Since 2022, battery-grade lithium carbonate has moved through a full cycle. Prices collapsed from a record RMB 560,000 per tonne to below RMB 100,000, then bottomed out and rebounded. Over the same period, the pricing logic for energy storage cells shifted. It moved from a single anchor—lithium carbonate—to a model that now links to three major raw materials: lithium carbonate, electrolyte, and electrolytic copper. The structural change in cell BOM costs is redistributing cost pressure across the supply chain.
Key judgments of this article:
First, multi-material indexation has become normal practice in domestic cell pricing. However, passing these costs through to project owners is far from smooth. Large power investment groups, in particular, show very low acceptance for formulas tied to lithium carbonate, electrolyte, and electrolytic copper.
Second, the adjustment cycle in overseas markets is shortening. Yet even a lithium-carbonate-only linkage faces resistance at the owner level. This reflects a mix of factors: long project delivery times, system margins, and integrator strategies.
Third, cost pressure is concentrating heavily at the integration stage. This is forcing integrators to build upstream risk management capabilities. Some firms have already begun purchasing lithium carbonate directly and taking positions in the futures market.
Three stages of the pricing mechanism
Based on SMM’s classification of lithium carbonate price trends and linkage models from 2022 to 2026, energy storage cell pricing has passed through three distinct stages.
From January 2022 to December 2023, the market operated under a single-factor linkage. Battery-grade lithium carbonate surged from about RMB 350,000 per tonne to a historic high of RMB 560,000. Cell pricing was anchored entirely to lithium carbonate and moved in lockstep with the lithium price.
From January 2024 to June 2025, fixed pricing dominated. Lithium carbonate prices plunged below RMB 100,000, creating a one-sided downshift in expectations. Cell makers switched heavily to fixed-price long-term contracts to lock in costs. At its peak, this model accounted for roughly 50% of the market.
From July 2025 onward, the market entered a multi-material linkage phase. Lithium carbonate bottomed and began to recover, while electrolyte and electrolytic copper prices also rose. Cell pricing formulas now incorporate all three raw materials, not just lithium.
The shift in BOM cost structure supports this picture. A comparison of LFP cell costs between August 2025 and February 2026 shows the following changes: the share of lithium iron phosphate (including lithium) moved from 42% to 46%; electrolyte went from 10% to 13%; and lithium battery copper foil held steady at 16–18%. Over the same period, the unit cost of a cell rose roughly 37%, from RMB 0.19/Wh to RMB 0.26/Wh. The increase was driven by cathode material, electrolyte, and copper. Lithium alone can no longer explain today’s cost movements.
Cost pass-through: owners remain reluctant
Under the new mechanism, cell makers pass changes in the three raw materials to integrators, who are then expected to pass them on to project owners. In practice, owner acceptance remains limited. Most integrator-owner contracts still use fixed prices or link solely to lithium carbonate. Full three-material pass-through clauses are not yet widely adopted.
The bidding frameworks and budget systems of China’s major power generation groups—the so-called “Five Big, Six Small”—are not yet equipped to handle such a complex and high-frequency adjustment mechanism. Owners are accustomed to a simpler, clearly defined cost structure. Acceptance of the “lithium, electrolyte, copper” formula is extremely low. This means integrators absorb multi-material volatility from upstream but struggle to transmit it downstream.
Owners’ investment logic also splits along project type. For projects with firm supply-security needs, owners are willing to pay a premium to guarantee stable cell supply. For projects driven purely by returns, they are far more cost-sensitive. Discussions with domestic owners in the first half of 2026 indicate that investment decisions are generally cautious. Owners remain reluctant to add more indexation factors or increase the frequency of price adjustments.
Differences between domestic and overseas mechanisms—and the reasons
Domestic and overseas markets differ significantly in how multi-material linkage is applied, though recent changes are worth noting.
In the domestic market, adjustment cycles are short—monthly or weekly—and most participants fully accept a three-material linkage covering lithium, electrolyte, and copper. Overseas, the cycle used to be quarterly or 45 days, and owners generally accepted only a single-factor lithium linkage. Recently, overseas integrators have been shortening their adjustment cycles toward 45 days. Some are also beginning to accept more raw materials in their formulas. Still, at the owner level, even a lithium-only linkage remains hard to push through.
Three factors explain the gap. First, overseas projects take much longer from investment decision to delivery. Shipping and customs add further delays. There is a clear time lag between cell procurement and project commissioning, so owners question the need for—and the workability of—short-cycle price adjustments. Second, overseas system prices are structurally higher than in China, giving integrators more comfortable margins. To win orders, some integrators absorb raw material cost swings themselves rather than pass them on. This trades short-term profit for market share and customer relationships. Third, the domestic market is more fiercely competitive. Margins for both integrators and cell makers are thinner, making them highly sensitive to marginal raw material moves. Cost transmission must therefore happen at a much higher frequency.
Impact on cell makers and integrators
The multi-material linkage model affects cell makers and integrators in different ways.
For cell makers, the pricing logic has shifted from passively bearing single-factor lithium volatility to actively managing a basket of raw material costs. Competitiveness no longer rests solely on manufacturing efficiency. It now also depends on the ability to forecast costs and lock in prices for cathode material, electrolyte, and copper foil. Cell makers that can build multi-factor pricing and risk control systems will gain bargaining power in this cycle. Those that cannot will see sustained pressure on gross margins.
For integrators, the position is more difficult. Upstream cell makers enforce multi-material-linked prices. Downstream owners offer limited acceptance. Integrators get squeezed from both sides. What is notable is the response. More integrators are now extending their risk management capabilities upstream. Some have begun direct procurement of lithium carbonate to lock in part of their cathode costs. Others have entered the lithium carbonate futures market, using hedging tools to manage lithium price risk. This marks an expansion of what it takes to compete as an integrator. The skill set is moving beyond system integration and project development to include raw materials procurement strategies and financial hedging. Small and mid-sized integrators lacking these tools will face even greater operational pressure in the current cycle.
![[SMM Analysis] VC Supply-Demand Tight Balance Persists in the Short Term, Huasheng's 60,000 mt Project Adjustment May Reshape the Industry's Long-Term Competitive Landscape](https://imgqn.smm.cn/usercenter/JmyWy20251217171729.png)
