Metals Update

Lithium:

Last year, Lithium Hydroxide prices fell drastically from ~70 down to ~15. This was mainly caused by a depressed demand in a troubled macro environment and magnified by an increase of supply due to previous higher prices.

Going forward it will be interesting to see which part the IRA plays to dictate price action – will this cause bottlenecks for material exports or will operations be set up overseas?

CME LTH OI has certainly grown exponentially in the midst of uncertainty to ~14500 which should attract more participants in 2024. The contango on the CME Hydroxide forward curves vs FM spot has enticed sellers nearer by, focusing mainly on Q224 and Q324 and this selling is being absorbed by the consumers as their hedging programmes gain momentum.

Aluminium:

Aluminium volatility spiked towards the end of 2023 and we saw a rally across the LME and the Premium markets. This was initially sparked by a UK sanction regarding UK individuals trading Russian Aluminium. This uncertainty was then exacerbated by a rally in the Alumina price alongside pirates targeting container ships in the Red Sea.

As the price rallied, we saw a surge of producer hedging emerge which has seemingly capped any further hedging for the time being. However, given the lingering headwinds regarding supply, many are predicting an interesting year ahead.

By Mike Day, Senior Director, Derivatives and Jake Constable, Broker, Derivatives.