[IMG] MARKETS LME Revs Up for Electric Cars With New Contracts...

MARKETS
LME Revs Up for Electric Cars With New Contracts for Battery Metals

London Metal Exchange plans to launch futures contracts for battery metals as early as the start of 2019

Traders on the floor of London Metal Exchange.PHOTO: BLOOMBERG NEWS
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By
David Hodari
Oct. 29, 2017 8:01 p.m. ET

Traders, start your engines.

The London Metal Exchange said Monday that it is planning to launch futures contracts for battery metals as early as the start of 2019, the latest example of how the commodities market is hoping to capitalize on the push toward electric vehicles.

The LME will “be working with the battery and electric-vehicle industries over the coming months to deliver new contracts such as lithium and cobalt sulfate to bring price risk management to this rapidly growing market,” the exchange’s CEO Matthew Chamberlain said in a statement.

Cobalt and lithium are used in the batteries that power electric vehicles and their miners have long predicted a surge of interest on the back of the growth of this market.

“Between 2020 and 2022, we’re expecting EV demand to really take hold.” said Geordie Wilkes, a research analyst at Sucden Financial Research.

“Hybrid-electric vehicles look to be the most prominent,” Mr. Wilkes added, referring to the low-emissions autos sector.

Analysts say there is a compelling long-term story in the supply-demand balance of cobalt.
An “unpredictable” key mining country in the Democratic Republic of Congo and an already high exposure to the EV market should translate into “sustained and widening shortages” in cobalt availability from 2020 onward, Macquarie said in a recent report.

According to the widely used Metals Bulletin cobalt price, the metal averaged at $30 a pound between June and mid-October—double that seen at the start of 2017, according to Macquarie.

In order for the world’s auto fleet to convert to EVs, hybrid battery makers would have to halve the amount of cobalt they currently use in each battery at current supply levels of the metal. Makers of full-electric batteries would only be able to use a seventh of current levels, the report continued.

Lithium provokes similar forecasts. If cars across the globe were to convert to EVs using current technology, the battery sector’s hunger for lithium could increase threefold said Norbert Rücker, Julius Baer’s head of macro and commodities research in a note.

Still, Mr. Rücker also admitted industry projections of spiraling prices should be “taken with a grain of salt,” pointing to an uncertain road ahead for plug-in vehicles, battery recycling and efficiency-increasing semiconductors as forces that could stymie investor demand for cobalt and lithium.

Either way, as the metals industry descends on London for the annual LME Week, conversations and presentations that don’t touch on EVs are likely to be the “exception rather than the rule, given they increasingly capture investor attention,” said Colin Hamilton, an analyst at BMO Capital Markets.
Write to David Hodari at [email protected]

https://www.wsj.com/amp/articles/co...e-on-push-toward-electric-vehicles-1509321660