What's Driving the Current Cobalt and Lithium Markets?
The cobalt and lithium markets continue to experience significant volatility in 2025, with contrasting supply-demand dynamics shaping price movements. The cobalt market has seen substantial price increases, primarily due to the DRC cobalt export ban extending to cobalt intermediates, creating immediate supply concerns. Meanwhile, the lithium market presents a more complex picture with temporary price rebounds against a backdrop of persistent structural oversupply.
"Despite the seasonal downturn in electric vehicle production, cobalt prices have surged as market participants respond to potential supply disruptions from the DRC," notes SMM's latest market analysis. This geopolitical development has reversed the previously declining price trend for cobalt products.
Global Supply Constraints vs. Demand Reality
Cobalt's supply chain faces significant disruption after the DRC government extended its ban on intermediate product exports. As the source of approximately 70% of global cobalt production, any policy change in the DRC creates immediate market ripples. The ban specifically targets cobalt hydroxide and other intermediate products, forcing many Chinese processors to seek alternative supply arrangements or pivot toward battery recycling process.
Meanwhile, lithium continues to face a different challenge. Despite spot prices for lithium carbonate briefly falling below ¥60,000/mt before rebounding to approximately ¥60,600/mt, the fundamental oversupply situation remains unchanged. Recent transactions of lithium concentrates have concluded at $620-630/mt, with ore suppliers maintaining firm pricing despite downstream pressure.
"What we're seeing is a disconnect between raw material prices and refined product markets. Lithium ore suppliers have continued to hold firm on prices at elevated levels despite the overall bearish sentiment in lithium chemicals," explains SMM's battery materials analyst.
This price resilience at the upstream level suggests that producers are attempting to defend margins rather than responding to actual demand improvements.
Price Trends and Market Response
Refined cobalt pricing on futures platforms has seen the most dramatic movement, with some grades experiencing 15-20% increases following the DRC announcement. Cobalt sulfate, which had been declining for weeks, has reversed course with quotes maintained near previous highs as producers anticipate raw material shortages.
For lithium products, the picture is more nuanced:
- Lithium Carbonate: After falling below ¥60,000/mt, prices have rebounded slightly to ¥60,600/mt without substantial demand improvement
- Lithium Hydroxide: Continues its downward trend despite stabilization in carbonate prices
- Technical-grade Lithium: Facing continued pressure from industrial demand weakness
According to trading data from SMM, these price movements reflect speculative positioning rather than fundamental demand recovery, with traders and chemical plants raising acceptance prices to hedge against potential future volatility.
Market participants should closely monitor the actual implementation and enforcement of the DRC export restrictions, as the gap between announced policy and on-the-ground reality has historically created additional market uncertainty in the cobalt supply chain.
How Are Geopolitical Factors Reshaping Supply Chains?
The battery metals landscape is increasingly shaped by government policies, international trade dynamics, and regional industrial strategies. Recent developments highlight how quickly supply chains can be disrupted by policy decisions, particularly in markets with concentrated production.
Impact of DRC's Export Restrictions
The DRC's decision to extend its export ban on cobalt intermediates has created immediate market disruption. Chinese cobalt processors, who have traditionally relied on DRC-sourced materials, are facing potential raw material shortages as the policy limits the export of cobalt hydroxide and other partially processed materials.
"Smelters have faced difficulties such as production cost losses and sluggish downstream demand," reports SMM, citing conversations with cobalt processors. "Many are suspending purchases and consuming existing inventory while waiting for market clarity."
This wait-and-see approach has led to limited spot transactions despite rising prices, as buyers remain uncertain about the ban's enforcement timeline and potential exceptions. The situation highlights the vulnerability of supply chains concentrated in politically volatile regions.
