Direct spodumene hedging becomes essential amid lithium market decoupling
Historically, spodumene closely tracked lithium chemical prices, allowing some market participants to hedge exposure via lithium futures. However, after years of tight linkage between spodumene and lithium chemical prices, theglobal lithium market is undergoing a structural shift, reshaping how producers, converters, and investors manage risk.
Benchmark Mineral Intelligence’s spodumene FOB Australia grade was assessed at $655 per tonne on 21 May 2025, reflecting an almost 23% decrease since the start of the year. Whilst Australian producers had established some degree of price discipline earlier in the year, stymying the downward price trend, competition from cheaper and often lower gradefeedstocks from Africahave made such price protection strategies tougher to maintain. In recent weeks, spot activity on an FOB Australia basis has seen a renewed surge in liquidity with multiple spot trades concluding in recent days at below $700 per tonne.
Whilst the spodumene supply landscape is indeed diversifying with increased product availability out of Africa, Australia will continue to provide the lion’s share of spot liquidity to the market.
Benchmark Mineral Intelligence (BMI) with the Intercontinental Exchange(ICE) will belaunching its spodumene concentrate futures contracton an FOB Australia basis, aligning with the prevailing contract structures of the physical market.
Index linked contracts between miners and refiners, mostly in China, utilise a combination of Benchmark’s flagship FOB Australia spodumene index and CIF Asia or EXW China lithium chemical indexes.
“Around 9% of the spodumene mined globally in 2024 – or slightly less than 60,000 tonnes – was traded on a spot basis,” commented Daniel Fletcher-Manuel, Benchmarks director of indexing and derivatives.
“With more than 500,000 tonnes of spodumene trading on long term contracts, and with prices today being so weak, we expect to see substantial hedging interest from spodumene miners in the months and years ahead. They’re unlikely to want to address the issue of price risk by adopting unnecessary basis risk by hedging to terms and grades which are not reflected in their physical contracts,” he added.
Meanwhile, lithium carbonate spot prices on a CIF Asia basis have decreased on a year-to-date basis by 21% and lithium hydroxide by just 13%.
Theonce-stable correlation between spodumene and its downstream chemicalshas become more volatile, introducing significant basis risk for those hedging spodumene with lithium chemical futures.
“All of this points to the fact that the BMI-ICE futures contracts, settled against BMI’s FOB Australia spodumene concentrate index is the natural choice for miners, refiners and automakers looking to hedge their physical risk whilst accepting minimal basis risk,” remarked Fletcher-Manuel.
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