New lithium market cycle offers growing opportunities for traders

The rebound in global demand for and prices of lithium compounds is creating a market environment that is increasingly attractive for commodity traders

While until recently the lithium space was mostly characterized by a notable absence of intermediaries – aside from a few – and relied mainly on direct seller-buyer interactions, the surge in prices of lithium compounds, as well as the expected growth in demand across the lithium complex in the coming years, are creating new opportunities for intermediaries.

This has been particularly evident in the domestic Chinese market where spot liquidity has historically been more relevant than in other regions with an established spot market and participants in it.

Market prices have surged in the past year following the multi-year lows of 2020 – the commodity entered a new bullish cycle supported by high demand for electric vehicles (EV) batteries. This has supported a price uptrend across the whole lithium complex, including technical grades, battery grades and spodumene concentrate feedstock.

Fastmarkets’ price assessment for lithium carbonate 99.5% Li2CO3 min, battery grade, spot prices cif China, Japan & Korea was $44-47 per kg on January 27, rising by 574% from $6.00-7.50 per kg in January 2021.

The assessment for lithium hydroxide monohydrate LiOH.H2O 56.5% LiOH min, battery grade, spot price cif China, Japan & Korea was $41-43 per kg on January 27, an increase of 366% at the mid-point from $8.50-9.50 per kg a year earlier.

The yearly rally was been triggered by a rapid change in direction in Chinese domestic lithium prices, with the lithium carbonate 99.5% Li2CO3 min, battery grade, spot price range exw domestic China assessed at 350,000-370,000 yuan ($59,974-58,116) per tonne on January 27, up by 433% from 65,000-70,000 yuan a year ago.

The fast-paced growth of the market, together with underlying demand trends, led to carbonate overtaking hydroxide and trading at a premium, which has increased in 2022 to date.

The growth story also highlights a market where traders can identify new business opportunities.

This has been particularly noticeable in the carbonate market due to its larger share of the total lithium market (carbonate accounted for about 65% of total lithium production in 2021) compared with a smaller but growing hydroxide market (32% of total production in 2021, with other lithium salts making up about 3%).

In previous years, the few intermediaries active in lithium used to limit themselves to handling spodumene. But with the entire complex poised for strong growth, commodity traders are increasingly interested in the downstream lithium chemicals market.

Carbonate has fewer logistics complexities than hydroxide, sources in China acknowledge; this allows for it to be easily interchangeable among players across the supply chain.

Additionally, the booming carbonate market in China led to also material with low-grade specifications to enter the battery supply chain for certain entry-level applications.

In the current environment, this means lithium carbonate as a product lends itself better to the intermediary activity of traders than hydroxide.

This, however, is set to evolve while battery demand expands outside of China where different battery chemistries and OEM strategies are likely to prompt growth of the overall size of the hydroxide market.


The increased presence of traders in lithium is one element in the “commodization” narrative that was a topic of some debated a few years ago – market participants and observers were split between those who considered lithium as a pure specialty chemical or a commodity.

While the industry has since moved on, that debate remains relevant to understand the sector today and its continuing evolution.

The lithium market’s strong demand growth prompted a tightening of product specifications and brought about increasingly stricter quality parameters in response to requirements by large consumers, such as OEMs. Supply of new compounds was established with those higher quality parameters, de facto enforcing a new standard.

In carbonate, that led to units being more homogenized in terms of product quality, making them more interchangeable across the market, with consumers less tied to one producer’s specs.

While the sector may continue to be considered a specialty chemicals business overall (including the specialty, non-battery grade applications, for instance), some components of the market have increasingly behaved like other commodities.

Lithium carbonate has moved in this direction, attracting commodity specialists such as traders.

“When a market is growing rapidly, when consumers are scrambling for material and prices are all over the place, then opportunities for traders emerge,” William Adams, head of battery materials research at Fastmarkets, said.

Some participants suggest the involvement of traders has partially contributed to this year’s price rally in lithium in the domestic Chinese market, which eventually filtered through other regions.

“Through the past year this has been happening: there were traders withholding stocks and then releasing it to the market,” one converter source said, adding that the current tightness means that strategy is now less evident: “Most of the traders that I work with have limited stocks on hand now.”

“Commercial arms of big producers” rather than full-blown traders have become more active in the past year, especially in China, a Europe-based trader suggested.

“I don’t think traders have been squeezing the market in China but [rather] big producers have been holding inventories [to support price growth],” he said.

As with other commodity markets, traders’ engagement in lithium is showing instances of direct involvement with new projects, proving expertise and trade finance.

In December, Traxys and start-up European Lithium said they will cooperate to develop the Wolfsberg Lithium Project in Austria, where the junior is seeking to set up a lithium hydroxide operation by the end of 2023.

Around the same time, Traxys also signed a multi-year offtake agreement with Canada-headquartered junior miner Lepidico. The trader will provide sales, marketing, logistics and trade finance services for 100% of the initial phase of the company’s lithium hydroxide production, which is expected to come online in 2023.

Risk management tools

The development of financial instruments such as derivative futures contracts, which have been launched by several commodity exchanges to provide tools to participants in the battery raw materials supply chain to manage price risk, will also benefit traders and enable them to take positions on the market while they look at both the futures and physical markets.

“Lithium has been so unpredictable [in 2021], and it’s astounding how strong [the price growth] has happened,” a producer source said. “That’s why it’s so important to have good visibility of where the market is.”

The Singapore Exchange (SGX) is looking to launch four futures contracts – for cobalt metal, cobalt hydroxide, lithium carbonate and lithium hydroxide – in the first half of the year to provide new hedging instruments for participants involved in energy transition, it said earlier this month.

“The combination of fast-moving prices, concern about supply and the emergence of traders is likely to increase the need for risk management tools such as exchange-traded futures,” Fastmarkets’ Adams said.

Keep up with what’s happening in the battery raw materials markets throughout 2022, visit our battery raw materials page.

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