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The contract will be launched on July 17, pending all relevant regulatory reviews, the exchange announced on Tuesday June 20.
Electric vehicle (EV) adoption growth continues to drive demand for battery raw materials and, in turn, growth in tools to help market participants manage risk.
“As electric vehicle sales continue to surge, we are pleased to introduce a second lithium futures contract, which will provide market participants with more tools to manage price risk across a variety of raw battery materials,” Jin Chang, managing director and global head of metals at CME Group, said.
Lithium carbonate prices have faced a volatile year, hitting record highs and lows within the past 12 months.
Fastmarkets assessed lithium carbonate 99.5% Li2CO3 min, battery grade, spot prices cif China, Japan & Korea at an all-time high of $80-82 per kg in November and December 2022, before a weaker EV market in China drove a sharp decline in lithium prices to a two-year low of $28-30 per kg in mid-April. The carbonate price has since rebounded, and was most recently assessed at $42-45 per kg on Tuesday.
Prices for carbonate, a key ingredient for lithium iron phosphate (LFP) batteries, rebounded on improved demand for the chemistry in May and June.
LFP cathode production is expected to further improve in June from May’s output, and multiple cathode producers are said to have been topping up their lithium carbonate inventories.
In the longer term, LFP batteries are expected to hold a 35% share of the global EV market by 2033, according to Fastmarkets research.
“Ever-evolving battery raw material markets and electric vehicle growth continues to drive demand for more hedging mechanisms throughout the supply chain,” Raju Daswani, Fastmarkets chief executive officer, said.
Volatility throughout the battery raw materials market has driven hedging activity so far in 2023.
“CME Group first entered the battery metals space just a few years ago and has quickly become the venue of choice for managing EV risk. Open interest in our cobalt contract recently hit a record of over 20,000 tons, and trading in our lithium hydroxide contract has already surpassed full-year 2022 volume, with over 2,000 tons traded year-to date, versus 400 tons last year,” Chang said.
The steep drop in global spot lithium prices throughout the first half of the year helped drive record-high volumes of trade on the year-old lithium hydroxide contract on the CME.
At the same time, cobalt hedging was driven by original equipment manufacturers looking to ‘hedge out’ their forward quarterly production lines by using a financially settled contract rather than taking on the risk of additional physical material.
The Singapore Exchange launched a lithium carbonate contract, also linked to the Fastmarkets lithium carbonate cif China, Japan & Korea price, last September.
In China, the Guangzhou Futures Exchange is planning to launch its own lithium carbonate futures and options.
Keep up to date with all the news, insights and the volatile lithium price with the Fastmarkets NewGen lithium long-term forecast.