The long-term implications could be substantial:
- Accelerated development of cobalt recycling infrastructure
- Premium pricing for cobalt from alternative jurisdictions (Australia, Canada)
- Investment in cobalt-reducing battery chemistries
- Potential relocating of processing capacity to the DRC
Global Trade Dynamics and Regional Policies
Beyond the DRC situation, other policy developments are reshaping battery material supply chains. The United States' recent tariff reductions on certain energy products have provided a boost to energy storage system (ESS) orders, particularly benefiting lithium iron phosphate (LFP) materials that dominate the stationary storage market.
China's export position in the electric vehicle and battery sectors continues to strengthen, with automotive exports projected to reach 7 million units by 2025 and potentially 10 million by 2030, according to Sun Xiaohong of the China Chamber of Commerce for Metals, Minerals & Chemicals Importers & Exporters (CCCME).
"The international market is proving to be a bright spot for Chinese battery manufacturers," notes SMM's analysis, "with growing demand in Southeast Asia and India for consumer battery applications offsetting some weakness in domestic markets."
This international dimension is becoming increasingly important as established markets face saturation and emerging economies begin their electrification journeys. Companies with global supply chain integration are better positioned to navigate the complex US‑China trade war and mitigate region-specific disruptions.
What's Happening in Battery Material Production?
Battery material production shows divergent performance across different chemistries, with technology advancements and cost pressures driving ongoing market evolution. The sector faces challenges balancing capacity utilization against changing demand patterns.
Cathode Material Trends
Ternary Cathode Materials (NCM/NCA)
Nickel-cobalt-manganese (NCM) and nickel-cobalt-aluminum (NCA) materials, collectively known as "ternary cathodes," have shown mixed price performance. High-nickel variants (8-series) have maintained stable pricing, while 5-series materials have seen slight increases. Production schedules remain relatively flat, with manufacturers cautious about second-half prospects.
"Domestic power battery demand for ternary materials remains mediocre," reports SMM, "with selective growth limited to newly launched vehicle models and niche applications requiring higher energy density."
The international market presents a brighter picture, with consumer battery applications in Southeast Asia and India showing steady growth, supporting export-oriented production despite domestic challenges.
Lithium Iron Phosphate (LFP)
LFP cathode materials have experienced slight price decreases of approximately ¥25/mt this week, continuing a gradual downward trend. However, production volumes are expected to increase modestly in June, primarily driven by energy storage system (ESS) demand rather than automotive applications.
"ESS orders have been significant," notes one LFP producer, "helping to offset weakness in the power battery sector and maintaining overall production enthusiasm."
This shift toward storage applications represents an important diversification for LFP producers, who have faced margin pressure from declining electric vehicle sales in China. The technology's inherent safety advantages and cost competitiveness make it particularly well-suited to stationary storage applications where energy density is less critical than in vehicles.
Lithium Cobalt Oxide (LCO)
The LCO segment has been most directly impacted by cobalt price volatility, with producers suspending quotes following the DRC export policy changes. The unique cost structure of LCO, with cobalt representing approximately 60% of material costs, makes it particularly sensitive to raw material fluctuations.
"LCO cathode plants still need to wait for upstream prices to become clear before providing reliable quotations," explains SMM's analysis. While declining lithium carbonate prices would normally benefit LCO producers, this advantage has been more than offset by rising Co₃O₄ costs, creating significant pricing uncertainty.
Anode Material Developments
The anode market continues to see price declines for artificial graphite, driven by previous cost reductions and abundant supply. Natural graphite prices have remained more stable but face long-term pressure as performance gaps between anode types narrow through technological innovation.
"Artificial graphite manufacturers have been able to continue price reductions due to process improvements and scale effects," reports SMM, "which has intensified competition with natural graphite in all but the most demanding applications."
This competitive dynamic is driving accelerated innovation across the anode sector, with blended products increasingly common as manufacturers seek to optimize performance-to-cost ratios for specific applications.
How Are Battery Component Markets Performing?
The auxiliary components of battery production show diverse market conditions, with price stability in separators contrasting with more dynamic conditions in the electrolyte segment. Both markets continue to face structural overcapacity issues.
