China threatens to stop export of iron-based cathode technology

China’s Ministry of Commerce has proposed restricting the export of technologies for producing lithium iron phosphate (LFP), an inexpensive cathode material for electric vehicle batteries. Nearly all LFP is made in China, and if the restrictions are implemented, companies outside of China could struggle to catch up.

The proposed rules would require Chinese firms to get a license before exporting technology for producing the most-advanced versions of LFP and lithium manganese iron phosphate, a similar cathode material. The rules would also apply to some lithium extraction and refining techniques. Chinese companies would still be able to export the materials themselves to foreign customers.

LFP has long been the chemistry of choice for electric car batteries in China, and carmakers outside China are increasingly choosing it over nickel-based materials to reduce costs. Non-Chinese battery materials firms want to establish LFP production to serve those auto companies.

In North America, several firms are betting on technology from outside of China. ICL Group is planning an LFP plant in St. Louis that will use technology from the Taiwanese company Aleees. In September, the US Department of Energy awarded Mitra Chem a $100 million grant to build an LFP plant in Michigan. At the end of last year, Nano One received $13 million from the government of Quebec to help commercialize a new LFP manufacturing process.

And several South Korean companies known for making nickel-based battery materials have also started moving into LFP production. L&F has built a pilot plant and is scaling up output to supply the US battery maker Our Next Energy. In 2023, South Korea’s LG Chem announced that it would work with China’s Huayou Group to build an LFP plant in Morocco.

Sam Adham, a battery industry analyst with the market intelligence firm CRU Group, says that some South Korean firms are enlisting technical help from China and that the new rules would complicate those partnerships.

Meanwhile, China’s battery market is flush with LFP materials, so Chinese producers have been eager to expand overseas, where the chemicals command higher prices and face less competition. For example, Hunan Yuneng New Energy Battery Material is planning an LFP plant in Spain, and Jiangsu Lopal Tech started producing LFP in Indonesia this year.

China’s proposed restrictions are ambiguous, but they might impede future construction of Chinese-owned plants in other countries since that often requires transferring technical knowledge, according to Cormac O’Laoire, managing director of the Hong Kong–based battery research firm Electrios Energy. Still, he expects that projects in planning stages now will be unaffected by the ministry’s proposal because they’re not using the high-end technology the rules target.

“These companies still have opportunities to operate overseas,” he says “They will need to adapt to the new regulations, potentially focusing on less advanced technologies or navigating complex licensing procedures.”

China’s government is trying to thread a needle with the regulations. It wants to defend its leadership position in battery materials, but it also wants Chinese firms to be able to capitalize on the demand for iron-based cathode materials outside of China. “At its core, the restrictions aim to protect China’s technological advantage,” O’Laoire says.

China’s LFP proposal is part of a series of escalating maneuvers by the US and China in high-tech industries. The US has tried to choke off the flow of advanced computer chip technology to China. Meanwhile, China has imposed restrictions on exports of graphite for battery anodes as well as the metals gallium, germanium, and antimony, used to make computer chips.

Adham says some of the moves and countermoves turn out to be saber rattling rather than significant obstacles. The LFP proposal may be more of the same, but a strict implementation of the rules has the potential to extend China’s dominance in LFP production and ensure that only Chinese companies have access to the best technology.