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ESG, batteries power SGX metal derivatives drive
Initiative aims to provide investors with pricing benchmark, risk management tool
Tom King 14 Jan 2022

The drive towards increased electrification, decarbonization and adoption of environmental, social and governance (ESG) initiatives has stimulated the demand for metals used in the manufacture of batteries – one of the key green-movement platform technologies, for example, used in electric vehicles – and prompted the Singapore Exchange (SGX) to start planning a suite of derivative contracts for these metals.

The suite of derivative contracts for these key battery raw materials, including cobalt metal, cobalt hydroxide, lithium carbonate and lithium hydroxide, will act as a pricing benchmark and tool for market participants to manage price risk exposures, says William Chin, head of commodities at SGX.

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

“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.”

SGX will partner with London-headquartered Fastmarkets, the price reporting agency for the derivative contracts, which are expected to launch in the first half of 2022. 

Pushing demand for these key metals, US auto giant General Motors said last year that it planned to stop making and selling petrol-powered and diesel vehicles by 2035, while German manufacturer Audi aims to stop producing internal combustion engine vehicles by 2033.

Asia plays a key role in the battery value chain as a major producer and consumer.

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