The Shanghai Futures Exchange (ShFE) is reportedly planning to open its domestic nickel futures contract to foreign institutional investors this year, a move that could appeal to hedge funds and asset managers as it looks to challenge the dominance of the London Metal Exchange (LME), according to a report by Reuters.
The report cites unnamed sources familiar with the matter as saying that ShFE is leaning toward internationalising its existing onshore nickel contract – traditionally off-limits to foreign players – rather than launching a new offshore version on its International Energy Exchange (INE).
The change would be facilitated through China’s Qualified Foreign Institutional Investor (QFII) framework, enabling international hedge funds, proprietary trading firms, and asset managers to trade directly in the local contract.
Back in 2022, confidence in the market was severely shaken after the LME took the controversial decision to suspend nickel trading and cancel billions of dollars ‘worth of transactions. Among those hit was Elliott Associates, the activist hedge fund that later sued the LME over the move.
ShFE has already taken steps to broaden access to its commodity derivatives markets. In February, the exchange opened several contracts – including stainless steel and fuel oil—to QFII investors. With around 900 QFII licences issued to date, market participants estimate that 200–300 of those are already active in commodities, suggesting substantial latent demand for products like nickel, which is essential in both stainless steel and EV battery production.
For global macro and commodities-focused hedge funds, the opening of China’s nickel market offers a potential edge in a landscape increasingly defined by fragmented liquidity and geopolitical risk. With ShFE’s nickel futures already offering deep onshore liquidity and local pricing power, a more accessible market could provide diversification and alpha-generation opportunities beyond the traditionally dominant LME.
Sources note that China’s securities regulator, the China Securities Regulatory Commission (CSRC), has been actively encouraging exchanges to internationalise their contracts as part of broader capital markets reforms. The CSRC’s support would be key to ensuring swift regulatory clearance.
Meanwhile, competitors including CME Group and ICE have explored launching new nickel benchmarks, while Abaxx Technologies debuted a nickel sulphate futures contract earlier this year. Yet, none have so far been able to displace the LME’s entrenched, if tarnished, position.
