Commodities exchange operator CME Group Inc. plans to launch a futures contract for lithium, seeking to capitalize on growing demand for a metal that helps to power electric vehicles.
The contract will be for lithium hydroxide delivered to China, South Korea and Japan, where most batteries globally are produced, CME said Thursday. If the futures contract is approved by regulators, it will begin trading on May 3.
Allowing lithium to trade freely on an exchange could help shed more light on historically opaque prices for the metal, a key ingredient in rechargeable batteries for smartphones, laptops and electric vehicles. Market participants currently rely on assessments from commodities-data trackers such as Benchmark Mineral Intelligence, S&P Global Platts and Fastmarkets.
Lithium’s role in powering rechargeable batteries has made it a strategically important commodity as governments seek to limit carbon emissions. The U.S. is racing to catch up with China in mining and refining the metal to support its auto industry and tackle climate change.
Demand for the metal is expected to boom amid efforts by governments to wean economies off fossil fuels, as well as moves by car makers including General Motors Co. to unveil suites of electric vehicles. But limited visibility over prices, which are mostly set in quarterly or annual contracts, have put buyers at a disadvantage in negotiations with producers.