China to open lithium futures to overseas traders next month

Thursday’s announcement follows the internationalisation in April of China’s main futures for another battery metal, nickel , on the Shanghai Futures Exchange. The lithium contract itself was launched domestically in July 2023.

China’s securities regulator had earmarked both contracts for internationalisation at the start of this year, as Beijing pushes ⁠wider use ‌of the yuan and seeks greater influence over commodity pricing.

Reference price

Overseas traders will be able to post US dollars ⁠as margin for the yuan-denominated lithium futures, subject to a 5 per cent haircut, the exchange said, meaning only 95 per cent of the posted dollar value will count as collateral.

Contracts for delivery from July onward, along with options based on them, will be open to foreign investors.

GFEX has rapidly emerged as a reference price for the lithium market, as China is the world’s biggest consumer of the battery ‌metal and home to two major producers, Ganfeng Lithium and Tianqi Lithium.

“Opening up the lithium carbonate contract not only strengthens (GFEX’s) role as a global pricing ⁠benchmark, but also finally gives international companies the ability to hedge their exposure directly in the world’s largest market,” said Tiger Shi, CEO of brokerage Bands Financial.

Bands is among overseas intermediaries that enable overseas investors to trade on GFEX.

The London Metal Exchange and the US COMEX exchange offer lithium hydroxide contracts based on Fastmarkets price assessments. COMEX also has a lithium carbonate contract.

Join the community of 2M+ industry professionals.

Subscribe to Newsletter to get latest insights & analysis in your inbox.

All about ETAuto industry right on your smartphone!

• Download the ETAuto App and get the Realtime updates and Save your favourite articles.