Record EV Growth Masks a Split Between Lithium and Nickel Demand

Global electric vehicle battery installations reached a record 1.2 terawatt-hours in 2025, roughly 30% above the previous year and more than seven times the volume of 2020. Yet the windfall from that milestone is splitting the critical minerals sector in two.

Lithium iron phosphate chemistries now hold more than 55% of the global market, and China commands around 80% of worldwide battery output. The old assumption, that electric vehicle growth lifts every battery metal equally, has broken down.

The reality now is bifurcated. Chemistry choices and trade policy, not headline vehicle sales, decide which projects thrive and which stall. This piece lays out a framework for separating the battery metal projects riding structural tailwinds from those dangerously exposed to regional concentration risk as the sector moves into late 2026.

The chemistry baseline: why total demand is no longer created equal

Two cathode families dominate the market, and the gap between them is the whole story. Nickel manganese cobalt (NMC) chemistries pack in nickel to lift energy density, range, payload, and cold-weather performance. Lithium iron phosphate (LFP), by contrast, strips out both nickel and cobalt entirely, keeping only lithium.

That single design difference explains why lithium and nickel are now on completely different trajectories.

The economics behind the shift are stark, but the underlying design logic is equally important: LFP battery architecture eliminates the nickel and cobalt that drive both cost and thermal management complexity in NMC cells, which is precisely why pack prices ran more than 40% below NMC alternatives in 2025.

The economics behind the shift are stark. In 2025, LFP pack prices ran more than 40% below NMC alternatives on a per-kilowatt-hour basis. The trade-off is lower energy density, but for cost-sensitive buyers the maths has been decisive, pushing LFP to more than 55% of globally deployed EV batteries, up from roughly 50% in 2024.

Structural defences and substitution threats

Here is the analytical pivot. Because lithium sits inside every major cathode chemistry, its demand is largely chemistry-agnostic. Whether LFP or NMC wins share, lithium remains the irreplaceable denominator. The International Energy Agency projects total lithium demand climbing from 205,000 tonnes in 2024 to 455,000 tonnes by 2030 under its Stated Policies Scenario.

That means you can evaluate lithium projects against overall EV adoption. Nickel is a different exercise entirely: its fate depends on predicting which specific regions and vehicle applications keep choosing nickel-rich packs.

One caveat protects nobody indefinitely. Sodium-ion technology looms as a margin threat in cost-sensitive segments, becoming genuinely competitive when lithium carbonate prices rise above roughly 150,000 Chinese Yuan per tonne, according to industry reporting. For now, lithium’s structural position holds, but it is not immune.

The regional divide and nickel’s cold-weather stronghold

The narrative that nickel is finished mistakes a Chinese domestic trend for a global one. Outside China, the picture reverses sharply: nearly 80% of batteries installed beyond Chinese borders in 2025 used nickel-containing chemistries.

That divergence is not accidental. China’s buyers favour the cheapest viable option, while Western original equipment manufacturers keep specifying high-nickel NMC and NCA packs for premium, long-range vehicles that require gravimetric energy density above roughly 250 Wh/kg.

Cold weather is where the divide hardens into physics. Nickel-heavy chemistries simply hold up better as temperatures drop, which matters enormously across Scandinavia, Canada, and the northern United States.

The performance gaps are measurable:

• Capacity retention at -20C: nickel-heavy packs hold 70-75% of rated capacity, versus 55-65% for LFP.
• Range retention at -10C to -20C: NMC retains 70-85% of its rated range, against 65-75% for LFP.
• Charge acceptance at -10C: NMC can absorb 60-70% of a normal charge rate, compared with 40-50% for LFP.

Those numbers translate directly into demand. Battery-sector nickel consumption is projected at approximately 480,000 tonnes in 2026, a 14% year-on-year increase, even as broader nickel demand grows a steadier 6% on stainless steel strength.

Battery-sector nickel consumption is projected at approximately 480,000 tonnes in 2026, a 14% year-on-year increase, even as the nickel price cycle remains suppressed by the same structural glut that has weighed on the stainless steel market, creating a disconnect between volume growth and spot price recovery that complicates project economics.

The read here is geographic. When you model nickel demand for the rest of this decade, weight Western premium brand targets and cold-climate vehicle requirements far more heavily than aggregate global sales. Continued demand for premium batteries across the European Union and North America is the lifeline keeping non-Chinese nickel producers viable, and it is defended by climate and consumer expectation rather than price alone.

Supply surpluses and 2026 pricing realities

Record installations have not rescued prices. That is the uncomfortable truth of September 2026, and it reframes everything.

