Futures Daily | Preliminary manifestation of lithium carbonate futures serving the real economy function
Aug,02,24
With the deepening of industrial cultivation,
the willingness and ability of industrial enterprises to use the futures market for risk management have significantly increased compared to the initial stage of listing.
Enterprises directly or indirectly participate in the lithium carbonate futures market through hedging, basis trading,
over-the-counter options, arbitrage trading, and other means, effectively playing the role of futures in serving the real economy.
The price discovery function is effectively utilized
Since the listing of lithium carbonate futures, the price discovery function has gradually emerged and has become a pricing "barometer" for industrial enterprises in spot trade.
Since the end of July last year, we have been closely monitoring the price of lithium carbonate futures, especially since the first quarter of this year.
The current price of lithium carbonate futures has gradually converged,
and many mining companies around us have calculated what price lithium ore should be sold at based on the price of lithium carbonate futures minus processing fees.
"A trader who has been engaged in lithium mining trade for a long time told reporters that as lithium carbonate futures are gradually recognized by industrial enterprises,
more and more domestic and foreign mining owners are using the lithium carbonate futures price of Guangqi Exchange as an important reference for conducting spot trading.
It is understood that lithium carbonate trade is mainly based on individual orders, with loose trade accounting for 70% to 80%, and there is a high risk of price fluctuations.
Previously, due to the lack of transparency in lithium salt market quotations,
companies could only refer to comprehensive platforms such as spot websites and professional institutions to observe price trends.
However, the sources and statistical methods of price collection vary among different institutions, and prices lack fairness and timeliness.
The quotation data of some platforms even only refer to the quotations of small traders with a trade volume of tens of thousands of tons,
and cannot represent those enterprises with a trade volume of millions or even tens of millions of tons, "the above-mentioned trader admitted.
After the listing of lithium carbonate futures, it attracts enterprises from all links of the industry chain and various types of investors to participate in futures trading,
reflecting market information and price judgments in real-time through trading, forming an objective, transparent, and continuous price.
The reporter found that since the listing of lithium carbonate futures, the trend of futures and spot prices has been basically consistent,
with the basis narrowing from about 67300 yuan/ton in the early stage of listing to a minimum of 0 yuan/ton.
The seven contracts that have completed delivery have achieved a return to futures and spot,
and the futures prices reflect the supply and demand pattern and expectations of the spot market well.
It is understood that the correlation between lithium carbonate futures and spot prices has continued to maintain at 0.98, and the price discovery function has been effectively utilized.
The person in charge of a new energy materials company stated that after the listing of lithium carbonate futures, the company can have a clearer, more open,
and transparent understanding of lithium carbonate prices, thereby better controlling its production pace.
The futures market provides a platform for collecting information on the spot market, reflecting changes in the entire spot market rather than individual enterprises.
With the increase in trading volume of lithium carbonate futures, prices will become more open and transparent.
We can analyze changes in the supply and demand of spot goods based on the price trend of the futures market and formulate the company's production strategy, "said the person in charge.
The participation of industrial enterprises is steadily increasing
Since its listing one year ago, the market size of lithium carbonate futures has gradually increased, and the market depth has initially met the risk management needs of enterprises.
According to the relevant person in charge of Guangzhou Futures Exchange, as of July 19, 2024,
the cumulative trading volume of lithium carbonate futures and options was 74.9254 million lots, with a cumulative trading volume of 7398.384 billion yuan;
The daily average trading volume is 309900 lots, and the daily average position is 345800 lots.
From the perspective of monthly transaction and position size,
the daily average transactions and positions of lithium carbonate futures and options in July 2024 increased by 302.06% and 2635.68% respectively compared to July 2023,
with futures positions accounting for about 57% of spot positions.
With the steady increase in holdings and trading volume, the lithium carbonate futures market has the liquidity required to serve industry risk hedging,
and has also brought new trading models to the industry chain.
Since 2023, the lithium carbonate spot market has entered a pattern of strong supply and weak demand.
In the first half of this year, the pressure of supply and demand further intensified, and market inventory remained high.
Against the backdrop of a downward trend in lithium carbonate prices, upstream lithium salt factories are facing the risk of inventory backlog.
Lithium carbonate futures provide enterprises with risk mitigation tools and have a certain role in resolving market risks.
For example, in late February of this year, lithium carbonate prices were at a low level and the spot market was sluggish.
An upstream lithium salt factory has determined that the current low range cannot be maintained in the long run,
and there is a need to reduce inventory, maintain sales, and recover funds due to operational needs.
On February 20th, the futures price was 95000 yuan/ton, with a market basis of -2000 yuan/ton.
The lithium salt factory signed a sales contract with Xiamen Xiangyu New Energy Co., Ltd.
(hereinafter referred to as Xiangyu New Energy) with a basis of -2000 yuan/ton, with a pricing period of one month.
