February 23, 2023

Battery-Grade Lithium Refining Market Assessment

Stratas Advisors


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In recent years, there has been a trend in the lithium midstream industry towards reducing production of lithium carbonate in favor of lithium hydroxide as a result of several factors, including increasing demand for high-nickel cathode chemistries, and the desire for higher-value products. In fact, lithium hydroxide is the preferred alternative for high-nickel cathode chemistries because it has better solubility with nickel and cobalt, which can improve battery performance. In contrast, lithium carbonate is commonly used in the production of lower-nickel content cathode chemistries such as LFP (lithium iron phosphate) and lower-nickel NMC (nickel manganese cobalt), but also in a wider range of end-use applications. While this is not expected to affect overall lithium demand, the shift to higher-purity lithium hydroxide products can have some implications on the competitiveness of the different types of lithium deposits. In general, due to their higher lithium content, hard rock (spodumene) deposits are the preferred feedstock for direct conversion into lithium hydroxide, while brine deposits are more suitable for lithium carbonate output maximization.
Analysis shows that the share of lithium hydroxide production in total lithium chemicals supply has been increasing steadily in recent years, reaching over one-third of total lithium chemicals production in 2022. While production of lithium carbonate continues to grow as well, by 2030 lithium hydroxide is expected to account for over half of the total chemicals market, growing at a CAGR of 29% against the 15% CAGR projected for carbonate. This is directly attributable to the stronger growth of upstream hard rock operations, driven mainly by expansions in Australia – with brine mining and processing additions expanding primarily in Argentina. China remains the undisputed leader in both cases, producing about 73% of global battery-grade lithium supply. China’s dominance is more accentuated in lithium hydroxide supply, holding a market share of over 88% in 2022, significantly above the 64% share registered for lithium carbonate.
While investment in lithium carbonate production remains more bearish, Chinese lithium iron phosphate (LFP) battery OEMs are increasingly investing in upstream and midstream projects in China and elsewhere to secure stable supply of brine ores for direct lithium carbonate production. OEM investment in lithium hydroxide refining remains marginal, as growth in the high-grade lithium industry is primarily driven by well-positioned companies with a relatively long history of operating in materials mining and processing. In part, the exponential growth of lithium hydroxide versus that of lithium carbonate reflects global investment trends in cathode precursor manufacturing for EV batteries, which are expected to increasingly favor the production of high-nickel chemistries, especially outside of China.



This report is part of a series covering all segments of the EV supply chain, and contains strategic insights on growth projections and production trends across major markets and 70+ players, outlining key investments which help shape estimates on annual supply through 2030.

Key takeaways:

  • Increasing demand for high-nickel cathode chemistries fuels growth in lithium hydroxide production, which outgrows global lithium carbonate supply as a share of total lithium chemicals supply by the mid-2020s

  • Global supply of battery-grade lithium hydroxide grows at a CAGR of 29% from 2022 to 2030 to account for about 60% of global supply of lithium chemicals supply by the end of the decade

  • About half of global supply of lithium hydroxide is currently dominated by four players; in the medium term however, the exponential growth of smaller players and new market entrants is projected to dramatically decrease this share to roughly 15% of global supply

  • Major Chinese battery OEMs witness strong growth in lithium carbonate production to support their LFP cathode manufacturing base, though most consolidated refiners and precursor manufacturers expand investments in lithium hydroxide production


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