【SMM analysis】 Lestored LFP vs. Hydrometallurgical Recycling: The 2026 Battle for Battery Waste Supremacy

SMM July 31 News:

In 2026, as restored lithium iron phosphate (LFP) capacity expands from 150,000–160,000 tons to 170,000–180,000 tons, traditional hydrometallurgical LFP recycling companies are facing a wave of profit and competitive landscape reshaping driven by rivalry between different technological routes.

I. Pricing

According to SMM data, from June 2025 to June 2026, China's monthly average LFP prices showed an overall upward trend followed by high-level fluctuations. Restored LFP prices consistently traded at 75%–85% of primary LFP prices, forming a distinct "discount band."

Behind this pricing logic lies a market consensus on "performance discounting": even as the compaction density of restored products improves, downstream battery manufacturers still classify them as "recycled materials" and demand price discounts to cover potential performance risks. However, as the share of high-end restored products increases and application fields expand, the 75%–85% discount rate may gradually narrow to 80%–90%, enabling restoration companies to achieve better market price acceptance.

Currently, SMM has listed two restored LFP price benchmarks: standard restored LFP and high-end restored LFP. The difference lies in compaction density — the high-end variant achieves ≥2.55 g/cm³, while the standard variant is <2.55 g/cm³. Both are primarily applied in the energy storage sector.

II. Capacity

In 2025, the nominal capacity of LFP restoration companies was approximately 150,000–160,000 tons; in 2026, the currently tracked nominal capacity is approximately 170,000–180,000 tons.

Although this volume represents only a single-digit percentage of China's total LFP cathode capacity, the growth rate is significant. More critically, the operating rates of restoration capacity are generally higher than those of certain over-supplied hydrometallurgical LFP lines. In the first half of 2026, operating rates were approximately 40%–50%. Compared with the second half of 2025, the production chart from January to December 2025 shows that restored LFP output increased month by month and capacity utilization continued to improve, indicating that downstream demand is genuinely being released.

III. Competitive Landscape

The current LFP recycling/reutilization market has formed three main categories of players:

Traditional hydrometallurgical recycling companies: Using black mass as raw material, they extract lithium carbonate and iron phosphate via hydrometallurgy and then synthesize LFP. Product performance is stable but costs are high.

Restoration-type LFP companies: Using waste cathode sheets or black mass as raw material, they directly restore and regenerate cathode materials. Costs are low, but performance variability is wide.

Integrated battery/materials companies: Building in-house recycling + restoration + cathode production lines with a closed internal loop. Costs are the lowest, but the proportion sold externally is limited.

The rise of restoration-type companies is compressing what was originally a linear value chain of "hydrometallurgical recycling → lithium carbonate/iron phosphate → cathode" into a short chain of "waste cathode → restored cathode." This "short-chain" trend poses a direct threat to the business models of traditional hydrometallurgical companies.

Furthermore, as restoration gains momentum, restoration companies have begun participating in waste material bidding for LFP electrode sheets and cell cores from battery manufacturers. With expanding demand, prices for waste LFP electrode sheets have continued to rise, widening the price spread between LFP electrode sheet powder and battery powder. This has led to tight supply of LFP electrode sheet black mass in the hydrometallurgical market, forcing some non-integrated companies to switch to LFP battery black mass for production.

The rise of restored LFP is essentially an expansion of technological pathways within the lithium battery recycling industry. Its core value lies in redirecting waste cathode materials back into the battery supply chain through a shorter route and at lower cost.

For traditional hydrometallurgical companies, the central contradiction has shifted from "whether to engage in recycling" to "which technological route to adopt for recycling." Over the next three years, players with integrated "hydrometallurgy + restoration + cathode" capabilities will demonstrate greater resilience than those relying solely on the hydrometallurgical route. Conversely, companies that stubbornly cling to traditional hydrometallurgy with weak cost control may face accelerated elimination in this round of technological route competition.