Chinese exports of electric vehicles and technologies are weighing on the European EV and ESS markets amid local regulators’ push for raw materials supply security, including from recycling.
China’s car exports and battery production for electric vehicles and energy storage have been growing this year, aimed at overseas markets rather than the domestic one.
China battery production surged in the first half of 2026 as energy storage demand and exports drove growth beyond the electric vehicle market.
In the European market, electric vehicle adoption continued to grow, with battery energy storage systems (BESS) emerging as a major source of demand for lithium and other commodities.
The European policymakers have been accelerating efforts to secure critical mineral supply chains and support domestic manufacturing, using regulatory frameworks such as the Critical Raw Materials Act (CRMA) and the Clean Industrial Deal with the Battery Booster programme.
Europe builds NCA, NCM cathode supply chain, with LFP remaining nascent
The buildout of the European battery supply chain remains heavily supported by Chinese and Korean investment, with Hungary a key hub of projects building localized cathode active material (CAM) supply.
Committed investment to build out Europe’s lithium-ion battery supply chain remains focused on high-nickel CAM chemistries — nickel-cobalt-aluminium (NCA) and nickel-cobalt-manganese (NCM).
South Korea’s EcoPro BM began mass production at its NCA CAM plant in Hungary in June and planned to launch a second production line at the plant in September 2026. EcoPro BM said it was targeting an annual production volume of 10,000 tonnes at the Hungary CAM plant in 2026, with production expected to expand to 30,000 tonnes in 2027.
In August, the company announced plans to invest approximately 40 billion won ($29.87 million) to convert an existing NCA production line to an “NCA-NCM mixed line” capable of producing an NCM CAM, where the nickel content will exceed 90%, too, which will be supplied to “a premium German automaker.”
As of 2026, Chinese CAM producer Ronbay, through its subsidiary JS Energy Europe (JSEE), continues construction and equipment installation at its planned mid-nickel/high-nickel CAM plant in Konin, Poland, which it bought from Johnson Matthey (JM) in 2024.
Another Chinese company, Huayou Cobalt, was ramping up production at its first European high-nickel CAM production plant in Hungary, with samples being sent to customers for testing in March 2026.
State-owned Finnish Minerals Group and China’s Beijing Easpring Material Technology are currently building a 60,000 tonne-per-year NCM CAM plant in Kotka, Finland, with the aim of launching commercial production in 2027.
European ESG regulations challenge battery plants construction
Challenges remain to build out European CAM capacity amid tighter environmental, social and governance (ESG) regulations in the region.
On August 31, 2026, Finnish Minerals Group said it would commission an external, independent audit, after allegations about the terms of employment and working conditions of Chinese workers at the Kotka CAM plant construction site were reported in the Finnish media.
In Hungary, the new administration under Prime Minister Peter Magyar, who defeated long-term incumbent Viktor Orban in an April election, announced it would raise the maximum fine for pollution by large manufacturers, including battery factories, to 5 billion forints ($15.97 million), according to a media report on September 9, 2026.
Much of the concern has surrounded South Korean battery maker Samsung SDI’s plant in Göd, Hungary, which had been fined multiple times in recent years by Hungarian authorities for exceeding emissions standards and labor violations, according to local media reports.
In April 2026, environmental charity Greenpeace said it had conducted investigations around battery factories in Hungary, following recent reports of environmental releases of N-methylpyrrolidone (NMP), a hazardous chemical, and various metals (antimony, arsenic, cobalt, lithium, nickel) used in battery production.
In response, Samsung previously stated in local media that the battery plant in question has been operating in compliance with all environmental and occupational safety regulations.
Greenpeace said that analysis of the samples, which were taken at Samsung SDI’s Göd plant, SK On’s battery factories, and Dongwha’s electrolyte and NMP processing plant, did not “contain any contamination that exceeded the limit value or was significant from a health perspective.”
Yet the association noted that the test results did not negate previous reports of pollution and labor issues.
Tighter regulations may cause a strong reaction from industry associations.
The Cobalt Institute (CI) said in June 2026 that “the European Commission, Council and Parliament agreed a proposal that will decimate Europe’s cobalt industry” by introducing stricter limits for cobalt occupational exposure.
This measure may affect battery precursor manufacturing (leading to a 70% reduction in capacity), “counter to Europe’s ambitions for defence, strategic autonomy, competitiveness and a circular economy”, the CI said.
Challenges to scale EU LFP capacity, with recycling being less profitable than NCM chemistries
Elsewhere in Europe, the buildout of production of lithium-iron phosphate (LFP) CAM remains at early stages.
LFP remains the predominant chemistry used in ESS cells, representing “over 90% of the battery energy storage market,” according to the International Energy Agency (IEA)’s Global Critical Minerals Outlook 2026.
