Tag: LFP

  • Nickel in 2026: How Indonesia and China Killed a Global Industry

    In 2020, Indonesia banned the export of raw nickel ore. Within four years, Indonesia’s share of global nickel production had risen from 31.5% to 60%. At least eight nickel mines in Australia and New Caledonia closed. BHP wrote down $3.5 billion on its Western Australian nickel operations and suspended them. Glencore closed its Koniambo smelter in New Caledonia. The only operating nickel mine in the United States — Eagle Mine in Michigan — is scheduled to close by 2026. Macquarie Group estimates that roughly 250,000 tonnes of annual production has been taken out of the global market by mine closures, with another 190,000 tonnes of planned output delayed. At $18,000 a tonne, 35% of global nickel production is unprofitable. At $15,000, that number jumps to 75%. The mechanism that did this was straightforward: Chinese companies invested roughly $30 billion in Indonesian nickel smelting capacity, using technology that could convert low-grade laterite ore — traditionally too expensive to process — into nickel pig iron and battery-grade nickel at costs that undercut every sulfide mine in the Western world. Indonesia provided the ore and the export ban that forced domestic processing. China provided the capital, the technology, and the smelters. Together, they flooded the global market with cheap nickel, cratered the price, and eliminated the competition. An Indonesian government official reportedly told struggling Western producers not to expect prices above $18,000 a tonne and said the country would ensure the market remains well supplied. The critical minerals supply chain has a new case study in how resource nationalism, backed by Chinese capital, can restructure a global commodity market in under five years.

    Why nickel matters

    Nickel’s industrial demand splits into two categories that are pulling in opposite directions. The legacy demand — roughly 60% of global consumption — is stainless steel. Nickel alloyed with chromium and iron produces the corrosion-resistant steel used in everything from kitchen sinks to chemical processing tanks to surgical instruments. Stainless steel demand grows with global industrial activity — slowly, predictably, and without the dramatic growth curves that battery metals generate.

    The growth demand is EV batteries. Nickel-manganese-cobalt cathodes — NMC — are the dominant battery chemistry in European and Korean electric vehicles, offering higher energy density and longer range than the lithium iron phosphate (LFP) chemistry that dominates in China. A typical NMC battery pack for a long-range EV contains 30 to 50 kilograms of nickel. Higher-nickel formulations — NMC 811, where nickel constitutes 80% of the cathode — reduce the need for expensive cobalt while increasing energy density. The trajectory for years was clear: more nickel per battery, more batteries per year, nickel demand going parabolic.

    Then LFP happened. LFP batteries use no nickel and no cobalt. They’re cheaper, safer, last longer, and — with improvements in energy density — increasingly competitive on range. In China, NMC’s share of the EV battery market fell from 25% in 2024 to 18% in the first nine months of 2025. Globally, LFP reached 50% of all EV batteries sold in 2025. The chemistry shift doesn’t eliminate nickel demand from batteries — NMC still dominates in premium vehicles, European production, and applications where energy density justifies the cost premium. But it slows the demand growth rate at exactly the moment Indonesia’s supply surge is flooding the market. The result is a 261,000-tonne surplus projected for 2026, the third consecutive year of oversupply, with LME warehouse inventories at their highest level in more than four years.

    How Indonesia did it

    Indonesia’s nickel strategy is the most successful example of resource nationalism in the 21st century, and the playbook is worth understanding because it’s being studied by every mineral-rich government on Earth.

    Step one: ban the export of raw ore. Indonesia prohibited raw nickel ore exports in January 2020, forcing any company that wanted Indonesian nickel to build processing capacity inside the country. The policy created an immediate incentive for foreign investment in domestic smelters.

    Step two: welcome Chinese capital. Tsingshan Holding Group — which produces nearly a third of the world’s stainless steel — built the Indonesia Morowali Industrial Park in Central Sulawesi, a massive complex of nickel pig iron smelters, stainless steel mills, and HPAL (high-pressure acid leach) facilities for battery-grade nickel. CATL, the world’s largest battery manufacturer, is building a mine-to-battery supply chain in North Maluku and a battery plant in West Java. Chinese companies now control approximately 75% of Indonesia’s nickel smelting capacity.

