China's Wuxi exchange plans to launch lithium contract as soon as July: sources

[SHANGHAI] China's Wuxi Stainless Steel Exchange plans to launch a lithium contract as soon as July in response to strong market demand to trade the metal used in electric vehicle batteries, according to two sources with knowledge of the matter and a draft document.

The yuan-denominated contract will be for battery-grade lithium carbonate, the draft announcement reviewed by Reuters showed.

The document did not give a date for the launch, but one of the sources said trading - which can be done on a spot or forward basis - would start around July, while the second said it would be in July or "August at the latest".

Both sources declined to be named as the information was not public. The Wuxi bourse had no immediate comment on Monday.

A launch any time in 2021 would likely make this the first exchange-traded lithium contract in China, the world's biggest electric vehicle market, allowing lithium producers and consumers to manage price exposure.

In the United States, CME Group Inc launched a futures contract for lithium hydroxide - a chemical favoured in nickel-rich batteries - last month, while the London Metal Exchange plans to roll out its own hydroxide futures on July 19.

Located in Jiangsu province around 120 km (75 miles) west of Shanghai, the Wuxi exchange already trades nickel and cobalt, and serves as a reference point for domestic transactions.

It is pursuing the lithium contract after requests from "numerous traders", taking into account the "production and trading needs" of relevant enterprises, the draft said.

Lithium carbonate prices in China have shot up more than 67 per cent in 2021 on resurgent demand after a three-year downturn, and are currently assessed by Asian Metal AM-995C-LTCB at 88,000 yuan (S$18,215) per tonne.

According to the document, prices on the Wuxi contract will be quoted in yuan per kg, with the trading limit - or how much prices can fluctuate either way during a day's trade - initially set at 10 per cent.

BLOOMBERG