China Increases Lithium Storage Facilities to Ease Cargo Shortages

China's Guangzhou Futures Exchange (GFEX) has added more warehouses for lithium carbonate, it said on Dec 11, a move analysts saw as an effort to alleviate fears of a shortage of cargoes available for January delivery.

China is the world's largest consumer and producer of lithium carbonate, and the GFEX contract was launched on July 21, after the exchange was set up in 2021 to focus on new energy materials.

In a statement, the exchange said it added three warehouses to deliver the material used for electric vehicle batteries and raised the minimum guaranteed storage capacity at 10 other sites to 5,000 metric tons from 2,000 tons earlier.

"The move is to calm the irrationality in the futures market," Zhang Weixin, an analyst at China Futures, said of the new warehouses.

"The increase of warehouses showed that there will be abundant volume for physical delivery."

The exchange's most active lithium carbonate contract surged 7 percent on Dec 8, fuelled by concerns about a shortage of material that could be delivered in January, two analysts based in China said. The most-active contract switched from January to July on Dec. 7. The bourse said later on Friday it would strengthen market supervision and investigate violations of lithium carbonate trading after prices surged. It had already increased trading fees and introduced trading limits to stabilize the market earlier in the week.

"Even so, GFEX lithium carbonate futures remain volatile... We are seeing intensified activity among financial speculators," said Citi analysts in a Thursday report, noting that the open interest for the January contract was well above the spot inventory level.