SGX to offer energy metals derivatives as demand for electric vehicles rises

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SINGAPORE (THE BUSINESS TIMES) – The Singapore Exchange (SGX) is planning to launch a suite of derivative contracts for battery metals as a pricing benchmark and tool for market participants to manage price risk exposures, amid rising demand for electric vehicles (EVs).

The bourse operator, in an update to stakeholders on Wednesday (Jan 12), said that derivative contracts for cobalt metal, cobalt hydroxide, lithium carbonate and lithium hydroxide are expected to be launched in the first half of 2022, subject to regulatory approval.

New energy metals used in the production of EV batteries have been in demand as the green transport mode becomes popular amid decarbonisation and environmental, sustainability and governance (ESG) initiatives.

Mr William Chin, head of commodities at SGX, said: “2022 will see a crystallisation of ESG initiatives with the global economy embarking on a strong sustainability drive towards net-zero promises. The strong momentum we have seen in electric vehicle adoption will continue, with battery metals providing the crucial backbone underpinning the green movement.”

Asia plays a pivotal role as a major producer and consumer in the battery value chain, SGX noted.

“With the launch of the energy metals derivative contracts, we will be providing our clients with unique capital efficiencies in a ‘virtual car complex’ alongside our global rubber benchmark, allowing market participants to undertake price risk management of key raw materials used in car production,” Mr Chin added.

SGX is partnering Fastmarkets, with the latter to be the price-reporting agency for these derivative contracts.

Shares of SGX closed four cents or 0.4 per cent higher at $9.64 on Wednesday.

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