Cost Analysis of NMC Precursors

NMC precursors are key raw materials in the production of NMC cathode materials, and their cost largely determines the market competitiveness of NMC batteries. The table below summarizes the core cost components and recent market trends, providing a quick overview of the overall landscape.

Analysis dimension	Key points
Cost structure characteristics	Raw material costs dominate (approx. 85% or more), while manufacturing costs account for a relatively low proportion.
Typical cost range	5-series: approx. RMB 82,800/ton (data from July 2025) 8-series: approx. RMB 91,300/ton (data from July 2025)
Market price reference	5-series (523 type): approx. RMB 74,000/ton (early November 2025) 8-series (811 type): approx. RMB 89,500/ton (early November 2025)
Industry profitability	Widespread losses: 5-series profit approx.RMB 9,800/ton, 8-series profit approx.RMB 1,500/ton (July 2025)
Key market characteristics	Facing severe competition from lithium iron phosphate (LFP), with the installation share of NCM batteries dropping to below 20%.

The cost analysis of NMC precursors mainly consists of raw material costs, processing costs, and other expenses. The following is a detailed analysis:

Raw Material Costs  

Nickel Sulfate: As one of the primary raw materials for NCM precursors, nickel typically accounts for a significant proportion in NMC materials, enhancing the specific capacity and energy density of the material. Its price is influenced by factors such as nickel ore mining costs, international market supply and demand, and transportation expenses. For example, when nickel ore resources are abundant, mining costs are low, and the international market supply is sufficient, the price of nickel sulfate tends to be relatively low, and vice versa.  

Cobalt Sulfate: Cobalt plays a role in stabilizing the structure of NMC precursors, but cobalt resources are relatively scarce, leading to higher prices. Cobalt prices are affected by factors such as cobalt ore production, supply chain stability, and demand from the new energy industry. If cobalt mining is restricted or demand for cobalt from new energy vehicles increases significantly, the price of cobalt sulfate rises, thereby increasing the cost of NCM precursors.  

Manganese Sulfate: Manganese helps reduce costs and improve the safety performance of NCM materials, but excessive content can disrupt the layered structure of the material. The price of manganese sulfate is relatively stable, primarily influenced by the supply of manganese ore resources and market demand.  

Other Auxiliary Materials: Materials such as liquid ammonia, liquid alkali, and deionized water, though accounting for a relatively small proportion of costs, also impact overall expenses. For instance, the preparation cost of deionized water and the procurement prices of liquid ammonia and liquid alkali can affect the cost of NMC precursors to some extent.

Processing Costs

Energy Costs: The production of NCM precursors requires significant electricity consumption for processes such as material mixing, reaction, and drying. Electricity prices directly impact processing costs, and prices vary across regions. For example, in Southwest China, where hydropower resources are abundant, electricity prices are relatively low, helping reduce production costs.

Equipment Depreciation: Production equipment for NCM precursors includes reactors, drying equipment, mixing equipment, and filtration equipment. The procurement cost of such equipment is high, requiring depreciation. Factors such as the service life of equipment and the frequency of upgrades affect equipment depreciation costs.

Labor Costs: These include wages, benefits, and training expenses for production personnel. As labor costs rise, the proportion of labor costs in NCM precursor production gradually increases.

Other Costs

R&D Costs: To improve the performance of NMC precursors, reduce costs, and develop new product models, companies need to invest in research and development. This includes R&D personnel salaries, procurement and maintenance of experimental equipment, and raw material consumption for trials.

Environmental Costs: The production of NCM precursors generates pollutants such as wastewater, exhaust gases, and solid waste. Companies must invest in environmental treatment, such as building wastewater treatment facilities, exhaust gas purification equipment, and solid waste disposal systems, to comply with environmental regulations.

Sales and Management Costs: These include expenses for market promotion, sales team operations, office costs, and management salaries. These costs are also allocated to the overall cost of NMC precursors.

Cost Composition and Market Status  

Understanding the cost of NCM precursors hinges on recognizing the "raw materials determine success" characteristic.  

Raw Materials as the Cost Core: In the cost structure of NMC precursors, raw materials account for as much as 85% or more, primarily including nickel sulfate, cobalt sulfate, and manganese sulfate (or their corresponding metal salts). This means that price fluctuations in metals such as nickel, cobalt, and manganese directly and significantly impact precursor costs.  

Nickel: Amid the trend toward high-nickel formulations, the cost share of nickel sulfate continues to rise.  

Cobalt: Cobalt prices are highly volatile, making it one of the main sources of uncertainty in costs.  

Processing Fees: The margin left after deducting raw material costs has been severely compressed, making it difficult to cover manufacturing expenses and leading to widespread losses in the industry.  

Price Below Cost: As shown in the table, current market prices are generally lower than production costs, leaving the industry as a whole in a loss-making state. This is driven by a severe supply-demand imbalance: on one hand, the growth rate of the terminal new energy vehicle market has slowed, intensifying price competition; on the other hand, lithium iron phosphate (LFP) batteries, with their cost and safety advantages, are accelerating their capture of market share, leading to a significant decline in the installation share of NMC batteries.

Technology Roadmap and Cost Reduction Pathways

Faced with these pressures, the industry is primarily seeking to improve efficiency and reduce costs through product high-nickelization and industrial chain integration.

The Ongoing Trend Towards High-Nickel Cathodes: Increasing the nickel content in NCM materials enhances battery energy density, thereby reducing the cost per kilowatt-hour. This is a key technological pathway for NCM batteries to compete with LFP. Market share is progressively shifting from 5-series to 6-series, 8-series, and even 9-series products.

6-series: Has become the mainstream product in the domestic market due to its effective balance between performance and cost.

8-series and above: Primarily targeted at the overseas high-end power battery market and are considered a candidate cathode material for the transition to solid-state batteries.

Vertical Integration and Overseas Expansion  

Upstream Integration: To control raw material costs at the source, leading companies are investing in nickel and cobalt resources through joint ventures and acquisitions, particularly by building smelting projects in resource-rich countries like Indonesia.  

Relocation Overseas: To circumvent trade barriers and stay close to customers, some manufacturers are establishing precursor production capacities in regions such as Europe and Africa, building localized supply chains.

Industry Challenges and Future Outlook  

The NMC precursor industry is currently undergoing a profound adjustment period, with both challenges and opportunities ahead.  

Short-term Pressure, Anticipated Consolidation: In the near term, prices and profitability are expected to remain under pressure due to overcapacity and weak demand. The healthy development of the industry depends on accelerating the consolidation of outdated production capacity.  

Holding Firm in the High-end Market: Despite shrinking market share, NCM batteries maintain an irreplaceable position in the high-end electric vehicle market that prioritizes long range, as well as in emerging sectors such as electric Vertical Take-Off and Landing (eVTOL) aircraft and robotics, thanks to their high energy density advantages. Future competition will increasingly focus on technological leadership and the stable supply of high-end products.