In August 2026, German LFP CAM producer IBU-tec advanced materials AG said construction at its new facility in Bitterfeld in central-eastern Germany is progressing “as planned”, with completion and an LFP production capacity of 15,000 tonnes per year expected by 2028. In October 2025, IBU-tec agreed to cooperate with PowerCo, the battery arm of global automaker Volkswagen Group.
In March 2026, French lithium refining startup Viridian Lithium, which was in the list of CRMA-approved projects, was placed into judicial liquidation after financing hurdles, marking another setback for efforts to build an independent European battery materials supply chain.
End-of-life LFP batteries are nevertheless gaining importance in Europe yet remain less profitable to recycle because they lack high-value nickel and cobalt.
Their economics depend mainly on lithium recovery, so they may require gate fees, producer funding, tolling or closed-loop contracts. Direct recycling could preserve more cathode value but is not yet proven at scale; Europe will therefore need payable-based models for nickel-bearing batteries and service-based contracts for LFP, Fastmarkets analysts said.
In 2026, lithium prices have remained broadly elevated as BESS have become a major driver of lithium demand.
Fastmarkets’ benchmark assessment of the lithium carbonate 99.5% Li2CO3 min, battery grade, spot prices cif China, Japan & Korea stood at $17.80-20.00 per kg as of September 9, having weakened from a year-to-date peak of $24.50-25.80 per kg on May 12, which was up by 212% from a recent low of $7.50-8.60 per kg in June 2025.
After a recent increase in lithium prices, sodium-ion batteries have also experienced growing interest from the energy storage sector.
Fastmarkets’ experts are embedded in this market, providing price data and market intelligence to help you make sense of today and tomorrow. Stay informed through our news, forecasting and analysis. Find out more about our lithium market insights today.
Sodium-ion chemistries for energy storage are scaling up
In Fastmarkets’ analysts’ view, sodium-ion ESS in 2026 is moving from early commercialization towards supply-chain industrialization, with China’s Contemporary Amperex Technology Co. (CATL) being a notable example.
Sodium-ion batteries have long been viewed as a potential alternative to lithium-ion batteries in stationary storage, but the speed of industrialization started to change.
For stationary storage, sodium iron phosphate pyrophosphate (NFPP) chemistry is emerging as one of the most important sodium-ion cathode pathways. Its lower energy density remains a disadvantage compared with LFP, but this matters less in utility-scale applications where cost, cycle life and safety can be more important than volumetric density, Fastmarkets analyst Walter Zhang said.
In June 2026, the world’s largest battery maker, China’s CATL, unveiled its TENER Sodium Energy Storage System, which it described as “field-validated,” adding that “cumulative shipments are expected to reach 1 gigawatt hour by the end of 2026,” with global deliveries to begin in June 2027.
“We believe that sodium and lithium together will form the twin foundations of the future energy storage system,” William Wu, director of CATL’s Energy Storage Technology Center, said then.
European BESS provider Alfen plans to deploy 5 GWh of CATL’s advanced sodium-ion BESS across Europe, it said on July 16.
Connor Watts, Fastmarkets’ battery raw materials analyst, called the deal a strong indicator for future sodium ESS demand in the region.
“Sodium’s superior safety characteristics make it a better option for some smaller footprint applications, while also decoupling these projects from lithium price volatility, even if costs at this point aren’t outright lower than an equivalent lithium ion deployment,” Watts added.
Cobalt demand concerns overtake supply restrictions
For most of 2026, cobalt market participants have been concerned about available feedstock supply.
Cobalt hydroxide from the Democratic Republic of Congo (DRC) and cobalt contained in mixed hydroxide precipitate (MHP) from Indonesia are the main feedstock sources to produce cobalt metal and battery salts such as sulfate and tetroxide.
Throughout this year, the supply of cobalt hydroxide feedstock from the DRC remained tight due to its exports being under a quota until the end of 2027.
Indonesia has mining quotas in place and had issues due to the sulfuric acid supply from the Middle East in spring.
China remains the refining hub for processed cobalt, according to the IEA, and China’s domestic cobalt prices have been lowering throughout summer 2026 on declining demand from the lithium cobalt oxide (LCO) sector, with the bearish sentiment spreading onto other markets.
Cobalt demand from the LCO sector is expected to decline by 9% year on year, despite the global demand for cobalt set to increase, according to Fastmarkets analytics manager Oliver Masson.
“This is due to an expected fall in shipments for smartphones, laptops and tablets, as rising demand for chips from AI datacenters restricts the availability of chips to the consumer electronics sector, while simultaneously raising prices,” Masson said.
Fastmarkets’ daily price assessment for cobalt hydroxide 30% Co min, cif China was at $15.75-17.35 per lb on September 10, 2026, falling from $22.00-23.00 per lb one month earlier, as fresh spot liquidity was reported below previous levels, breaking the stalemate in the fixed price spot market.
