China to launch second lithium futures this year in push for more pricing power

China aims to launch its second lithium futures contracts by the end of this year, sources said, in a push to expand hedging tools for its vast electric vehicle battery supply chain and gain more global pricing power over the battery metal.

The Guangzhou Futures Exchange is working on the launch of lithium hydroxide futures, said two sources with knowledge of the matter, complementing the existing lithium hedging tool and challenging rival bourses.

The new lithium futures could debut in October, one of the sources said, while the other said it will likely be listed in the fourth quarter.

Both sources requested anonymity as they were not authorized to speak to media.

The Guangzhou bourse has offered lithium carbonate futures since July 2023, opening trading to overseas investors earlier this month as part of Beijing’s efforts to exert greater influence over global commodities pricing.

For lithium hydroxide, however, the US COMEX’s cash-settled futures are still widely seen as the international benchmark.

While lithium carbonate and hydroxide are both used in electric vehicles, the latter is typically used to make nickel-cobalt-manganese (NCM) and nickel-cobalt-aluminum batteries for premium long-range EVs.

GFEX did not respond to an emailed request for comment outside normal business hours.

Chinese lithium producers Chengxin Lithium and Yahua Group are preparing to apply to become lithium hydroxide delivery warehouses for the Guangzhou exchange, according to exchange filings published in June.

These moves suggested that preparation works for launching the new lithium futures are progressing well, analysts said, also on condition of anonymity.

Yahua’s marketing director, Kevin Zhou, said his company also wanted to list its lithium hydroxide as a brand deliverable on the Guangzhou exchange.

(By Tom Daly; Editing by Mark Potter)