LME considers introducing lithium contract to tap electric car boom
2017-09-05 17:42:01 [Print]
BEIJING (Asian Metal) 5 Sep 17 - According to reports, the London Metal Exchange (LME) is considering introducing a contract for lithium, which is in strong demand due to its use in electric cars.
The exchange, which sets the global price for metals such as copper, aluminum and nickel, has been looking at the feasibility of trading the metal, which is mostly used by battery manufacturers.
As ownership of electric cars increases and more batteries are used to store power from renewable energy such as wind and solar, the demand for lithium is set to soar.
Sociedad Quimica y Minera de Chile (SQM), one of the world’s largest producers of lithium, said last week it expected a 14% rise in demand for the material this year.
“The LME has been approached by industry users regarding the introduction of an LME lithium contract, which we are looking into. We believe in developing products in conjunction with participants to meet the real needs of the market, and are committed to assessing and enhancing our offering as effectively as possible,” noted the LME.
Miners, producers and traders use the LME to lock in or hedge prices, but more investment funds start to use it to bet on the direction of metal prices. A lithium contract would give investors exposure to growth in electric vehicles, alongside other battery metals nickel and cobalt, which are also traded on the LME.
Storing lithium in its network of warehouses is a problem for the LME, since the material is mostly sold to battery makers in chemical forms, as lithium hydroxide and lithium carbonate powders. That makes it harder to store than other metals.
Next month the LME is due to release its feedback on a wide-ranging discussion paper it issued in April. The paper asked for feedback about whether the exchange should launch new products.
The exchange, which sets the global price for metals such as copper, aluminum and nickel, has been looking at the feasibility of trading the metal, which is mostly used by battery manufacturers.
As ownership of electric cars increases and more batteries are used to store power from renewable energy such as wind and solar, the demand for lithium is set to soar.
Sociedad Quimica y Minera de Chile (SQM), one of the world’s largest producers of lithium, said last week it expected a 14% rise in demand for the material this year.
“The LME has been approached by industry users regarding the introduction of an LME lithium contract, which we are looking into. We believe in developing products in conjunction with participants to meet the real needs of the market, and are committed to assessing and enhancing our offering as effectively as possible,” noted the LME.
Miners, producers and traders use the LME to lock in or hedge prices, but more investment funds start to use it to bet on the direction of metal prices. A lithium contract would give investors exposure to growth in electric vehicles, alongside other battery metals nickel and cobalt, which are also traded on the LME.
Storing lithium in its network of warehouses is a problem for the LME, since the material is mostly sold to battery makers in chemical forms, as lithium hydroxide and lithium carbonate powders. That makes it harder to store than other metals.
Next month the LME is due to release its feedback on a wide-ranging discussion paper it issued in April. The paper asked for feedback about whether the exchange should launch new products.
Lithium Carbonate 99.2%min Delivered China
Unit:RMB/mt
Chna's lithium hydroxide producers; number MoM output increase statistics by province by month
Unit: pcs
