London — The London Metal Exchange on Tuesday said it has set up a lithium committee made up of key market participants ahead of the potential launch of a lithium contract.
The LME is looking to launch a futures contract it argues will bring price transparency to the lithium market. So far, there has been significant pushback from the industry as it views lithium as a chemical, not a commodity.
The topic was aired regularly during the annual LME Week gathering in London this week.
One fund manager said that regardless of whether the material is a commodity or a chemical, the market still needs a transparent pricing mechanism.
The LME agreed, saying in a statement Tuesday, "as the lithium market grows, there is considerable demand for trusted and transparent prices and a liquid derivatives market."
Over the past two years, the LME has been engaging with the lithium market as it prepared for the launch of a lithium futures contract, "which will support the growing demand for price risk management solutions for battery metals."
The committee will represent the interests and views of stakeholders of the lithium industry, the LME said. Members include Tesla, BASF and Jaguar Land Rover.
For much of 2019, the lithium price has been plunging because of a perceived supply glut. However, opinion is divided on whether that stockpile is battery grade or a lesser quality material.
S&P Global Platts assessed lithium carbonate $400/mt lower week on week at $9,500/mt Friday, while lithium hydroxide fell $200/mt to $11,500/mt.
Producer Ablemarle, another LME lithium committee member, said in a statement it expects lithium prices to keep falling in 2020.
-- Ben Kilbey, ben.kilbey@spglobal.com
-- Edited by Keiron Greenhalgh, keiron.greenhalgh@spglobal.com