The last week – since China unveiled its hypocritical plan to ban petrol cars – has seen record inflows into Lithium-related funds.
Trading volumes have exploded higher and prices for LIT (the Lithium and Battery Tech ETF) are back to near 6 year highs.
Never one to miss out on an opportunity, LME is reportedly looking to introduce a contract for lithium (via Mining-Journal.com)…
While details were scarce on the ground, SP Angel expects that the contract would be tied to lithium carbonate concentrate, a major traded raw material for lithium processors and battery producers, and also possibly a contract for lithium hydroxide, a value added product preferred by some downstream consumers.
Both would likely have strict quality controls which might add to costs, SP Angel said.
When contacted by Mining Journal for comment on the possible contracts, a spokesperson for the LME said it had been approached by industry users regarding the introduction of an LME lithium contract and it was looking into this.
“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,” the spokesperson said.
Lithium prices have been on an uptrend recently thanks to increased demand for lithium-ion batteries.
European lithium carbonate/lithium hydroxide supplier Novo Lítio (AU:NLI), formerly Dakota Minerals, says demand forecasts for lithium carbonate equivalent (LCE) range from 550,000-600,000 tonnes per annum by 2025, up from 200,000tpa in 2016, mostly driven by an increase in lithium-ion battery uptake for storage solutions and electric vehicles.
To meet this demand, according to a May report by Roskill, an additional 370,000tpa of LCE production capacity is scheduled to come online by 2020, although it said not all is likely to be realised.
SP Angel said it welcomes the introduction of such contracts, which would help provide the industry a standardised benchmark to use, as opposed to the various short-term, long-term and region-specific prices currently quoted on the market.
It gave the example of lithium carbonate prices fluctuating between US$11-16 per kilogramme for large biannual contracts delivered into the US, while spot delivered into China was quoted at $17.4-22.8/kg in July/August, which it said highlights “the discrepancy in prices for differing contracts and locations.
“We hope the LME can get on and establish this contract ASAP to help better manage and stabilise the market,” it said.
As Climateer Investing notes, to date the only way to participate for non-industry punters has been through mining company equities, almost none of which offer pure-play exposure. Should exposure be what one desires. Our preference was cobalt for which the LME does have a futures contract and whose underlying supply vs. lithium is a bit tighter. As usual though, once you think you’ve found the key they go and change the lock, in this case after the 150% move higher the battery producers are getting very creative with ways to reduce per-battery use of cobalt.
Innovation and substitution: the commodity speculators enemy.