A recent tightening in the upstream supply chain for electrolyte has led to a wave of long-term supply agreements being secured by electrolyte manufacturers, making stable supply a primary concern for battery cell producers.

According to an incomplete industry survey by Gaogong Industry Institute (GGII), the total volume of publicly disclosed long-term electrolyte contracts exceeds 4.5 million tons, further driving up demand for upstream materials like lithium hexafluorophosphate (LiPF6), lithium bis(fluorosulfonyl)imide (LiFSI), and Visteon (VC).

The electrolyte sector is poised for a period of intensive capacity commissioning over the next two to three years, which will also trigger a wave of capacity expansions for its upstream raw materials.

GGII data indicates that global lithium battery output surpassed 1.5 TWh in the first half of 2026, driving global electrolyte shipments to approximately 1.49 million tons.

Chinese electrolyte shipments accounted for 1.42 million tons of this total, marking a 63% year-on-year increase and representing over 95% of the global share.

Regarding the competitive landscape, the top ten Chinese electrolyte firms held a combined shipment share exceeding 90% in H1 2026.

Companies with self-supply capabilities for key materials like LiPF6, solvents, and additives are expected to possess stronger profitability and sustained competitiveness moving forward.

Key Challenge in Supply Chain Stability

The stability of core upstream raw material supply has become a major factor influencing the development of the electrolyte industry.

GGII data shows that domestic LiPF6 capacity was around 300,000 tons by the end of 2025.

With leading lithium salt producers gradually ramping up output, domestic LiPF6 capacity is projected to exceed 400,000 tons by the end of 2026.

Considering adjustments in electrolyte formulations and the increasing adoption of lower-cost LiFSI, the LiPF6 market is expected to remain in a tight balance throughout the year, with average industry capacity utilization exceeding 80%.

As of July 2026, prices for some domestic LiPF6 had already fallen below 100,000 yuan per ton.

VC as the Pivotal Constraint

VC is set to become the core variable limiting the growth of the electrolyte industry.

A tight supply situation for VC is anticipated to persist throughout 2026 and extend into the first half of 2027.

VC production faces high technical barriers and stringent environmental requirements, with complex approval processes for environmental impact assessments and solid waste treatment, making the construction timeline for new greenfield capacity at least one year.

Domestic VC capacity for lithium battery use stood at approximately 100,000 tons by the end of 2025, which was already struggling to meet the production schedules of battery makers in H1 2026.

Factoring in the gradual release of this capacity and the production yield ramp-up for new market entrants, domestic lithium battery VC capacity is expected to surpass 120,000 tons by the end of 2026.

However, based on projected global lithium battery output of 3.2 TWh for 2026, a significant supply gap for VC is forecast to remain in the domestic market, with prices expected to continue reaching new highs.

Beyond direct capacity constraints, battery technology evolution is also increasing VC consumption.

Demand for faster charging and longer cycle life is directly boosting the need for VC additive.

VC content in ternary batteries has risen by 0.5 to 1 percentage points compared to previous levels, while its additive amount in lithium iron phosphate batteries has increased to more than three times the original level.

As of July 2026, the domestic price for VC exceeded 140,000 yuan per ton, with some spot transactions even becoming illiquid despite high quoted prices.

The tight supply-demand situation for core additives like VC is unlikely to ease significantly in the short term, with prices expected to remain elevated.

Some relief in VC supply tightness is anticipated by 2027, though to a lesser extent than for LiPF6, as only new capacity from select companies is scheduled to come online that year.

Major capacity increments are expected to come from firms such as Qingmu Gaoxin, Tianshuo, Huasheng Lithium, and Hankang.

Prices are forecast to continue rising in H2 2026, with an expected correction to below 150,000 yuan per ton following the release of new capacity in 2027.