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China exchange adds lithium warehouses to allay fears of short squeeze

BEIJING, Dec 11 (Reuters) - China's Guangzhou Futures Exchange (GFEX) has added more warehouses for lithium carbonate, it said on Monday, a move analysts saw as an effort to alleviate fears of a shortage of cargoes available for January delivery.

China is the world's largest consumer and producer of lithium carbonate and the GFEX contract was only launched on July 21, after the exchangewas set up in 2021 to focus on new energy materials.

In a statement, the exchange said it added three warehouses for delivery of the material used for electric vehicle batteries and raised the minimum guaranteed storage capacity at nine other sites to 5,000 metric tons, from 2,000 tons earlier.

The exchange did not respond to a request for comment.

"The move ... is to calm the irrationality in the futures market," Zhang Weixin, an analyst at China Futures, said of the new warehouses.

"The increase of warehouses showed that there will be abundant volume for physical delivery."

The exchange's most active lithium carbonate contract hit the 7% limit up on Friday, fuelled by concerns about a shortage of material that could be delivered in January, two analysts based in China said.

"People were afraid there would be a short squeeze due to concerns of a lack of sufficient cargoes," said Susan Zou, an analyst at consultancy Rystad Energy.