The Singapore Exchange will launch the first lithium and cobalt futures contracts, which will further boost commodity trading and attract interest from battery companies and investors.
$SGX (S68.SG)$Trading in two lithium and two cobalt contracts will be launched on Monday, September 26, becoming the third exchange in the world to list lithium futures contracts after the London Metal Exchange (LME) and CME Group Inc (CME).
The Singapore Exchange will launch four contracts: battery-grade lithium carbonate and lithium hydroxide, as well as metal cobalt and cobalt hydroxide. As of Sept. 22, CME and LME Lithium hydroxide had zero open positions.
Martin Jackson, senior analyst at CRU Group, said:
"for miners, the advantage of futures contracts is that they can directly increase equity investment in the mining business."
In terms of listing period, starting from the contract of October 2022, it is planned to list cobalt futures and cobalt swaps for 36 contract months and lithium futures and lithium swaps for 24 contract months.
With the accelerated development of the global automotive industry to electric vehicles, the demand for battery minerals is expanding rapidly, leading to sharp fluctuations in battery mineral prices.
Rising raw material prices have pushed up battery costs and threatened the popularity of electric vehicles, as carmakers and battery makers have been trying to lock in future mineral supplies amid fears of worsening shortages. An index that measures the global price of lithium shows that it has more than tripled in the past year.
While the surge in prices has sparked calls for greater transparency in pricing, analysts say there are other obstacles to widespread trading of contracts.
Leah Chen, a commodities analyst at S&P Global Inc., said:
In the case of lithium, miners and lithium processors usually link their production to long-term contracts. If there is no physical delivery, it will be a 'paper transaction' and may fall into speculative space without providing hedging protection. "