After several rounds of sharp lithium price volatility, companies across the battery supply chain have become increasingly focused on raw-material risk management. Long-term agreements, spot procurement frameworks, futures and standard options are gradually becoming part of the procurement toolkit. At the same time, a more complex type of structured product has also attracted attention from industry participants: the Accumulator . At first glance, an accumulator contract offers a procurement opportunity at a price below the prevailing market level. In a range-bound or moderately rising market, it can indeed help reduce average procurement costs. However, the discount is not free. By obtaining a more favourable purchase price, the company is effectively selling part of its downside protection to the counterparty: it receives a limited procurement discount in exchange for assuming tail risk if prices fall. This article examines the basic mechanics of accumulators, their potential applications in the battery supply chain, their transmission effects on market prices and inventories, and the key issues companies should consider when using such instruments. 1. What Is an Accumulator? An accumulator is not a single standardized option. It is an over-the-counter structured contract under which the reference price is observed on a daily, weekly or monthly basis and procurement volumes accumulate over time. Under a typical structure, a downstream buyer agrees with a bank, trader or financial institution to purchase a specified quantity of raw-material exposure at a fixed price over a defined period. The agreed purchase price is usually below the prevailing spot price at inception, making the structure appear attractive from a pricing perspective. However, the contract normally includes two important features. The first is the knock-out mechanism . If the market price rises to a predetermined level, the contract terminates early. The buyer retains the discounts already obtained but can no longer continue purchasing at the discounted price. The second is the volume-multiplier mechanism . If the market price falls below the agreed strike price, the buyer is required to continue purchasing a larger quantity. A common structure is a doubling of the purchase volume, although other multipliers may also be agreed. This creates a clear asymmetry: Market Scenario Outcome for the Buyer Prices rise moderately but remain below the knock-out level The buyer continues purchasing at a price below spot and benefits from the discount Prices rise rapidly and reach the knock-out level The contract terminates early; previous discounts are retained, but the buyer must return to the spot market for future procurement Prices fall below the strike price The buyer must continue purchasing at the agreed price and at a higher volume, usually double the original quantity Prices continue to fall High-cost purchases accumulate, inventory pressure increases and cash-flow exposure expands; theoretical losses are uncapped The defining feature of the accumulator is therefore not simply price locking. It is the exchange of limited procurement discounts for downside tail-risk exposure. 2. Why Would Downstream Battery Companies Consider This Type of Structure? Several characteristics of the battery supply chain make accumulator structures attractive under certain conditions. First, raw-material prices can be highly volatile. Lithium prices have experienced both rapid increases and prolonged declines. For cathode-material producers and battery-cell manufacturers, changes in lithium carbonate prices can quickly affect product costs and profit margins. Second, there is a clear timing mismatch across the supply chain. Companies often need to secure raw materials in advance, while downstream orders and actual deliveries remain uncertain. When prices rise, buyers worry about insufficient procurement coverage. When prices fall, they worry about having locked in excessive volumes at elevated prices. Third, some downstream companies prefer not to pay the explicit upfront premium associated with standard options. An accumulator embeds knock-out and volume-multiplier provisions, converting part of the visible premium into conditional risk. This can make the initial pricing appear more attractive. However, this does not mean accumulators are suitable for every company. They are more appropriate for companies with stable raw-material demand, strong cash-flow capacity, mature risk-management systems and professional derivatives teams. For companies with volatile demand, limited inventory capacity or significant funding pressure, accumulators can materially amplify operating risk. 3. A Simplified Scenario: How Does an Accumulator Work? Consider a cathode-material producer. At the time of signing, the spot price of lithium carbonate is RMB 100,000 per tonne. The company is concerned about a possible price rebound and wants to lock in part of its future procurement cost. A simplified accumulator structure could be designed as follows: Contract Term Illustrative Setting Spot price at inception RMB 100,000/tonne Accumulator strike price RMB 90,000/tonne Knock-out price RMB 110,000/tonne Base purchase volume 100 tonnes per month Purchase volume if price falls below strike 200 tonnes per month Contract tenor 12 months Scenario 1: Prices Rise Moderately The lithium carbonate price rises from RMB 100,000 to RMB 105,000 per tonne but does not reach the knock-out price of RMB 110,000 per tonne. The company continues purchasing at RMB 90,000 per tonne and gains a procurement advantage of RMB 15,000 per tonne. This is the most favourable environment for an accumulator: prices remain range-bound or rise moderately, allowing the buyer to continue benefiting from discounted procurement. Scenario 2: Prices Rise