FINANCE FORUM
PRICING CONCERNS DIVIDE
LITHIUM AND COBALT MARKETS
The London Metals Exchange is partnering with Fastmarkets to promote the lithium
industry’s transition to benchmark pricing, but not all producers are on board, writes
Danica Cullinane.
H
aving no benchmark price for lithium is causing issues for
investment in the sector, but the London Metal Exchange
(LME)’s plan to set a reference price for the white metal hasn’t
appeased everyone.
Last month, LME announced it is teaming up with Fastmarkets to promote
the industry’s transition to transparent and representative global pricing,
which it said will pave the way for the launch of a lithium futures contract.
However, some lithium producers are not impressed by the plan, believing
the metal is not a true commodity requiring a benchmark. The issue
shadows similar concerns raised a few years ago relating to using the LME as
a pricing reference for cobalt.
LME lithium contract
Despite the electric vehicle (EV) revolution sparking rapid development and
the subsequent growing demand for lithium, it differs from other EV-related
metals such as copper by having no current traded price. Producers currently
negotiate contracts with buyers under confidential deals, with growth in the
sector also clouded by oversupply concerns and mixed views on the best
way to track industry pricing.
“In recent years there has been
unprecedented price volatility in the
lithium market, driven particularly
by explosive electric vehicle battery
The move is expected to provide industry investors, customers, analysts and
executives with a full sense of the
global market and develop
risk-management tools for
the industry. “The fact
that there isn’t a
benchmark price
means that
some of
the banks haven’t been keen to get involved because they can’t hedge their
price risk,” Fastmarkets analyst, William Adams, told reporters.
Lithium-bearing pegmatites in Namibia.
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African Mining September 2019
www. africanmining.co.za