The Electric: How China's Massive Over-Production of Cathodes Is Driving Down Battery Costs

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Investors and mining hands were broadsided last year by a large surplus of lithium, nickel and other battery metals and a plunge in their prices. This week, we look at a little-known reason for the unexpected hit lithium prices have taken—Chinese companies have massively overproduced iron-based cathodes.

At a lithium evaporation pond in Golmud, China, a billboard promotes the production of battery metals and minerals. Photo: Qilai Shen/Bloomberg/Getty.

Even as large inventories piled up through 2023, Chinese makers of cathodes for electric vehicles continued to run their factories at high volume, ending the year with a surplus of some 2.5 million EVs’ worth of iron-based electrodes, according to CRU Group, a U.K.-based metals research firm. The overproduction—which exceeded demand by 54%—helps to explain a more than yearlong 81% plunge in lithium prices and reflects China’s still-growing dominance in the industry.