Singapore-based Abaxx Commodities Exchange has unveiled plans to introduce the world’s inaugural nickel sulphate futures contract. This innovative contract will enable the direct exchange of this crucial mineral between sellers and buyers, bypassing the need to route the mineral through a network of storage warehouses.
While several existing futures exchanges trade in nickel, including the London Metal Exchange (LME), they predominantly deal in Class 1 refined nickel, mainly used in stainless steel production, rather than nickel sulphate. Nickel sulphate holds significant importance in the manufacturing of electric vehicle (EV) batteries.
Abaxx provided insights into the necessity of a nickel sulphate futures contract, explaining, “Supplying the nickel sulphate necessary to meet [global] demand is expected to require high levels of investment, thus creating a unique opportunity for a well-functioning futures market, critical to discovering and hedging the price risk associated with these investments and unlocking the capital required.”
The development of the nickel sulphate futures contract was a collaborative effort involving Abaxx and 21 companies from various industries.
The exchange elaborated that bilateral discussions for the contract encompassed “two major global auto manufacturers, two global mining companies, six merchant trading firms, two EV battery manufacturers, three nickel sulphate producers, and four bank/broker trading firms.”
Dan McElduff, President of Strategy and Development at Abaxx, stated, “It’s unquestionable that this market needs more and better price discovery, and the best way to do that is with a physically settled futures contract. Our focus in starting was to not battle it out with big exchange groups in their core products but to focus on emerging markets, and we classify nickel sulphate as an emerging market.”
With global demand for nickel sulphate projected to increase by 22% annually between 2020 and 2030, the nickel sulphate futures contract aims to facilitate access to EV battery metals for producers. Additionally, by 2030, 40% of nickel demand is expected to be attributed to battery component usage, effectively doubling the current figures.
Throughout 2023, battery manufacturers have been actively securing long-term offtake contracts for battery metals to preempt the anticipated surge in global supply driven by the energy transition.
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