North American LFP Battery Supply Chain Localization: A Strategic Investment Opportunity in First Phosphate

The clean energy transition is accelerating, and nowhere is this shift more evident than in the North American lithium iron phosphate (LFP) battery supply chain. As governments and corporations race to decarbonize transportation and energy systems, the demand for LFP batteries—known for their safety, longevity, and cost-effectiveness—is surging. For investors, the key question is not just about the technology but about where the supply chain is built. And in this race to localize production, First Phosphate (PHOS) stands out as a compelling opportunity.

The Policy Tailwind: Inflation Reduction Act and Supply Chain Security

The U.S. Inflation Reduction Act (IRA) has rewritten the rules for battery manufacturers and mineral suppliers. By offering tax credits for domestically sourced materials and penalizing reliance on foreign entities of concern (FEOCs), the IRA is forcing a seismic shift in the industry. According to a report by Energy-Storage.News, companies must ensure that 55% of their supply chain components come from non-prohibited foreign entities by 2026, rising to 100% by 2030 [3]. This creates a clear advantage for firms like First Phosphate, which has built a vertically integrated supply chain using North American-sourced phosphate, lithium, and iron [1].

First Phosphate’s strategy aligns perfectly with the IRA’s objectives. The company holds over 1,500 square kilometers of high-purity phosphate rock deposits in Quebec, a critical input for LFP cathodes [2]. By partnering with Prayon SA for phosphoric acid technology and GKN Hoeganaes for cathode production, First Phosphate ensures compliance with IRA traceability requirements while reducing exposure to geopolitical risks [3]. This is no small feat: as noted by Columbia Energy Policy, the IRA’s final implementation details remain fluid, but its emphasis on localized production is here to stay [5].

First Phosphate vs. LG Energy Solution: Complementary Strategies

While First Phosphate focuses on raw material integration, LG Energy Solution (LG ES) is scaling up LFP battery manufacturing in North America. LG ES recently retooled its Michigan plant to produce 16.5 GWh of LFP batteries annually, positioning itself as a leader in energy storage systems (ESS) [1]. This move reflects a broader industry trend: automakers and energy firms are pivoting from EV-centric battery production to diversified applications like grid storage and industrial use [6].

However, First Phosphate’s strength lies in its end-to-end control over the supply chain. Unlike LG ES, which relies on third-party material suppliers, First Phosphate mines, processes, and produces LFP cathodes in-house. This vertical integration not only enhances cost predictability but also strengthens eligibility for IRA tax credits. For instance, First Phosphate’s recent $27 million in private placements—raised since 2022—has funded drilling and resource definition at its Bégin-Lamarche property, ensuring a steady feedstock for its Quebec-based production [2].

Market Dynamics and Financial Realities

The North American LFP battery market is projected to grow at a staggering 28.27% CAGR, reaching $2.06 billion by 2029 [3]. This growth is driven by surging demand in EVs, particularly in the Light Commercial Vehicle (LCV) and Medium and Heavy-Duty Truck (M&HDT) segments, as well as expanding applications in solar storage and data centers [4]. Yet, the financials of First Phosphate tell a mixed story. The company reported net losses of -$9.8 million and -$8.3 million in 2023 and 2024, respectively [1]. These losses, however, must be contextualized: First Phosphate is still in the early stages of scaling its operations, and its recent $3.2 million July 2025 private placement underscores investor confidence in its long-term potential [2].

Moreover, LFP battery prices have plummeted in 2025 due to oversupply and weak demand growth, with a cumulative drop of over 3,000 yuan per metric ton [6]. While this pressures margins, it also lowers barriers to entry for companies with cost-competitive supply chains—like First Phosphate.

Strategic Partnerships and Future Outlook

First Phosphate’s collaboration with American Battery Factory (ABF) to produce 40,000 tonnes of LFP cathodes annually by 2028 is a game-changer. This partnership not only secures a key downstream partner but also aligns with the IRA’s 2026 compliance deadlines [1]. Meanwhile, LG ES’s focus on ESS and prismatic cell technology positions it to dominate grid-scale applications, but First Phosphate’s localized model offers a hedge against global supply chain disruptions.

For investors, the key takeaway is clear: supply chain resilience is now a premium asset. As the U.S. government tightens FEOC regulations and accelerates clean energy incentives, companies that can prove domestic content and traceability will outperform. First Phosphate’s vertically integrated approach, combined with its IRA-compliant partnerships, makes it a standout in a market poised for explosive growth.

Source:
[1] LG ES, First Phosphate progress North American LFP [https://www.energy-storage.news/lg-energy-solution-first-phosphate-push-forward-lfp-supply-chain-in-north-america/]
[2] First Phosphate raises $2.95M to advance drilling, bolster plans for integrated LFP supply chain [https://ca.proactiveinvestors.com/companies/news/1077258/first-phosphate-raises-295m-to-advance-drilling-bolster-plans-for-integrated-lfp-supply-chain.html]
[3] North America LFP Battery Pack Market Size [https://www.mordorintelligence.com/industry-reports/north-america-lfp-battery-pack-market]
[4] Lithium Iron Phosphate Battery Market Size, Growth Report [https://www.gminsights.com/industry-analysis/lithium-iron-phosphate-lfp-battery-market]
[5] The IRA and the US Battery Supply Chain: One Year On [https://www.energypolicy.columbia.edu/publications/the-ira-and-the-us-battery-supply-chain-one-year-on/]
[6] LFP Battery Prices: Key Drivers and Forecast for H2 2025 [https://discoveryalert.com.au/news/lfp-price-movements-2025-market-forecast/]