Fastmarkets and SGX to launch battery metals contracts to meet EV growth

Fastmarkets has partnered with Singapore Exchange to launch energy-metal derivatives contracts. Expected to launch in H1 2022, these new contracts will support the demand for energy metals used in the production of electric vehicles (EV) batteries with Asia playing a pivotal role as a major producer and consumer in the battery value chain.

The suite of commodities contracts will include four battery raw materials – cobalt metal, cobalt hydroxide, lithium carbonate and lithium hydroxide. With the global EV market on a rapid growth trajectory, prices for battery raw materials have been on the rise. These derivative contracts will facilitate market participants to manage price risk exposures to energy metals crucial to battery production.

Speaking on the partnership Fastmarkets CEO Raju Daswani said, “Fastmarkets is looking forward to working with SGX in developing the new contracts for key battery raw materials. As demand for both lithium and cobalt continue to accelerate in line with growing electric vehicle adoption, these new derivatives contracts will undoubtedly be welcomed by battery supply chain participants as tools to help mitigate exposure to price volatility.

“The Fastmarkets prices that the contracts will settle against are widely used in their respective physical markets and are increasingly referenced in both long- and short-term contracts, minimizing the potential for basis risk when managing risk. SGX has a successful track record in the development of cash-settled derivatives in recent years and is well positioned to support the growth and maturity of the battery industry, particularly in the Asia-Pacific region where activity to date has been most concentrated.”

William Chin, head of commodities at SGX said, “2022 will see a crystallization of ESG initiatives with the global economy embarking on a strong sustainability drive towards net zero promises. The strong momentum we have seen in electric vehicle adoption will continue, with battery metals providing the crucial backbone underpinning the green movement.”

“With the launch of the energy metals derivative contracts, we will be providing our clients with unique capital efficiencies in a ‘virtual car complex’ alongside our global rubber benchmark, allowing market participants to undertake price risk management of key raw materials used in car production.”