China lithium-battery materials: the third cycle

Every processing margin in the note moves after lithium carbonate moves. In 2025 the refined salt, the product that actually goes into cathode plants, traced a U: a low near 73,000 CNY/t (about A$15,000/t), then a rebound to about 120,000 (about A$25,000/t). January 2026 added 28% in a month, from 119,000 to 152,500. A Zimbabwe concentrate-export ban and Jiangxi lepidolite licence renewals — supply scares, not a demand census — then took the print to 200,000 CNY/t in May, about A$42,000/t, before it settled around 145,000 (about A$30,000/t). That is the price that pays the converters. It is also the price that, a year earlier, had been 60,000.

Hexafluorophosphate is the next rung, not a separate boom. It is the fluorine salt dissolved in battery electrolyte, and its cash cost is mostly carbonate plus fluorine processing. The note puts that cost near 100,000 CNY/t (about A$21,000/t) when carbonate was 200,000. LiPF6 itself ran from 51,700 CNY/t in the first half of 2025 (about A$11,000/t) to 180,000 by year-end, then back to about 110,000 (about A$23,000/t) when the note was written. At that level Do-Fluoride and Tinci, two listed LiPF6 and electrolyte names, are described as having left the trough because the salt is in the money, not because they acquired pricing power over CATL. Electrolyte is mostly solvent plus that salt: a mid-price of about 32,000 CNY/t for ternary-power grade and 31,000 for LFP-type, more than 50% above the 2025 low, then a plateau.

LFP cathode powder is the same story one step further downstream: carbonate plus iron-phosphate processing, between 45,000 and 66,000 CNY/t (about A$9,500 to A$14,000/t) in the period covered. Separator film is the exception that proves the mechanism. It contains no lithium. It is polyethylene or polypropylene, sold by the square metre, and it firmed because wet-process lines take about eighteen months to build, not because carbonate rose. Senior Technology (Enjie) and Sinoma Science are separator companies. A mine can be restarted faster than a wet-process line can be commissioned. That is a different tightness from a salt shortage, and it should not be folded into one “materials boom.”

Twenty-Four Tide’s use of the 2026 bounce is to ask how long it can last. The last decade gives a blunt answer: lithium-materials cycles are violent because the supply response is slow on the way up and indiscriminate on the way down. The first cycle, 2015–2019, was a policy impulse meeting a physical accident. China put a subsidy architecture under new-energy vehicles; demand came off a standing start; carbonate rose from 50,000 CNY/t to 170,000 (about A$11,000/t to A$36,000/t at today’s rate), a 240% move. In March 2015 Chile’s Atacama salt lake flooded. Brine tonnes that the market had been counting on did not arrive.

The unwind was Australian. By 2017 the subsidy was being phased down just as new mine capacity arrived together — in particular the expansion at Greenbushes, in Western Australia, the hard-rock deposit that still sits behind a large share of seaborne spodumene. Inventories built. Carbonate fell from 170,000 CNY/t to 40,000 by the end of 2019 (about A$8,400/t), a 76% decline. The template is already visible: a demand impulse, a supply scare, a capex response, a glut. Greenbushes is not a cameo. It is the reason a Perth reader already lives inside this cycle.

August 2020 was the cycle low, at 40,000 CNY/t (about A$8,400/t). The next two years produced a 1,400% rise to 600,000 (about A$126,000/t). That is the move the note calls rare in any bulk commodity, and the arithmetic is ordinary: Chinese NEV sales were 3.52 million in 2021 and 6.89 million in 2022, eleven times and twenty-one times the 2015 level, arriving on a supply base that the previous crash had starved of capital and that Covid then delayed. The mismatch was the entire story. Demand did not have to be infinite. Supply only had to be late.

The surplus accrued upstream. LiPF6 went from 70,000 CNY/t in 2020 to nearly 600,000 at the start of 2022. Tianqi reported CNY 24.1 billion of net profit that year (about A$5.1 billion), an eleven-fold rise, on an 85% gross margin. Hunan Yuneng, then as now a large LFP cathode supplier, saw revenue rise six-fold and profit three-fold. A womenswear issuer, Nikbo Fashion, entered the trade and renamed itself Puyuan Materials. That is not a curiosity. It is what late cycle capital looks like when the margin is sitting in the mine and the salt plant rather than in the cell.

The crash did not require electric-vehicle sales to fall. It required planned capacity to arrive faster than sales were still growing. The Ministry of Industry and Information Technology’s incomplete 2022 count was more than forty cell projects, more than 1.2 TWh of capacity, CNY 430 billion of investment (about A$90 billion). Domestic planned cell capacity that year was more than four times 2022 installations of 294.6 GWh. Midstream, 156 expansion projects across cathode, anode, separator and electrolyte carried more than CNY 500 billion of planned investment (about A$105 billion). Chinese lepidolite and African mines then arrived together. NEV sales growth slowed from above 50% to around 40% — still growth. Cell makers, the note says, still wanted the incremental share, so capacity overshot on the way down as well as on the way up.

Battery-grade lithium carbonate fell from 600,000 CNY/t to 60,000 by mid-2025 (about A$126,000/t to A$13,000/t), a 90% decline. LFP cathode powder fell from 173,000 CNY/t to 34,000 (about A$36,000/t to A$7,100/t), −80.2%. The note puts the industry in loss for more than thirty-six consecutive months. Electrolyte nameplate reached 3.5 million tonnes against demand of 1.2 million; global utilisation was below 40%. Tianqi lost nearly CNY 8 billion in 2024 (about A$1.7 billion). Dynanonic, the LFP cathode name, lost money in each year from 2023. Tinci’s net profit shrank from CNY 5.7 billion in 2022 (about A$1.2 billion) to less than 500 million in 2024 (about A$110 million). The 2026 bounce is a recovery from that compression. Percentage rises from those bases will look heroic. They are supposed to.