Separator Market Conditions
Separator prices have maintained remarkable stability, with mainstream quotations holding steady at ¥1.35/m² for 5μm wet-process separators and ¥0.45/m² for 12μm dry-process variants. This price stability comes despite prolonged capacity release cycles creating persistent supply surpluses.
"The separator market's structural overcapacity continues to limit pricing power for manufacturers," observes SMM's component analyst, "with limited volatility expected in the near term despite raw material cost fluctuations."
The stable pricing reflects both intense competition and the maturity of separator manufacturing technology, with most producers focusing on capacity utilization rather than margin expansion. This component category represents one of the few areas where battery manufacturers have maintained consistent cost expectations throughout 2025.
Electrolyte Market Dynamics
The electrolyte market presents a more complex picture, with declining LiPF₆ prices offset by rising solvent costs due to petrochemical product price increases. This has created a relatively neutral overall cost structure, allowing electrolyte prices to remain stable despite significant movement in individual components.
Manufacturers have adapted to market conditions by operating on "produce based on sales" models with selective order fulfillment, abandoning low-margin business to minimize losses. This approach reflects the challenging economics of the electrolyte market, where structural overcapacity maintains downward price pressure despite profitability concerns.
"Electrolyte producers have become increasingly selective about which orders they accept," notes SMM's research, "prioritizing long-term relationships and higher-margin products while reducing exposure to commodity segments."
This strategy has helped leading electrolyte manufacturers maintain viable operations despite the challenging market conditions, though smaller players continue to face significant profitability challenges.
What's the Status of Emerging Battery Technologies?
New battery technologies are gaining traction, offering alternatives to traditional lithium-ion chemistries and creating diversification opportunities for material suppliers and cell manufacturers. These emerging technologies are progressing at different rates, with some already entering commercial deployment while others remain in development stages.
Sodium-Ion Battery Development
Sodium-ion battery technology has shown meaningful commercial progress, with increasing production and shipments of sodium iron pyrophosphate (NFPP) cathode materials. This technology offers a compelling alternative to lithium-ion batteries for applications where cost is more critical than maximum energy density.
"The primary demand for sodium-ion batteries comes from energy storage and start-stop applications," reports SMM, "with economies of scale driving continued price reductions and improved market competitiveness."
The sodium-ion value proposition is particularly strong in regions facing lithium supply constraints or price volatility, as the abundant nature of sodium resources provides a more stable cost outlook. As production volumes increase, the technology is benefiting from the same learning curve effects that have driven lithium battery cost reductions over the past decade.
Solid-State and Semi-Solid Battery Progress
The solid-state battery segment shows a more varied development timeline, with pure solid-state solutions still in the small-trial sample phase while semi-solid-state batteries have progressed to market promotion stages. This technology progression reflects the significant engineering challenges associated with solid electrolytes, particularly around interface stability and manufacturing scalability.
According to Far East Smart Energy, their development plans include "integration with full-tab large cylindrical batteries (21700, 4680, 4695) in key sectors," targeting applications requiring high C-rate charging and high specific energy.
The staged approach to solid-state deployment reflects both technical realities and market pragmatism:
- Semi-solid electrolytes: Offering meaningful safety improvements while maintaining acceptable performance
- Full solid-state: Promising transformative advantages but requiring significant manufacturing innovations
- Application-specific deployment: Targeting premium segments where performance advantages justify higher costs
This phased approach allows battery manufacturers to capture incremental benefits while continuing to develop more ambitious long-term solutions.
What's Happening in Battery Recycling Markets?
The battery recycling segment shows mixed performance, with recent price movements reflecting both upstream material costs and evolving recovery economics. The sector faces ongoing challenges around profitability and scale, with most participants operating in challenging economic conditions.
Black Mass Market Conditions
Battery black mass prices have shown modest movements, with slight rebounds in ternary and LCO black mass values following broader cobalt price increases. Coefficient trends show stable overall ratios, with slight increases in cobalt coefficients (reflecting higher metal prices) offset by declining lithium coefficients (due to persistent lithium oversupply).