    Step three: undercut global competitors. Indonesian NPI production costs are low enough — thanks to cheap local labor, integrated operations, and coal-fired power — that producers remained profitable at price levels that forced Australian, New Caledonian, and Canadian mines into closure. The environmental cost is significant: deforestation of tropical rainforest for laterite mining, acid waste from HPAL processing, coal-powered smelters producing some of the highest-carbon nickel on the market, and tailings management practices that environmental groups have documented as inadequate. The “clean energy” supply chain for EVs runs through one of the dirtiest nickel production systems in the world.

    Step four: manage the surplus. By late 2025, Jakarta recognized the oversupply was depressing prices enough to threaten its own producers. The government cut 2026 mining quotas to 260-270 million wet metric tonnes, down roughly 30% from 2025’s 379 million. It shortened quota validity from three years to one year. It banned new NPI smelters and HPAL plants. PT Vale Indonesia temporarily halted mining in January 2026 after failing to secure its quota approval. Tsingshan suspended production lines at Morowali. The government that flooded the market is now trying to drain it — classic OPEC logic applied to nickel.

    The class problem

    There is a detail the market cares about enormously that most coverage glosses: not all nickel is the same. Class 1 nickel is high-purity metal (99.8%+ nickel content) — the form that can be delivered onto the London Metal Exchange and that battery cathode manufacturers need for NMC production. Class 2 nickel includes nickel pig iron and ferronickel — lower-purity products suitable for stainless steel but not for batteries without additional processing. Indonesia overwhelmingly produces Class 2. The HPAL facilities produce mixed hydroxide precipitate, which can be refined into battery-grade nickel sulfate — but that refining step happens mostly in China.

    The class distinction matters because the global nickel surplus is concentrated in Class 2. The Class 1 market is tighter. LME warehouse inventories are rising because Chinese and Indonesian producers are refining excess feedstock into Class 1 metal and dumping it onto the exchange — China’s refined nickel exports are up 55% year-on-year through October 2025. The price signal that the market sends — “there’s too much nickel” — is accurate for stainless steel feedstock and misleading for battery-grade material, where the supply chain still runs through Chinese refining that the CHIPS Act and the Inflation Reduction Act were specifically designed to reduce dependence on.

    The Western response

    The response has been slow and expensive. Vale is building a nickel sulfate refinery in Bécancour, Québec, with deliveries to General Motors targeted for the second half of 2026. Canada Nickel’s Crawford project in Ontario has Department of Defense funding and Samsung SDI investment. Talon Metals received $20.6 million from the DOD and $115 million from the DOE for a processing plant in North Dakota tied to a copper-nickel project in Minnesota led by a Glencore-Teck joint venture. These are meaningful investments. They are also, collectively, a fraction of the capital China has deployed in Indonesia. The semiconductor supply chain demonstrated that fab construction takes years and billions of dollars. Nickel mine development takes 5-10 years minimum from discovery to production, requires $1-3 billion per project, and — at current prices — struggles to attract financing because Indonesian supply has set a price floor that Western sulfide projects can’t compete with. The free market solution to Indonesian nickel dominance is to build mines that lose money at current prices and hope the market recovers before the capital runs out.

    Why it matters

    Nickel is the Rare Earth Elements course’s resource nationalism case study — the lecture that shows what happens when a major mineral-producing country decides to capture downstream value rather than exporting raw materials. The antimony and gallium/germanium cases are about export controls — restricting supply as leverage. Indonesia’s nickel strategy is the opposite: flooding supply as leverage, using Chinese-backed processing capacity to undercut competitors, eliminate their mines, and establish a dominant market position that will take a decade to challenge even if prices recover. The ARMSCOR post documents a state that built an arms industry to circumvent an embargo. Indonesia built a nickel industry to circumvent the global cost curve.

