Strong demand for Lithium Hydroxide Monohydrate (LHM) to continue as Europe reconsiders its battery strategy

Lithium demand by split (2024)
Source : Industry, Viridian Lithium

For now, the liquid-state lithium-ion (Li-ion) battery technology dominates. Electrolytes account for less than 10% of lithium battery applications. These consist of lithium salts and high-purity organic solvents (ethylene carbonate, diethyl carbonate, dimethyl carbonate, ethyl methyl carbonate, etc) that play a key role in conducting ions between the cathode and the anode of lithium batteries. The most common electrolyte in lithium batteries is a lithium salt solution such as lithium hexafluorophosphate (LiPF6), produced from lithium fluoride (LiF derived from Li₂CO₃) and phosphorus pentafluoride (PF5).

Li-ion battery technology, although now mature, is a complex ecosystem that is constantly evolving. The race for reliability and performance, measured by battery energy density (gravimetric and volumetric) that supports greater vehicle autonomy and fast charging capacity, constantly pushes for optimisation and the emergence of new battery chemistries, shapes, and packaging to meet specific end-uses.

This race could see the commercial development of solid-state lithium batteries by the end of the decade, a potential breakthrough compared to the liquid electrolyte batteries currently used, combining very high energy density (more than 400 kWh/kg and 800 kWh/l), fast charging capacity, durability, and reliability, three key elements that are desired by the general public when it comes to EV adoption. Lithium use in electrolytes may drop as the solid-state technology scales up in the next decade; some organic electrolytes get replaced by gel-polymer (semi-solid) and oxides/sulphides solid ceramic or polymer ones (solid). These developments will see increasing use of lithium in the anode in the form of lithium metal, which is still marginal at present.

We will here focus on cathode active materials (CAM). Thirty years ago, when lithium-ion (Li-ion) cells were first commercialised, they mainly included lithium cobalt oxide (LCO) as CAM for consumer electronics applications. Numerous other options have emerged since then. We present below an exhaustive benchmark of the key performance indicators of the most relevant cathode chemistries deployed to date, their main end-uses and their preferred lithium precursor (BG LC or BG LHM). All have merits and shortcomings.

Key performance indicators for the most relevant cathode chemistries and their preferred type of lithium compound:

Sources: Shim et al. 2023, Fitch et al. 2017, Tahmasebi et al. 2023, Seenivasan et al. 2022, Välikangas et al. 2020, Kerroumi et al. 2025,
Liu et al. 2022, Lu et al. 2024, Xu 2024, Lei et al. 2025, Xiao et al. 2023, Viridian Lithium

LFP/LMFP and NMC chemistries are the dominant CAMs in Li-ion batteries, driven by the growth in Electric Vehicles (EV) applications. At a global scale, LFP/LMFP and NMC chemistries represent approximately 45% and 55% of the market, respectively. However, these global figures hide a significant regional discrepancy, given that LFP chemistries dominate in China (>80% of domestic CAM mix). In contrast, NMC chemistries are the preferred choice in the rest of the world (almost 100% of ex-China CAM mix).

A lot has been written about the shift in the global Li-ion industry with Western OEMs/battery makers refocusing on LFP/LMFP chemistries to bring down EV manufacturing costs. Recent data shows that LFP chemistry has expanded rapidly between 2020 and 2025 to replace Low-nickel-content NMC chemistries (NMC 111-532), which both predominantly use Lithium Carbonate precursors, whereas High-nickel-content NMC chemistries (NMC 622-811), which rely on Lithium Hydroxide Monohydrate precursors (insérer lien section Lithium du site), have reached over 40% of market penetration during that time. In effect, this has led to a relative stability of the LC (55%) and LHM (45%) market penetration in CAMs.

Cathode chemistry mix (LHS) and Lithium precursor in battery applications (RHS) over 2020-25

Europe needs to look beyond the LFP vs NMC debate

The LFP vs NMC debate has agitated the European battery ecosystem since spring 2024. It has been particularly impactful in the recycling space, where two-thirds of the projected European black mass processing capacity by 2030 has been delayed or cancelled.

The lower cost of LFP is central to the debate, with this chemistry increasingly viewed as the preferred cathode active material (CAM) for reducing EV prices, particularly under the influence of Chinese OEMs. While affordability remains a key priority, the cost advantage of LFP, which works well in the Chinese market, becomes less clear when considering its lower recyclability and the challenges of scaling LFP manufacturing in Europe, where critical mass and vertical integration are lacking. We try to debunk the main points of discussion below.

Decrypting the LFP vs NMC debate

Source: Peiseler et al. 2024, Viridian Lithium

 As shown above, both LFP and NMC chemistries have strengths and shortcomings. They are complementary, can and will coexist. They can be interestingly blended to overcome their respective weaknesses, as evidenced by development at Tesla and CATL.

• LFP/LMFP batteries combine safety (thermal stability), long-cycle life and cost effectiveness if the cells are made-in-China and when recycling cost is not taken into consideration. Their lower content of critical raw materials reduces their CO2 footprint. They, however, come short on energy density and recyclability (albeit they are better suited for second-life use). Their strengths make them an attractive option in the battery market today, particularly for A-C segment EVs and energy storage systems (ESS).
• NMC batteries exhibit higher energy density and high recyclability, but far less favourably on safety. NMC manufacturing costs, including recycling, compare favourably with LFP when transposed in Europe. Here, the high recyclability of NMC cathodes is a compelling argument to bring their production cost down, reduce environmental footprint and develop urban mining. NMC strengths are ideal to meet autonomy and fast charging requirements of the D-E segment EVs and Heavy-Duty EVs.

It is time for Europe to look beyond the LFP–NMC dilemma and refocus on the NMC battery chain it began building in 2020 and still actively supports. Unlike LFP, where Europe remains heavily dependent on Chinese technologies and IP, NMC offers a more realistic path to a sovereign, integrated, cost-competitive and sustainable battery supply chain. This is further underscored by China’s recent decision to impose export restrictions on LFP-related technologies, including the preparation processes, manufacturing know-how and licensing of cathode materials such as LFP and LMFP. While finished products may still flow, the underlying technology is now tightly controlled. Europe must draw the proper conclusion: strategic autonomy in LFP is unattainable under these conditions. Interestingly, NMC remains the dominant battery chemistry in Europe, accounting for around 85% of CAM capacity in deployment over the 2025 to 2030 period. As a result, the region’s demand for lithium hydroxide monohydrate (LHM) is projected to exceed 200,000 tonnes per annum (LCE) by 2030. However, recent studies and industry benchmarks show that the integrated projects currently under development in Europe will fall short of meeting this demand, leaving the region increasingly reliant on imports unless domestic lithium refining capacities are rapidly scaled up.

Doubling down on NMC is not just a matter of industrial policy; it is a matter of sovereignty.