Rapidly and Trigger the Knock-Out The lithium carbonate price rises to RMB 110,000 per tonne, triggering the knock-out mechanism. The contract terminates early. The company retains the discounts already achieved but must return to the spot market for future purchases, now at a higher price level. This demonstrates that an accumulator provides only limited protection against extreme upside risk. Scenario 3: Prices Fall Below the Strike Price The market price falls to RMB 70,000 per tonne. The company must still purchase at RMB 90,000 per tonne, and the monthly purchase volume doubles from 100 tonnes to 200 tonnes. The monthly cost disadvantage reaches RMB 4 million. If the price falls further to RMB 50,000 per tonne, the monthly cost disadvantage increases to RMB 8 million. If actual production demand is insufficient, the additional volumes cannot be consumed immediately and will become involuntary inventory. The core risk of an accumulator is therefore not price volatility alone. It is that the company is forced to expand its exposure precisely when market prices move against it. Procurement volumes, inventory pressure and cash-flow risk rise at the same time. 4. How Can Accumulators Affect Lithium Market Prices and Inventories? When a market contains a meaningful volume of outstanding accumulator contracts, physical orders alone may no longer fully explain procurement behaviour. Traditional supply-demand analysis usually focuses on mine output, lithium chemical production, cathode-material production schedules and end-use demand. However, financial instruments can influence physical procurement patterns around specific price levels, creating signals that do not fully reflect underlying fundamentals. When accumulator contracts are concentrated around a particular price range, three phenomena may emerge. First, Downstream Procurement May Increase as Prices Fall Falling prices would normally suggest weakening demand. However, if accumulator contracts trigger volume multipliers, downstream companies may be required to increase purchases. Some market participants may interpret this as restocking or demand recovery. In reality, part of the additional procurement may be driven by contractual obligations rather than improved end-use demand. Second, Inventory Composition May Change High-cost inventory accumulated through contractual obligations may not immediately return to the market. However, it can reduce companies’ willingness to make additional discretionary purchases and create destocking pressure when prices recover. Inventory analysis should therefore go beyond total volume. It should also examine how inventory was accumulated and at what cost. Third, Liquidity May Become Distorted Around Key Price Levels If a large number of contracts are concentrated near similar trigger prices, volume multipliers, margin changes and dynamic hedging by counterparties may jointly affect market liquidity. This can create short-term volatility that appears disconnected from the underlying supply-demand balance. It is important to emphasize that the price impact of accumulator structures is not necessarily one-directional. The effect depends on whether contracts are physically settled, how counterparties hedge their positions, whether contract sizes are sufficiently large and whether exposures are clustered around similar price levels. For analysts, periods of significant lithium price volatility require closer attention to procurement behaviour, unusual increases in transaction volumes during price declines and signs of involuntary inventory accumulation. An increase in procurement during a falling market should not automatically be interpreted as a recovery in real demand. 5. Lessons from the 2023–2024 Lithium Price Downturn Lithium carbonate prices declined by more than 80% from their peak during the 2023–2024 downturn. This provides a useful stress-test scenario for evaluating the risks embedded in accumulator structures. If downstream companies had entered large accumulator positions with relatively high strike prices during the elevated-price period, a prolonged decline would have amplified the pressure through volume multipliers, high-cost inventory accumulation and cash-flow requirements. The key lesson is that the knock-out mechanism terminates gains during price increases, while the volume-multiplier mechanism magnifies losses during price declines. This structural asymmetry can become particularly severe in highly volatile commodity markets. A company may have stable physical demand, but stable physical demand does not automatically mean that its financial exposure is safe. Because accumulator contracts are generally customized over-the-counter instruments, public markets rarely provide complete information on individual companies’ positions, strike prices or contract tenors. It is therefore more appropriate to view the 2023–2024 downturn as a risk scenario rather than as confirmation of any specific company’s actual transaction behaviour. 