    The irony of the energy transition’s nickel dependence is structural. Western governments want clean EVs made with responsibly sourced materials. The cheapest nickel on Earth comes from coal-fired smelters processing laterite ore strip-mined from Indonesian rainforest, financed by Chinese capital, refined into battery-grade material in Chinese facilities, and sold to automakers who need it to qualify for IRA subsidies requiring critical minerals sourced from U.S. free trade agreement partners — which Indonesia is not. The lithium supply chain routes through Chinese refining. The graphite supply chain routes through Chinese processing. The nickel supply chain routes through Chinese-built smelters in Indonesia. The vanadium alternative to lithium-ion storage avoids nickel entirely but introduces its own concentration risk. Each solution to one dependency creates another.

    This is the kind of supply chain our Rare Earth Elements course was built to map — where a single export ban in 2020 restructured a global commodity market by 2024, eliminated the Western competition by 2025, and left the energy transition dependent on the dirtiest nickel production system on Earth, financed by the country the energy transition’s trade policy was designed to reduce dependence on.

  • Lithium in 2026: The Battery Metal That Doubled, Crashed, and Doubled Again

    Lithium carbonate prices nearly doubled between early December 2025 and late January 2026 — rising from roughly $13,400 per metric ton to $26,278, a 95% increase in under two months. If that volatility sounds familiar, it should. In 2022, lithium carbonate traded above $80,000 per metric ton as EV demand outran supply. By late 2023, it had crashed below $10,000 as new Australian hard-rock mines came online, Chinese lepidolite production surged, and downstream battery manufacturers burned through stockpiles they’d panic-bought at the top. By mid-2024, the market looked oversupplied. Then CATL’s Jianxiawo lepidolite mine in China hit delays. Zimbabwe suspended exports of raw lithium concentrates in February 2026, accelerating a ban that had been scheduled for 2027. Maintenance shutdowns hit multiple producers simultaneously. Speculative buying amplified the move. And lithium — the element whose price chart looks like a heart monitor during a cardiac event — was back above $26,000 before most analysts had finished publishing their “lithium surplus” forecasts from the quarter before. The fundamentals haven’t changed. Global EV sales rose 22% in 2025. Lithium-ion battery demand is forecast to grow at a 14% compound annual growth rate over the next decade. Every phone, every laptop, every EV, every grid-scale battery installation on the planet requires lithium. The planet produces roughly 180,000 metric tons of lithium carbonate equivalent per year. The planet needs more. Whether the planet can produce more fast enough, from mines that take 7-10 years to permit and build, is the question the entire critical minerals supply chain depends on.

    How lithium gets out of the ground

    There are two established methods and one emerging method, and the tension between them defines the supply chain’s economics.

    Hard-rock mining is the fast option. Australia — which accounts for over half of global mined lithium — extracts spodumene ore from open-pit mines, primarily in the Pilbara region. The ore is crushed, concentrated through froth flotation, and then chemically converted into lithium carbonate or lithium hydroxide at processing facilities that are, overwhelmingly, located in China. The advantage of hard rock is speed: a mine can ramp production in months rather than years, and output isn’t weather-dependent. The disadvantage is cost — hard-rock processing is energy-intensive, and the spodumene concentrate needs to be shipped across an ocean to Chinese refineries that control the conversion step. When lithium prices crashed in 2023-2024, Australian producers operating at the higher end of the cost curve shut down or curtailed production. When prices rebounded, they restarted. The boom-bust cycle is the business model.

