Lithium Prices Double While Sodium-Ion Cells Reach 175 Wh/kg
Lithium prices at the start of 2026 were more than twice as high as in the same period in 2025, according to the International Energy Agency's Global EV Outlook 2026. The price rise traces back to faster-than-anticipated demand growth from battery energy storage systems, low inventories in China, and temporary supply disruptions including the suspension of operations at CATL's Jianxiawo lithium mine.
Average battery prices still fell 8% in 2025, supported by manufacturing efficiency gains and shifts in battery chemistries. But the IEA warned that if upward price trends persist, they could exert upward pressure on lithium-ion battery prices and reinforce momentum behind sodium-ion batteries, which offer lower ranges but do not rely on lithium.
Sodium-ion batteries are now being scaled up by CATL and BYD, two of the world's largest battery producers. The latest sodium-ion cells can reach up to 175 Wh/kg, compared with up to 205 Wh/kg for the latest generation of LFP batteries and 265 Wh/kg for NMC batteries. That energy density gap translates into a driving range of up to 350 km for an average SUV equipped with a sodium-ion battery, versus 400 to 600 km for lithium-ion batteries under average weather conditions.
Cold-Weather Performance Gives Sodium-Ion a Niche Edge
Sodium-ion batteries perform significantly better at low temperatures than lithium-ion batteries, particularly LFP chemistries. The latest generation can retain around 90% of nominal capacity at temperatures as low as -40 degrees Celsius and can operate at temperatures as high as 70 degrees Celsius.
For manufacturers who maintain multiple supply chains in parallel, sodium-ion expertise and production capacity can reduce exposure to lithium price spikes. The first sodium-ion battery-powered electric car was introduced in China only in late 2023, so the technology has moved from novelty to scale-up in roughly two years.
The trade-off is lower energy density. Sodium-ion batteries remain constrained by lower energy density than lithium-ion technologies, limiting their competitiveness with LFP batteries at current lithium prices. Sodium-ion cells also fall behind on volumetric energy density measured in Wh/l, which matters for packaging in vehicles with limited space.
LFP Cathode Producers Run at a Loss While Expanding Capacity
In 2025, LFP battery packs were more than 40% cheaper on average than NMC alternatives per kWh. Part of that cost advantage reflects the lower energy density requirements of stationary storage applications, which predominantly use LFP. LFP batteries benefit from structurally lower material costs.
There are growing concerns about the sustainability of today's price levels. Many cathode active material producers are currently operating at a loss while continuing to expand manufacturing capacity, increasing the risk of market consolidation. This risk may be reduced if cathode producers gain pricing power, but either outcome would put upward pressure on battery production costs.
Lithium prices at the beginning of 2026 were more than twice as high as in the same period in 2025, even though they remained around 70% lower than their 2022 peak. The recent increase, if sustained, could put upward pressure on battery costs as stockpiles of minerals purchased at lower prices are drained. Existing long-term contracts for lithium supply and vertical integration among major battery producers could temper the effect.
Recycling Will Stay Scrap-Dominated Until the Mid-2030s
Battery recycling is crucial for the long-term sustainability of the battery industry and is likely to become an important future source of critical minerals. Today, recycling already plays an important role, primarily through the recovery of production scrap generated during manufacturing of battery cells and components.
The availability of end-of-life batteries for recycling has not increased at the same pace as deployment. Nearly all batteries deployed in EVs and stationary storage systems over the past few years remain in use today and most will operate until the mid-2030s. In practical terms, this creates a structural time lag of roughly 15 years between the growth in EV battery demand and the moment when comparable volumes of these batteries start reaching end of life.
China hosts over 85% of global recycling capacity. China has a strong position in access to end-of-life batteries, reflecting its status as the world's largest battery producer and EV market. Some recyclers, notably Brunp, the CATL-affiliated recycling subsidiary, benefit from direct links to major battery manufacturers, giving them preferential access to production scrap and ensuring steady feedstock volumes. Others face difficulties securing sufficient material feedstock, as recycling capacity is currently largely in excess compared to available feedstock globally.
