addition, there is a large price difference between Lun nickel and Shanghai nickel. It takes time for Chinese prices to digest. Some enterprises must be affected. At present, our businesses are still in normal operation step by step.” Du Peng, futures trading manager of Jinchuan Group Co., Ltd. (hereinafter referred to as “Jinchuan Group”), said.
Compared with large enterprises integrating the whole industrial chain, they have strong anti risk ability, and the normal operation order of some middle and downstream enterprises is disturbed.
Xu Aidong, vice president of the nickel branch of China Nonferrous Metals Industry Association, told the first financial reporter that the rise of nickel prices seriously deviated from the fundamentals, spot trade was close to stagnation, and some downstream nickel consumption enterprises had suspended receiving orders. The “high outside and low inside” of nickel prices affected the sustainable development of China’s nickel and related industries. Enterprises were looking forward to the industry organizations and the government to deal with such market chaos as soon as possible.
some middle and downstream enterprises were seriously injured
On March 7, Beijing time, the main contract of LME nickel futures rose sharply, reaching a record high of US $55000 / ton, with a sharp rise of 72.67% in a single day. On March 8, continuing the strong rise, LME nickel once rose to US $101400 / ton, setting a new record. As of the closing, LME nickel rose 59% within the day to US $80000 / ton.
The main futures contract of Shanghai nickel in China rose continuously on March 7, March 8 and March 9. As of March 9, it closed at 267700 yuan / ton.
In the face of such a soaring market, Jinchuan Group appears relatively calm. “We have been engaged in futures trading for more than 30 years, and we have seen many things. We have not adjusted our hedging strategy because of this market.” Du Peng said that Jinchuan Group has established short positions in LME (London Metal Exchange) for hedging, operates according to the normal business volume, and strictly implements how many positions are built and how many positions are closed every day, but the total position per day is not large.
“On the contrary, LME trading suspension has changed our hedging plan. For example, we have to throw 200 tons of nickel every day for 20 trading days a month, but now it has become 10 trading days, and we have to throw 400 tons of nickel every day this month. This has a little impact, but it is not big.” Du Peng told the first financial reporter.
He also said that although the establishment of short positions still has a certain impact when the price of LME nickel rises, production enterprises are different from trade. Production enterprises have raw materials every day and have to produce every day. The suspension of trading means that the elimination at the futures end is gone, while the input at the purchase end of raw materials is still in progress. In addition, Jinchuan Group has strict system norms. Hedging is not to participate in the game in the market. It mainly earns money in production, not in the financial market. Therefore, no matter what happens, Jinchuan Group operates according to the production plan and hedging plan.
However, “due to the import of some raw materials, Jinchuan Group, the upstream business of electrolytic nickel, did not enjoy much profit when the price rose due to the price comparison between the two cities and the suspension of trading.” Du Peng said.
As for the middle and lower reaches business, Du Peng said that because the nickel price is too high, Jinchuan Group’s enthusiasm for middle and lower reaches procurement has decreased, but for the production-oriented enterprises that have signed the long order agreement, the fluctuation in recent days has little impact, because the long order is generally the average price. As for Jinchuan Group as a whole, it has been affected to some extent, but it will not affect the strategic adjustment of various businesses, so it is still in normal operation step by step as before.
Jinshan Group is a super large mining, beneficiation, metallurgy, chemical and deep processing joint enterprise, which mainly produces nickel, copper, cobalt, platinum group precious metals and non-ferrous metal calendering products, chemical products, non-ferrous metal chemicals, non-ferrous metal new materials, etc. Among them, the output of nickel ranks fourth in the world.
Different from the calm of large enterprises, the operation of some small and medium-sized enterprises is affected. Xu Aidong told the first financial reporter that China is the world’s largest nickel consumer, but nickel resources are poor and the dependence on foreign raw materials exceeds 90%. China’s imported nickel raw materials generally take LME nickel price as the pricing benchmark. The “high outside and low inside” attacks the reduction of the import enthusiasm of Chinese enterprises, affects the supply of raw materials, is not conducive to the development of downstream industries, and affects the sustainable development of China’s nickel and related industries.
Some people in the futures industry told the first financial reporter, “at present, some enterprises in the spot market are in a short-term stagnation state. They want to wait until the situation is clear. They learned that a material enterprise has reserved some goods in March, but it will be in trouble in April.”
“In the absence of major changes in fundamentals, LME nickel prices have risen sharply in the short term. Chinese enterprises generally take a wait-and-see attitude towards nickel prices, and spot trade is close to stagnation. Some downstream nickel consumption enterprises have suspended orders, and look forward to industry organizations and the government to deal with such market chaos as soon as possible.” Xu Aidong said.
how should all parties respond
The situation in Ukraine and the tight market are among the reasons for the sharp rise in nickel prices. It also makes this round of market seem more special. In this case, what are the most concerned developments and how should we deal with them?
“What we are most concerned about now is when LME will resume trading, because the suspension of trading has affected our hedging plan, and we hope that the nickel price can return to the normal relationship between supply and demand.” Du Peng said that at present, it is mainly to wait until the price difference between Shanghai nickel and Lun nickel returns normally. This time, the market is in a special situation and will return to the normal track in line with the fundamental supply-demand relationship sooner or later.
Xu Aidong put forward three suggestions on how all parties should respond: first, enterprises should fully, completely and accurately grasp the LME trading rules, such as the delivery risk of some non-standard products; Second, the State Reserve should dispose of reserves in a timely manner, stabilize prices and stabilize expectations; Third, we should vigorously support backbone enterprises to establish nickel industry chain supply chain alliance and cooperate to build an independent and controllable ecosystem.
Under the sharp rise of nickel price, some listed companies also use futures and derivatives for hedging.
Zhejiang Huayou Cobalt Co.Ltd(603799) ( Zhejiang Huayou Cobalt Co.Ltd(603799) . SH) announced on March 9 that the company has set up nickel and cobalt resource development business in Indonesia. Under the condition that the nickel price continues to rise, in order to prevent and control the risk of price decline and lock in operating profits, the company carries out nickel hedging business in strict accordance with the company’s hedging management system in combination with its own production and operation.
“Hedging business is a common risk prevention tool in production and operation, not active speculation. Recently, there has been ultra abnormal fluctuations in the nickel futures market, so far, the company has not been forced to close its positions, and the risk is controllable. There is uncertainty in the future trend of nickel futures, which may lead to the loss of the company’s hedging business.” Zhejiang Huayou Cobalt Co.Ltd(603799) scale.
Recently, the Shanghai Futures Exchange (hereinafter referred to as the “Shanghai Futures Exchange”) has also taken a series of regulatory measures on nickel futures and prompted risks.
On March 9, after the exchange adjusted the transaction fees of some nickel futures contracts on March 8, the exchange issued a notice that some nickel futures contracts reached the daily limit for three consecutive days. According to Article 16 of the measures for risk control and management of Shanghai Futures Exchange, the exchange studied and decided that from the evening trading on March 9, ni2204, ni2205, ni2206, ni2207, ni2209, ni2212 Ni2301 contract is suspended for one day.
In addition, at the closing settlement on March 9, the price limit of ni2204, ni2205, ni2206, ni2207, ni2209, ni2212 and ni2301 contracts remained at 17% and the proportion of trading margin remained at 19%.
