Though the LFP cathode factories have been challenged by poor profits, the bidding of top-tier battery cell factories around the middle of January 2025 instilled confidence to the market, and the low-end fabrication charges rose slightly, easing the losses of cathode factories. Specially, the quotations of third-generation-plus and fourth-generation LFP enjoyed higher premiums of Yuan 1,000-3,000 over ordinary quality products due to better product property.
The recovery in LFP prices actually signals the beginning of a new round of technological competition. Currently, except for Fulin, which adopts the ferrous oxalate process route, most LFP cathode factories are transitioning to the fourth-generation products using the two-step sintering process. This process not only increases sintering costs but also posts high threshold for capacity.
Therefore, apart from companies like Fulin, Yuneng, Wanrun, Defang, Lopal, Anda, and GCL, progress in fourth-generation products is relatively slow among most firms, with the majority of the market still dominated by second-generation and second-generation-plus products. While striving to reduce losses, the cathode factories also face considerable pressure to invest more in product upgrades.
Generally, the LFP prices lacking momentum are attributed to battery cell factories actively forcing down the prices for cost control, as well as lithium carbonate prices holding firm. To cope with cost pressures, some LFP companies have started extending their reach to the mining sector, hoping to save costs by participating in lithium salt processing.
Despite such dilemma, the orders in February have remained relatively robust compared to previous years, and the industry operating rates are expected to have reached 55%. Among them, leading cathode factories reported stable orders and higher operating rates, with most capacity utilization rates ranging between 60% and 80%. Among the second and third-tier manufacturers, the new forces almost operated at full capacity, while some third-tier manufacturers have not fully utilized their production lines due to product or order issues. It is noteworthy that as leading LFP cathode factories held firm on prices, some orders have started shifting to second-tier factories.
Furthermore, some factories mulled over a production increase by the end of February due to additional energy storage orders from leading battery cell manufacturers, and there are LFP manufacturers seeking outsourcing in the market.
Meanwhile, the new capacity ramping up at leading LFP manufacturers has increased the supply of high compaction density products. As March is the start of the traditional peak season, the demand is gradually recovering, and some idled energy storage-related production lines at battery cell manufacturers are also preparing to resume operations. According to Mysteel's preliminary research, the LFP production in March is expected to jump 10%-15% from the previous month. (The specific production and scheduling data will be released on March 7.)
Source: Mysteel
Overall, the LFP market faces intensive price competition, technological iteration, and capacity adjustment. As the peak season approaches, the demand is gradually recovering, especially with the cancellation of mandatory energy storage system for clean energy power generation projects, which may lead to a surge in energy storage battery demand starting in April.
Simultaneously, the cancellation of mandatory energy storage system is driving the LFP industry toward third and fourth-generation LFP products with higher compaction density. In addition to optimizing material structures through secondary sintering, synthesis routes using lithium dihydrogen phosphate instead of lithium carbonate to reduce energy consumption and emissions are also emerging as alternative technology routes.
Written by Aggie Hu, huchenying@mysteel.com
