Investing in lithium – a bet on the future?

Trade lithium futures contract

The London Metal Exchange put a new one in July 2021 Lithium futures contract on. Contrary to the assessment by Fastmarkets for lithium hydroxide, this is billed in battery quality. More specifically, at least 56.5 percent battery-grade lithium hydroxide. According to the experts, the contract is intended to help meet a growing need among original equipment manufacturers (OEMs) and improve risk management throughout the supply chain.

This contract should lead to more transparency in the market. Before that, prices were purely a matter of negotiation between producers and buyers. In many cases it was agreed not to disclose price agreements in supply contracts. Prices have varied by several thousand US dollars per ton in recent years. The futures contract also allows buyers to hedge against future price fluctuations.

Producers like Albermarle reject the contract in a statement. Among other things, this states that “the lithium market simply would not work in this way”. The refusal is not surprising, however, since the scope for setting prices for supply contracts could be significantly limited by the reference price of the contract. The LME is planning a cash settlement for maturing futures contracts. The reason for this is that a chemical composition and the different degrees of purity make physical delivery impossible.

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