Singapore Stock Exchange follows global rivals with launch of power metals futures

SINGAPORE – The Singapore Stock Exchange (SGX) is set to launch its first lithium and cobalt contracts, bolstering efforts by commodity exchanges to interest battery materials companies and investors in using forward contracts. term.

SGX is due to start trading two lithium contracts and two cobalt contracts on Monday. The London Metal Exchange and CME Group already offer futures contracts for both metals, although exchange liquidity is still far below established commodity contracts.

Demand for battery minerals is growing rapidly as the global auto industry accelerates the push toward electric vehicles (EVs), triggering sharp price swings. A global lithium price index has more than quadrupled in the past year, while China’s lithium carbonate just hit a new record high last week.

As unprecedented price spikes have prompted calls for greater price transparency, analysts have pointed to obstacles for contracts to gain traction – from the relative complexity of markets to a greater reliance on supply agreements terms that limit spot trading.

“In the case of lithium, lithium miners and processors often tie their volumes to long-term contracts,” said Leah Chen, analyst at S&P Global Commodity Insights. “Without the physical delivery of cargo, it will be a paper market and there may be a risk that it will fall into the speculative space without providing the security of cover.”

SGX is launching four contracts on Monday: lithium carbonate and battery-grade lithium hydroxide, as well as cobalt metal and cobalt hydroxide. Open interest on the CME and LME lithium hydroxide contracts was zero as of September 22.

As higher raw material prices drive up battery costs and threaten the pace of EV adoption, automakers and battery makers have tried to lock in future mineral supplies amid fears of growing shortages. . This includes off-take agreements and multi-year supply partnerships between upstream and downstream companies.

“The advantage of this over futures for miners is that it increasingly translates into direct equity investments in mining operations,” said Martin Jackson, principal analyst at CRU Group. “As long as this spot market remains the minority of traded material, liquidity will limit the potential for futures trading.” BLOOMBERG

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