Trading of CME Group Inc.’s nearly three-year-old lithium hydroxide futures contract is soaring, with more funds crowding into the budding market as prices of the battery metal falter.
This year’s growth in open interest builds on the robust liquidity of 2023, which was driven by the arbitrage trade between China and the US. The Asian nationThe surge in open interest is a positive sign that the market is gradually maturing for the lithium industry, which is still evolving compared to other metals such as copper and aluminum.
The increasing liquidity of CME’s lithium hydroxide contract is a bright spot in an industry that has been facing headwinds. Prices of the white, silvery metal are down more than 80% from the record high in November 2022 as the market whiplashed from shortage fears to a mountain of surplus inventories. The price collapse has created havoc among producers, with stalled projects, scrapped deals and output cuts.
The rise in open interest gives “assurance” to funds and financial participants that they can trade the contract fairly easily, moving in and out of positions if price direction moves against them, said Leon Hoffmann, a broker at SCB Environmental Markets in Switzerland, adding that more Asia-based funds are trading the CME contract this year. “We also see funds that are active in metals now adding lithium to their suite of trade.
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Source: CoinDesk - 🏆 291. / 63 Read more »