Lithium Price Index

How does the electric vehicle supply chain use Benchmark Minerals lithium prices in contracts?

There is no doubt that the lithium industry is evolving to the needs of the lithium ion battery and electric vehicle (EV) industry.

Existing majors are expanding, new producers are entering the market and even more buyers are purchasing spodumene concentrate and the speciality chemicals, lithium carbonate and lithium hydroxide, in greater and greater quantities.

When Benchmark Mineral Intelligence (Benchmark Minerals) established its plan to create the lithium industry’s reference price back in 2014, we stood alone in our vision to aid industry negotiations with a series of independently collected and assessed prices to an IOSCO regulated standard.

Fast forward to 2019 and we are proud to have achieved this goal, with our Lithium Price Assessments used as references and benchmarks within electric vehicle (EV) and lithium ion battery supply chain contracts.

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How did the Benchmark Minerals team achieve this?

Our lithium-first approach works with the industry rather than financial markets to gain accurate lithium price data and our global credibility is helped by the fact that the lithium ion battery to EV supply chain is all we do.

Benchmark Minerals is a unique business in a market that is flooded with information from publishers that have a non specialised focus covering many commodities. Confusion is also added to by bad and unscrupulous analysis from some banks and brokerages.

Our business growth has been predicated on hiring the right personalities from both the commodity price publishing and forecasting industry and the EV supply chain, with recent hires from Tesla, SQM, and Albemarle testament to that.

While a major part of our role at Benchmark Minerals is to advise clients on the different ways to use our lithium prices in contracts, it is something we have not broadcast before.

Here we explain the basis of how the industry use Benchmark Minerals’ lithium prices in supply chain contracts.

1. Contract Reference Pricing – a specific grade for a specific lithium price movement

Benchmark Minerals prices are regularly utilised as a reference for contracts, whereby the adjustment to an agreed upon lithium price level will be decided on either the individual monthly prices or a longer-term average to reflect the lithium price trend in the market.

This allows for an independent update to be applied to the price resulting from private contract negotiations.

2. Formal Contract Benchmarks – directly tied to a specific lithium price

Benchmark Minerals lithium prices can also be used as formal benchmarks in industry contracts, where certain transacted volumes are tied to a specific Benchmark Minerals’ price index(es) to form the pricing terms of a contract.

This is becoming an increasingly common mechanism as downstream users in the battery supply chain seek to incorporate accurate and transparent pricing mechanisms into physical contracts

3. Basket Prices – the grouping of multiple data sources

Benchmark Minerals’ prices are also used in contracts as part of a basket of lithium index prices, primarily alongside public sources of price information such as trade statistics and company reports.

This mechanism is becoming less common due to the inaccuracies and lack of detail that arises in public data such as trade statistics and other sources of lithium prices from commodity publishers.

Having an independent, third-party information source, with a robust and accountable price assessment methodology is becoming a necessity for participants across the supply chain.

4. Linked Adjusted – tied to the average movements shown in our lithium indexes

Benchmark Minerals’ Lithium Price Indexes show the relative change in the grade specific prices we publish for lithium carbonate and lithium hydroxide, weighted by the volumes traded in the market.

An adjustment linked to the movement of these indexes therefore provides a reference point for pricing across the global market and is becoming a common way of introducing third party referencing to pre-existing pricing terms.

This allows for more globally reflective adjustment of prices than has historically been available in the lithium market, while keeping prices tied to a pre-determined level between buyer and seller.

Why has the lithium industry chosen Benchmark Minerals?

The unprecedented demand growth expected in the lithium market over the coming decade means the number and size of market participants is increasing at a rapid speed.

To facilitate this quick market expansions, more frequent pricing adjustments are required to limit the price risk for both parties.

A respected and independent third-party source of information can help address this risk and provide for a more flexible pricing structure across the industry.

This source is Benchmark Mineral Intelligence.

Despite many publications marketing lithium prices, it is crucial to understand whether they are specialists with previous lithium experience, whether they have enough resource on price collection, and whether they are known or trusted by the lithium industry.

Benchmark Minerals has been organically built from the ground up for this purpose and it is why we have become the lithium industry’s reference price.

Below are some more reasons why:

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