Charged up for the future: building resilience in the battery supply chain

The global lithium-ion battery market exceeded US$150 billion in 2025, rising by more than 20% year on year – a trend that reflects the strategic role that batteries have across automotive, power, data centre and industrial applications. But, as fears mount over the high concentration in China of the supply chain across processing, component manufacturing and cell production, the race is on to build greater local capability around the world.

Now, as markets look to industrial policy, investment, strategic partnerships and recycling capacity and take on China’s dominance, understanding the core components of the battery supply chain is more important than ever: 

The battery supply chain can be viewed in four stages: upstream, midstream, downstream and end of life. Each contributes its own geographic and economic challenges and opportunities, shaping how and where resilience can realistically be built across the value chain. 

Upstream

Upstream activity covers the extraction of raw materials used in battery chemistries. The most widely used chemistries today are lithium nickel manganese cobalt (NMC) and lithium iron phosphate (LFP), while sodium-ion technologies are gaining attention for selected applications. 

Lithium is typically produced either from brine resources common in South America, or from hard-rock mining, which is more prevalent in Australia, China, Canada and Zimbabwe. These routes differ in cost, speed and environmental impact, but both are central to global battery supply. 

Other important materials include nickel, cobalt, iron and phosphate. Indonesia is the leading source of mined nickel, while the Democratic Republic of the Congo dominates cobalt production. LFP batteries rely on more abundant iron and phosphate inputs, which can reduce exposure to some higher-risk materials.

To ensure that there are increasingly more resources to make batteries, new lithium deposits have been found, e.g. the Bonneville Salt Flats in the USA and there are rich seams of lithium in the UK and Europe. Additionally, with the introduction of cheaper and different battery chemistries such as LFP, there is less reliance on certain hard-to-attract minerals such as cobalt, reducing the geopolitical risk of relying on such critical minerals.

Midstream

Midstream activities refine mined materials into battery-grade chemicals and manufacture key components such as cathodes, anodes, separators and electrolytes. This is the most geographically concentrated part of the value chain. China holds the strongest position in lithium refining and dominates the production of active materials and components, supported by scale, integration and long-term investment. China has accounted for 60-70% of the global refining of lithium (Source: IEA).  

Dependence on graphite is especially notable because graphite remains the primary anode material in most lithium-ion batteries and processing capability outside Asia is still limited. This concentration creates a strategic vulnerability for Europe and North America, even where cell manufacturing capacity is expanding. 

For both the battery cathode and anode, there is a requirement for Europe and the UK to invest in battery technology. The EU “Made in Europe” regulation explicitly covers the local production and support of production of batteries and energy storage systems to ensure that regional supply chains are resilient. 

Downstream

Downstream production covers cell manufacturing, pack assembly and integration with control systems such as battery management systems and inverters. China remains the leading manufacturing base, while the United States and Europe are expanding capacity to support electric vehicles, stationary storage and wider electrification. However, regional build-out is uneven. Europe has announced substantial gigafactory capacity, but project delays, cost pressures and weaker-than-expected EV demand have created uncertainty around how much of this pipeline will be delivered on time. 

Across the battery supply chain, there is a requirement to ensure that projects are commercially viable, and this can only be achieved through large-scale battery production. Battery production is a high asset, highly operationally geared process that requires significant investment.

End of life

End-of-life management begins when a battery no longer delivers sufficient performance for its original use, often after capacity falls to around 70–80% of its initial level. At this stage, batteries can be repurposed, remanufactured or recycled. Repurposing gives used batteries a second life in less demanding applications, particularly stationary energy storage. This approach can extend asset value and reduce waste before materials are recovered through recycling. 

Recycling is developing rapidly but remains commercially challenging. The main routes are mechanical processing, hydrometallurgical treatment and pyrometallurgical treatment. In Europe, recycling has become a strategic priority not only for waste management, but also for securing secondary supply of critical materials such as lithium, nickel, cobalt and graphite. Regulation is also becoming more important, with the EU Batteries Regulation designed to improve sustainability, traceability and material recovery across the battery life cycle. 

Some of the key processes at this stage include:

• Mechanical processing involves collection, discharge and shredding to produce black mass, which then requires further treatment before it can be returned to battery-grade material streams.
• Hydrometallurgical processes use chemical treatment to recover metals at high purity, but they are capital-intensive and typically require scale to be economic. 
• Pyrometallurgical processes use heat to extract valuable materials, but they also involve high energy use and cost. Recycling economics are generally stronger for higher-value chemistries such as NMC than for LFP, which increases the importance of repurposing and policy support. 

It is important to note that, at this early stage of recycling, the largest source of recycled material is battery manufacturing waste. However, over time, as more BEVs come to the end of their life, damaged or old batteries will require recycling.  It is estimated that around the mid-2030s , waste from EVs will start to be greater than scrap from battery manufacturing (Source: Transportenvironment.org). There is expected to be a “tidal wave” of BEV batteries coming into the recycled market from the return of the first Gen EVs in the mid-2030s.    

The battery supply chain is strategically critical but remains imbalanced. China remains the leading force across refining, materials and cell production, while Europe and the United States are investing to improve resilience and local capability.  

Improving resilience depends on aligning upstream supply, midstream processing and downstream demand, while developing viable circular solutions at the end of life.  
Markets that succeed will be those that take a realistic, end-to-end view of the supply chain, focus investment where it can be competitive, drive diversification, reduce risk and create new battery chemistries and support with coherent policy, partnerships and long-term capital.