The London Metal Exchange has Initiate a new contract For battery metal lithium, it launched a transatlantic war with the US competitor CME Group, because the exchange hopes to seize the rapid growth in demand for commodities related to the electric vehicle industry.
The LME stated that the lithium contract is “designed to make up for” the need for battery and automakers to hedge against the risks of lithium price fluctuations, as well as the growing interest of investors seeking to participate in the fast-growing industry.
This move comes after CME Group launched a similar battery metal contract in May.Two exchanges Also competing in the field of cobalt, Another key battery metal.
By 2030, lithium demand will increase sevenfold With the increase in electric vehicle sales, According to consulting firm Benchmark Mineral Intelligence. The price of lithium hydroxide in China, the world’s largest electric vehicle market, soared 86% this year.
All electric cars use lithium-ion batteries and rely on metals to store energy. Lithium hydroxide is a compound favored by many battery manufacturers and automakers such as Tesla because it allows the use of more powerful nickel-based batteries.
Many lithium miners are original Hostile to the LME’s plan, because the futures contract will standardize the products produced to different qualities and grades.
However, the LME said it has been cooperating with the lithium industry for three years to launch cash-settled futures contracts. The lithium committee members of the exchange include Albemarle, the world’s largest lithium producer, and automakers including Tesla.
Ron Mitchell, Sales Director of Tianqi Lithium, a Chinese lithium producer, said: “The launch of lithium hydroxide cash-settled futures contracts is not only an important issue for the LME, but also for the global lithium industry. Milestones.”
“The contract provides an important price risk management tool for the industry, and it comes at a critical moment in supporting the future electrification goals of many countries.”
Most lithium supply transactions between car manufacturers and miners are based on long-term transactions evaluated by pricing agencies. For auto companies, futures contracts will provide greater visibility into future prices, enabling them to hedge risks. This is particularly important in an environment where prices are rising.
Martim Facada, the battery raw material broker of SCB Group, said: “One of the most common questions about lithium is where the price will go tomorrow.” “Having a forward curve helps solve this problem and allows you to better predict and update Better control of costs and better hedging.”
The LME and CME contracts are similar in that they are both based on the price of lithium hydroxide produced in China, Japan and South Korea by Fastmarkets.
Last year, CME Group launched a new cobalt contract, which is now tradable until December 2023 and has won the favor of some traders.
The LME stated that the introduction of lithium is part of a broader sustainability agenda, which includes new contracts to recycle metals and the ability of producers to increase the carbon footprint of their metals on exchanges.
The LME said on Monday that it has also launched a scrap aluminum contract for the US second-hand beverage can market.