SMM Overview: Arbitrage Trading between Shanghai and Wuxi Nickel Prices

Published: Apr 24, 2015 12:03

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Arbitrage trading between SHFE and Wuxi nickel prices has increased recently. Is arbitrage opportunity often available?

SHANGHAI, Apr. 24 (SMM) – Arbitrage trading between SHFE and Wuxi nickel prices has increased recently. Is arbitrage opportunity often available? SMM makes a short overview of arbitrage trading between the two markets since the launch of SHFE nickel contracts on Mar. 27.

The first opportunity appeared between Mar. 27 and Apr. 2. The price spread between SHFE and Wuxi nickel prices was 870 yuan, and investors then sold SHFE lead, and bought Wuxi lead to make profits.

The second opportunity happened between Apr. 15 and 23. During the period, positions on SHFE nickel market surged to 132,000 lots, and the longs entered the SHFE market, believing supply could not meet their delivery needs and much stricter deliverable requirements in Shanghai, and sold on Wuxi market. The price spread between the two markets expanded to 2,750 yuan per tonne. SHFE nickel positions fell to 110,000 lots by Apr. 23.

No arbitrage trading reported between Apr.3-14 between the two markets, since the spread of 300-500 yuan was not big enough.

The adjustment of nickel deliverable brands on SHFE will be the biggest risk in arbitrage trading between the SHFE and Wuxi electronic trading market, SMM’s nickel analyst says.

Earlier news reported that Russian nickel will likely become SHFE deliverable brand.

Without adjustment, the longs on SHFE nickel market will continue their similar trading, and the spread between the two markets will increase further as a result.

SHFE 1507 Nickel, Wuxi 1505 Nickel and LME Nickel in Mar. 27-Apr. 23

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arbitrage trading shfe nickel nickel prices

Data Source Statement: Except for publicly available information, all other data are processed by SMM based on publicly available information, market communication, and relying on SMM‘s internal database model. They are for reference only and do not constitute decision-making recommendations.

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