Automaker exposure to lithium prices highlights need for hedging

By the end of the decade, Benchmark forecasts that BYD will be spending over $2 billion annually on lithium, with others such as Volkswagen and Tesla seeing lithium spend rise above $1 billion annually.

This rise in demand exposes automakers to swings and volatility in the lithium price. Automakers and battery producers are also highly exposed to cobalt prices, which can change significantly based on policy moves as seen by the DRC’s cobalt export ban and subsequent quota system this year.

“Having an advanced hedging strategy in place to protect yourself against any unforeseen price movements is absolutely key to the success of these businesses,” Caspar Rawles, Benchmark’s chief operating officer, told attendees at Benchmark Week 2025.

How much do lithium and cobalt prices move?

“Whether you’re a battery materials producer, refiner, or an end-user, you have exposure to these prices going up and down – often quickly,” Mike Wittner, the global head of oil market research at Intercontinental Exchange (ICE), said at the event.

How can battery supply chain participants hedge?

Hedging strategies, whilst frequently used in more mature energy markets such as oil, are not commonly used across the battery materials supply chain.

“Battery materials, in terms of the market, is relatively immature,” Wittner said. “But there is a need for risk management tools, particularly because the supply contracts […] are in the process of evolving from fixed price to index linked pricing.”

Mike Wittner, global head of oil market research at ICE, discusses ICE Battery Materials Futures at Benchmark Week 2025

Key to enabling such hedging strategies is the presence of a trusted futures contract with which to hedge. Benchmark Mineral Intelligence’s (BMI) Lithium and Cobalt Futures will launch on Intercontinental Exchange (ICE) on 24 November 2025. These will be cash-settled derivatives over the average of the month, based on Benchmark’s assessments.

The futures contracts available will be for lithium carbonate, lithium hydroxide, spodumene concentrate and cobalt hydroxide. The contracts will include near term time periods and also extend out through December 2027 with the potential to extend the forward curve out further as the market demands.

“The trades are cleared at ICE Clear Europe,” Wittner said. “That’s important to the markets, particularly an immature market, because that means we, ICE, are the counterparty. So there’s really almost no counterparty risk.”

To learn more about Benchmark’s lithium and cobalt prices, fill out the form below and one of the team will be in touch: