CME Group launches lithium carbonate futures in response to industry demand

US-based derivatives marketplace CME Group Inc. launched a new futures contract for lithium carbonate on July 17, in a move intended to respond to growing industry demand for the chemical, a company leader told S&P Global Commodity Insights.

The futures contract is based on assessments from pricing agency FastMarkets Ltd., and it joins a growing list of lithium contracts that experts have said could boost transparency and investment within a traditionally opaque industry.

Lithium carbonate demand is expected to surge as sales of the electric vehicles with lithium-based batteries accelerate. Global lithium carbonate demand for plug-in EVs is expected to jump by 135% between 2023 and 2027 to reach approximately 1.5 million metric tons, according to a June 27 research report by Commodity Insights analyst Alice Yu.

Although both lithium carbonate and lithium hydroxide are used in EV batteries, lithium hydroxide is typically more expensive to refine since it can require additional processing. It is also favored for energy-dense nickel-manganese-cobalt batteries, whereas lithium carbonate is more common in increasingly popular, shorter-range lithium-iron-phosphate batteries.

CME Group launched a lithium hydroxide futures contract in May 2021. The London Metal Exchange started its own cash-settled lithium hydroxide futures contract shortly after, in July 2021. China-based Guangzhou Futures Exchange is expected to open a lithium carbonate futures contract on July 21.

The decision to launch a lithium carbonate futures contract came in part due to feedback from industry members about expectations for continued lithium carbonate demand, said Jin Chang, managing director and global head of metals at CME Group.

"It really is a critical role for us as an exchange leader to come up with the right mechanism for the industry to help its long-term growth and to provide more transparency and a price risk management tool," said Chang. "Our rationale for launching the lithium carbonate [contract] now is the industry has told us that they firmly believe that lithium hydroxide is where the future of the demand is going to go, but right now the main demand really resides with the lithium carbonate."

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