The rapid rise of lithium-iron-phosphate (LFP) batteries is changing the dynamics of the lithium market and Australia could capitalise with a shift to different value-adding, an S&P Global Energy conference was told in Perth last week.
Lithium prices are double the levels of a year ago when oversupply, weak demand and tariff tensions weighed on sentiment.
Then mining licence cancellations in China, plus CATL’s Jianxiawo lepidolite mine suspension, and Zimbabwe’s export ban drove prices higher.
Rising inventories and a bearish outlook for 2027 have created the recent downtrend, Singapore-based nonferrous metals price reporter Louissa Liau told the event.
“Market participants remain very cautious,” she said.
However, recent maintenance shutdowns across China’s lithium salt sector have tightened supply availability, lithium carbonate inventories continue to decline and downstream new energy demand remains robust, leading to a sustained improvement in market fundamentals, Liau said.
Australia provided almost 50% of China’s spodumene imports in June, accounting for 370,964 metric tons of the 768,411mt imported.
It was the same month China recorded its first spodumene import from the Democratic Republic of Congo, but imports from Zimbabwe were down 58.5% year-on-year due to the country’s export ban.
The market is waiting to see if lithium miners in Zimbabwe will meet the January 1, 2027, deadline for on-site processing, although some China-backed companies have asked for extensions.
James Chappelow, senior principal analyst mine economics and emissions, said January 1 was “a near impossible timeline” which he said strengthened Australia’s relative market position.
“Australia’s dominance in raw lithium supply is structural – the scale and grade is unmatched,” he told those gathered.
The fuel crisis created by the conflict in the Middle East is posing a risk to lithium miners but this supply uncertainty is also fuelling demand for electric vehicles.
Battery energy storage, AI data centres and e-trucks are adding to lithium demand, making the forecast surplus beyond 2029 fragile.
“The margin for error is thin,” Chappelow said.
“Any disruptions, policy hurdles or delays to long-lead projects could easily tighten the market and flip it to deficit.”
Juniors had faced financing difficulties in 2025, reducing exploration, majors were buying assets and not creating new supply, and a structural gap was looming given the average 16-year timeline from discovery to production.
In the battery space, Liau said China’s increased production of LFP over nickel-manganese-cobalt (NMC) batteries had grown to an LFP market share of more than 80% in June.
LFPs use lithium carbonate, which has created a price premium for this chemical over lithium hydroxide.
“The NMC market isn’t collapsing, it’s just that Australia can’t capitalise on the LFP boom,” Chappelow said, pointing to the lack of domestic lithium carbonate refining.
To date, Australia has focused on setting up lithium hydroxide refineries, although the Kemerton plant was idled in February and the Kwinana facility is operating below capacity.
Chappelow pointed to a circa three-fold cost differential between Kwinana and China refineries, due to factors including labour and energy costs, reagents and access to sulphuric acid.
“A pivot to the midstream could allow Australia to capture more of the supply chain value and avoid refining challenges,” he said.
