In 2023, China's LFP battery production grew by 30% from 2022, with 2024's growth projected at 22%. LFP capacity in 2023 rose by 101%, outstripping demand: from 2.12 million mt to 4.27 million mt by year-end, far exceeding the 30% production rise. The rate at which demand windows opened fell short of expectations, making the market crowded and competitive. Top firms' capacities jumped up to 300% in 2023.
Annual growth underperformed in 2023, with Q1-Q4 quarterly rates at -40%, 61%, 19%, and -15%. Peak demand was in Q2 and Q3, boosting growth.
2. Raw Material Dynamics: 2023 saw volatile lithium carbonate prices, a major cost factor. This volatility affected industry supply-demand and led to fast price drops, causing industry caution. LFP firms managed raw material and product inventories carefully to minimize stock and risk.
3. Cost Situation: 2023 saw LFP firms grappling with high costs and slim profits. Companies buying iron phosphate externally nearly lost money all year. A small profit emerged in Q2 with better demand, but Q4 saw profits dip again as iron phosphate prices fell due to overcapacity.
4. Capacity Situation: Capacity is regionally concentrated; leading firms hold a high share. Sichuan tops with over one million tons of annual LFP production.
5. Corporate Production: Top companies dominate, holding large market shares with shifting market proportions among them.
The 2023 LFP industry saw ten key trends. 1. Cooling Investment: The sector saw a decline in investment enthusiasm. 2. Overcrowded Market: There has been a proliferation of companies vying for market share. 3. Overcapacity: Production capacity has far exceeded future demand. 4. Profitability Challenges: Companies are struggling with marginal profits. 5. Price Undercutting: Firms are engaging in aggressive pricing to secure market positioning. 6. Rapid Evolution: The industry is marked by swift technological iteration. 7. Slower Payments: There has been an extension in payment periods. 8. Oligopolistic Dynamics: A small number of firms are dominating the market, illustrating the 80/20 principle. 9. Weakening Contracts: There is a noticeable lack of integrity in business dealings. 10. Collective Endurance: The industry is going through a shared phase of hardship, yet the outlook for the future remains optimistic.
These ten conditions are shaping the LFP industry, with short-term persistence and potential long-term iterative improvements. The trend is towards cautious investment, detailed management, quicker operations, and fiercer competition. In 2024, the industry aims to recover from 2023's overcapacity and low prices.
In 2024, LFP firms are focusing on core skills and cutting costs to bolster market standing, while confidently growing their customer base. The future looks bright and attainable!
