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The Tesla 3 continues to make inroads into
the traditional combustion engine market

The LME is working on implementing a cash-settled lithium contract
supply will be adequate
or oversupplied and what
reasonable range of price
is, most banks are going
to avoid lithium.”
A possible solution to
this impasse could be
emerging. In August, the
London Metals Exchange
selected Fastmarkets as
the preferred price report-
ing agency to provide a
lithium price for a proposed
cash-settled lithium futures
contract to be traded on
the LME.
Robin Martin, LME Head
of Market Development,
told Paydirt the LME’s
experience with other bat-
tery minerals had led it to
investigate the possibility
of creating a lithium trading because they can’t link future production introducing some much-needed transpar-
platform. to end-to-end pricing and financiers can’t ency into the market.”
“We were already active mitigate risk,” Martin explained. “The big The LME hasn’t set deadlines for the
in the EV space through car manufacturers are also finding their launch of the lithium contract but Martin
nickel and cobalt and it input sourcing is compromised because said the technical aspects would be ready
became clear there was a of the volatility in lithium prices. If they can in 2020.
growing appetite for a risk control price risk more effectively, they’ll
management vehicle for be much happier. “In partnership with Fastmarkets we aim
lithium,” Martin said. “We “It goes all the way through to countries to drive the industrywide adoption to their
started discussions with in- not being able to maximise their tax take lithium carbonate and lithium hydroxide
dustry partners – car man- because producers are paying tax on of- prices, eventually opening the door to a
ufacturers, battery suppli- ten arbitrary prices. Some governments cash-settled contract. The settled price
ers, miners, etc. and it was believe exports are being under-priced.” will be the monthly average of the Fast-
clear there was growing To inform the process, the LME has markets price,” Martin said.
appetite for a cash-settled lithium futures formed a lithium committee, including the “Once the technical side is ready the
contract.” likes of BASF, Tesla and Jaguar Land Rov- committee will then look at what the timing
Martin said stakeholders on all sides of er as well as miners such as Albemarle will look like which will be subject to market
the supply/demand chain were eager to and Australian junior Pilbara Minerals Ltd. readiness.”
bring more transparency to lithium pricing. “They’ve all taken a real interest in the Martin pointed to the example of other
“As it is a fairly nascent and small market topic,” Martin said. “The introduction of the metals on both the LME and elsewhere
with an historic absence of a universally lithium futures contract would mean eve- of how a cash-settled contract could be
recognised reference price, junior lithium ryone is linked to a reference price, thus adopted in the market.
miners can find it difficult to get financing “Iron ore is an interesting precedent, as
is aluminium,” he said. “Everyone accepts
trading of aluminium, but it took a lot of
years from the 70s onwards to develop the
liquidity and shift pricing on exchange.
“We also launched the steel scrap and
rebar contracts in 2015 and they are grow-
ing healthily but still have a long way to go.
It’ll undoubtedly take time, but we want
to work with the lithium industry to drive
change.
“The market has to be supported by risk
management; it will lead to better financ-
ing and growth and we think it is healthy
for the lithium market’s development. Over
5-10 years, it is going to be an exciting
growth sector and we are keen to continue
engaging with market participants.”
– Dominic Piper

Joe Lowry
aUSTRaLIa’S PaYDIRT FeBRUaRY 2020 Page 29