Black mass feedstock to increasingly remain in Europe, alleviating supply hurdles
Europe’s battery recycling market has been moving toward a regional closed-loop model but limited feedstock and processing capacity continue to restrict growth.
The hazardous-waste classification of black mass, expected in November 2026, and related materials will limit exports outside the OECD, keeping more valuable feedstock in Europe. However, the region remains focused on shredding and lacks sufficient refining capacity to produce battery-grade materials.
With production scrap still dominating supply and end-of-life volumes rising slowly, plant utilization rates continue to be low until the mid-2030s, potentially forcing recyclers to pay for feedstock rather than charge gate fees.
The binding constraint in Europe is feedstock rather than processing capacity. Shredding capacity has been built out faster than the material available to fill it: production scrap from cell plants and gigafactory ramp-ups still accounts for the bulk of supply, while end-of-life volumes are held back by the young age profile of the European EV fleet and will not scale materially until the early 2030s.
The result is structurally low utilization, persistent competition for tonnes, and a market balance that favors scrap suppliers rather than recyclers: gate fees for nickel-bearing material have narrowed considerably in Europe — typically €0.5-1.0/kg for NCM where still charged — and recyclers have at times been paying for feedstock outright, compressing processing margins.
The trend is not one-way: some recyclers have reverted to gate fees where scrap availability is too low. The longer-term outlook is more supportive on volumes. Global black mass supply is forecast to rise from around 852,000 tonnes in 2026 to approximately 2.2 million tonnes by 2036, with Europe’s share increasing from about 7% in 2026 to roughly 15% by 2036 as end-of-life batteries reach scale and the hazardous-waste classification of black mass keeps more material inside the region. Capturing that growth, however, depends on Europe building refining capacity alongside shredding capacity.
European black mass also trades at a discount to Asian material. In August 2026, nickel and cobalt payables averaged about 82% in Europe, compared with 103% in South Korea, owing to weaker buyer competition and higher logistics and compliance costs.
Regulation could support long-term demand for battery materials
The G7 called for increased stockpiling and recycling to secure critical raw materials for energy and defense applications, during a summit in Évian, France, in June 2026.
So far, the EU Battery Regulation provides the strongest long-term support for the European recycling market, setting a lithium-based battery recycling efficiency target of 65% by the end of 2025, rising to 70% by the end of 2030 with material recovery targets reaching 90% for the recovery of cobalt and nickel by 2027, increasing to 95% by 2031.
Lithium recovery must reach 50% by 2027 and 80% by 2031.
The regulation will also introduce minimum recycled-content requirements from August 2031. EV and industrial batteries placed on the EU market will need to contain at least 16% recycled cobalt, 6% recycled lithium and 6% recycled nickel.
These requirements should create structural demand for secondary battery materials and support investment in European refining. However, regulation alone will not guarantee commercial success. Projects will still need reliable feedstock, competitive operating costs and customers for their recovered products.
Outside the battery space, the adjacent rare earth market is balancing two competing trends: efforts to boost sources of rare earths outside China as well as the growing interest in technologies that could reduce dependence on magnets containing rare earths altogether.
Rare earths market in anticipation of Chinese controls and REE-free motor research
China’s planned November 2026 export controls are a key focus for the market of neodymium-iron-boron (NdFeB) magnets, integral to the design and functioning of electric vehicle motors.
If implemented, China’s export control measures may extend licensing requirements further down the value chain, covering products manufactured using Chinese technology, equipment or feedstocks.
Outside China, demand for heavy rare earths dysprosium and terbium, used as a dopant in NdFeB magnets to improve performance, is still heavily supported by inventories and stockpiled material in the rest of the world.
On April 4, 2025, China’s introduction of export controls on heavy rare earths marked a major turning point for the market.
China’s export controls allowed the country to effectively turn the tap on and off: restricting specific countries or end users while easing controls when desired. The resulting reduction in the availability of the heavy rare earths dysprosium and terbium outside China has led to a steadily widening divergence between domestic Chinese and ex-China prices.
Companies and governments have accelerated efforts to diversify sources of supply ever since. Notably, USA Rare Earth and Energy Fuels have pursued integrated “mine-to-magnet” supply chains, covering mining, separation, refining and magnet production, by investing heavily in projects and through mergers and acquisitions.
Tesla’s recent announcement of developments to its rare-earth-free ferrite-based motor technology in its Cybercab vehicles has also attracted attention.
While ferrite magnets are not new and generally involve performance trade-offs compared with NdFeB magnets, Tesla’s announcement has reinforced discussion about whether future motor designs could reduce demand for rare earth magnet materials, especially for the “heavies.”
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