Albemarle declines to participate in LME lithium contract

SANTIAGO (Reuters) - Albemarle Corp, the world’s largest lithium producer, said on Tuesday it will not participate in the London Metal Exchange’s plan to launch a new contract for the white metal, depriving it of a key source of pricing data.

Vice President, Corporate Strategy and Investor Relations of Albemarle Corporation, David Ryan, attends the lithium industry's annual conference in Santiago, Chile, June 11, 2019. REUTERS/Pablo Sanhueza

The move reflects a view by some that lithium, used to make electric car batteries, is a specialty chemical rather than a basic commodity, and should be priced on a contract-by-contract basis.

“An exchange contract tends to support a commodity market, and that’s not what we believe this (lithium market) is,” David Ryan, Albemarle’s head of corporate strategy and investor relations, told the Fastmarkets Lithium Supply and Markets Conference in Santiago.

The LME, owned by Hong Kong Exchanges and Clearing Ltd, on Monday chose Fastmarkets to provide a reference price for the contract.

“At this point our intent is that we will not be providing price information to the index,” said Ryan.

The LME said in a statement to Reuters that it respects the right of companies to operate in whatever ways best suit their needs.

“The LME continues to work with a supportive group of industry participants to develop solutions for the lithium industry, and will launch a contract when those participants are ready to use it,” spokeswoman Bianca Blake said

Slideshow ( 2 images )

Unlike for copper or other metals used to make electric cars, there has not been a traded price for lithium, leaving the industry’s investors, customers, analysts and executives without a full sense of the global market.

Ryan spoke on a panel presentation alongside executives from rivals SQM and Tianqi Lithium Corp, which agreed that lithium is not a true commodity.

“The challenge of the index is to try to have very good representation of the market, which I really feel is not possible today because of how the lithium industry works,” Pablo Altimiras, SQM’s vice president of lithium and iodine, told the conference.

An SQM spokeswoman did not respond to multiple requests for comment on Tuesday when asked after Altimiras spoke if the Chilean company plans to participate in the LME contract.

Tianqi President Vivian Wu had said on Monday that the contract is “going to be helpful for us” and should bring more clarity to the market.

Charlotte, North Carolina-based Albemarle operates across Chile, Australia and the United States, providing lithium used by Panasonic Corp to make batteries for Tesla Inc and other electric automakers.

The company sells nearly all its lithium on long-term contracts, not spot deals, which would be the most influenced by a LME lithium price.

Many long-term supply contracts are already referencing an LME price, an anticipatory step designed to set future deal parameters, industry investors have told Reuters.

(GRAPHIC-Game of Mines link:

(GRAPHIC-Global Lithium Production link:

Reporting by Ernest Scheyder; Additional reporting by Dave Sherwood; Editing by David Gregorio and Lisa Shumaker