6. How Should Companies Use Accumulator Structures Prudently? Accumulators are most suitable for managing a portion of highly certain procurement demand. They should not replace the overall procurement framework. A more appropriate approach is to integrate accumulators into a layered procurement system rather than use them as the primary tool. Demand Category Characteristics More Suitable Instruments Base demand Supported by confirmed orders and rigid procurement needs Long-term agreements, spot frameworks and futures hedging Flexible demand Order probability is relatively high, but delivery timing may vary Staged spot procurement, futures or standard options Strategic demand The company can tolerate some volume variation and seeks to optimize average procurement cost Small-scale accumulator positions In practical terms, companies should focus on at least four constraints. Link the Structure to Real Procurement Demand The base volume under the accumulator should remain materially below confirmed procurement requirements. Even after the multiplier is triggered, the company should still be able to absorb the resulting volume through actual production. If a company needs 500 tonnes per month, it should not set the base accumulator volume at 500 tonnes. Once doubled, the required purchase volume would materially exceed actual consumption. Link the Structure to Inventory Limits Companies should define inventory limits in advance, including: Maximum inventory volume; Maximum inventory days; Maximum proportion of high-cost inventory; Warehouse capacity; Working-capital requirements. If the additional purchase volume triggered by a price decline would exceed these limits, the company should not expand its accumulator exposure. Conduct Stress Testing Before signing, the company should model scenarios in which prices fall by 20% or 40%, remain below the strike price for six consecutive months, downstream orders fall short of expectations and inventory turnover slows. Only companies that can maintain cash-flow safety under extreme scenarios should consider using accumulator structures. Ensure the Pricing Benchmark Matches the Physical Exposure Battery materials are not fully standardized products. If the specification or delivery location of the company’s physical lithium carbonate procurement differs from the settlement benchmark used in the derivative contract, basis risk may arise and reduce the effectiveness of the hedge. The contract should clearly define: Reference product; Product specification; Delivery location; Settlement benchmark; Price source; Quality differentials. Companies should not focus only on whether the strike price appears attractive. 7. What Problems Cannot Be Solved by Accumulators? Accumulator structures can help reduce a portion of procurement costs, but they cannot eliminate all supply-chain risks. First, they cannot solve physical supply shortages. If the market experiences resource constraints, logistics disruptions or supplier defaults, a cash-settled accumulator cannot provide physical material. Second, they cannot fully protect against extreme price increases. Once the knock-out level is triggered, the company must return to the spot market. Third, they cannot replace inventory discipline. Even a discounted purchase price can become a burden if the company lacks effective inventory management. Fourth, they cannot create real demand. Financial instruments do not generate physical orders. Companies should not expand procurement merely because a discounted purchase opportunity exists. Fifth, they cannot eliminate basis risk. Differences in product specifications, quality, geography and trading terms may still reduce hedging effectiveness. Conclusion Accumulator contracts are not inherently unsuitable, but they must be placed within a strict procurement-management framework. They can serve as a complementary tool alongside spot procurement, long-term agreements, futures and standard options. In range-bound or moderately rising markets, they may help companies optimize average procurement costs. However, the discount comes from risk transfer rather than risk elimination. The buyer receives a limited price advantage while assuming the obligation to expand purchase volumes, increase inventory and absorb greater cash-flow pressure when prices fall. From the perspective of lithium market analysis, accumulators introduce an important additional dimension: An increase in procurement during a falling market does not necessarily indicate real demand recovery. An increase in inventory does not necessarily indicate active restocking. Around key lithium price levels, the impact of financial contracts on physical procurement behaviour deserves close attention. Disclaimer: This article provides an analysis of market mechanisms based on commonly used industry structures and publicly available information. It does not constitute confirmation or implication of any specific company’s actual positions, trading activities or financial condition. Lesley Yang Senior New Energy Analyst, SMM yangle@smm.cn

[CleanTech Is About to Sign a 40-Year Operating Contract With the Chilean Government for the Laguna Verde Lithium Project] CleanTech Lithium, an Anglo-Australian company, is about to sign a 40-year contract with the Chilean government to develop the Laguna Verde lithium project in the Atacama Region, enabling it to advance extraction of this mineral at one of the salt lakes opened to the private sector. After reaching agreement with the Ministry of Mining on the terms of the Special Lithium Operating Contract (CEOL), Chile’s Office of the Comptroller General is now expected to approve the document in Q2 2026. CleanTech, its subsidiary Atacama Salt Lakes, and minority shareholders that are among the consortium members established to advance the Laguna Verde project have begun celebrating this new phase, as it provides greater certainty for their investment. [Rio Tinto Begins Commercial Lithium Exports From the Rincon Project] Rio Tinto’s milestone achievement in commencing commercial lithium exports from the Rincon project marked a pivotal moment for the global lithium market. Miners are currently contending with the complex interplay of resource scarcity, geopolitical tensions, and the accelerating popularization of EVs. The traditional supply-chain dependencies that have defined battery materials sourcing for decades are being reshaped by new producers launching commercial operations in previously underexplored regions. These developments signify not merely a slight increase in capacity, but a fundamental shift in how critical minerals move