Metals Update

Lithium prices have fallen by over 50% since the start of 2023. Poor consumer demand for EVs has resulted in a weak Chinese battery market and from what we are hearing, many Chinese lithium processors and refiners have reduced or stopped production as a result. Market participants maintain a bearish outlook on lithium prices for the first quarter of next year, due to weak consumer demand. The long term view is also bearish due to new Lithium production capacities coming online in the next 1-2 years.

Cobalt has been following a similar path to Lithium with weak demand and plentiful supply adding to the downward pressure for the coming year. The Cobalt Salt (sulfate) market has been weaker than the Metal market so some salt refiners have switched over to producing Metal which seems to be only compounding the weakness.

The Futures market for both Lithium and Cobalt remains active and continues to attract new participants. This week, Lithium and Cobalt options launched on the CME and SSY brokered the first ever Lithium Options trade. The option, which covered exposure to higher pricing in Q1 of 2024 was arranged between two participants in the Lithium Hydroxide futures market, one of which was a European bank.

The rapid development of options trading in the Battery Materials market evidences the importance participants are placing in this dynamic and volatile market by managing their risk exposure via industry benchmark pricing mechanisms.

We look forward to the continued growth in this exciting market.

By Ben Taylor, Partner, Derivatives, SSY