The rising global demand for lithium metal batteries is exceeding production capacity, posing a challenge to industry growth. Despite its significant potential, the sector is struggling to source enough lithium metal for battery manufacturing.
In 2024, if all available lithium metal were allocated to battery production, it could support cell production ranging from 5 to 10 gigawatt-hours (GWh). However, a considerable amount of lithium metal is being directed to other industries, resulting in a supply shortfall this year. This deficit is expected to increase from nearly 10 GWh in 2024 to approximately 60 GWh by 2026.
As the disparity between supply and demand continues to grow annually, we delve into a comprehensive analysis of market projections for the remainder of this year.
Read more on our previous coverage on the 2024 Outlook: GFEX and SGX Lithium Carbonate Futures.
Supply and Demand Deficit
The rapid growth in the demand for lithium metal batteries is the primary cause for the increasing deficit in the lithium market. Developers are shifting focus from cell development to pilot production, which is boosting the demand for lithium metal.
Lithium chloride, the precursor to lithium metal, is obtained either directly from brine or through the conversion of lithium carbonate. However, most brine resources have unsuitable impurity profiles, and converting lithium carbonate entails substantial capital expenses.
Next-generation lithium metal batteries require thinner lithium metal foils for the anode, presenting a challenge to conventional production methods. Overcoming this technical obstacle is vital for the expansion of the industry, prompting companies to explore innovative strategies to tackle this issue.
Despite these challenges, trading of the metal on CME Group Inc. is seeing a notable increase, attracting greater attention from funds amidst declining prices of battery metals.
During the first quarter, the contract witnessed a significant rise in open interest, reaching a record high of 24,328 contracts extending to September 2025. This surge in open interest signifies a substantial enhancement in liquidity within the contract, indicating a growing and more mature market for the lithium industry.
Global Race for Market Dominance
China currently dominates global lithium metal production, accounting for over 90% of capacity in 2023. While certain companies globally are reducing output and expenditures in response to enhanced supply prospects and a deceleration in electric vehicle (EV) demand, Chinese firms are pursuing a divergent strategy. China eventually plans to double its production capacity over the next 3 to 5 years.
While China currently holds a dominant position in the market, the Indian government official has revealed that India is actively working to secure its access to essential minerals such as lithium. This initiative comes as India strives to compete with countries like China in the race to establish advanced energy supply chains for the future.
New Delhi is encouraging state-owned mining companies to explore mineral reserves in regions like South America and Africa and is also soliciting bids for the development of domestic mining sites. These efforts aim to bolster industries such as electric vehicles and renewable energy, where China currently holds a strong advantage.
India plans to allocate around half of its upcoming domestic exploration projects to vital minerals like graphite, molybdenum, nickel, cobalt, lithium, and potash. Additionally, the government intends to reveal the successful bidders from a November auction for 20 mining blocks next month. VL Kantha Rao, a secretary in India’s ministry of mines said that a second round tranche of 20-30 blocks would be offered to bidders after the general election, which will wrap up in early June.
Furthermore, India disclosed in January its acquisition of five lithium blocks in Argentina. Through its state-owned enterprise Khanij Bidesh India Ltd (Kabil), established in 2019 to ensure access to critical minerals, India signed a deal with Catamarca Minera y Energetica Sociedad del Estado (Camyen), owned by Argentina’s Catamarca province government.
Despite these efforts, India is a newcomer and currently holds a minor role in the global competition for critical mineral supplies, which has significant geopolitical implications as countries vie for resources essential to next-generation energy technologies. India has yet to significantly narrow the gap in securing mineral supplies compared to China, which has made substantial investments in countries like Indonesia, the world’s largest nickel producer.
Trading Lithium Futures on SGX
Apart from CME, traders have the option to engage in trading Lithium Carbonate Futures through the Singapore Exchange (SGX). SGX provides FM Lithium Carbonate CIF CJK (Battery Grade) LIC/LICF futures contracts, offering traders opportunities for price discovery and hedging in the lithium market. Traders can access SGX via Orient Futures Singapore, which holds membership with SGX, simplifying the process for traders to participate in futures and options trading on the exchange.
Aside from Lithium Carbonate Futures, SGX offers other Electric Vehicle (EV) Metals futures like SGX FM Lithium Hydroxide Futures CIF CJK (Battery Grade) Futures.
Benefits of trading with SGX include reduced counterparty risk through daily mark-to-market positions, comprehensive trading opportunities across various products, up to 21.5 hours of clearing, and secure trading facilitated by a reputable clearing house.
SGX operates with standard trading procedures, orders, and timing, ensuring efficient trading for traders.
In addition to Lithium Carbonate Futures, SGX also provides GIFT Nifty (formerly known as SGX Nifty 50 Index Futures), SGX USD CNH Futures, and more.
For further details on the advantages of trading with SGX, interested parties can refer to the official SGX website.
SGX FM Lithium Carbonate CIF CJK (Battery Grade) Futures Contract Specifications
The SGX Lithium Carbonate Futures contract follows the following specifications:
The contract size for Lithium Carbonate is 1,000kg multiplied by the Contract price, with a minimum price fluctuation of one-hundredth of a United States dollar, equivalent to ten United States dollars per Contract.
SGX Trading Hours are from Monday to Friday, at these trading hours:
7:10am - 8:00pm (T-session)
8.00.01pm - 5.15am (T+1 Session)
7:10 am – 8:00 pm (Last Trading Day)
Trading Surge Reveals Market Resilience
The increase in open interest follows a strong performance in 2023, largely driven by arbitrage trading between China and the US. Notably, China introduced its lithium carbonate contract on the Guangzhou Futures Exchange in July of the previous year, further boosting trading activity. This highlights the growing significance of lithium derivatives markets as essential tools for industry participants to manage price risks.
The growing liquidity in CME’s lithium hydroxide contract is a positive development for an industry grappling with challenges. Lithium prices have plummeted by over 80% from their peak in November 2022, mainly due to shifting market dynamics oscillating between concerns of shortages and the emergence of surplus inventories.
Despite industry challenges, the surge in open interest provides reassurance to funds and financial participants. It gives them confidence in their ability to trade the contract, allowing them to enter and exit positions as necessary, even amidst adverse price movements. Furthermore, more Asia-based funds are expressing interest in trading the CME contract this year, indicating the increasing appeal of lithium as an investment opportunity.
Additionally, the current market conditions, where lithium prices are in contango (futures prices higher than spot prices), present attractive opportunities for funds.
Start Trading With Orient Futures Singapore
Overseas Intermediary of Shanghai International Energy Exchange (INE), Dalian Commodity Exchange (DCE), and Zhengzhou Commodity Exchange (ZCE), when foreign clients participate in internationalised futures contracts in these Chinese markets with us, they have direct access to trading, clearing, and settlement. Our parent company, Shanghai Orient Futures, is the largest broker in terms of aggregated volume across the five regulated exchanges in China.
Orient Futures Singapore also currently holds memberships at the Singapore Exchange (SGX), Asia Pacific Exchange (APEX), and ICE Futures Singapore (ICE SG). Starting August 2023, corporate clients can also gain access to the B3 Exchange through us.
We provide bespoke services to our professional clients, tailored to their corporate and individual needs. Our team will be there for you 24 hours on trading days to provide a one-stop portal for all your trades, with simple processes and an intuitive user interface that has low or near-to-zero latency.
