Deep Dive into Core Battery Metals: Market Dynamics and Production Developments

Lithium: Supply Shocks, Price Volatility, and the Quest for New Sources

The lithium market is currently defined by a significant disconnect between short-term price volatility and long-term market fundamentals. A speculative price rally, triggered by the news of the CATL mine suspension, sent lithium carbonate futures on the Guangzhou Futures Exchange (GFEX) soaring to a one-year high of Yuan 85,100/mt on August 13, 2025. This dramatic price increase was mirrored in the physical market, with battery-grade lithium carbonate spot prices rising to Yuan 82,500/mt. This market exuberance, however, appears to be driven by sentiment rather than a fundamental shift in supply and demand.

The broader market reality remains one of persistent oversupply. This is underscored by recent export data from major producers: Brazil's total lithium spodumene exports fell by a staggering 73% in H1 2025 compared to the same period in 2024, a drop that represents $123 million in revenue. This decline is a clear indication of a global oversupply and slower-than-expected demand that has lowered international negotiations. Similarly, Australian spodumene exports, despite new production from Liontown Resources, only saw a marginal 2.8% increase in the first half of the year. This is further evidence that the market is still facing an abundance of supply, which has kept prices depressed for many months.

Amid this volatile backdrop, key players are taking strategic action to secure their supply chains and future positioning. In China, Jiangxi Special Electric Motor announced that its subsidiary, Yichun Yinli, will officially resume production after a temporary maintenance halt. On the global stage, Chinese producer Yahua and South Korean LGES are moving forward with a joint plan to develop a new lithium salts refinery in Morocco. This project is strategically important as Morocco has a free trade agreement with the United States, offering a potential pathway for IRA-compliant sourcing. Meanwhile, Standard Lithium has bolstered its leadership team with the appointment of a new General Counsel to support the company's growth and development. The data on corporate actions and trade flows reveals that despite the recent price rally, market participants are not fooled by short-term sentiment. They are making long-term, strategic investments in new production and supply chain localization, anticipating that the underlying fundamentals will eventually reassert themselves.

Nickel: Oversupply, High-Nickel vs. LFP, and Supply Chain Shifts

The nickel market is characterized by a "tug-of-war" between weak macroeconomic sentiment and strong production cost support, resulting in prices that fluctuate within a narrow range. On August 20, the most-traded SHFE nickel contract fell below 120,000 yuan/mt, influenced by a broader decline in commodity sentiment. However, the metal has shown resilience throughout 2025, with prices hovering around $15,000-$16,000/t. This stability is supported by improving market fundamentals, including a robust nickel demand in China and the first LME nickel stock outflows since May 2023.

The market remains structurally oversupplied, with a projected surplus of 198,000 mt in 2025, which would mark the fourth consecutive year of surplus. This oversupply is largely driven by Indonesia, whose share of global nickel output is expected to grow to 63.4% in 2025.There are, however, some supply-side challenges, including a shortage of low-grade high-nickel pig iron in the domestic Chinese market. Additionally, nickel ore supply from the Philippines is tightening as the country enters its rainy season, a trend that is supporting nickel ore prices. Indonesia has also introduced a new policy to reduce the length of mining production quotas from three years to one year, which is intended to address oversupply and price volatility.

Demand for nickel is showing a clear dichotomy driven by battery chemistry trends. The rapid growth of LFP batteries, particularly for energy storage systems (ESS) and short-range electric vehicles, is a headwind for nickel-based chemistries. In China, LFP battery sales (129.3 GWh) vastly outpaced NMC sales (44.5 GWh) in the April-May period of 2025.However, this does not spell the end for nickel. Demand remains robust for high-nickel NMC batteries, which are essential for long-range EVs due to their superior energy density. As one industry expert noted, while LFP technology is in its infancy, nickel-based batteries are well-suited for users who require long-distance driving and operation in varied climates. This suggests the market is segmenting, with LFP dominating stationary and short-range applications while high-nickel NMC retains its place in the premium, high-performance EV sector. The future of the nickel market will hinge on the balance between these two competing demand segments.

