CME Lithium Trading Hits Record High as Funds Rush Emerging Markets

(Bloomberg) - CME Group's nearly three-year trading volume in lithium hydroxide futures is soaring, as more money pours into the budding market as prices for the battery metal fall.

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According to the American exchange, a record 24,328 carriers were outstanding in the first quarter, and the useful life of the outstanding carriers was extended to September 2025-an indication of the increased liquidity in this nascent name. The number of futures changing hands in the quarter was close to the volume traded in all of last year. cME, one of the world's largest commodities exchanges, launched a name for lithium hydroxide, a chemical form of the battery metal, in May 2021, and the CME is the world's largest exchange for lithium hydroxide, a chemical form of the battery metal.

This year's growth in open carpet positions builds on strong liquidity in 2023, which is driven by arbitrage trading between China and the United States. In July last year, the Asian country launched a lithium carbonate carry on the Guangzhou Futures Exchange.

Compared to other metals such as copper and aluminum, the lithium industry is still in a developmental phase, and the surge in open carry is a positive sign that the market is maturing. A well-developed derivatives market is essential for commodities, as it allows producers, traders and end-users to hedge against fluctuations in the spot market. At the same time, hedge funds and other financial players can profit from trading on volatility and spreads.

As public interest continues to grow, "we expect more end-users and physical market participants to enter these markets," said Jin Hennig, global director of the Exchange Metals business at the Department of Arms, based in Chicago.

The increase in liquidity in CME's lithium hydroxide contracts is a bright spot in an industry that has been facing headwinds. Prices for the silver-white metal have fallen by more than 80% from their November 2022 record highs as the market has gone from fear of shortages to a mountain of excess inventory. The price collapse has wreaked havoc on producers, with projects stalled, deals canceled, and volumes reduced.

Read more China exchanges step up efforts to control lithium futures volatility

The fall in lithium prices put the market into a contango situation, where the futures price is higher than the spot price. This change created opportunities for the Fund.

Leon Hoffmann, a broker at SCB Environmental Markets in Switzerland, said the increase in open carry provides "reassurance" to funds and financiers that they can trade the carry relatively easily, taking positions when the price moves against them. out of their positions." We are also seeing funds active in metals now including lithium in their trading packages."

Lithium trading on the Chicago Mercantile Exchange is already on track to break last year's record. According to the exchange, the number of carriers exchanged in the first three months of the year reached 20,101, second only to the 20,307 traded in all of 2023.

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