The global push for lithium iron phosphate (LFP) batteries to power electric vehicles (EVs) and energy storage systems (ESS) faces a major hurdle: China’s overwhelming dominance.
More than 99 per cent of LFP supply is projected to come from China this year, with the country still accounting for 90 per cent of global production in 2030, according to Benchmark’s lithium-ion battery database.
For Europe and North America, reducing reliance on Chinese supply chains is a critical goal, driven by geopolitical tensions and economic policy.
“The current ex-China LFP pipeline won’t go nearly far enough to meet demand, not just for EVs but for ESS markets,” Benchmark director of consultancy for Australasia Terry Scarrott said.
Australia, as a global leader in lithium production, is well-placed to capitalise on the West’s desire for diversified supply chains.
While China dominates LFP cell manufacturing, Australia controls over half of the world’s lithium supply and is ramping up downstream processing capabilities.
By forging partnerships with ex-China battery manufacturers and automakers, Australia could play a pivotal role in establishing localised LFP supply chains.
Benchmark analysis suggests ex-China players can compete by reducing logistics costs, securing raw material supply, and leveraging government incentives.
Australia’s existing free trade agreements with the US and Europe position it as a preferred supplier of battery materials to these markets.
Additionally, Australia’s emphasis on sustainable mining could align with Western consumers’ increasing demand for low-carbon products.
LFP batteries manufactured in Sweden, for instance, have been shown to reduce carbon intensity by 54 per cent compared to those produced in China.
Despite these opportunities, the global shift away from Chinese LFP dominance will require significant investment and collaboration.
Joint ventures between automakers and battery producers in Europe and North America signal progress, but it remains to be seen whether these efforts can scale fast enough to meet demand.
For Australia, this could be a chance to move beyond raw material exports and become a key player in the global battery supply chain.
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