Lithium Carbonate and Hydroxide Prices Surged to New Highs! Lithium Futures Contract on Track for Official Launching!

SHANGHAI, Sep 28 (SMM) - Since the average spot price of battery-grade lithium carbonate refreshed the previous high for the first time on September 23 at 504,500 yuan/t, the spot price remained stable briefly for one trading day and then rose again. As of September 27, the spot price of domestic battery-grade lithium carbonate rose to 502,000-512,000 yuan/mt, with an average of 507,000 yuan/mt, an increase of 2,500 yuan/mt in a single day and a new record high.

On the fundamentals, according to a recent survey by SMM, major upstream lithium carbonate manufacturers rarely quoted recently, but the existing quotation has once surged to about 530,000 yuan/mt. It is expected that after the leading manufacturers finish delivering the long-term orders, the quotation in the spot market will rise slightly further. The production of upstream lithium salt smelters has been stable, but the spot sales sentiment has been relatively animated. Slower production of the salt lake system have further fuelled the price of industrial-grade lithium carbonate.

In terms of downstream players, the material factories are now in the cycle of month-end restocking, and the transaction price has risen amid robust purchases. The average price of imported lithium carbonate in August added 14% compared with the previous month, and it is expected that the price will continue to rise in September.

In terms of lithium hydroxide, on September 27, the spot price of domestic battery-grade lithium hydroxide also rose along with lithium carbonate to 490,000-503,000 yuan/mt, an increase of 2,000 yuan/mt with an average of 496,500 yuan/mt, a new high since SMM recording.

According to SMM research, domestic material factories are preparing for the production in October recently, especially in light of more orders for high-nickel materials. With the elimination of negative factors such as power rationing and maintenance, the production resumed to normal levels. At present, the quotation offered by domestic lithium hydroxide smelters is around 489,000-500,000 yuan/mt, and the growth is slightly slower than that of lithium carbonate.

In addition, the spot price of LiPF has also been raised by 1,000 yuan/mt on September 27 to 263,000-268,000 yuan/mt, with an average price of 265,500 yuan/mt.

According to the SMM survey, the prices of lithium carbonate, LiF and PCl₅, the raw materials for lithium LiPF, have all risen recently. In terms of PCl₅, due to the safety accidents and relocation of some manufacturers, the supply has been tight, fuelling the price hike with a level of 25,000-26,000 yuan/mt at present. And LiF price is also shored up by the high price of lithium carbonate as well as the tight supply to nearly 850,000-860,000 yuan/mt.

On the news, on September 26, the Singapore Exchange launched two lithium and two cobalt contracts. This behaviour also made the Singapore Exchange the third in the world after the London Metal Exchange and the Chicago Mercantile Exchange that lists lithium futures contracts.

It is reported that the Singapore Exchange will launch four contracts, namely battery-grade lithium carbonate, battery-grade lithium hydroxide, cobalt metal and cobalt hydroxide. In terms of listing period, the Exchange will list cobalt futures and cobalt swap contracts for 36 contract months starting from the October contract in 2022, as well as lithium futures and lithium swap contracts for 24 contract months.

Stimulated by the rapid rise in the spot price of lithium carbonate, the topic of "lithium futures" has been frequently mentioned. It was reported as early as on August 1 that Guangzhou Futures Exchange planned to complete institutional research on the design of lithium carbonate futures contract rules and delivery standards this year, and promote the listing as soon as possible. Referring to the design ideas of its lithium carbonate futures, Guo Chenguang, senior executive manager of the Commodities Division of the Guangzhou Futures Exchange, introduced that the lithium carbonate futures launched this time will take battery-grade lithium carbonate as the benchmark deliverable product, and industrial-grade lithium carbonate as the alternative deliverable product .

It is worth mentioning that in the high-end interview panel of the 7th China International New Energy Conference in 2022, Lin Hongfu, executive vice president of Zijin Mining Group, said that lithium carbonate will be in huge demand in the future, and it will be one of the important commodities, and the total value has even exceeded that of lead and zinc combined, Lithium carbonate is expected to achieve a value level second only to copper in the future. However, the processing industry is currently facing the risk posed by huge fluctuations in lithium carbonate prices. If there are no relevant hedging tools and measures, the business risk of the enterprise is extremely high, which is equivalent to the collective gamble of processing enterprises with the absence of hedging strategies. Once the price falls sharply, the processors holding lithium stocks will be at great risk. The most urgent thing during the launching of futures contract for the industry is to formulate quality standards for lithium carbonate as soon as possible. At the same time, it is necessary to choose the right time to launch the derivatives, that is, not to launch derivatives when the lithium carbonate is overheated to prevent aggravating market volatility.