From the second half of 2025 the note dates a third cycle, and it does not attribute the tightness only to storage demand. The visible half is cancelled capex and association discipline: a coordinated attempt to stop selling film, powder and salt at cash cost. In June 2025 the China Battery Industry Association and the plastics-processing association asked members to compete on quality rather than price. In August the lithium branch of the Nonferrous Metals Industry Association warned against ruinous competition. Separator producers agreed to slower release of output and a pause in inefficient expansion. In January 2026 four central agencies — industry, planning, market regulation, energy — held a session on competitive order in traction and storage cells. That is an administered pause, not a merger wave.

The cancellations give the pause a tonne count. Since August 2025, on an incomplete tally, at least eight large materials expansions have been stopped, covering CNY 29.53 billion of planned investment (about A$6.2 billion). Senior Technology cancelled a Malaysian separator line of about CNY 2 billion (about A$420 million). Dynanonic cancelled LFP cathode plants at Qujing and Huize, 440,000 tonnes a year, about CNY 10 billion (about A$2.1 billion). Zhongke Electric halted three graphite-anode projects, 330,000 tonnes a year, CNY 10.3 billion (about A$2.2 billion). Yongtai cancelled a 200,000-tonne electrolyte line at Shaowu, CNY 950 million (about A$200 million). Tail plants also left on cost, environmental compliance and energy-intensity. Effective supply is tighter. The industry is not more concentrated. The next profitable quarter can restart the same race.

A materials plant buys from mines and sells to cell makers. In a squeeze it has no end to push. Twenty-Four Tide’s structural exhibit is a Shenwan Hongyuan industry tag — “battery chemicals,” meaning midstream materials, not the mines. In the first half of 2022 that tag booked CNY 31.167 billion of net profit (about A$6.5 billion) and about 90% of the chain. By the first half of 2025 the same tag was down to CNY 4.941 billion (about A$1.0 billion), about a tenth. Cell makers booked CNY 36.51 billion (about A$7.7 billion), 76.9%. The 2026 materials bounce is a recovery from that compression. It is not, in the note’s reading, a reversal of who sits in the middle.

CATL is the reason the split is sticky. Its 2025 net profit was CNY 72.2 billion (about A$15.2 billion), more than thirteen A-share automakers combined. The note puts the cell sector at about 90% of new-energy-industry profit, and that 90% as concentrated: CATL at 40% of global traction cells and 30.4% of 2025 storage-cell shipments, a fifth consecutive year at the top of storage. A purchasing decision there sets the materials price. Midstream leaders are generally below 30% share. Hunan Yuneng, a CATL cathode supplier, is cited at 28.2% globally — large for a powder plant, still a supplier. In the first half of 2026 CATL’s gross margin is given as 24%; Ronbay, which sells high-nickel cathode into that system, below 10%. That gap is the oligopoly. It does not close because carbonate had a good May.

Capacity constraint and a demand surprise can still make a materials year. Once supply and demand rebalance, the same plants are squeezed from both ends. That is the claim H1 2026 has not yet been asked to answer.

The optimistic reading is limited new materials capacity, traction and storage both pulling, a tighter balance. The note’s reservation is that midstream is still scattered, so private expansions restart as soon as profits look real. Putailai is the named case because it makes the two midstream products — graphite anode and separator film — that the rest of the industry had just agreed to stop overbuilding. In March 2026 it planned about CNY 2.051 billion (about A$430 million) for a 50,000-tonne anode plant in Malaysia. In May it announced CNY 5.6 billion (about A$1.2 billion) for 7.2 billion square metres of separator capacity in Sichuan. Self-discipline is not a capacity cap. It is a gentlemen’s agreement in a fragmented industry.

Storage demand is the other half of the 2026 bounce, and it is being financed as if the constraint will last. From 2014 to 2025 China’s primary market recorded 3,557 storage financings and about CNY 325.1 billion of disclosed proceeds (about A$68 billion). In 2025, central state-owned enterprises set up or funded 392 storage-related firms with registered capital above CNY 50 billion (about A$11 billion). About twenty-three storage “unicorns” are given a combined valuation above CNY 500 billion (about A$105 billion). Those are claims on future cells, not cells. China Investment Industry Research Institute put 2025 planned domestic storage-battery capacity above 1 TWh, against a global 2026 demand figure of about 450 GWh. The comparison mixes a China plan with a world demand number. That is the tell, not a slip: if even part of the pipeline is built, the materials upswing is co-financing the next glut in the product the upswing is counting on.

GGII counted nearly twenty Chinese storage projects in the first half of 2026, more than 500 GWh of planned capacity and more than CNY 47 billion of investment (about A$9.9 billion), up 110% year on year. Zhongyuan Securities expects more than 500 GWh of new storage lithium-ion capacity in 2026 and more than 1,200 GWh of domestic stock by year-end, naming Chuneng, CATL, Hithium, Envision, EVE, REPT and CALB. Planned tonnes, financed tonnes and demand tonnes are different objects. Treating them as one number is how the last cycle was sold.