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In its half-year results published on Thursday February 19, Wesfarmers said that performance during commissioning at the Covalent Lithium joint venture refinery in Kwinana had been “pleasing,” with the plant producing high-quality lithium hydroxide.
But the company also noted that the timing of the production ramp-up phase has been extended due to intermittent odor issues, with work underway to address these.
While the refinery has demonstrated that the underlying process is operating as intended, commercial ramp-up remains gradual. In the interim, excess spodumene concentrate is being sold, reflecting continued flexibility while downstream conversion stabilizes.
The Covalent update comes amid broader challenges for ex-China lithium hydroxide assets. Market participants continue to cite operational constraints at the Kemerton Lithium Plant, operated by Albemarle, and earlier commissioning difficulties at Kwinana as examples of the technical complexity involved in scaling up battery-grade hydroxide production outside China’s established conversion base.
In South Korea, POSCO Pilbara Lithium Solution (POSCO-PLS) idled two lithium hydroxide lines in December, according to market sources, citing subdued demand and inventory adjustments. The curtailments highlight the widening gap between nameplate capacity and effective operating rates while downstream procurement remains cautious.
Attention has also turned to Tesla’s lithium hydroxide refinery in the US state of Texas, with market chatter suggesting that commissioning activity is advancing. But, as with other Western projects, qualification processes and customer approvals are expected to take time before material volumes enter the broader supply chain.
The operational headwinds coincide with weaker demand for lithium hydroxide relative to carbonate, while high-nickel cathode growth slows.
According to Fastmarkets’ research team, weak lithium hydroxide pricing is closely tied to shifting demand dynamics in North America, which remains the main end-consumer of high-nickel NCM cathode material outside China.
“The gutting of electric vehicle [EV] subsidies in September 2025 via the OBBBA led to a significant reduction in new EV sales in the US throughout the fourth quarter,” Connor Watts, EV battery raw material demand analyst at Fastmarkets, said.
“That had second-order effects,” he added, “with companies such as Ford and Stellantis announcing plans to convert EV cell manufacturing capacity toward the US energy storage system [ESS] market.”
According to Watts, however, the ESS sector is overwhelmingly dominated by LFP chemistry, which held more than a 90% market share in this vertical in 2025 and typically uses lithium carbonate. Carbonate has historically been cheaper and does not face the same shelf-life management constraints as lithium hydroxide, making it more suitable for stationary storage applications.
“Industry sentiment toward EVs in the US is also described as near all-time lows,” Watts said, “while the ESS market is expected to expand rapidly, driven in part by the emergence of AI data centers as a new pillar of electricity and battery demand.”
While Europe remains a relative bright spot for lithium hydroxide consumption – supported by the dominance of South Korean battery OEMs such as LG Energy Solution – structural risks are emerging there as well. The onshoring of Chinese cell manufacturers, including CATL, which is developing plants in Spain and Eastern Europe, could accelerate substitution toward LFP chemistry to meet local production requirements.
Such a shift would potentially erode lithium hydroxide’s dominance in what is currently the second-largest EV market outside China.
Because lithium hydroxide is predominantly used in nickel-rich cathodes such as NCM and NCA, the broader pivot toward LFP has disproportionately weighed on hydroxide consumption growth. Traders said that this has reduced urgency among converters to push aggressively toward nameplate capacity, particularly where technical ramp-up issues persist.
As a result, ex-China lithium hydroxide capacity continues to advance sporadically: first production milestones are being achieved, but sustained, high-utilization output remains elusive. With commissioning timelines extending and demand signals mixed, the sector’s diversification ambitions remain intact – though progress is proving slower and more complex than initially expected.
Fastmarkets’ daily price assessment for lithium hydroxide monohydrate LiOH·H₂O 56.5% LiOH min, battery grade, spot price cif China, Japan & Korea, was $15.00-19.00 per kg on February 19, unchanged from Wednesday, but having narrowed upward from $14.50-19.00 per kg on Tuesday.
The corresponding weekly assessment of the lithium hydroxide monohydrate LiOH.H2O 56.5% LiOH min, battery grade, spot price, ddp Europe, was $19.40-21.00 per kg on Thursday, also unchanged from the previous session.
And the weekly assessment of the lithium hydroxide monohydrate LiOH.H2O, 56.5% LiOH min, battery grade, spot price, ddp US and Canada, was $20.75-23.00 per kg on Thursday, up from $17.50-20.75 per kg in the previous session.
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