It was agreed that the lithium salt factory would sell a certain amount of lithium carbonate spot to Xiangyu New Energy at a provisional price.
On March 4th, the futures price of lithium carbonate rose above 120000 yuan/ton.
Through the "futures+basis" post pricing model, the lithium salt factory chose to price at 124000 yuan/ton and ultimately achieved sales at a high price of 122000 yuan/ton.
By cooperating with Xiangyu New Energy through basis trading, the lithium salt plant has achieved the goal of locking in inventory sales in advance and stabilizing production,
and has achieved higher profits than directly selling spot goods in the initial stage through post pricing.
It is understood that Xiangyu New Energy is a commodity supply chain enterprise under Xiangyu Group,
and its lithium carbonate business volume will rank among the top five in the country in 2023.
During the fluctuation of lithium carbonate prices, Xiangyu New Energy still maintained a relatively stable operating volume and performance,
which is closely related to the existence of the lithium carbonate futures market.
Lithium carbonate futures provide industrial enterprises with more diversified choices in risk management, business models, pricing mechanisms,
and other aspects, effectively promoting the healthy development of the entire new energy industry.
Chen Junyi, assistant general manager of Xiangyu New Energy,
told reporters that the pricing model of "futures+basis difference" for lithium carbonate conforms to the significant changes in the supply and demand pattern of the lithium carbonate industry,
and is therefore increasingly applied in spot trading of lithium carbonate.
The Futures Daily reporter learned from Guangqi that the industry customer participation in the lithium carbonate futures market is steadily increasing,
and the participant structure is also constantly optimizing.
As of July 19, 2024, the number of customers in the lithium carbonate futures industry exceeded 15900,
and the average daily holdings of lithium carbonate futures by general corporate customers accounted for 32.5%.
Overall, the participation rate of leading enterprises in the futures market exceeds 50%, and the number of industrial customers and market participation level are still steadily increasing.
In terms of listed companies, from 2023 to present, a total of 56 A-share listed companies have issued announcements clarifying the development of lithium carbonate futures hedging business.
Guangqi Institute takes multiple measures to continuously improve market services
The stable operation of the lithium carbonate futures market is inseparable from the efforts made by Guangqi Exchange in market cultivation over the past year.
It is reported that since the listing of lithium carbonate futures,
the Guangzhou Futures Exchange has organized more than ten lithium carbonate industry training sessions in conjunction with industrial concentration areas such as Qinghai, Jiangxi, and Sichuan,
covering key industrial enterprises and attracting over 1300 participants. Since July 2023,
Guangzhou Futures Exchange has actively cooperated and supported futures companies to carry out over 280 lithium carbonate futures market cultivation activities,
with a total of more than 65000 participants. The activities have radiated to 20 provincial-level administrative regions including Jiangxi, Guangdong, Shanghai, and Zhejiang,
greatly improving the level and ability of industrial enterprises to understand and utilize the futures market.
In order to enhance market service capabilities, Guangqi Futures Exchange organized high-frequency training for futures personnel.
Prior to the listing of the product, five lithium carbonate futures listing training sessions were held in Beijing, Shanghai, Guangzhou, Shenzhen, Chengdu and other places,
covering the headquarters and operating institutions of futures companies in major regions across the country, with nearly a thousand participants.
Relying on the "New Energy · Towards the Future" market training brand, since July 2023, Guangqi Institute has organized 16 sessions of variety video training, with 66000 participants.
In addition, Guangqi Futures Exchange also supports researchers and industry service personnel from
futures companies to conduct research in key production areas such as Jiangxi and Sichuan multiple times,
familiarizing themselves with the current status of industrial development and risk management demands.
In order to effectively reduce the cost of physical enterprises participating in the futures market and improve risk management efficiency,
Guangqi Futures Exchange has successively introduced measures to reduce delivery, cash to cash, warehouse receipt related business, and hedging fees.
It is reported that since the listing of lithium carbonate futures, delivery, warehouse receipt transfer, warehouse receipt offset,
cash to cash and hedging fees have been reduced by more than 14 million yuan.
Looking ahead to the future, the relevant person in charge of Guangqi Futures stated that they will continue to enhance their service capabilities in the lithium carbonate futures market.
One is to actively carry out industry training activities, thoroughly explain the risks and roles of the futures market, and enable enterprises to "see first, try second, and participate third",
and use the futures market in an orderly manner to manage risks.
Secondly, we will continue to conduct tracking research on the lithium carbonate industry,
closely follow the development of the spot market, continuously evaluate the scientificity of contract rules, continuously optimize contract rules, and better serve the needs of physical enterprises.
The third is to further enrich and improve the variety system of raw materials for the lithium battery industry,
continue to accelerate the research and development of lithium hydroxide and other lithium battery related varieties, and provide security for the supply chain of China's lithium battery industry.
