COLUMN-Lithium price tensions highlight need for an LME contract – by Andy Home (Reuters U.K. – November 8, 2018)

LONDON, Nov 8 (Reuters) – What’s the price of lithium, the “hot metal” at the heart of the electric vehicle (EV) revolution? The spot price in China has collapsed over the course of 2018 as the market absorbs a wave of supply, much of it from the new hard-rock mines that have come on stream in Australia.

Outside of China, however, the picture is very different with the price of lithium in bigger-volume contracts consolidating an upwards trend that has been running since 2015. The divergence shows how pricing lithium is still very much work in progress.

It also explains why the London Metal Exchange (LME) is looking to enter the fray with what would be the first exchange-traded lithium contract. The spot lithium carbonate market has collapsed from an average $26.18 per kilogram in December 2017 to $11.23 in October, according to Fastmarkets MB.

The spot price is purely a domestic Chinese one, reflecting an assessment of the price of lithium carbonate ex-works in China. China sits at the heart of the lithium market thanks to its aggressive build-out of both electric vehicle and battery-manufacturing capacity.

It is also where short-term supply and demand drivers have been playing out to negative price effect. Not only has Chinese domestic lithium brine production been running strong, the country is also the destination for the direct shipping ore coming from new Australian producers such as Galaxy Resources, Altura Mining and Pilbara Minerals.

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