As with so much else coming out of China, battery manufacturing is in a state of overcapacity which stretches right through the supply chain from final product up to raw materials. But this won’t last forever, as both the EV industry and the energy storage industry are young and have huge growth potential from their current scale.
Chinese media outlet EVTank, also known the China YiWei Institute of Economics, has published commentary predicting that the lithium hexafluorophosphate price will rise slightly this year, and may then rise more steeply at some point through 2026-2030, with demand threatening to catch up with supply.
Similar points to those made in this article about hexafluorophosphate could likely be made about the immediate precursor material lithium carbonate – the important thing is the delayed reactions of production capacity scale to changes in demand, not any particular supply chain segment.
Like everything else, lithium hexafluorophosphate is in oversupply at present, with China’s production coming to 371,000 tons and global 390,000 tons as of end-2024. Compare to 249,000 tons of expected demand this year, which EVTank expects will more than double by 2030, to 545,000 tons.
As of end-2023 global production capacity was 300,000 tons, with as much as 1 million tons under construction or planning, but as with solar polysilicon, most of these plans were cancelled once prices dropped. In the case of polysilicon, most factories had a proposed second phase of equal scale whose construction was subject to market conditions and was therefore never built.
EVTank states that in 2024, most small and medium-sized hexafluorophosphate suppliers entered long-term shutdowns, which also mirrors the low utilization rates in solar manufacturing, disproportionately hitting smaller operations.
So on the supply side, clear overcapacity which has killed off most expansions and mothballed a lot of existing capacity. Some existing capacity can also be considered obsolete, liable for replacement in future. On the demand side, EVTank comments that new lithium salts are being explored such as lithium bis(fluorosulfonyl)imide (LiFSI), but that these technologies are immature, with disadvantages across process maturity, technical difficulty, and marginal production cost, so hexafluorophosphate can be assumed to be the dominant electrolyte product through 2030.
According to the Gaogong Research Institute, 60% of Chinese battery makers have suffered losses, with battery cells falling in price from $124 per kWh in early 2023, to $41 per kWh today. That price can be shouldered by BYD and CATL, at least for a time, but not so much for smaller players, 30,000 of which have entered bankruptcy (many of them likely entered battery manufacturing after the pandemic, and had a short run).
A recent energy storage battery tender held by China Power Construction saw an average price of just $65 per kWh for batteries, down 20% from the already low 2024 average price – little wonder that energy storage systems cost less than $200 per kWh to install in that country. Per recently released Ministry of Industry and Information Technology statistics, China manufactured 1,170 GWh of batteries in 2024, of which 260 GWh energy storage, 84 GWh consumer electronics, and 826 GWh power batteries.
The cost of fire protection systems has fallen from $9 per kWh to $2.3 per kWh, and there may have been declines in product reliability despite the accumulation of design expertise and technology. China’s energy storage batteries have low utilization rates and have been built out due to regulatory requirements – in a contrived, state-directed precursor to the ‘real’ industry of the future. From June 1st, renewable energy will be sold in China according to market rates, which will see solar and wind installations decline, but may well see a redoubling of demand for energy storage batteries.
It would only take a 20% per annum demand increase to more than double demand by 2030 – combine this with the current collapse in investment in new production, and it is not hard to see a second price increase for batteries, although it will be nothing compared to the post-pandemic price spikes.
Shipments of lithium hexafluorophosphate came to 208,000 tons in 2024, again according to EVTank, which was a 23.1% increase over 2023, even as the dollar value shrank by 33% to $1.8 billion. Prices fell from a peak of $82,000 per ton in 2022 to $7,450 per ton in Q4 2024, and three Chinese companies are now responsible for more than two-thirds of all shipments, pushing out foreign and smaller suppliers.
It’s precisely the harshness of this oversupply that leaves room for some bounce-back of prices later on. And this applies equally to other segments in the supply chain, such as battery-grade lithium carbonate production (670,000 tons produced in 2024, up 45% from 2023) and lithium hydroxide (360,000 tons, up 26%).