Power Play: Can U.S. Batteries Take on China?

Over the past two decades, two lithium-ion battery chemistries have vied for dominance in the energy storage space: nickel manganese cobalt (NMC) and lithium iron phosphate (LFP). Initially, NMC gained prominence due to its superior energy density, which allowed electric vehicles (EVs) to achieve greater range. However, in recent years, LFP has surged in popularity, thanks to its lower cost, better safety profile and more abundant materials.

As the battery market evolves, LFP is now seen as the most promising chemistry for scaling up EV production and renewable energy storage. Its rise is fuelled by both technical improvements and sustainability motivations, as manufacturers seek to move away from reliance on ethically and geopolitically complicated materials like nickel and cobalt.

Understanding the Chemistry: NMC vs. LFP

Both NMC and LFP are types of lithium-ion batteries, meaning they rely on lithium ions to transfer energy between the anode and cathode. However, the composition of the cathode is what differentiates the two:

NMC Batteries: The cathode in NMC batteries is made up of a combination of nickel (Ni), manganese (Mn) and cobalt (Co). These materials contribute to the high energy density of NMC batteries, with nickel responsible for increasing the energy capacity, cobalt stabilising the cathode and manganese adding a level of safety. The anode is typically made of graphite. NMC’s higher energy density (around 250-300 Wh/kg) has made it the preferred option for premium EVs that prioritise range.¹ However, the downsides include the reliance on materials with challenging supply chains, especially cobalt, which is often mined under difficult and unethical conditions.

LFP Batteries: In contrast, LFP batteries use a lithium iron phosphate cathode (LiFePO4), with iron and phosphate as the key materials. These elements are not only more abundant but also cheaper and more sustainable. LFP batteries offer lower energy density (160-190 Wh/kg), but they excel in safety, longevity and cost.² They are also less prone to overheating and can withstand a higher number of charge cycles—up to 4,000, compared to NMC’s typical 1,000-2,000 cycles.³ For many applications, particularly in mass-market EVs and stationary energy storage, LFP’s advantages outweigh its lower energy density.

The Sustainability Drive: Why the Shift from NMC to LFP?

One of the most compelling reasons for the shift from NMC to LFP is the sustainability of the supply chain. NMC batteries depend heavily on nickel and cobalt, two materials that are not only expensive but often sourced from regions with significant geopolitical and ethical concerns. For example, over 70% of the world’s cobalt is mined in the Democratic Republic of Congo, where human rights abuses and environmental degradation are rampant.⁴ The supply of nickel, while more geographically diverse, also faces challenges due to rising global demand.

LFP batteries, on the other hand, use iron and phosphate—two of the most abundant and easily accessible elements on the planet. This makes LFP batteries far more sustainable from a sourcing perspective. In addition, LFP’s lower environmental footprint, combined with its superior safety profile, positions it as the ideal chemistry for large-scale EV adoption and renewable energy storage systems.

China’s Dominance and the U.S. Opportunity

One of the biggest challenges in the global battery market is China’s near-total dominance of the LFP supply chain. China controls between 90 to 93% of LFP production, a result of decades of government-led industrial policy and massive investments in battery manufacturing.⁵ This dominance has allowed Chinese companies to bring down the cost of LFP batteries and achieve production at an unprecedented scale, making it difficult for other countries to compete.

However, this reliance on Chinese manufacturing has raised concerns about supply chain security, especially in light of growing geopolitical tensions. The COVID-19 pandemic further exposed the vulnerabilities of relying on a single source for critical technologies, as disruptions in China reverberated across global markets.

The U.S. now faces a unique opportunity to build a domestic supply chain for LFP batteries. Recent legislation, such as the Inflation Reduction Act and the Bipartisan Infrastructure Law, has created incentives for U.S.-based battery production and sourcing of raw materials. As EVs and batteries become more widespread, recycling is becoming a critical issue, especially for addressing sustainability in battery supply chains. Several companies are leading the charge in this area, both from the recycling and materials recovery perspective.

Public Companies:

• Republic Services: A major waste management company, Republic Services has expanded its efforts into battery recycling as part of its broader e-waste initiatives. As more batteries reach the end of their life, their recycling capabilities will become increasingly important in recovering valuable materials.
• Radius Recycling: Specialising in metal recycling, Radius Recycling is already handling electric vehicle components. As the number of EVs on the road increases, Radius Recycling could be pivotal in recycling batteries and recovering valuable materials for reuse.
• LKQ Corp: With a focus on automotive parts recycling, LKQ has expanded its capabilities to include EV battery recycling. As EV adoption grows, their expertise in automotive recycling could be key to addressing the challenges of safely recycling EV batteries.

Private Companies:

• Redwood Materials: Founded by a former Tesla executive, Redwood Materials is focused on developing advanced recycling technologies for EV batteries. With innovations in recovering key materials like lithium, nickel and cobalt, Redwood is well-positioned to address battery sustainability and speculation about its potential IPO has generated excitement in the market.
• Retriev Technologies: Another leader in battery recycling, Retriev Technologies has been building solutions to efficiently recycle and recover materials from used batteries. As they continue to innovate, an IPO could see significant demand, given the growing focus on battery circularity.

Improving LFP Performance: The Path Forward

While LFP’s lower energy density has historically been seen as a disadvantage, technological advances are helping to close the performance gap. One of the most promising developments is the introduction of lithium manganese iron phosphate (LMFP), a variant of LFP that substitutes some of the iron with manganese. This adjustment results in a dual voltage curve, allowing for a 10-15% improvement in energy density over standard LFP, bringing its performance closer to that of NMC while retaining LFP’s safety and cost benefits.⁶

Moreover, battery innovation isn’t limited to the cathode alone. Improvements in cell architecture, pack design and overall system integration are helping LFP batteries achieve comparable performance at the system level. This holistic approach to battery design is critical to making LFP a viable option for more demanding applications, including long-range EVs.

Conclusion: A Turning Point in Battery Technology

As the world moves toward mass adoption of electric vehicles and renewable energy, the choice of battery chemistry becomes ever more crucial. NMC may still have the edge in energy density, but LFP’s lower cost, safer profile and sustainable supply chain are driving its rapid growth. China’s dominance in LFP production poses challenges, but it also presents an opportunity for countries like the U.S. to invest in domestic manufacturing and build a more secure, diversified supply chain.

With innovations in recycling and materials recovery driven by companies like Republic Services, Radius Recycling and LKQ Corp, alongside private pioneers like Redwood Materials and Retriev Technologies, the future of sustainable battery supply chains is beginning to take shape. If these private innovators go public, the demand for their shares could be spectacular, further accelerating the transition to a cleaner, more resilient energy future.