The contracts’ first yr has not been with out drama — buying and selling limits needed to be raised a few occasions late final yr to deal with worth spikes — however the persistent downturn in costs for lithium carbonate, a semi-processed type of the electrical automobile battery ingredient, has helped juice volumes. Spot costs are down nearly 90% from a peak in late 2022, as a provide glut coincides a slower-than-expected progress in EV demand.
“The pickup in hedging exercise is principally due to the extended worth hunch,” mentioned Zhang Weixin, an analyst at China Futures Co. “Because the futures market in Guangzhou grew to become extra mature and steady, producers are discovering hedging efficient in countering the downturn dangers.”
The buying and selling quantity of lithium futures in Guangzhou was greater than 9 occasions increased in July than after they had been launched a yr earlier. The sturdy exercise helps to attain China’s aim of creating the nation a price-maker somewhat than taker in commodities important to the vitality transition. The alternate additionally hosts buying and selling of futures for industrial silicon, and has plans to listing contracts for lithium hydroxide, palladium and platinum.
China accounts for about 70% of the world’s lithium refining capability, knowledge from BloombergNEF present, however the nation imported nearly 60% of its uncooked lithium wants final yr, in accordance with the China Nonferrous Metals Trade Affiliation. That makes firms there extra weak to cost volatility and geopolitical dangers.
Ganfeng mentioned it put 38 million yuan ($5.4 million) into futures buying and selling within the first half ,and made a revenue of three.43 million yuan. Sichuan Yahua is amongst corporations that began hedging this yr, saying the transfer was “to regulate the affect of product costs on firm income.”
One other main Chinese language lithium producer, Tianqi Lithium Corp., mentioned it hadn’t engaged in hedging but, however is organising a group to take action. Tianqi needs to keep away from dangers brought on by worth fluctuations on its operations by “successfully combining futures and spot transactions,” it mentioned.
(By Annie Lee)