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The rise in lithium prices in 2026 has created growing cost pressures for manufacturers and developers of battery energy storage systems (BESSs), industry participants told Fastmarkets at the Energy Storage Summit Europe in London on Wednesday February 25.
Fastmarkets’ benchmark assessment of the lithium carbonate 99.5% Li2CO3 min, battery grade, spot prices, cif China, Japan & Korea, was $20.00-22.50 per kg on February 26, up from $17.00-19.00 per kg on February 23, which was the last day of the Lunar New Year holiday period in East Asia.
The assessment was up by about 264% from a recent low of $7.50-8.60 per kg in June 2025.
But BESS market participants were still in the early stages of exploring strategies to minimize their exposure to lithium price volatility. Market participants told Fastmarkets that low lithium prices over the past few years meant that the raw material cost was not a major consideration in the price of BESS systems over that period.
In recent years, strong price competition between cell manufacturers fighting for market share has been putting downward pressure on cell costs.
“When we go to our suppliers to buy lithium, they will not forward-buy, because if they buy now, we could see a massive drop in pricing,” Kieran Hartley, senior sales manager at Chinese BESS and battery cell producer JinkoESS, said in a panel discussion at the event.
“If we went ahead now and forward-bought for six months, on a framework agreement or a supply agreement,” Hartley added, “we could be caught with very expensive lithium when our competitors could have very cheap lithium, if they’re buying on day-ahead pricing. So it’s impossible for a BESS supplier to do the responsible thing at the moment.”
Market participants also noted that stockpiling battery cells was not an ideal strategy to manage pricing volatility, because the value of cells can begin to degrade after 3-6 months.
Many BESS framework agreements include clauses that allow counterparties to adjust cell and system cost prices should the lithium price, based on assessments published by price reporting agencies (PRAs), increase by a certain level.
“We do see risk transfer as being key, with cell suppliers and integrators indexing their costs against lithium, in terms of how much risk that supplier is pushing onto their end-customer developer,” Aaron Marks of consultancy Intertek CEA told delegates.
“But if [BESS] developers are not necessarily bound by policy restrictions in terms of what suppliers they can work with, then ultimately the buyer power sits with them, and they can look at those hedge contracts and say, ‘Oh, that’s too much’,” he added.
The adoption of such practices was not widespread and can vary, depending on the BESS project’s size, location and the existing counterparty relationship, sector sources said.
“It’s very interesting because we actually do not know what prices our suppliers are getting when it comes to the raw materials such as lithium carbonate.” Paul Soskin, vice president of supply chain & contracts at BESS operator-developer Masdar.
“In the past six months, the spot price for lithium carbonate went up [by about] 250% – I do not know what that means for my BESS cost. I believe that there’s very little lithium in a cathode, so I’ll tell my suppliers, ‘It does not affect the cell price that much, does it? And can you absorb it?”
Another BESS systems manufacturer told Fastmarkets that while the lithium carbonate price has more than doubled recently, the effect on BESS system costs was more likely to amount to around a 10-15% cost increase.
But cell manufacturers that are vertically integrated, back to mined supply, along with their “huge market share… means that they have been able to, on the whole, absorb the [lithium] price rise more than some of the other participants in the market,” Sarah Montgomery, founder of BESS supply chain intelligence provider Infyos. “It’s definitely not a consistent pattern we’re seeing, in terms of exactly what market participants are increasing their [cell] price.”
Recent strength in lithium, copper and aluminium prices has refocused attention on the cost structure of BESSs just as global demand was accelerating, according to Paul Charles, co-chair of the ESS data center committee for NAATBatt International (the Trade Association for Advanced Battery Technology in North America), speaking in a recent interview with Fastmarkets.
“After the recent jump in lithium prices at the start of the year, maybe hedging will be under greater focus,” one BESS systems producer said. “The validity period for battery cell offers since January 2026 is now as short as 14 days, whereas last year it was three months.”
Hedging battery raw material costs through futures contracts, especially for lithium and copper, the two metals with the highest exposure, remains in its infancy in the BESS sector, market participants told Fastmarkets on the event sidelines.
Trading volumes have been growing on the Chicago Mercantile Exchange’s (CME) lithium carbonate contract, which settles based on the monthly average of Fastmarkets’ benchmark assessment for battery-grade lithium carbonate on a cif China, Japan & Korea basis.
The contract, which was launched in late 2023, saw 14,567 tonnes traded over 2025, up sharply from 3,106 tonnes in 2024.
A suite of lithium futures contracts, which all settle based on Fastmarkets’ assessments, is listed on the CME, the Singapore Exchange (SGX), the Intercontinental Exchange (ICE) and the London Metal Exchange.
The vast majority of BESS systems use lithium iron phosphate (LFP) chemistry cells. In 2025, the LFP 314 Ah cell was the leading choice for utility-scale ESS deployments.
But the BESS market was rapidly transitioning to next-generation high-capacity cells, such as LFP 587 Ah, which were likely to become a mainstream option by the third quarter of 2026, according to Fastmarkets’ senior analyst, Walter Zhang.
The LFP battery chemistry was likely to continue to dominate the energy storage market in the future, Zhang added, barring a technological breakthrough. Other battery chemistries used in ESS would include NCM, sodium-ion and vanadium redox flow batteries (VRFB).
Fastmarkets believed that the number of global ESS installations would increase by around 25% every year over the next decade, to nearly 800GWh by 2030 and to more than 1,600GWh by 2035.
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