For LFP black mass, which contains minimal cobalt, prices have remained more stable, with pole pieces trading at ¥2150-2300/mt and battery-derived material at ¥1950-2100/mt. This price differential reflects the varying material recovery values and processing requirements between different battery chemistries.
"Market transactions remain sluggish as recyclers deplete existing inventories," reports SMM, noting that grinding mills and traders have been lowering price expectations amid falling salt prices for most of 2025. This suggests that the recent uptick may be temporary rather than indicating a sustained recovery.
Recycling Market Outlook
The economic viability of battery recycling operations remains challenging, with SMM reporting that "most wet-process recyclers are operating below breakeven levels except for leading integrated players." This profitability gap highlights the importance of scale and vertical integration in the recycling value chain, with standalone operations facing particular challenges.
"Black mass prices continue to track salt price movements in the absence of other market drivers," explains SMM's recycling specialist, creating a direct link between refined material markets and recycling economics. This connection means that recyclers face similar market volatility to primary producers but with additional technical challenges and variable feedstock quality.
The outlook for recycling operations depends significantly on the evolution of primary material prices, with higher cobalt and nickel values potentially improving recovery economics for high-value chemistries. However, the persistent lithium oversupply situation limits the contribution of lithium recovery to overall recycling economics, creating an imbalanced value proposition for mixed battery waste streams.
How Is the Energy Storage Market Developing?
The energy storage sector shows remarkable resilience despite challenges in the broader new energy vehicle market, with stable pricing and continued project development. This segment has emerged as a critical demand driver for battery materials, particularly for LFP chemistry.
Energy Storage System Pricing
DC-side battery cabin prices have maintained stability, with current levels at ¥0.432/Wh for 5MWh units and ¥0.437/Wh for 3.44/3.77MWh units. This price stability reflects a maturing market where scale effects and standardization are offsetting raw material cost pressures.
A notable recent project award provides insight into total system economics: a 200MW/400MWh standalone ESS project was awarded at ¥283.6 million, equating to ¥0.709/Wh for the complete system. This figure includes not just battery costs but also power conversion systems, controls, and balance of plant, illustrating the significant value-add beyond cell-level components.
"Project owners and integrators are adopting a wait-and-see approach as provinces implement power market participation policies," notes SMM's analysis, suggesting that regulatory developments remain an important driver of deployment timing and project economics.
Market Outlook and Regional Development
Energy storage demand has emerged as a critical offset to weakness in power battery applications, providing battery manufacturers with an important diversification channel. This shift has been particularly beneficial for LFP producers, whose chemistry aligns well with storage requirements.
"Continued implementation of mechanisms for ESS participation in power markets will drive the next wave of deployments," predicts SMM, highlighting the importance of market design and regulatory frameworks in determining storage economics.
The price stability in DC-side battery cabins is expected to continue in the short term, with limited fluctuations anticipated despite ongoing volatility in underlying material markets. This stability reflects both the competitive landscape for storage systems and the increasing separation between battery material prices and finished system costs as non-battery components represent a growing share of total system value.
The energy sector continues to see increased interest in pumped hydro storage investment as a complementary long-duration technology alongside battery systems.
What Are the Key Market Indicators to Watch?
Several critical indicators will determine the direction of cobalt and lithium markets in the coming months, requiring close monitoring by industry participants. These factors span supply dynamics, demand trends, and broader market conditions.
Supply-Side Indicators
The DRC export policy implementation represents the most immediate supply-side concern for cobalt markets. The actual enforcement of the announced ban, including any potential exceptions or grace periods, will significantly impact material availability and pricing. Monitoring physical shipments and customs data will provide earlier signals than official policy announcements.
Lithium production capacity continues to expand despite current oversupply, with several major projects approaching completion. The commissioning schedules and actual production ramp-ups of these facilities will shape supply dynamics through 2025 and beyond. Of particular importance is the discipline of producers in adjusting output in response to market conditions rather than focusing solely on utilization rates.
Recycling volume growth represents an increasingly important supply factor
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