The relationship between spodumene and lithium salts takes centre stage in Shanghai

While market participants gathered in Shanghai for Fastmarkets’ Battery Raw Materials conference from February 25-26, 2025, the key topic on the minds of participants across the value chain was the relationship between spodumene and battery grade lithium salts prices.

Lithium prices under pressure

While all lithium prices have remained under pressure since 2023 amid growing supply and slower than expected demand, the relationship between spodumene and lithium salts has come under increasing scrutiny.

Characteristics of spodumene, its pricing and production

Spodumene concentrate is used in the production of lithium hydroxide and lithium carbonate, is priced typically on a 6% lithium content basis, though often is produced closer to 5-6% grade.

The most recent disconnection between the spodumene and lithium prices started in the second half of 2024 but became increasingly strong especially after Chinese New Year in 2025.

Typically, depending on the lithium product produced, refining lithium salts from spodumene requires 7-8 tonnes of spodumene per tonne of lithium salts.

This means, that price of spodumene represents a significant proportion of the cost of production for converters.

Back in 2024, Fastmarkets previously reported on the growing shift within the market to tie the cost of spodumene to lithium salts prices, with roll back mechanisms and payable structures.

Such mechanisms, at the time, allowed for greater connectivity between the two products, while also allowing both sides to hedge their exposure through the risk management tools then only available in lithium salts, such as the Guangzhou Futures Exchanges (GFEX) lithium carbonate contract, and the Chicago Mercantile Exchange’s (CME), Singapore Exchange’s (SGX) and London Metal Exchange’s (LME) lithium hydroxide contract.

However, the supply and demand dynamics of spodumene, which are distinct from the downstream lithium salts, has propelled the upstream miners to gradually shift away from a lithium salts-linked pricing for spodumene, with lithium salts prices currently sitting at or close to multi year lows.

Amidst this shift, there has been a growing disconnect between the two market prices.

The mismatch between the spodumene and lithium salts prices was further highlighted by a growing number of spodumene auctions held by major miners, with the concluded transactions often settling higher than the lithium prices in the market, pushing offer prices higher amongst other sellers.

Similarly, the availability of spot cargos of spodumene has at times fluctuated, further adding to the volatility seen in prices.

However, the disconnection between the spodumene and lithium prices has happened in the background where the spodumene supply far exceeds the converters’ demand for the material, with growing production of spodumene from new regions such as Africa.

On the other hand, the sustained narrow or even thin margins among the converters emphasized on the importance of mitigating price risks, particularly for spodumene.

Growth of futures contracts

The GFEX’ lithium carbonate futures contract in China is an important tool for risk management, especially amongst the converters to manage their margins or losses as they can lock in their lithium sales prices in the forward months.

In a tight spodumene market, a converter will sell the price they sell the forward month lithium carbonate at higher prices to ensure better margins and balance the pressure from the spodumene prices.

The GFEX’s position as a central hedging mechanism for Chinese lithium market participants has also resulted in it increasingly being used as a reference for pricing also, alongside traditional price reporting agency (PRA) assessments.

However, Fastmarkets understanding is that at present spodumene contracts typically only reference specific spodumene indices referenced by PRAs, further fuelling the disconnects in pricing.

Further driving this push towards spodumene specific pricing has been the launch of a new cash settled spodumene futures contract, launched by the CME in September 2024.

Liquidity on this contract is currently still small, but the potential for hedging of spodumene prices specifically, as well as lithium salts prices, offers an exciting development for the market.

As a result, Fastmarkets understands that Chinese lithium converters were reportedly looking to include spodumene prices in their long-term lithium contracts to navigate thin or even negative margins, although downstream lithium consumers were reluctant to accept such a proposal.

Though liquidity on the newly launched spodumene contract remains small, the overall adoption of futures within the battery raw materials space has grown impressively, signalling that they are increasingly being used for hedging and investment purposes and the industry’s continued confidence in the physical benchmarks.

In fact, the lithium hydroxide futures contract has been one of the fastest growing and most successful futures launches for CME in the past years, and certainly in the metals space.

Comparing Q1 2024 to Q1 2025, lithium hydroxide futures experienced more than a 50% increase in both volume and open interest. This surge was driven by new market participants entering the space and existing players executing larger trades.

Similarly, lithium carbonate has been growing, last year this time there was barely any open interest and volumes traded, while this year’s open interest is comfortably increasing almost every month, and we witnessed one of the largest trades in the lithium futures market earlier this year. This indicates that the hedging interest is increasing as participants want to hedge the price that they use in their physical contracts.

The ongoing disconnect between spodumene and lithium chemical prices, coupled with challenges in price discovery and transparency, remains a pressing issue. These concerns are expected to steer discussions among participants at the upcoming conference in Seoul.