As lithium becomes key to the global clean energy transition, the industry is in the midst of a "transformation" that has previously upended pricing for other commodities such as iron ore. Currently, demand and price volatility have also led global lithium miners to step up the push for more transparent lithium trading and pricing mechanisms.

Since March, the lithium miner, U.S.-based Albemarle Corp. has held a series of auctions in which potential buyers compete for cargoes through bidding. These auctions represent an important change for the lithium industry, as for a long time previously, lithium was primarily priced and sold at a fixed price in long-term contracts. In theory, this fixed price would use the lithium spot price as a reference factor and also take into account the emerging lithium futures market price, but at an operational level, there is a practical lack of consistency in how lithium is valued in the supply chain from mines to electric vehicles.

According to Przemek Koralewski, global head of market development at price reporting agency Fastmarkets, "Auctioning lithium serves two purposes. On the one hand, it gives miners access to real-time prices for the day, and on the other hand, auctions enable most lithium auction prices, i.e. contracts, to truly reflect market dynamics." The rationale for these auctions and the increased liquidity in the lithium futures market is that more real-time, short-term public spot pricing through bids and offers allows market participants to react more quickly to changes in supply and demand, thereby adjusting the market during boom and bust times, said Barry, president of consulting firm House Mountain Partners.

Yabo conducted four auctions in April and March, and held three more this month, but in reality, this is not the industry's first use of auctions. Yabao's situation can be described as a microcosm of the industry, along with lithium prices previously plunged, a series of projects stalled, a series of transactions canceled, lithium miners also began to reduce production. However, the lithium market has recently stabilized and rebounded, Yabao also ushered in the positive again, the stock price rebound and by a number of institutions to raise the expected target price. Overall, however, the lithium market is still struggling to cope with the removal of rapidly expanding boom-era inventories. As the lithium supply chain matures, the difference between the prices of different lithium raw materials continues to widen. Previously, long-term contracts were traditionally close to the downstream chemicals market and distant from the mined raw material, lithium pyroxene, which only became a major source of lithium extraction in the past decade. Right now, the price relationship between lithium prices and lithium chemicals is breaking down as the main source of supply changes. In addition, lithium miners are also facing shifts in the geopolitical landscape and industry regulation that could lead to divergences between pricing in different regions.