    Brine extraction is the cheap option — but slow. The Lithium Triangle — spanning Argentina’s Salta and Jujuy provinces, Chile’s Atacama Desert, and Bolivia’s Salar de Uyuni — contains roughly 60% of the world’s identified lithium reserves in the form of lithium-rich groundwater beneath salt flats. Conventional brine mining pumps this groundwater to the surface and spreads it across massive evaporation ponds where it sits for 12 to 24 months while the sun concentrates the lithium content. Recovery rates are 40-60%. The process requires vast tracts of land, specific climatic conditions (hot, dry, windy), and enormous volumes of water in regions that are already among the driest on Earth. Chile’s SQM and Albemarle operate the world’s largest brine operations in the Atacama. Argentina is the fastest-growing brine producer. Bolivia — which has the largest single lithium deposit in the world at the Salar de Uyuni — has produced almost nothing, because the salt flat’s magnesium-to-lithium ratio is too high for conventional evaporation, the government insists on state control of extraction, and the infrastructure doesn’t exist.

    Direct lithium extraction — DLE — is the technology that could change the equation. Instead of waiting 12-24 months for the sun to do the work, DLE uses chemical or physical processes — adsorption, ion exchange, solvent extraction, membranes, or electrochemical methods — to pull lithium out of brine in hours or days, with recovery rates above 80-90%. DLE can work on brines too dilute or too contaminated for evaporation ponds, including geothermal brines in Europe and oilfield brines in the United States, which would open entirely new lithium-producing regions. The technology exists. Adsorption DLE is commercially proven in Argentina and China. Ion exchange systems from companies like Lilac Solutions and Standard Lithium are in advanced development. What hasn’t been proven is whether DLE works at the scale the market needs, at the cost the market can absorb, across the full range of brine chemistries the world’s lithium deposits present. DLE is the fusion energy of the lithium industry — the technology that could solve the supply problem, if the engineering catches up to the chemistry.

    The refining chokepoint

    The part of the lithium supply chain that most coverage skips is the part that matters most: refining. Australia mines spodumene. Chile and Argentina pump brine. But the conversion of raw lithium into battery-grade lithium carbonate and lithium hydroxide — the chemical products that actually go into battery cathodes — happens overwhelmingly in China. Chinese facilities process the majority of the world’s lithium into battery-grade material because China invested in the refining infrastructure decades before the rest of the world recognized lithium as a strategic material. The pattern is identical to what our Rare Earth Elements course documents across gallium, graphite, antimony, and the rare earths themselves: you can mine the mineral anywhere, but if the refining capacity is concentrated in one country, the mine doesn’t solve the dependency.

    Australia’s Pilbara spodumene is shipped to Chinese ports, refined in Chinese facilities, incorporated into cathodes at Chinese battery factories, and then exported — as finished batteries or battery cells — to automakers in Europe, Japan, South Korea, and the United States. The CHIPS Act and the Inflation Reduction Act both include provisions designed to incentivize domestic and allied-nation refining capacity. Albemarle is building a lithium hydroxide conversion plant in Australia. SQM and Codelco are developing lithium processing capacity in Chile under the country’s National Lithium Strategy, which requires that value-added processing happen domestically rather than shipping raw brine to China. The European Union’s Critical Raw Materials Act targets 40% domestic processing of strategic materials by 2030. All of these timelines assume permitting, construction, and commissioning schedules that the critical minerals industry has historically missed. The gap between “legislation passed” and “refinery operational” is measured in years. The market needs the refinery now.

    The price chart as diagnostic

    Lithium’s price action tells you something that no industry report will say directly: the market doesn’t know how to price this material. The 2022 spike to $80,000 was driven by genuine scarcity — demand outran supply and everyone panicked. The 2023 crash to $10,000 was driven by supply response — Australian mines expanded, Chinese lepidolite production surged, and stockpile-destocking flooded the spot market. The late-2025 rebound to $26,000 was driven by the supply disruptions and speculative positioning that always follow a price crash, because the mines that shut down during the bust take time to restart and the new mines that were supposed to fill the gap haven’t been built yet.

