Cheap Batteries, Costly Dependence

Record-low LFP battery prices mask a critical supply vulnerability: nearly all global grid storage depends on Chinese manufacturing

2 Apr 2026

LFP batteries now power more than half of all electric vehicles and over 90% of global grid-scale energy storage. Prices fell more than 15% last year, widening the cost gap with nickel-based alternatives to over 40%. The technology looks like a clean energy success story.

The International Energy Agency is less sanguine. In a February 2026 assessment, it warned that the economics conceal a structural vulnerability of unusual severity. China produced more than 80% of all lithium-ion batteries in 2025. For LFP specifically, the concentration is sharper: China controls close to 100% of global LFP cathode material output and 75% of the purified phosphoric acid required to make those cathodes. Virtually every grid battery currently in service depends on Chinese inputs at some stage of its production.

The IEA identified a further risk embedded within that structure. Intense domestic competition and oversupply have pushed many Chinese LFP cathode producers into loss-making territory. Sustained below-cost pricing increases the likelihood of consolidation, which could shrink the global supplier base and hand the remaining players considerable leverage over Western buyers. Export controls introduced by Beijing in late 2025, covering battery materials, cells and production technology, compound the problem by constraining the very inputs Western manufacturers would need to build independent supply chains.

Korean producers represent the most credible near-term alternative. They are scaling LFP output, but continue to rely on Chinese precursor materials for cathode production and have struggled to close a persistent cost gap. The IEA noted that manufacturing costs in the US and Europe can run up to 50% above Chinese equivalents, a gap rooted in midstream material supply deficits rather than labour costs.

The agency will publish a fuller treatment in its Energy Technology Perspectives 2026. The direction of travel is already clear: affordability and supply security are not the same condition, and the gap between them will not be closed by cell assembly investment alone.