Exclusive: LFP Sharply Expanded Production Capacity in H2, and to Usher in Overcapacity in 2022

SHANGHAI, Aug 27 (SMM) – The proportion of LFP batteries installed in NEVs has increased from 38% in January to 51% in July, exceeding that of ternary batteries in a single month. The improvement of LFP battery technology brings higher energy density and longer range, better safety as well as cost-effectiveness. The overall new energy market is still in a period of rapid development in H2. In addition, LFP battery shows high cost-effectiveness after the price of nickel, cobalt and lithium metal continues to rise. Many new and old car models have increased the demand for LFP battery. The installed capacity of LFP battery is expected to continue to grow in H2.

LFP materials supply tightened amid bullish downstream demand. The effective production capacity of LFP companies in China tightened in H1 as market demand rose sharply, the expansion efficiency at domestic producers was slow and many small and medium plants were unable to meet the demand from motive power market. According to industry and SMM data, the output of motive power LFP battery stood at 47GWh in January-July, the demand for LFP materials is 124,000 mt, and the actual output of motive power LFP materials is 130,000 mt. Thus, the supply of LFP was tight in the motive power market. LFP stocks have declined since May.  Many battery companies have also begun to purchase LFP materials everywhere and increase the number of suppliers to ensure a stable supply of raw materials.

Due to the imbalance in the supply and demand of LFP materials, many LFP companies have also begun to expand production. For example, Shenzhen Dynanonic is expected to expand its production capacity by 70,000 mt, BTR New Energy Material by 50,000 mt, and Gigaenergy by 50,000 mt and Wanrun New Energy by 30,000 mt. The newly expanded capacity of LFP materials is expected to stand at 363,000 mt in H2. Output of LFP materials is expected to stand at 350,000 mt in 2021, based on the demand from motive power, energy storage and small motive power markets. The current production capacity of LFP market is 410,000 mt, and there will be more capacity to be released next year. LFP market is likely to face overcapacity next year after the rapid expansion of production across companies in H2.