Cobalt: The DRC-Indonesia Tug-of-War and Price Divergence

The cobalt market presents a fascinating contradiction, with prices for upstream and downstream products moving in opposite directions. The Democratic Republic of Congo's (DRC) extended export ban until September 2025 has created artificial scarcity for raw materials, pushing up prices for cobalt intermediate products. As a result, traders are holding firm on prices, with some quoting as high as $13.5 per pound. This has also had a slight upward effect on cobalt sulfate prices, which rose to 49,000-52,000 yuan/mt due to the rising cost of raw materials.

In stark contrast, the price of refined cobalt has weakened. This is due to a confluence of factors, including weak downstream demand, high social inventory levels, and a "just-in-time" procurement rhythm from manufacturers. Downstream demand for cobalt from the battery sector is particularly subdued, a result of a seasonal lull in China, the shrinking market share of NMC batteries in favor of LFP, and lower exports of mobile phones.

This price divergence between the upstream and downstream segments reveals a structural inconsistency in the market. Geopolitical policy from the DRC is creating a supply-side shock for intermediate products, but a technological shift towards LFP and broader macroeconomic weakness is simultaneously depressing demand for the final product, refined cobalt. This creates a difficult situation for refiners, who face rising raw material costs but cannot pass on the full price increase to their customers due to weak demand, leading to margin compression. The emergence of Indonesia as a growing cobalt producer is a critical counterpoint to the DRC's dominance. Indonesia's share of mined cobalt supply is expected to triple by 2029, and its mixed hydroxide precipitate (MHP) is becoming an increasingly important feedstock alternative, helping to alleviate some of the supply tightness caused by the DRC's ban. The market's stability will ultimately depend on whether downstream demand recovers or if the DRC's policy changes.

Iron Phosphate, Manganese, and Graphite: The Backbone of LFP/ESS

The raw materials that form the backbone of the lithium iron phosphate (LFP) battery are experiencing a period of aggressive expansion and fierce competition, even as overall demand for LFP grows.

Iron Phosphate (FP): Domestic iron phosphate production saw a significant increase of 10% month-on-month and a massive 70% year-on-year surge in July 2025.This rapid growth is driven by the expansion of new capacity from both integrated and non-integrated producers. The concentrated release of this new capacity has intensified competition, putting pressure on prices and squeezing the shipments of existing enterprises. Despite this, demand from downstream LFP manufacturers is strong, with a preference for high-quality materials at lower prices. On the cost side, while the price of industrial-grade MAP has softened, the cost of ferrous sulfate, a key iron source, continues to rise, putting further pressure on producers' margins. In this competitive environment, technological innovation is a key differentiator. The development of titanium-doped iron phosphate technology is a notable breakthrough, as it improves the physical properties of LFP precursors and provides a pathway for high-end product development.

Manganese: The manganese ore market is stable but heavily influenced by downstream demand. Prices have remained firm, supported by a moderate production enthusiasm from SiMn alloy producers. However, a recent round of stockpiling by downstream buyers has caused port inquiry activity to decrease, leading to a slight correction in prices. Inventory levels are mixed, with a buildup at Tianjin Port but a slight destocking at Qinzhou Port. The market's future will depend on the continued demand from the SiMn market and the impact of price changes on the acceptance of manganese ore by alloy plants.

Graphite: The graphite anode market is in a state of overcapacity, with the graphitization market in a "stalemate" as orders for tolling services decline. As anode material enterprises pursue vertical integration, the pressure of a supply surplus is intensifying. As a result, the price of artificial graphite declined in June and is expected to remain under pressure, despite a slight rebound in raw material costs. This is where geopolitical policy and technological innovation intersect. The imposition of a 160% combined tariff by the US on Chinese anode-grade graphite is creating a protected market for domestic producers and driving new investments. Companies like NEO Battery Materials are also looking beyond commoditized applications by developing high-performance, silicon-enhanced anodes for the defense and industrial drone markets, a high-margin niche that offers both performance advantages and supply chain security.