Battery Metals at Risk: Securing Lithium, Cobalt & Nickel Supply Chains

The world is racing towards a greener future, fueled by the promise of electric vehicles and renewable energy. This transition, however, hinges on a secure and sustainable supply of critical minerals. This article dives into the complex world of battery metal supply chains, exploring the latest report from the International Energy Agency (IEA) and highlighting the challenges and opportunities that lie ahead.

Unstable Ground: Geopolitical Tensions and Metal Supply

The global landscape of critical mineral supply is far from stable. Geopolitical tensions and export restrictions are reshaping the market, making it crucial to understand the vulnerabilities in the supply chain. The IEA’s “Global Critical Minerals Outlook 2025” offers a comprehensive analysis of these trends, assessing market dynamics, mining investment, and the future of critical mineral security. The report highlights the risks associated with the concentration of mineral supplies and emphasizes the need for policy interventions and technological innovations to diversify the sources of these vital materials.

Soaring Demand, Shifting Prices

The demand for essential battery metals surged in 2024, with the energy sector leading the charge due to the global expansion of renewable energy technologies. While demand grew, the supply of minerals increased at a faster rate, particularly from producers like China, Indonesia, and the Democratic Republic of Congo. This imbalance has led to a price correction, especially for battery metals.

Lithium prices have plummeted by over 80% since 2023. Graphite and cobalt prices have decreased by 20%, while nickel has fallen by 10%. This price correction has negatively impacted the financial capacity of the top 25 mining companies worldwide. Investment in critical minerals grew by only 5% in 2024, a slowdown from the 14% growth observed in 2023 (excluding iron ore, gold, and silver).

The IEA stresses the importance of ensuring adequate production capacity to meet projected demand and secure long-term investments. Price stabilization mechanisms, such as contracts with fixed ceilings and floors, can benefit both producers and consumers of these metals.

Innovating for a Sustainable Supply Chain

To build resilient and sustainable supply chains, it is essential to embrace new technologies that support efficient and sustainable production. These include Direct Lithium Extraction (DLE) in mining and innovations in refining processes that reduce energy consumption and techniques for separating rare earth elements.

The Rise of LFP and Battery Market Trends

The IEA projects that Lithium Iron Phosphate (LFP) battery cathodes will capture a growing share of the electric vehicle battery market. In 2020, nickel-based lithium-ion batteries, particularly those with Lithium Nickel Manganese Cobalt Oxide (NMC) cathodes, dominated over 90% of the global EV battery market. By 2024, LFP batteries accounted for nearly half of the global EV battery market, overtaking nickel-based batteries. This shift is driven by the price volatility of nickel and cobalt in 2020 and 2021 and advancements that have improved the energy density of LFP batteries.

Simultaneously, Sodium-ion batteries have emerged as the only commercially available EV battery chemistry that does not rely on lithium. There is also a trend towards increased use of manganese in lithium-ion battery cathode formulations, with improved LFP variants like Lithium Iron Manganese Phosphate (LFMP) and manganese-rich formulations for nickel-based batteries. Solid-state batteries also represent a major shift in battery chemistry and supply chains, which the industry is closely watching.

Concentration of Supply Chains: China’s Dominance

China dominates the production and processing of metals needed for batteries, including the emerging technologies like LFP. The report outlines the concentrated nature of these supply chains:

Phosphoric Acid: China is the world’s largest producer of phosphate rock, followed by Morocco and the United States. While China leads in global supply, Morocco holds the largest phosphate rock reserves worldwide, accounting for 70% of global reserves, while China has only 5%. This has led to significant Chinese investment in Morocco’s battery sector to secure phosphate supplies for LFP battery production. These batteries require high-purity phosphoric acid, which China also dominates, producing nearly three-quarters of the global supply. The United States and Europe follow, with around 5% each. China also leads in the production of sodium hydroxide, essential for sodium-ion batteries, capturing approximately 45% of global production in 2024. The United States is another significant player, with 15% of the supply, followed by Europe, with over 10%.

