In recent years, the fluctuation in lithium prices has dramatically impacted the production and operations of related enterprises within the industry chainThis instability in raw material pricing has driven many publicly listed companies across various sectors to disclose their intentions to engage in futures hedging activities.

On January 21, Ganfeng Lithium Co., Ltd(stock code: 002460) announced that it aims to mitigate operational risks arising from market price volatility of lithium salt productsThe company plans to utilize the hedging functionalities of financial instruments to conduct commodity futures and options hedging in a strategic manner that aligns with their production and operational activitiesThis decision comes as an effort to shield the company from the unpredictable nature of lithium market prices.

Ganfeng Lithium specified that the hedging activities will be limited to products that are directly related to its operational focus, specifically lithium salt futures

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The maximum value of trading margins and premiums involved in these hedging transactions will not exceed 200 million yuan, nor will the highest contract value held on any trading day go beyond 300 million yuanThese limits are set to ensure that the company maintains a sustainable approach to risk management, allowing for noticeable flexibility as market conditions evolve over a period that spans 12 months from the board's approval.

According to Ganfeng Lithium, the collaboration between the company and its subsidiaries in futures hedging will be grounded in their typical production activitiesAimed primarily at minimizing the adverse effects of carbonate lithium price fluctuations on overall corporate operations, Ganfeng Lithium boasts over two decades of experience within the lithium sectorThis extensive background enables the company to remain vigilant and responsive to the dynamic trends within the lithium industry.

Moreover, Ganfeng has implemented institutional measures such as the "Futures and Derivative Trading Management Regulations." This comprehensive document outlines clear operational guidelines, approval authority protocols, structural responsibilities, risk management strategies, and business processes

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Coupled with the establishment of specialized teams equipped to handle futures and derivatives trading, Ganfeng is poised to execute its hedging strategies with diligence and precision, showcasing a practical pathway for managing market volatility risks.

On the same date, another enterprise, Rongjie CoLtd(stock code: 002192), also operating in the renewable energy materials and optoelectronic display materials sectors, revealed its intention to pursue commodity futures hedging as a means of counteracting substantial commodity market risksThe company noted the direct implications that price fluctuations of its primary products, including lithium carbonate and lithium hydroxide, have on its operational performance and inventory valuations.

The recent trend of escalating volatility in lithium prices calls for robust and strategic hedging measuresThe company acknowledged that employing futures tools for risk mitigation is essential for sustaining stable operational performance, given the precarious fluctuations in product prices

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Such actions underscore the growing necessity for enterprises within the lithium production field to adopt proactive measures to safeguard their financial stability against the burgeoning uncertainties of market prices.

Earlier, another entity, Molybdenum Co., Ltd(stock code: 002407), had articulated a similar strategy, reinforcing the collective cognizance within the sector regarding the importance of hedging against unpredictable market conditionsThe company's primary engagement in renewable energy lithium battery materials, particularly lithium salt products, aligns with the shared experience of facing significant pricing volatility that directly impacts overall operational performance.

Monitoring from industry analysts, specifically from ZD Consulting, indicates that by 2024, the market prices for fundamental lithium salts in China exhibited a trend of initial increase followed by subsequent declines

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At the beginning of the year, the near cessation of operations during the Chinese New Year led to stagnant trading volumes and price stabilization after initial fluctuationsFollowing the holiday, concerns emerged over tight supply in anticipation of peak season demand during March and April, prompting sharp increases in prices that surged past 110,000 yuan per ton.

Nevertheless, subsequent stability in demand, coupled with consistent supply levels, placed downward pressure on pricesAfter periods of adjustment, the availability of brine lithium production surged in the second quarter, enhanced by replenishment from imported sources, leading to the swift accumulation of inventory within the spot marketAs a result, challenges in maintaining price levels led to a gradual decline, persisting until the end of August.

The market witnessed sporadic interruptions to operations from several high-cost producers as the impending "golden September" approached, leading to a renewed optimistic outlook regarding traditional peak season demand