    The structural issue is that lithium is caught between two timescales. Demand grows at 12-14% per year, compounding predictably because EV adoption curves and grid storage deployment are policy-driven and structurally irreversible. Supply responds on a 7-to-10-year cycle, because mines take that long to permit, finance, construct, commission, and ramp. Battery manufacturers need to sign offtake agreements 3-5 years in advance to secure material. Miners need price certainty to justify the capital expenditure. Neither side can give the other what it needs, so the price oscillates between “too expensive to buy” and “too cheap to mine,” and the companies in the middle — the battery manufacturers, the automakers, the grid storage developers — absorb the volatility as a cost of doing business.

    The vanadium flow battery industry’s leasing model was invented partly to manage exactly this kind of commodity price volatility. The copper shortage creates a different but parallel constraint — a material the energy transition needs in quantities the mining industry cannot produce fast enough. The semiconductor supply chain demonstrated in 2020-2022 what happens when a concentrated supply chain meets a demand shock. Lithium’s version of that demonstration plays out in slow motion, over years rather than quarters, because mines are slower to build than fabs — but the structural logic is identical.

    What lithium is actually inside

    The chemistry matters because not all lithium demand is created equal. Lithium-ion batteries come in several cathode chemistries, and the chemistry determines how much lithium goes in.

    NMC (nickel-manganese-cobalt) cathodes use lithium hydroxide and are the dominant chemistry in European and Korean EVs — higher energy density, longer range, but more expensive and dependent on cobalt and nickel supply chains that carry their own geopolitical and ethical risks. LFP (lithium-iron-phosphate) cathodes use lithium carbonate, contain no cobalt or nickel, are cheaper and safer, and have become the dominant chemistry in Chinese EVs and increasingly in Tesla’s standard-range vehicles. LFP’s rise has shifted the demand mix from lithium hydroxide toward lithium carbonate — which matters because the two products require different refining pathways and different raw material specifications. The irony of LFP’s success as a “cobalt-free” battery chemistry is that it increases lithium intensity per kilowatt-hour while reducing cobalt intensity — trading one supply chain dependency for another.

    Beyond batteries: lithium hexafluorophosphate is the dominant electrolyte salt in lithium-ion batteries, and its production is concentrated in China and Japan. Lithium is used in ceramics, glass, lubricating greases, and pharmaceutical applications (lithium carbonate is a mood stabilizer prescribed for bipolar disorder). And — in a detail the fusion companies post mentioned — lithium-6 is a critical material for tritium breeding blankets in deuterium-tritium fusion reactors. If fusion works, the battery supply chain and the fusion supply chain will be competing for the same element. That competition doesn’t exist yet. It might within a decade.

    Why it’s Lecture 13

    Lithium is the Rare Earth Elements course’s anchor lecture because it is the single most important battery material in the world and the one whose supply chain most clearly illustrates every theme the course teaches: geological concentration (the Lithium Triangle holds 60% of reserves), processing concentration (China dominates refining), extraction technology evolution (DLE may transform the supply economics but hasn’t proven it can scale), price volatility driven by timescale mismatch (demand compounds annually, supply responds on a decade cycle), and the policy response gap (legislation targets 2030, the market needs capacity now).

    Every other critical mineral in the course — graphite in the anode, cobalt and nickel in the cathode, copper in the wiring, antimony in the flame retardants that keep the battery pack from burning down the car, vanadium in the grid-scale flow batteries that store the electricity the car charges from — orbits around lithium. The battery is the product. Lithium is the element that makes it possible. And the supply chain that delivers it is a 7-to-10-year engineering problem being asked to solve a 12-to-14% annual demand curve, in a market where the price can double or halve in a single quarter, with refining concentrated in a country that has demonstrated — across gallium, graphite, antimony, and rare earth processing technologies — that it will use export controls when it decides the strategic calculus requires it.

    This is the kind of supply chain our Rare Earth Elements course was built to map — where the lightest metal on the periodic table carries the heaviest strategic weight, the price chart looks like a seismograph, and the question that matters most isn’t whether there’s enough lithium in the ground but whether anyone can get it out, refine it, and deliver it fast enough to keep the energy transition on schedule.