Manganese Sulfate: China controls 95% of the global supply of high-purity manganese sulfate in 2024. With only two processing plants outside of China, one in Belgium and another in Japan, and limited projects planned, the industry faces significant challenges, including high investment and operational costs, lack of technological expertise, and stricter environmental regulations.

Nickel Cathodes: China leads the world in nickel cathode supply, possessing nearly two-thirds of the global production capacity in 2024. South Korea is the second-largest producer, with around 30% of the production capacity, while Japan accounts for 5%. In contrast, China has a near-complete monopoly on the production of LFP cathodes, controlling 98% of global production capacity in 2024. The IEA expects the European Union and the United States to increase their share of nickel cathode supply to 10% of global production capacity by 2030, while China is expected to remain the primary supplier of LFP cathodes.

Challenges Ahead: A Complex Landscape

The expansion of emerging battery technologies faces several technical and operational challenges:

• Technical Difficulties: Solid-state batteries require thin lithium metal anodes to achieve high energy density. The production of these anodes with battery-grade purity is financially and technically demanding and poses safety risks. China is expected to have over 90% of the global production capacity for lithium metal anodes for batteries by the end of 2025.
• Competitive Costs: The prices of LFP materials in China are exceptionally low, making it challenging for other market players to compete. Chinese producers benefit from a highly integrated supply chain, where the raw materials needed for production are available domestically at very low costs, which is difficult to replicate elsewhere in the world.
• Processing Capacity Shortfall: A significant shortfall in the supply of high-purity manganese sulfate is anticipated by the mid-2030s. By 2035, the available supply is expected to meet only 55% of the demand in the announced policy scenario and 45% in the announced commitment scenario. Without additional production capacity, manganese refining could become a true bottleneck in the supply chain, especially for nickel-based battery production.
• Supply Chain Disruptions: Lacking manganese sulfate may also impede the production of lithium iron manganese phosphate batteries. Certain producers in China are using alternatives like manganese dioxide. Manganese sulfate, however, is crucial for nickel-based battery chemistries.
• Trade Restrictions: In January 2025, China’s Ministry of Commerce proposed new export restrictions on technologies related to LFP battery production, particularly on the advanced fourth-generation cathode materials. Additionally, China dominates patents on advanced LFP materials that allow for fast charging and higher energy density. If these proposed export controls are implemented, it could impact the international companies with advanced capabilities in producing LFP batteries. This could hamper the development and diversification of supply chains for these batteries, especially given the ongoing high demand from battery cell manufacturers and automotive companies.

Policy Recommendations: Paving the Way Forward

The IEA report offers several recommendations for developing battery metal supply chains:

• Localizing Machinery Manufacturing: Providing incentives and financial support to manufacturers of LFP battery machinery and equipment can reduce equipment costs through economies of scale. Establishing a consortium of local or international equipment producers to coordinate the production of components and equipment can accelerate the realization of economies of scale. Local demand for LFP batteries can be stimulated by providing incentives to users of locally manufactured LFP cells.
• Incentivizing Producers: Financial support is necessary for those in the mineral supply chain, whether through capital or operational expenses or through other risk mitigation measures, such as loan guarantees or reduced interest rates. These measures can encourage private investment and facilitate increased metal production and processing. Supporting emerging technologies, such as developing solid carbon production capacity, metal lithium anodes, and lithium sulfide, is also a primary focus in the development of emerging battery technologies.

Finally, the IEA emphasizes the need to support industrial research and development in LFP to develop the competitive fourth-generation cathode materials, as well as coordinating among various entities and countries to negotiate more effectively in the event of any trade restrictions on metal exports. Collaboration among key players can be important in patent negotiations in the event of conflicts and reduce the costs of raw materials.

Conclusion:

Securing a sustainable supply of critical minerals is not just a technical challenge; it’s a strategic imperative for the future of clean energy. By understanding the complexities of the supply chain, fostering innovation, and implementing supportive policies, we can build a more resilient and diversified ecosystem that supports the global transition to a cleaner, more sustainable future. The path ahead requires vigilance, collaboration, and a commitment to securing the essential resources that will power the world of tomorrow.: