Until recently, the lithium space was mostly characterized
by a notably small number of intermediaries and relied mainly
on direct seller-buyer interactions. But the surge in the
prices of lithium compounds, as well as the expected growth in
demand across the lithium complex in the coming years, are
creating new opportunities for intermediaries.
This has been particularly evident in the domestic
Chinese market, where spot liquidity has historically been more
relevant than in other regions, with an established and active
Market prices surged last year following the
multi-year lows of 2020 – the commodity entered a new
bullish cycle supported by high demand for electric vehicle
(EV) batteries. This supported a price uptrend across the
lithium complex, including technical grades, battery grades and
spodumene concentrate feedstock.
Fastmarkets’ price assessment for lithium
carbonate 99.5% Li2CO3 min, battery grade, spot prices cif
China, Japan & Korea, was $44-47 per kg on January 27 this
year, rising by 574% from $6.00-7.50 per kg in January
The assessment for lithium hydroxide monohydrate
LiOH.H2O 56.5% LiOH min, battery grade, spot price cif China,
Japan & Korea, was $41-43 per kg on January 27, an increase
of 366% at the mid-point from $8.50-9.50 per kg a year earlier.
The rally was triggered by a rapid change in direction in
Chinese domestic lithium prices.
The fast-paced growth of the market, together with
underlying demand trends, led to carbonate overtaking hydroxide
and trading at a premium. The growth story also highlights a
market where traders can identify new business
This has been particularly noticeable in the carbonate
market due to its larger share of the total lithium market
(carbonate accounted for about 65% of total lithium production
in 2021) compared with a smaller, but growing, hydroxide market
(32% of total production in 2021, with other lithium salts
making up about 3%).
In previous years, the few intermediaries active in
lithium used to limit themselves to handling spodumene. But
with the entire complex poised for strong growth, commodity
traders are increasingly interested in the downstream lithium
Carbonate has fewer logistics complexities than
hydroxide, sources in China acknowledge; this allows for it to
be easily interchangeable among participants across the supply
chain. Additionally, the booming carbonate market in China also
led to material with low-grade specifications entering the
battery supply chain for certain entry-level
In the market environment outlined, this means lithium
carbonate as a product lends itself better to the intermediary
activity of traders than hydroxide. This, however, is set to
evolve while battery demand expands outside of China, where
different battery chemistries and OEM strategies are likely to
prompt growth of the overall size of the hydroxide
The increased presence of traders in lithium is one
element in the "commoditization" narrative that was a topic
debated a few years ago – market participants and
observers were split between those who considered lithium a
pure speciality chemical or a commodity. While the industry has
since moved on, that debate remains relevant to understanding
the sector today and its continuing evolution.
The lithium market’s strong demand growth
prompted a tightening of product specifications and brought
about increasingly strict quality parameters in response to
requirements by large consumers, such as OEMs. Supply of new
compounds was established with those higher quality parameters
- in effect, enforcing a new standard.
In carbonate, that led to units being more homogenized
in terms of product quality, making them more interchangeable
across the market, with consumers less tied to one
While the sector may continue to be considered a
speciality chemicals business overall (including the
speciality, non-battery grade applications), some components of
the market have increasingly behaved like other commodities.
Lithium carbonate has moved in this direction, attracting
commodity specialists such as traders.
"When a market is growing rapidly, when consumers are
scrambling for material and prices are all over the place, then
opportunities for traders emerge," William Adams, head of
battery materials research at Fastmarkets, said. Some market
participants suggest the involvement of traders has partially
contributed to this year’s price rally in lithium
in the domestic Chinese market, which eventually filtered
through to other regions.
"Through the past year this has been happening: there
were traders withholding stocks and then releasing it to the
market," one converter source said, adding that the current
tightness means that strategy is now less evident. "Most of the
traders that I work with have limited stocks on hand now," he
"Commercial arms of big producers" rather than fully
established traders have become more active in the past year,
especially in China, a Europe-based trader suggested. "I
don’t think traders have been squeezing the market
in China but [rather] big producers have been holding
inventories [to support price growth]," he said.
Traders’ engagement in lithium is showing
instances of direct involvement with new projects, providing
expertise and trade finance.
In December, Traxys and start-up European Lithium said
they will cooperate to develop the Wolfsberg Lithium Project in
Austria, where the junior is seeking to set up a lithium
hydroxide operation by the end of 2023.
Around the same time, Traxys also signed a multi-year
offtake agreement with Canada-headquartered junior miner
Lepidico. The trader will provide sales, marketing, logistics
and trade finance services for 100% of the initial phase of the
company’s lithium hydroxide production, which is
expected to come online in 2023.
The development of financial instruments such as
derivative futures contracts, which have been launched by
several commodity exchanges to provide tools to participants in
the battery raw materials supply chain, to manage price risk,
will also benefit traders.
The Singapore Exchange (SGX) is looking to launch four
futures contracts – for cobalt metal, cobalt
hydroxide, lithium carbonate and lithium hydroxide –
in the first half of 2022 to provide new hedging instruments
for market participants involved in energy transition, it said
earlier this year.
"The combination of fast-moving prices, concern about
supply and the emergence of traders," Adams said, "is likely to
increase the need for risk management tools such as