Black Mass Imports Open a New Channel Into China
Until recently, imports of black mass, a concentrated mixture of the metals originally contained in a lithium-ion battery, were banned in China. This changed in August 2025, when imports of high-grade black mass were permitted. Import tariffs were also reduced at the start of 2026.
While the short-term impact has been limited, this policy shift could have medium-term implications. Part of the black mass produced outside China may increasingly be sent to Chinese facilities for recycling, attracted by available recycling capacity, expertise, and lower processing costs. This will also depend on regulations elsewhere, which could limit the flow.
At the same time, battery chemistry preference is shifting toward more affordable options such as LFP, while interest in sodium-ion batteries is growing. This poses challenges for recycling businesses relying on the economic value of recovered critical minerals, potentially requiring different business models and devoted regulations to ensure end-of-life batteries are properly collected and processed.
Toll-Based Models Shift the Economic Driver
Under toll-based models, the recycler is paid for the recycling service and the customer maintains ownership of the recycled materials. This model can be particularly effective when combined with policies that assign responsibility for end-of-life batteries to automakers or battery manufacturers, such as under the EU battery regulation or as recently introduced in China.
Under such conditions, the main economic driver shifts away from profit earned from selling recovered minerals, which may be insufficient for lower-value chemistries, and toward the savings associated with recycling compared with the cost of disposing of used batteries. This can reduce price volatility in recycling services and make recycling economically viable even when the recycling process itself is not profitable on a standalone basis.
The EU Battery Innovation Roadmap 2035, published by EUROBAT, identifies the EU Battery Regulation as one of the most significant drivers of battery R&D in Europe. The regulation addresses the full lifecycle environmental impact of batteries, from sustainable raw material sourcing and carbon footprint reduction through to recycling and end-of-life recovery. The roadmap also identifies R&D challenges associated with data management, traceability, and lifecycle monitoring, including the potential use of blockchain or similar technologies, in connection with the Battery Passport.
Manufacturing Capacity Keeps Outpacing Demand
Global plant nameplate capacity is expected to reach about 6.7 TWh by 2030, a 67% increase over the current estimated capacity of 4 TWh, according to McKinsey's Battery 2035 report. Nearly 700 GWh in additional capacity was under construction in the United States alone as of early 2025.
McKinsey expects dry electrode coating to reduce capital expenditures and energy use, high-speed stacking to improve throughput and precision, and advanced battery-formation approaches to save time and improve cell consistency. Greater integration of digital twins and inline analytics can improve quality control. Taken together, these manufacturing advances have the potential to improve yields up to as much as 95%.
Costs are expected to remain relatively stable and possibly rise slightly as continued technological improvements are balanced by a gradual rebound in material prices. McKinsey projects global average per-kWh pack costs of $75 to $90 for NMC and $55 to $65 for LFP by 2035, based on a low-price scenario for raw materials. A price floor is not guaranteed.
What This Means for 2026
The IEA data shows a battery market caught between two opposing forces: falling manufacturing costs and rising mineral prices. Sodium-ion batteries are the clearest beneficiary of that tension, but their energy density gap means they will not replace LFP in passenger vehicles any time soon.
The recycling sector faces a different clock. With end-of-life batteries not arriving in volume until the mid-2030s, recyclers will depend on production scrap and, increasingly, on toll-based contracts and extended producer responsibility rules to stay solvent. Whether black mass flows into China or stays local will depend on regulations outside China that have not yet been written.
For automakers and storage developers, the practical takeaway is to treat lithium price exposure as a live risk rather than a settled cost. Long-term supply contracts and vertical integration among major producers will temper price swings, but they will not eliminate them. The next two years will show whether sodium-ion's cold-weather advantage and lithium independence are enough to earn it a permanent share of the market, or whether it remains a niche chemistry for specific use cases. See our battery tech coverage for more.
For the full data, see the IEA Global EV Outlook 2026.