from extraction sites to manufacturing hubs, with implications far beyond quarterly production data. Rio Tinto’s commercial lithium exports from the Rincon project reflected its prudent positioning in one of the world’s most fiercely contested mining regions for this mineral. Following the suspension of the Jadar project in Serbia in 2025, the company shipped 200 mt of battery-grade lithium carbonate from Buenos Aires to Shanghai in March 2026, marking the official start of operations at its core South American lithium asset. The timing of this market entry reflected broader industry dynamics across the Lithium Triangle. Argentina’s regulatory environment has increasingly favoured large-scale international mining operations. In addition, the Rincon project is located in Salta Province, placing Rio Tinto within a geographic cluster that contains significant global lithium resources across Argentina, Chile, and Bolivia. [The Geothermal Plant Behind Europe’s Lithium Push] The town of Landau in der Pfalz, near the French-German border, has long been at the heart of the local winemaking industry. The region is also home to the Upper Rhine Valley brine fields, which contain Europe’s largest lithium resources and have now made it a hub for Europe’s push to advance EV development. The planned integrated geothermal-lithium extraction plant forms part of renewable energy producer Vulcan Energy’s ambition to build a carbon-neutral EV supply chain in Europe. The project will use geothermal wells to extract lithium-rich brine from depths of up to 5 kilometers. The high-temperature brine will be pumped to the surface, where lithium will be extracted before being transported to a plant. There, the lithium will be converted through electrolysis into lithium hydroxide monohydrate (LHM). The brine will then be reinjected underground, while LHM will be delivered to offtakers, including automaker Stellantis, which owns automotive brands such as Citroen and Peugeot. [Liontown's Interim Loss Widens as It Bets on a Recovery in Lithium Prices] Australia's Liontown said on Thursday that its loss widened in H1 due to a non-cash accounting charge, and added that it is evaluating potential expansion options for its Kathleen Valley mine as lithium prices are expected to rise. The miner of this raw material used in EV batteries has been seeing an initial price recovery after nearly two years of weakness. Previously, EV adoption was slower than generally expected, resulting in oversupply. Liontown said in its December quarter report that prices improved, with the selling price reaching $900/mt, up 28% from the previous quarter. As its flagship project transitioned to underground mining, the company sold 190,000 mt of spodumene, a lithium raw material, in H1. Source: https://www.investing.com

Ahead of Q2, the tensions across China’s NEV supply chain had already become increasingly visible in February and March. On the one hand, battery output remained resilient, supported by OEM volume targets and the new-model cycle;

On the eve of the Spring Festival holiday, the lithium hydroxide market showed signs of a moderate price rebound. According to SMM data, on February 13, lithium hydroxide was quoted in a range of 130,000 to 145,000 RMB/ton, with an average price of 137,500 RMB/ton, an increase of 5,000 RMB/ton from February 6 (the previous Friday). As of February 13, the average price for February was provisionally reported at 139,575 RMB/ton. From the supply side, the overall lithium hydroxide supply remained tight in February. Although upstream smelters' willingness to release inventory slightly increased due to fluctuations in lithium carbonate futures prices, the overall sentiment to hold firm on prices remained strong, with quotes generally maintained at or above 140,000 RMB/ton. Pre-holiday macroeconomic policy expectations boosted sentiment in the lithium market. Coupled with the fact that few trading days remain in February, the pattern for the monthly average price has been largely set. Consequently, on the demand side, some material manufacturers increased their inquiries before the holiday to secure raw materials for post-holiday production. However, due to relatively sufficient earlier stockpiling and individual leading ternary material enterprises entering maintenance phases, the raw material shortage situation eased somewhat in the short term. Downstream companies showed limited acceptance of high raw material prices, with procurement intentions largely centered around the monthly average price. Overall, market transactions were still dominated by a tug-of-war between quoted prices and psychological price expectations, with actual trading volumes remaining quite limited. During the Spring Festival holiday, the market operated stably overall, with trading activity cooling down significantly. Affected by the hazardous chemical properties of lithium hydroxide, transportation came to a virtual standstill, and the market entered a seasonal quiet period. On the macro front, on the eve of the Spring Festival, the Chinese government announced the implementation of a zero-tariff policy for 53 African countries with which it has diplomatic relations, effective May 1st. It also promotes the signing of agreements on economic partnership for common development to expand market access for African products. This move will further deepen China-Africa economic and trade cooperation. In the long term, it is expected to broaden import channels for resources, including critical minerals, providing more solid resource support for China's new energy industry chain (such as battery raw materials). Meanwhile, significant movements also occurred in the international market. The U.S. Supreme Court's ruling that certain tariff policies from the Trump administration were illegal drove