The most actively traded Lithium contract at CME Group, Lithium Hydroxide CIF CJK (Fastmarkets) futures, is setting new activity records in the first quarter of 2024. Find out why as we look at five charts that document this growth.

Chart 1. Open interest surpasses 20,000 metric tons

Open interest in the contract has been on an upwards trajectory since the second half of 2023 – most recently the contract surpassed the 20,000 metric tons open interest threshold for the first time. In notional value terms, that is equivalent to about $250M exposure measured at current spot prices. While this number pales in comparison to the most liquid metal commodity contracts including GC Fold futures at around $80B and HG Copper futures at $20B, it is already comparable to contracts such as HRC steel ($400M) or cobalt metal ($550M).

Chart 2. Futures liquidity is setting new records

A very active start to the year has pushed average daily volume (ADV) to a record high of 325 contracts in 2024, equivalent to a daily transaction volume of around $5M notional. January 2024 was a record setting month with a recorded ADV of 380 contracts. While February was a bit quieter, in part due to the Lunar New Year holidays, the contract is on track for another record volume year. In fact, at the time of this being written, Lithium futures already recorded half as much volume year-to-date in 2024 as in the whole of 2023.

Chart 3. Global reach of the contract

A breakdown of trading activity year-to-date 2024 by time of trade execution shows that the Lithium contract is globally relevant with activity starting in the morning in London. This means that it is overlapping with the afternoon in Asia and lasting right until the midafternoon in the UK when U.S. based traders would be at their desk. Activity is well balanced in between these main trading hours.

Chart 4. Forward trading activity

An analysis of the term structure of open interest held in the contract shows that trading activity is well balanced across contract month maturities and relatively stable across time. As of the end of January 2024, the median open interest was 5.5 months forward, which means that 50% of open interest was in contract maturities within the next five months and 50% beyond that date. Notably, the 75% percentile point is up to eight or night contract months out, meaning that a full quarter of open interest held at the Exchange is for contract maturities beyond that period. Current open interest in the contract extends to September 2025, or 20 months forward from today.

Chart 5. Market switches from backwardation to contango

The Lithium market came under pressure during 2023, with spot prices dropping 80% from record highs recorded in late 2022. The price drop was due to a well-supplied market, notably with African production surprising on the upside and a challenging demand picture. In the futures market, the price drop was accompanied by a term structure switch from backwardation (futures trading below spot) to contango (futures above spot). Typically, contango is associated with a benign current pricing environment and potential for a tightening supply/demand balance in the future. Traders will watch the term structure to determine the value of time spreads (the value difference between two different delivery periods of the same commodity) and execute cash-and-carry trades, which entails buying commodities in the spot markets and selling at forward dates.

All examples in this report are hypothetical interpretations of situations and are used for explanation purposes only. The views in this report reflect solely those of the author and not necessarily those of CME Group or its affiliated institutions. This report and the information herein should not be considered investment advice or the results of actual market experience.

CME Group is the world’s leading derivatives marketplace. The company is comprised of four Designated Contract Markets (DCMs). 
Further information on each exchange's rules and product listings can be found by clicking on the links to CME, CBOT, NYMEX and COMEX.

© 2024 CME Group Inc. All rights reserved.