As the 28th United Nations Climate Change Conference (COP28) drew to a close on Wednesday, December 13th, in Dubai, those keeping an eye on the currently volatile global lithium industry noted how the closing statement of conference president Sultan Ahmad Al-Jaber appeared to have an impact on the value of the Guangzhou Futures Exchange (GFEX) lithium carbonate futures in China.
Lithium carbonate futures traded 3.1% lower than usual at around 11:30 AM on the day, extending losses that hit the previous day. However, as the trading day came to an end, their value surged and the futures ended the day at 10.0%. It should be noted that 10% is the most at which these futures can be traded from where they were in the previous session.
Many opine that Al-Jabbar’s statement regarding the global shift from the use of fossil fuels to power the energy systems of individual nations and the global rush to achieve net-zero carbon emissions by 2050 played a major role in this about-face. Not only was this the first time in the history of the conference that fossil fuels were referred to in such a direct manner, but it has been implied that the use of lithium in the production of rechargeable power solutions is a key factor for achieving this goal.
Thanks to volatile activity regarding its lithium carbonate contracts over the past several weeks, GFEX made a slight increase on their daily limit move, shifting from 7% the week before to 13% on December 13th.
Market watchers point out that limit moves involving GFEX lithium carbonate futures have been more frequent of late. Indeed, GFEX’s benchmark contract set for July 2024 closed limit-down thrice and limited up another three times over eight consecutive trading sessions.
However, it isn’t all good for GFEX’s lithium contracts, especially in light of how it recently needed to return several deliveries as the lithium they contained was of inferior quality. As a result, Chinese market participants have expressed concerns that there won’t be enough battery-grade lithium come January 2024.