Bridging the U.S. Battery Supply Chain Gap: The Active Materials Challenge

Securing Critical Materials: Progress and Remaining Gaps

Efforts to reduce U.S. reliance on imported raw materials have gained momentum, with projects such as Thacker Pass (Nevada), Salton Sea (California), and Smackover Formation (Arkansas) aiming to establish a domestic lithium supply. Collectively, these sites, along with other reserves, could theoretically meet the projected lithium demand for U.S. battery production by 2030. However, extracting and refining these resources on a scale presents profitability and practicality challenges:

• Thacker Pass is expected to yield 80,000 metric tons of lithium carbonate per year, but environmental concerns and permitting delays slow progress.
• Salton Sea's lithium extraction technology remains unproven at commercial scale due to challenges in scaling direct lithium extraction (DLE) and high upfront infrastructure costs, despite its potential to become a major domestic lithium hub.
• Smackover Formation has promising reserves but requires significant infrastructure investment in DLE processing facilities, refining capacity, and brine transport infrastructure to scale production efficiently.

Outside of lithium key battery materials like nickel, graphite, and manganese have little to no domestic production, forcing the U.S. to rely on imports from Canada, Australia, and emerging trade partners like Indonesia and Morocco. This shift in sourcing introduces new geopolitical dependencies, as securing stable supply chains requires navigating trade policies, tariffs, and resource nationalism in mineral-rich nations.

Despite these advancements, the U.S. remains heavily dependent on China and other foreign suppliers for processed materials such as lithium hydroxide, essential for high-nickel cathodes, and nickel sulfate, which enhances battery performance and reduces cobalt reliance.

The Elephant in the Room: Active Material Sourcing

Securing raw materials is only part of the equation. The next frontier in the U.S. battery supply chain challenge is ensuring the local production of cathode active materials (CAM) and anode active materials (AAM)— some of the most critical components in battery manufacturing which make up 60-65% of typical both cell costs and volume.

China currently dominates the production of CAM and AAM, controlling over 80% of the global supply. This leadership is due to their advanced capabilities in converting processed raw materials into active materials necessary for battery electrolytes on a large scale. By 2030, the U.S. is on track to produce only ~25% of its local active material needs, highlighting a huge the gap to achieving localization goals. As a result, U.S. battery manufacturers will continue to depend on processed materials from abroad, despite efforts to create a domestic supply chain.

Challenges to Scaling U.S. Active Material Production

Several key barriers must be overcome to establish a competitive domestic active material industry:

1. Capital Commitments
   • High CapEx requirements: Developing CAM and AAM production facilities requires billions in capital investment, making it difficult for new entrants to compete with well-established Chinese suppliers.
   • Government incentives, such as DOE grants and tax credits under the Inflation Reduction Act (IRA), have helped to bridge the funding gap, but private capital remains hesitant due to pricing volatility, long payback periods, and an uncertain regulatory environment.
2. Technical Know-How & Workforce needs
   • CAM and AAM production involve highly specialized chemical processes that require deep R&D expertise. China, Japan, and South Korea have spent decades refining these technologies, putting U.S. firms at a disadvantage.
   • U.S. manufacturers must invest in workforce development and knowledge transfer to scale up local production capabilities.
3. Lead Time for Supplier Validation
   • Battery manufacturers demand strict quality and performance validation before integrating new active materials into production.
   • It can take 2–4 years for new suppliers to qualify their materials with battery cell makers, delaying market entry for domestic producers.

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‍Industry Players Taking Action

Recognizing these challenges, major industrial players with strong R&D backgrounds and financial resources are stepping into the active materials space. Companies such as Dow, 3M, and Umicore have announced strategic investments in U.S.-based material production, aiming to localize and scale CAM and AAM supply.

• Dow is investing in novel electrolyte and separator materials to enhance battery longevity.
• 3M is leveraging its chemical expertise to improve advanced cathode formulations.
• Umicore is developing a CAM production plant in North America, focusing on high-nickel NMC cathodes.

These incumbents bring technical expertise and capital that startups often lack, making them pivotal players in closing the supply chain gap.

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The Role of Policy in Driving Partnerships

The U.S. government is actively pushing for joint ventures (JVs) and partnerships to accelerate the domestic battery industry. However, past collaborations have faced challenges, including:

• GM/Ultium: Supply chain constraints and pricing pressures have led to delays in scaling up Ultium battery production.
• Ford/SK On: Struggles in securing localized battery materials have slowed down their planned EV expansion.

Despite these hurdles, policy incentives like IRA tax credits and DOE funding are encouraging more JVs, particularly between U.S. automakers and material suppliers.

A Call to Action: Supporting Upstarts to Close the Gap

To fully bridge the U.S. active materials supply chain gap, the industry must support emerging players like Ascend Elements, Syrah Resources, and Mitra Chem, which are positioned to scale up domestic CAM and AAM production but require greater industry collaboration and government backing. Federal grants, loan programs, and strategic partnerships will be crucial in helping these companies establish cost-competitive, high-quality production at scale. One key initiative is government-backed funding for pilot plants, such as the CEC (California Energy Commission) grant, which supports a pilot-scale facility to validate new battery material innovations and advance domestic production capabilities.

By fostering collaboration between startups, incumbents, and policymakers, the U.S. can reduce its reliance on foreign suppliers, strengthen its battery supply chain, and secure its position in the global energy transition.

Conclusion

The U.S. has made progress in securing critical raw materials, but the real challenge now lies in scaling domestic active material production. With strategic investments, technical innovation, and supportive policies, the country can close the battery supply chain gap and establish a more resilient and independent energy future. However, time is of the essence, if the U.S. does not act swiftly, it risks falling further behind in the global battery race.

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