SMM Analysis: Will Corners of SHFE Shanghai Nickel Happen as Market Concern?

SHANGHAI, Sept. 27 (SMM)－For recent changes, the market anticipation will not exclude possibility of SHFE corners. The reasons are: 1. The number of SHFE registered warehouse receipts has been dropping rapidly since 51,687 tonnes on Sept 5^th, to 41,640 tonnes on Sept 26^th. The number dropped almost 20% in 7 workdays. 2. Stock of CMST appears to rise but the spot premiums keeps going up with the increase of social stock. Russian Nickel premium is 400-500 yuan per tonne against Wuxi Main, which is the high level since Russian Nickel entered SHFE, showing supply tension of Russian Nickel spot. 3. The stock of London electrolytic nickel is 383,298 tonnes (statistics of Sept.26^th), among which Nickel bean is 275,829 tonnes and nickel plate is 107,406 tonnes, including brands that cannot enter SHFE. Also some of the nickel plate is non-negotiable warehouse receipts pledge. Hence SMM predicts those amount of nickel plate of LME nickel stock that can enter SHFE is limited.

SMM thinks if the number of warehouse receipts of SHFE nickel continues to drop to 30,000, those stock-up companies may do corners. But it is difficult under current situation: SHFE released a new regulation on Sept 22^nd, saying since Sept 25^th, 2017, the maximum number of opening position of non-member or clients of Futures Company during Nickel NI1801 contract is 1500. The maximum number of opening position during the day of account group of actual control relationship goes as per single client. It is expected that position limit system is probably used to prevent corners.

Since early September, Shanghai Nickel Index has continued to decline from high point 97,720 yuan per tonne to low point 83,350 yuan per tonne. If bulls do corners at this point, Shanghai Nickel Index will probably surge rapidly with all moving averages broken. Concerning whether previous high points can be broken, what measures SHFE will take, SMM would not comment.

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