Yvonne Yue Li of Bloomberg reports that the drop in lithium prices has flipped the market into contango — when futures prices are higher than spot. This change has created opportunities for funds. She writes:
Trading of CME Group Inc.’s nearly three-year-old lithium hydroxide futures contract is soaring, with more funds crowding into the budding market as prices of the battery metal falter.
The number of outstanding contracts hit a record high of 24,328 in the first quarter, and open interest extends to September 2025 — an indication of more liquidity for the nascent contract, according to the US bourse. The number of futures changing hands in the quarter was close to the trading volume for all of last year. CME, one of the world’s largest commodity exchanges, introduced its contract for lithium hydroxide — a chemical form of the battery metal — in May 2021. […]
CME’s lithium contract is already on pace to shatter last year’s record trading volume. The number of contracts changing hands reached 20,101 in the first three months of this year, according to the exchange, just shy of the 20,307 traded in all of 2023.
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