China’s path-setting lithium futures tumble on trading debut

Battery production factory. (Image courtesy of Ganfeng Lithium.)

China’s first futures for lithium — an essential ingredient for electric-vehicle batteries — had a rocky start in their first day of trading.

Lithium carbonate on the Guangzhou Futures Exchange fell below the base settlement price of 246,000 yuan ($34,263) a ton on Friday, data from the bourse showed. Contracts for January delivery plunged to as low as 214,150 yuan, before paring losses to close 13% lower. Those for February to July sank by the first-day limit of 14%. A total of 65,439 lots were traded.

The new contracts may help to provide more transparent lithium pricing, reduce volatility in spot prices, and give producers and buyers more effective ways to hedge risk. Tesla Inc. Chief Executive Officer Elon Musk described last year’s surge in prices for the metal that’s key to the clean-energy transition as “insane,” but has since noted its pullback.

The fact that the new futures are for next year may have contributed to the price drop, according to Shirley Wang, general manager of industry research at Shanghai Metals Market. “Sentiment is now tempered by an anticipated surplus for lithium products in 2024,” she said.

Lithium producers’ stock prices in China also had a tough day. Shares in Tianqi Lithium Corp., YongXing Special Materials Technology Co., and Ganfeng Lithium Group Co., slid to the lowest in at least a year on Friday.

Spot prices of lithium carbonate — a refined form of the metal — have been on a wild ride. They surged to a record in November as a global push toward an electrified transport fleet fired up consumption, before plunging this year as supply pressures eased.

Battery manufacturers and carmakers around the world are still scrambling to secure offtake or expansion deals to lock in raw-material supplies. Western nations are also stepping up efforts to build their own supply chain with allies, as China still dominates processing and is a significant producer.

“The lithium and battery sector would like to have a more representative and credible futures” market in China, said Dennis Ip, an analyst at Daiwa Capital Markets.


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