a broad uptick in overseas markets. It is expected that this trend will continue to reinforce domestic market confidence after the holiday. However, the minutes from the Federal Reserve's January meeting revealed significant divergence among policymakers regarding the future path of interest rates, which could exacerbate global capital market volatility and introduce uncertainty for the post-holiday market. Looking ahead to the post-holiday market: On the supply side, due to fewer production days and planned maintenance at some lithium salt plants, February's lithium hydroxide output is expected to decrease by more than 10% compared to January. On the demand side, as material manufacturers gradually resume production after the holiday, raw material procurement demand is expected to be gradually released, and market trading activity may pick up. However, the pace of the demand recovery still faces certain variables. On one hand, changes in the order structure of downstream battery cell manufacturers and the progress of new production line integration may affect the actual raw material procurement rhythm of material manufacturers. On the other hand, the price trends of upstream lithium ore and lithium carbonate, as well as the upcoming second-quarter contract negotiations, will also disturb the cost transmission and market expectations for lithium hydroxide, thereby exacerbating market uncertainty. Overall, the current lithium hydroxide market is in a phase of stabilizing before the holiday and gathering momentum afterward. The tug-of-war between supply and demand intensifies, intertwined with the influence of macroeconomic policies and the external environment. In the short term, prices are expected to remain volatile and range-bound. Subsequent trends will require close attention to downstream production start-up rates and upstream cost changes.

As of the end of the current period, Core Lithium Ltd's (Core) bank balance has increased compared to the previous quarter. Through a series of strategic decisions, the Company has effectively reduced liabilities, resolved legacy contracts, and strengthened its overall financial position. Currently, the Company holds approximately 5,000 tonnes of lithium concentrate and 75,000 tonnes of lithium fines in inventory, which can be monetized as market conditions improve. In late August 2025, Core initiated a capital raising, successfully securing funds through a two-tranche Placement and a Share Purchase Plan (SPP), providing further financial support for project advancement and operations. To support the potential future restart of the Finniss Lithium Project, Core has reached an agreement with Tesla. The parties have executed a comprehensive and binding settlement agreement, formally terminating negotiations for an offtake agreement. The specific terms of the settlement are confidential; however, as part of the agreement, both parties have agreed to a full and final release of all potential claims related to the previously disclosed dispute. This settlement resolves all offtake contracts and related obligations, leaving all future Finniss production unencumbered. Regarding lithium project operations, following the release of the Finniss Restart Study on 14 May 2025, the Company has continued to de-risk and refine the operating plans for the Finniss operation. Based on the latest geotechnical assessment results from the Grants deposit, Core has identified significant opportunities to bring forward revenue and reduce the pre-production capital cost for the Grants mine. Under the revised mine plan, the Grants mine will commence with open-pit mining before transitioning to underground mining. This approach is expected to lower the rebuild cost for Grants and accelerate the timing of first ore and revenue. The pre-production capital cost for the Grants mine is now estimated to be A$35–45 million lower than the estimate in the Restart Study. Furthermore, by modifying the underground mining method to incorporate backfilling using tailings that can be recovered from both the Grants mine and underground development at the Carlton prospect, underground recovery rates are maximized. Under the revised plan, an updated Ore Reserve Estimate (ORE) for the Grants deposit has been completed, showing a 33% increase in total tonnage and a 44% increase in contained metal . The upgrade to the Grants ORE is supported by substantial work completed. The Ore Reserves and related assumptions were developed and supported by independent consultants and Core's Competent Persons. The Mineral Resource Estimate (MRE) for the Finniss Project (including the Grants deposit) remains unchanged. The total project Ore Reserve Estimate has increased to 15.6 million tonnes at 1.27% Li₂O . At the Blackbeard prospect, the FY26 diamond drilling program continues. This program is designed to test the geology and lithium mineralization at depth within the exploration target. On project advancement, key technical work encompassing geotechnical studies, water management, mine design, and operating sequencing progressed during the quarter and remains on schedule to support a Final Investment Decision (FID). This work has further de-risked the restart plan and is aligned with the scope set out in the Restart Study. The strategic financing process is progressing on schedule and continues to attract interest from high-quality counterparties. Recent improvements in lithium market conditions are providing greater flexibility and optionality for the process. Source: Core Lithium official website, compiled by SMM

From capital markets to industrial demand, signals of recovery in the lithium industry are clear. Driven by the dual engines of EVs and ESS, the lithium market is gradually emerging from a prolonged downturn and entering a new growth cycle.