US rules give Korean LFP makers rare opening against China

LFP stands for lithium iron phosphate, a cathode chemistry used in rechargeable batteries. Compared with nickel-rich batteries, LFP batteries generally offer lower costs, longer cycle lives, and greater thermal stability. They are less attractive for premium electric vehicles because they provide lower driving range, but those limits matter less in stationary storage.

Large energy storage systems use batteries to stabilize electricity supplies and manage changes in demand. LFP’s lower price helps reduce the cost of these installations. Its long cycle life supports repeated charging and discharging, while greater thermal stability is valuable when many batteries operate together.

The article links rising LFP demand to US energy storage expansion and growing electricity needs from AI data centers. Korean companies are converting production lines and building new plants to supply LFP cathode materials. China still produces more than 98 percent of global LFP cathode material and cells.

South Korean materials companies are rapidly adding LFP cathode capacity after years of focusing mainly on nickel-rich products. They are adapting existing production lines, constructing dedicated factories, and securing long-term orders from Samsung SDI and SK On. The shift responds to expanding energy storage demand and US pressure to reduce reliance on prohibited foreign entities.

Posco Future M converted part of its Pohang high-nickel lines to LFP production, with mass production planned by year-end. It is also building a plant with Chinese precursor maker CNGR, targeting production next year and eventual annual capacity of 50,000 tons. It plans to use Argentine lithium to improve costs.

L&F signed supply agreements with Samsung SDI and SK On. Its LFP-focused subsidiary opened a Daegu plant and began trial shipments. Capacity is expected to rise from 30,000 to 60,000 tons by mid-next year.

US rules change the economics of battery sourcing. Under the One Big Beautiful Bill Act, Section 45X tax-credit rules require battery components to meet minimum thresholds for the share of direct material costs coming from non-prohibited foreign entity sources. Companies using too much material linked to PFEs risk losing the credit.

The mechanism is straightforward: a battery maker may pay more for qualifying Korean materials, but preserving tax-credit eligibility can make that supply chain more attractive overall. Korean cathode producers are therefore gaining opportunities in LFP, a market long dominated by China on cost and scale. Battery makers are seeking non-PFE suppliers.

This does not remove China’s advantage. China still produces more than 98 percent of LFP cathode material and battery cells. However, US restrictions create room for Korean suppliers, while Samsung SDI, LG Energy Solution, and SK On expand North American energy storage production.

China currently produces more than 98 percent of the world’s lithium iron phosphate cathode material and battery cells, according to the International Energy Agency. That gives Chinese manufacturers an overwhelming position in both the materials and products needed for LFP batteries.

The article attributes this lead to years of investment, economies of scale, and an integrated supply chain. China links raw material processing, cathode production, and battery manufacturing in one broad industrial system. LFP batteries also power most Chinese electric vehicles, supporting further production experience and demand.

This concentration is now facing a challenge rather than an immediate replacement. US restrictions on prohibited foreign entities are encouraging battery makers to seek other suppliers. Posco Future M and L&F are expanding LFP capacity in South Korea, while Korean battery makers build energy storage businesses in North America.

AI data centers are increasing electricity demand, according to the article. Their expansion creates a stronger need for systems that can help maintain a stable power supply. Large-scale energy storage can hold electricity and manage changes between supply and demand.

Energy storage systems are useful because they stabilize electricity supplies and handle demand fluctuations. LFP batteries fit these applications because they cost less, last through more charging cycles, and offer greater thermal stability. These benefits are often more important for stationary installations than maximum driving range.

The rising demand is helping Korean battery makers find a new growth engine during a prolonged slowdown in electric vehicle batteries. Samsung SDI, LG Energy Solution, and SK On are expanding North American ESS operations. They are converting EV lines and developing facilities that can produce batteries for both vehicles and storage.

Korean battery materials makers previously focused on nickel-rich cathodes because they had stronger technological advantages in higher-energy-density batteries. These chemistries were better suited to premium electric vehicles, where driving range is especially important. LFP batteries were less attractive for that market.

Competing in LFP also meant challenging China’s overwhelming cost advantage. China had built years of investment, economies of scale, and an integrated chain covering raw materials, cathode production, and battery manufacturing. It produces more than 98 percent of global LFP cathode material and battery cells.

That calculation is now changing. Energy storage demand is expanding, and LFP’s lower cost, longer cycle life, and thermal stability suit stationary systems. New US restrictions on prohibited foreign entities also create incentives to buy from non-Chinese suppliers. Korean companies are therefore converting lines, building plants, and signing supply deals.

The cathode is a central battery material that affects how much energy a battery stores, how it behaves during charging and use, and how much it costs. Nickel-rich cathodes generally support higher energy density, which helps electric vehicles travel farther. LFP cathodes sacrifice some energy density but offer lower costs, longer cycle lives, and greater thermal stability.

Those chemistry choices create practical trade-offs. A higher-energy-density cathode can suit premium vehicles, while a cheaper and more stable cathode can suit large stationary storage. Cathode chemistry also affects lifespan because cycle life determines how often a battery can charge and discharge before performance declines. Thermal stability is linked to safer operation.

Cathodes also shape supply-chain dependence. China produces more than 98 percent of LFP cathode material and cells, while Korean firms focused on nickel-based products. US rules are now encouraging battery makers to seek non-PFE materials, making alternative cathode suppliers more valuable.