Battery-grade lithium carbonate spot prices in China have ranged between roughly US$17,800 and US$22,500 per tonne through early and mid-September, with the Shanghai Metals Market benchmark near the top of that band and later assessments closer to the bottom. The volatility is real, but the direction is not a recovery; it is a market still absorbing excess supply.

For the 2026 calendar year, lithium supply is projected at 1,250,000 tonnes of lithium carbonate equivalent against demand of 1,150,000 tonnes, leaving a surplus of roughly 100,000 tonnes. That glut is not a one-year anomaly.

Benchmark Mineral Intelligence forecasts a persistent lithium surplus extending to 2030, with prices projected to bottom near US$14,500 per tonne in 2028 as global output continues to expand.

Nickel tells a parallel story. Battery-grade nickel sulphate has averaged near US$3,900 per tonne, with the Shanghai Metals Market index tracking a band of roughly US$3,893 to US$3,959 per tonne on 16 September 2026, under continued downward pressure from a structural glut.

The interpretive point is blunt. Both metals are operating in surplus, so you can no longer count on a rising commodity tide to bail out marginal projects. Survival in 2026 depends on where a producer sits on the cost curve, not simply on whether it holds a viable resource. This is the section where optimistic volume forecasts meet a balance sheet, and readers should scrutinise all-in sustaining costs accordingly.

Past performance does not guarantee future results. Financial projections are subject to market conditions and various risk factors.

China’s midstream chokehold and project renegotiations

Cell factories in Europe and the United States do not, on their own, create independent supply chains. The real dependency sits upstream, in the processing and active material stages that China dominates almost completely.

China holds an estimated 70-85% of global cathode and anode production capacity and produces roughly 98% of the world’s LFP active materials. Global battery nameplate capacity passed 4 terawatt-hours at the end of 2025, and China controlled more than 80% of it, while the EU and US each held between 6% and 7%.

That concentration has become a policy lever. On 8 November 2025, China’s Ministry of Commerce introduced expanded export controls targeting the sector’s core chokepoints:

1. Lithium batteries and cells with gravimetric energy density of 300 Wh/kg or higher.
2. High-density LFP cathode materials.
3. NCM and NCA precursor materials.
4. Graphite anode materials.
5. Associated battery manufacturing equipment.

Though some measures were temporarily suspended, revised controls are expected to hold through at least November 2026. For non-Chinese gigafactories, that means navigating strict dual-use export licensing simply to secure raw materials and production technology.

The November 2025 export controls are one data point in a broader pattern of supply chain vulnerabilities that extend beyond export licensing to include processing concentration, precursor material dependencies, and equipment sourcing restrictions that no single off-take agreement can fully neutralise.

The takeaway is that a signed off-take agreement no longer guarantees project success. You now have to scrutinise the geographic alignment between a mine and its processing partner to judge true geopolitical risk.

Corporate fallout and strategic pivots

The pressure is already showing up in contracts. In September 2025, Core Lithium scrapped a spodumene off-take deal with China’s Ganfeng Lithium, covering 75,000 tonnes per year, paying a US$2 million termination fee to free future output from its now-dormant Finniss mine for spot sales.

Liontown Resources took a different route, amending its long-term off-take with Tesla in September 2025 to shift pricing away from lithium hydroxide indices toward spodumene concentrate, better matching its actual product, while also engaging Ford to adjust financing terms.

The strategic pivot points north. Downstream buyers are increasingly targeting North American supply, encouraged by Inflation Reduction Act incentives. Lithium Americas amended its General Motors off-take at Thacker Pass in October 2025 to permit third-party sales, while Sigma Lithium and Smackover Lithium both struck fresh supply agreements with LG Energy Solution. These are the symptoms of a supply chain trying to decouple under financial strain.

Evaluating mining assets in a bifurcated battery market

The central divergence is now clear. Lithium offers volume security across every battery chemistry, insulated by its role as the common denominator. Nickel offers premium leverage, but only in specific Western geographies where range and cold-weather performance keep NMC in demand.

That changes how a resource company should be assessed. Grade and tonnage still matter, but processing geography and chemistry alignment now carry equal weight in judging whether a project can survive a prolonged surplus.

Looking toward 2027 and beyond, the decoupling of Western and Chinese supply chains is likely to redefine premium pricing for critical minerals. Producers aligned with non-Chinese processing, and positioned low on the cost curve, stand to capture that premium. Those exposed to concentration risk may not.

For investors modelling project economics through the 2028 price trough, our dedicated guide to the lithium market floor examines the structural demand shifts and cost-curve dynamics that will determine where prices stabilise before the next supply-demand rebalancing cycle.

This article is for informational purposes only and should not be considered financial advice. Investors should conduct their own research and consult with financial professionals before making investment decisions. These statements are speculative and subject to change based on market developments and company performance.