【SMM Analysis】Integrated rate of lithium iron companies continues to increase. How big is the demand for external sales of iron phosphate in the market?

Purpose of integration: Cost reduction and increased efficiency.

Iron phosphate is the precursor of lithium iron phosphate and can only be used to make lithium iron cathodes. This one-way relationship means that the demand for iron phosphate is directly influenced by the demand for lithium iron, specifically the demand for lithium iron in markets other than those where iron phosphate can already be self-produced.

Correspondingly, lithium iron companies are actively promoting the process of integration in the strategy of cost reduction, increasing efficiency, and the reasonable use of local resources. The advantage of integration lies in the fact that in the same production base, it is possible to reduce logistics costs; FP/LFP efficient matching and iterative upgrades are guaranteed; and communication costs are reduced. However, iron phosphate companies are also continuously improving their competitiveness. While integrated iron phosphate companies do not need to worry about sales channels, they may also be limited by technologically conservative approaches.

According to SMM research, currently, there are 3 companies with an integration rate of over 80%, 3 companies with a rate of 50%-80%, and one company with a rate lower than 50%. In companies that have already integrated, the comprehensive integration rate is 67%. The logic of calculating the integration rate is FP production capacity / (LFP production capacity * FP consumption). In reality, integrated iron phosphate companies have not yet reached full capacity, and there is still demand for external acquisition of iron phosphate. If the iron phosphate production capacity of integrated companies is fully released, there will be a total capacity of 1.3-1.5 million tons.

It is expected that by 2024, the proportion of externally sourced iron phosphate demand will be within 50%, depending on the price of iron phosphate and the operating rate of small and medium-sized enterprises. In the current integrated companies, there will also be considerations regarding the cost changes brought about by the choice between external acquisition and self-supply. Therefore, the external demand for iron phosphate and price changes in 2024 will be affected by the shift between self-production and external acquisition in integrated companies. In the current relatively weak situation of iron phosphate prices, some integrated companies may also reduce the proportion of self-produced iron phosphate and switch to external acquisition due to iron phosphate technology, production costs, and raw material risks. This will be a good opportunity to improve the supply chain system, promote deep cooperation between upstream and downstream, and if achieved, the security of the supply chain will be effectively guaranteed, and the process of product iteration and renewal will be more efficient.

From the "signal" released in the price war of car companies at the beginning of 2024, it can be seen that costs will be further reduced to stimulate consumer demand for car purchases, thereby boosting domestic demand. Similarly, the "price war" will gradually transmit to the upstream raw material market...

Currently, the supply and demand pattern of iron phosphate and lithium iron phosphate, as well as overcapacity, have led to weaker bargaining power for iron phosphate companies in price negotiations. The profit level of iron phosphate companies has shifted from profitable or marginally profitable to struggling on the verge of losses in early 2024.

For more informationa contatc Gina Wen: ginawen@smm.cn