SunSirs: Raw Material Prices Are Trending Strong, and Market Prices for Ferrous Lithium Phosphate Are Improving

Price trends

According to the Commodity Market Analysis System of SunSirs, the price of premium-grade power-type ferrous lithium phosphate (LFP) stood at 59,000 RMB/ton as of July 16. On July 15, Hunan Yuneng—a leading LFP manufacturer—issued a price adjustment notice to its customers. Citing the continued rise in the cost of key upstream raw materials, as well as the fact that the company is operating at full capacity and its newly added capacity for the year cannot meet the growing order demands of all clients, the company announced a price increase of 2,000 RMB/ton across its entire LFP product line, effective August 1.

Fundamental Analysis:

Regarding operating rates: Leading enterprises—such as Hunan Yuneng and Defang Nano—that possess integrated phosphorus and lithium supply chains are operating at 95%–100% capacity; they continue to run at full capacity with sales matching output, and delivery lead times have been compressed to under seven days. In contrast, small and mid-sized enterprises lacking high-end, high-tap-density capacity and cost advantages generally have operating rates below 50%; affected by order losses and inverted cost structures, some have already reduced or halted production as outdated capacity is rapidly phased out. Overall, while the industry's average operating rate in July was approximately 90% (skewed upward by the leading players), the actual effective supply of high-end capacity remains tight.

On the upstream front, the price of iron phosphate has surged significantly—driven by rising costs of sulfur (up over 167% year-to-date) and wet-process phosphoric acid (up over 70%)—climbing from approximately 10,000 RMB/ton at the start of the year to 15,000 RMB/ton (an increase of over 50%). As iron phosphate accounts for more than 70% of processing costs, this sharp rise has severely squeezed the profit margins of material manufacturers. Meanwhile, lithium carbonate prices have fluctuated at high levels; battery-grade lithium carbonate has traded within the 164,000–169,000 RMB/ton range—and although it has retreated slightly, it remains high, providing firm cost support for ferrous lithium phosphate (LFP) materials.

On the demand side, energy storage has surged to become the primary growth driver; demand for utility-scale, C&I (commercial and industrial), and residential storage systems has materialized rapidly across domestic and international markets. Energy storage battery shipments rose by nearly 90% year-on-year in the first half of the year, with July production schedules increasing by 3.72% month-on-month. Power battery demand remains steady: LFP (ferrous lithium phosphate) batteries account for over 80% of total power battery installations, with demand underpinned by the rising sales volume of PHEVs (plug-in hybrid electric vehicles) and EREVs (extended-range electric vehicles), alongside the accelerating electrification of commercial vehicles; July power battery production schedules rose by approximately 7%–9% month-on-month, defying the traditional off-season slowdown. Exports have also seen strong growth: overseas markets are shifting en masse to LFP batteries for affordable models, driving a 710% year-on-year surge in LFP material exports in May, with leading companies securing long-term contracts extending through the first half of 2027.

Market Outlook:

Analysts at SunSirs believe that in the short term, LFP prices will maintain their current trend, showing steady to firm movement. In the medium term, as newly built high-end production lines (4th and 5th generation) ramp up output—adding approximately 250,000 tons of capacity—the supply-demand gap will narrow, and prices are likely to fluctuate within a tight range.

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