Battery cathode materials: Cycles
How a lithium boom and bust crushed cathode makers' margins
How a lithium boom and bust crushed cathode makers' margins What this tab covers How its prices and margins move: past booms and busts with price levels, the spread or margin that the industry watches, the drivers of the cycle and the metrics to track.Cathode prices are mostly pass-through: contracts index lithium, nickel and cobalt and add a processing fee. So revenues swing with metal prices while margins swing with utilisation. The 2021-22 lithium boom inflated revenues; 2023-25 brought price collapse and LFP overcapacity at about 50% utilisation, which crushed processing fees. 2025 demand growth of 34-50% and a 2026 rebound in lithium, cobalt and phosphate inputs turned the cycle. The floor is cash cost of the marginal Chinese plant; the ceiling is set by when cell makers switch chemistry (NMC to LFP, LFP to sodium-ion).
The spread to watch Processing fee (cathode price minus metal content value)Cathode price less lithium, nickel, cobalt and iron phosphate value at index prices. It is not published freely; SMM says LFP processing fees fell in 2024 and were hard to raise in 2025.
Booms and busts
- 2021-2022
EV sales and restocking drove a lithium boom. Cathode revenues and profits soared, and Chinese firms announced large LFP expansions.
US battery-grade lithium carbonate average rose from $11,700/t (2021) to $63,700/t (2022) (Benchmark via USGS)
- 2023-mid 2025
Lithium prices collapsed and new LFP capacity flooded the market. LFP industry utilisation fell to about 50% and processing fees fell (SMM).
lithium carbonate fell to $11,800/t (2024) and $9,000/t (2025) (USGS)
- Late 2025-2026
Storage demand and EV growth lifted world cathode shipments 34% (SNE); GGII's China tally rose about 50%. Input prices rose and GGII expects 2026 cathode prices more than 30% above 2025.
cobalt rose over 170% and lithium carbonate nearly 60% from the start of 2025 to early 2026 (GGII); Fastmarkets carbonate CIF CJK $24.50-25.80/kg in mid-May 2026, $15.20-18.50/kg on 2 Oct 2026
What drives the cycle
- Lithium carbonate price. Sets about half of LFP cost and is passed through, so it drives cathode revenues more than volumes do.
- Chemistry mix (LFP vs ternary). LFP's rise from about 60% to about 70% of world cathode volume shifts demand from nickel and cobalt to iron and phosphate.
- Storage demand. Over 600 GWh of Chinese ESS cells in 2025 made storage the swing buyer of LFP.
- Trade policy. Chinese export controls (suspended to 10 Nov 2026), US foreign-entity rules and EU rules decide where new plants are built.
Metrics to track
| Metric | Why it matters | Where to track it |
|---|---|---|
| Cathode shipments by chemistry | Volume and mix | GGII; SNE Research; SMM |
| Lithium carbonate CIF CJK and GFEX futures | Main cost driver | Fastmarkets; GFEX |
| LFP operating rate | Margin signal | SMM |
| Listed company margins (Hunan Yuneng, Ronbay, EcoPro BM) | Processing fee proxy | company reports |