Nickel Futures 2.0 Explained: What Retail Traders Must Know About MCX's New Contracts?

Unlike gold and silver, which rally as safe havens, base metals like nickel move mainly on industrial demand and global growth trends. With easing geopolitical jitters boosting sentiment, the Multi-Commodity Exchange (MCX) has revamped its nickel futures contract-bringing in more transparency and making it simpler for retail investors to trade.

The revised nickel futures include changes to the trading unit, expiry date, delivery arrangements, market efficiency, etc. The commodities derivative exchange has also reduced the trading unit and lot size to rope in a higher number of retail traders as well.

MCX Introduces Nickel 2.0: What Are The Key Changes?

The trading unit for nickel futures has been reduced to 250 kilograms from 1,500 kilograms. The revised trading unit will come into effect from September 2025.
The delivery unit has also been fixed at 1,500 kg. Maharashtra's Thane district has been fixed as the sole delivery centre for nickel futures.

The ticket size has also been fixed at Rs 0.10 per kilogram with daily price limits of 4%. The margins have been set at a minimum of 10% or SPAN.

The last trading day has also been shifted from the last calendar day of the expiry month. Now the Nickel futures are expiring on the third Wednesday of every month, or the preceding working day during holidays.

Reintroduction of nickel futures is an attempt to revive liquidity in the nickel futures contract, which has suffered due to diminished participation, rising surplus and disruptions that occurred on the LME.

How Revised Nickel Futures Would Benefit Investors?

The reduced delivery unit to 1,500 kg and trading unit to 250 kg will benefit retail traders. "In the previous version, the margins were pretty high at about 25-30% now the margins are as low as 12%. That is one of the advantages for traders at a lower margin, you can get to trade. If I calculate from the previous version, the lot size was 1500 kg, and the prices were around Rs 1500-1400. The kind of equation of the lot is about 17-18 lakh rupees, which is not conducive for retail participants. But whereas in this current version the multiplier is at 250 kgs and the price is around Rs 1300, which makes it about a Rs 3.5 lakh contract," explained Navneet Damani, Head of Commodity Research, Motilal Oswal Financial Services Ltd.

Nickel Hedging

The prices of base metals like copper, nickel, etc see are highly volatile because of their fluctuating industrial demand. "This contract eventually is going to be very beneficial for clientele who want to hedge their exposure into steel or nickel," noted Damani.

How is Nickel Different From Gold, Silver For Traders, Investors?

Nickel is a part of base metals, which are mainly in demand for their industrial usage. Whereas gold and silver also act as a haven amid market volatility. "Precious metal is a different ballgame altogether. It's a financial asset, whereas nickel, somebody might not understand much, but it's an asset that is used for trading for hedging purposes," explained Navneet Damani.

What Should Investors Keep in Mind While Trading in Nickel Futures?

Demand for nickel may surge leading to higher prices on the backdrop of stronger electric vehicle, and a rebound in stainless steel demand, according to Motilal Oswal.

"If somebody is a trader, then one should stick to stop losses. Whatever the desired profit, at least half of that should be a stop loss, and you should kind of move out of the position if it's not going in your favour," Damani added.

Further ramp-up in production of nickel by Indonesia, being the largest producer of class 2 products and weaker Chinese industrial activity may lead to further downside risk for Nickel.

Nickel Futures Outlook

A host of factors, including Indonesia, slower EV battery demand growth and elevated inventories, may weigh on Nickel prices in future.

"The Nickel market is expected to remain under downward pressure, as output continues to outstrip demand. Longer term, Class 1 nickel demand from the clean energy sector could support a gradual recovery," stated Motilal Oswal in its report.

The brokerage expects MCX Nickel to trade in a broad range between Rs 1300 and Rs 1390 over the next few weeks.

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