[SMM Analysis] Lithium Rally Fuels Sodium Battery Substitution: Industry Poised for Scale & Quality Leap in 2026

At the close of 2025, the continued rise in lithium carbonate prices pushed up lithium battery costs. With expectations of future cost advantages for sodium-ion batteries, substitution expectations continued to heat up, directly catalyzing a seasonal peak demand period in the industry chain. Against this backdrop, various segments of the sodium-ion battery industry showed differentiated growth trends. From materials to battery cell end-users, core product orders and production volumes benefited simultaneously. Enterprises engaged in frequent stockpiling and overseas expansion activities, laying a solid foundation for industry development in 2026.

Cathode Material: Strong NFPP Orders in December, Positive Market Sentiment

In December, sodium-ion battery cathode material production performed strongly, up 10% MoM and surging 156% YoY. Among these, the share of polyanion-type NFPP climbed to 81%, up 5 percentage points MoM, with its stable performance and cost adaptability offering greater advantages in substitution demand. NFPP orders remained high during the month, and producers actively stockpiled simultaneously to build inventory for the upcoming Chinese New Year holiday, ensuring timely delivery of unexpected orders during the holiday period. In contrast, the layered oxide O3-type product shipment performance was unsatisfactory.Affected by delays in related heavy-duty truck supporting projects and order postponements, layered oxide cathode production showed no significant improvement in December. Notably, another important route in the polyanion system—sodium iron sulfate (NFS)—recently showed signs of promotion, with multiple enterprises successively planning NFS capacity, expected to further open up growth space against the backdrop of continued lithium carbonate price increases. Looking ahead to January, sodium-ion battery cathode enterprises will plan production based on orders on hand while simultaneously stockpiling. Production in January is expected to decrease 3% MoM but still achieve substantial growth of 177% YoY.

Hard Carbon Anode Material: Robust Order Demand in December, Capacity Accelerates Adaptation

In December, sodium-ion battery anode material production continued its growth trend, increasing 10% MoM and surging 63% YoY. Orders for the core product, hard carbon anode, performed strongly, with some enterprises even facing tight delivery situations. Orders were mainly concentrated in cost-sensitive application fields such as ESS and start-stop. Currently, domestic hard carbon products have formed relatively clear functional segmentation, with corresponding price gradients also very distinct, enabling better adaptation to different customers' cost and performance needs. Besides securing orders from domestic battery cell manufacturers,hard carbon anode enterprises have also begun actively engaging with overseas customer orders to expand market space. Driven by continued optimism in downstream demand, the sodium-ion battery hard carbon anode market is expected to further expand, with capacity expansion becoming the primary task. Even though current capacity is still somewhat insufficient, the industry can compensate for short-term capacity gaps through partial process outsourcing. The hard carbon market is expected to enter a slight adjustment period in January, with production projected to decrease 12% MoM but increase 63% YoY.

Sodium-ion Battery Electrolyte: Stable Domestic Landscape with Potential for Overseas Order Breakthrough

In December, the production of sodium-ion battery electrolytes increased 4% MoM and 61% YoY. Affected by the previous price increase of LiPF6, the price of NaPF6 also rose in December. Currently, the capacity of NaPF6 is limited and mainly concentrated among top-tier enterprises, giving them strong bargaining power. Meanwhile, domestic electrolyte enterprises are actively exploring overseas markets for sodium-ion battery electrolytes, planning to expand into these markets in 2026 to find new growth drivers.In December, sodium-ion battery electrolyte enterprises organized production based on orders, benefiting from the release of year-end push for annual target demand from downstream battery cell enterprises amid rising lithium carbonate prices. Electrolyte factories followed suit in production, but generally had low stockpiling. It is expected that the production of electrolytes in January will decrease 13% MoM, with a 99% YoY increase.

Battery Cells and End-users: ESS Sector Gains Momentum at Year-End, Start-Stop Market Faces Winter Test

In December, the production of sodium-ion battery cells saw a significant increase, up 15% MoM and 140% YoY. The rise in lithium carbonate prices had the most direct impact in this segment, as the substantial increase in lithium carbonate prices in December raised the costs of LFP and other lithium battery systems, affecting the production sentiment of midstream and downstream players. The cost advantages of sodium-ion batteries may become more prominent in 2026, with a surge in orders for sodium-ion ESS projects at the end of 2025. Battery cell enterprises ensured supply and delivery, with some orders scheduled until February. Coupled with this cost advantage, the industry's expectations for sodium-ion battery development in 2026 have significantly improved.The current application of start-stop power supplies is still primarily in the secondary market. Facing the challenge of low winter temperatures, the sodium-ion start-stop market needs to build a reputation through excellent winter usage data, laying the foundation for future demand expansion and entry into original equipment manufacturer (OEM) systems. Additionally, influenced by the rising costs of LFP (linked to increases in lithium carbonate and iron phosphate prices), the extended-range/plug-in hybrid sector is expected to become an important breakthrough direction for sodium-ion batteries in 2026. It is projected that the production of sodium-ion battery cells in January will decline, down 13% MoM, but still with a 228% YoY increase.

Overall Summary of the Industry Chain

In summary, the outstanding performance of the sodium-ion battery industry chain in December, driven by the peak season effect of concentrated ESS project deliveries at year-end, formed a dual-benefit pattern of "cost-driven + demand-supported." Specifically, the NFPP route in cathode materials continues to lead due to its performance and cost advantages, while hard carbon anodes benefit from robust orders driven by substitution demands in the ESS and start-stop sectors. The electrolyte industry, while maintaining a stable domestic landscape, is actively expanding into overseas markets. On the battery cell side, direct substitution demand has led to high production growth. In the short term, production across all segments is likely to see MoM adjustments in January due to the Chinese New Year holiday,but if the market chain reaction caused by the rise in lithium carbonate prices persists, there could still be new breakthroughs for sodium-ion batteries YoY. In the long term, if the price center of lithium carbonate remains high, it will continue to strengthen the cost advantages of sodium-ion batteries. Combined with the advancement of new material routes such as NFS, breakthroughs in overseas markets, and the expansion of new application scenarios like extended-range hybrids, the sodium-ion battery industry in 2026 is expected to see a dual improvement in scale and quality. Cost advantages and scenario adaptability will become the core keys to industry competition.