The domestic electric vehicle (EV) supply chain has grown significantly in the last few years. This expansion has drawn attention to the need for a domestic midstream supply chain, which includes refining materials into cathode or anode active materials, electrolyzers, and separators. Although domestic manufacturers have made strides to continue onshoring, gaps in value remain. Supply chains that are overly reliant on other countries create added costs and exposure to geopolitical risks.

While today’s policy discussions often emphasize the importance of securing access to raw materials, a resilient battery supply chain requires much more than just domestic mining. One of the supply chain's most critical yet underdeveloped segments is the midstream—specifically, the refining and processing of raw materials into battery components. Refining is the stage raw minerals like nickel, lithium, cobalt, and copper are transformed into high-purity materials suitable for battery production. This is commonly achieved through hydrometallurgy, a water-based refining process that uses solutions to extract and separate valuable elements. In addition to the core materials, other trace elements are reclaimed, further reducing waste and environmental impact.

The results of these processes leave you with the aforementioned core battery components that can be combined through manufacturing into a lithium-ion battery cell.

Following refinement, these critical minerals feed directly into remanufacturing, where they are used to produce cathode active material—the most valuable and complex component of a lithium-ion battery. The cathode determines the battery’s performance, cost, and environmental footprint. It makes up roughly 60% of the cost of a battery cell and around 15% of the total cost of an electric vehicle.

In 2025, global capacity distribution of mineral processing and refining presents an economic and national security impetus to onshore midstream supply. According to a 2022 report by the IEA, China processed more than half of the world’s lithium, two-thirds of its cobalt, and 70% of all graphite. The efforts in North America and Europe pale in comparison. North America produces less than 1% of cathode active material and 5% of anode material. In Europe, production efforts are minimal, with 3% of cathode material production and 2% of anode production occurring on the continent. For both regions combined, McKinsey notes that other important battery components – electrolytes and separators – are 7% and 4% of all global production.

More critical parts of the U.S. midstream should be built out over the next few years as key facilities operated by Ioneer (Rhyolite Ridge) and Lithium Americas (Thacker Pass) come online. Each site will contribute to filling in some of the gaps of the midstream supply chain as they refine and process lithium on-site. Tesla is also expected to start production at its lithium processing facility in Texas later this year.  

In short, there isn’t enough financial support in the middle. And that’s often where other countries–mainly China–have the strongest hold in the entire supply chain.

Yet, the U.S. faces significant barriers in scaling domestic midstream capacity. According to McKinsey, market entry challenges, high capital requirements, and a shortage of skilled labor continue to limit investment in this space. As a result, much of the global refining and cathode production remains concentrated overseas—particularly in China, which has a strong foothold across the entire battery supply chain.

The U.S. federal and state governments can help to address some of these challenges moving forward. In a recent two-day event hosted by the ZETA Education Fund in Reno, Nevada, that highlighted various segments of the future of advanced manufacturing, several ZETA member companies, including Ioneer, Lithium Americas, Panasonic Energy, and Redwood Materials, all demonstrated the importance of domestic midstream processing capacity.

During a presentation at the event, Chad Yeftich of Ioneer, discussed why their project is significant for hardrock mineral production and midstream processing:

“The Rhyolite Ridge project that we’re developing in Esmeralda County is about three hours south of Reno—halfway between Reno and Las Vegas. What’s interesting and unique about some of the mineral deposition in Nevada is that, unlike around the world, it allows for the processing to be done on-site…That will allow us to not just extract but also refine and process those battery materials that our customers want without that material ever leaving the shores. That’s going to help with U.S. manufacturing and also mineral security.”

In a panel during the Reno event, the Executive Director of the NV Governor’s Office of Economic Development (GOED) asked ZETA members, Panasonic Energy and Redwood Materials, how we can address some of these gaps with off-take agreements and partnerships.

JB Straubel, Founder and CEO of Redwood Materials, shared, "We don’t have a lot of that [midstream] supply chain in the U.S. right now.” Straubel noted the importance of having Panasonic’s leadership to build knowledge and expertise around cell assembly, but that much of the supply chain has yet to follow. “I think it’s important to have a balanced set of incentives and support across the industry. So we don’t overdevelop one part of it and leave a little bit of a gap on another part.” In particular, JB noted the U.S. battery manufacturing industry doesn’t have connectivity across critical mineral refining and re-manufacturing.

Allan Swan, President of Panasonic Energy North America, agreed that there is a gap in the midstream supply chain. “Right now, most of the supply is coming from Korea and Japan.” He noted that the battery component materials that Panasonic requires must be top-notch in terms of their quality. Allan noted that the company is looking to source battery components from new organizations like Redwood Materials and established suppliers that are expanding and establishing capacity within the United States.

Although the United States is making great strides to build out the battery supply, uncertainty regarding tax credits and federal support still remains. Ultimately, two of the major bottlenecks within the midstream appear to be a lack of financing and skilled labor for this particular portion of the EV battery supply chain. More attention to solving these issues is just the beginning of elevating the midstream. The results could help strengthen how the U.S. produces its battery technology for electric vehicles and other uses.

Allan from Panasonic summed it up, saying, “It’s really important that we build an American supply chain, create American jobs, and build a battery supply chain that starts selling some of that product out of the United States versus pulling in.”

To build a resilient and self-sufficient battery industry, the U.S. must invest not just in mining and exploration but in the full ecosystem, including refining and manufacturing. Without support for the “missing middle,” domestic efforts to lead in clean energy and electric vehicles risk falling short.