FXTM information and reviews
FXTM
93%
IronFX information and reviews
IronFX
92%
Libertex information and reviews
Libertex
91%
FXCC information and reviews
FXCC
90%
Markets.com information and reviews
Markets.com
89%
FxPro information and reviews
FxPro
88%
EUR/USD
1.1724
BTC/USD
42 303.99
GBP/USD
1.3654
USD/JPY
109.5515
USD/CHF
0.9242
USD/CAD
1.2784
EUR/JPY
128.4327

How markets are looking at lithium


19 August 2021

Lithium has many properties destined to a wide range of applications. It is the lightest metal on Earth and has a great electrochemical potential. Its energy density is twice as high as the closest alternative, an ideal candidate for energy storage. Indeed, this component has become unavoidable in the production of batteries for electric vehicles and faces a growing demand.

The strong growth in the production of batteries by major players in the sector, such as LG Chem, Panasonic (in association with the car manufacturer Tesla), BYD or Foxconn is expected to fuel market growth in electric vehicles. The growth in electric car production would drive lithium demand from 50,000 to 200,000 tonnes of lithium carbonate equivalent (LCE) per year.

Markets are on the ball

In June this year the London Metal Exchange (LME) started offering futures contracts (a futures contract is an agreement to buy or sell a particular commodity asset at a predetermined price and time in the future) on this white metal. One further sign of growing importance of this component that is essential to electric vehicle batteries.

With the rise of clean cars, the demand for lithium has jumped since 2020.

And in particular the demand in lithium hydroxide, of better quality, which used to manufacture batteries offering the longest autonomy. The prices for this metal increased by a staggering 86% in China – the largest electric vehicle producer – since the beginning of the year. And the needs grow sevenfold by 2030 according to Benchmark Mineral Intelligence, one of the main analysts in this area

More transparency on prices

With the creation of a futures contract on this metal, the LME has contributed to making it a conventional commodity. The lithium market, however, is still quite opaque. Contracts are negotiated via over-the-counter agreements between manufacturers, mainly established in China, Japan and South Korea, and producers, with the four leaders being Albemarle (United States) SQM (Chile), FMC (United States) and Talison (Australia) controlling about 85% of the global lithium production.

These commercial contracts relate to long periods, annual or semi-annual. The Chicago Mercantile Exchange (CME) had already opened up the way early May, by launching its own lithium futures contracts. The LME was working for three years on the project, and throwing itself in the competition is something that should contribute to greater transparency on prices and a formalisation of the commodity’s trading.

“There is no benchmark price in contracts, not one price you can google. The CME and LME are trying to create a benchmark traded price, very much like what happened in the oil market in the 70s.” explains Financial Times metals and mining correspondent Henry Sanderson.

So far, the reference prices on which contracts were based were provided by specialized companies, such as Benchmark Mineral Intelligence, S&P Global Platts or Fastmarkets. But with listed futures contracts, it will be easier for business to anticipate the evolution of prices, and to hedge against possible price increases, those of lithium being very volatile. Such contracts could also attract investors wishing to strengthen their exposure to this sector in full growth and in turn allow the development of new production projects.

A future bet?

Lithium is currently the only metal to experience a dynamic market, with demand prospects and favourable prices. Growth in lithium production will involve the emergence of new players, probably mostly installed in stock-rich Argentina and using more innovation to produce battery-quality lithium and in a more environmental-friendly way. Whether carmakers use this contract to hedge against price risk or investors trust this commodity remain open questions.

#source

Related

Stock Futures Trade Sharply Lower
Stock Futures Trade Sharply Lower

Futures in the United States and in Europe are trading sharply lower as investors worry about the domino effect of Evergrande’s massive plunge on the Chinese property market..

21 Sep 2021

Oil market: the unbalanced demand and supply
Oil market: the unbalanced demand and supply

Oil prices climbed to higher grounds in the most recent daily sessions adding further to its upward momentum formed so far in September. The Oil market is running...

21 Sep 2021

US Markets lost major support, Asian Indices are melting
US Markets lost major support, Asian Indices are melting

Global markets closed last week on the back foot, and no significant positive factors emerged in Asian trading, increasing the flight to safety. The Hang Seng lost...

20 Sep 2021

US Retail sales and other data has supported Dollar
US Retail sales and other data has supported Dollar

The US Retail sales notably exceeded expectations, adding 0.7% in August vs an expected 0.7% decline. The increase to August last year is an impressive 14.9%...

17 Sep 2021

Geopolitics Fire Up Up and Cryptos Are Booming
Geopolitics Fire Up Up and Cryptos Are Booming

Futures in the United States and Europe are trading lower today as investors are worried about the new security agreement between the U.S., the U.K. and Australia...

16 Sep 2021

UK inflation surges, stocks struggle
UK inflation surges, stocks struggle

European markets flat at the open this morning as UK inflation surged to a record high in August and Chinese economic data was soft. China’s retail sales fell to...

15 Sep 2021


Editors' Picks

OctaFX information and reviews
OctaFX
86%
HotForex information and reviews
HotForex
85%
XM information and reviews
XM
80%
FXCM information and reviews
FXCM
79%
Vantage FX information and reviews
Vantage FX
78%
Moneta Markets information and reviews
Moneta Markets
77%

© 2006-2021 Forex-Ratings.com

The usage of this website constitutes acceptance of the following legal information.
Any contracts of financial instruments offered to conclude bear high risks and may result in the full loss of the deposited funds. Prior to making transactions one should get acquainted with the risks to which they relate. All the information featured on the website (reviews, brokers' news, comments, analysis, quotes, forecasts or other information materials provided by Forex Ratings, as well as information provided by the partners), including graphical information about the forex companies, brokers and dealing desks, is intended solely for informational purposes, is not a means of advertising them, and doesn't imply direct instructions for investing. Forex Ratings shall not be liable for any loss, including unlimited loss of funds, which may arise directly or indirectly from the usage of this information. The editorial staff of the website does not bear any responsibility whatsoever for the content of the comments or reviews made by the site users about the forex companies. The entire responsibility for the contents rests with the commentators. Reprint of the materials is available only with the permission of the editorial staff.
We use cookies to improve your experience and to make your stay with us more comfortable. By using Forex-Ratings.com website you agree to the cookies policy.