LFP Market February Summary [SMM Analysis]

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SMM, February 28:

China's LFP Market Production Declined in February Amid Industry Divergence, Strong Demand Recovery Expected in March

In February 2025, China's LFP market experienced a phase of adjustment. According to the latest data, LFP production decreased by 9.28% MoM but was still up 184% YoY, with the overall operating rate dropping to 47%. This change reflects a divergence in the industry's supply and demand dynamics.

Supply Side: Top-Tier Enterprises Maintain Stable Production, While Small and Medium-Sized Plants Face Challenges

On the supply side, the industry showed a clear trend of divergence. First- and second-tier LFP material manufacturers maintained stable production throughout February, with no holiday shutdowns, ensuring continuous supply of core capacity. However, other small and medium-sized manufacturers faced significant pressure, leading to varying degrees of production cuts or shutdowns.

Specifically, the challenges faced by small and medium-sized manufacturers stemmed from two main factors: first, rising iron phosphate prices without a corresponding increase in processing fees, which raised production costs and exacerbated losses, prompting some enterprises to halt production and supply; second, downstream orders increasingly concentrated on top-tier manufacturers, reducing or even eliminating orders for smaller manufacturers, further intensifying their operational pressures and leading some to cease production to minimize losses.

Demand Side: Off-Season Leads to Demand Decline, Inventory Increases

Demand side, February marked the traditional off-season for the industry, with overall demand sentiment weakening. Downstream battery cell enterprises slightly reduced their production schedules, causing a slight decline in LFP material shipments and an increase in inventory levels. This phase of demand adjustment sharply contrasted with the supply-side capacity divergence.

March Outlook: Strong Demand Recovery Expected, Industry Shifting Toward High-Compaction Products

Looking ahead to March, the market anticipates a strong recovery in demand for the LFP industry. As the post-holiday market gradually warms up, downstream demand is expected to rise rapidly, potentially driving a significant increase in LFP production. Meanwhile, processing fees showed an upward trend in February, with some material manufacturers successfully implementing price increases, primarily for mid- and high-compaction products.

According to SMM analysis, processing fees for low- and mid-compaction products are unlikely to increase significantly in 2025. Against this backdrop, high-compaction products, with their higher technical barriers and stronger pricing power, have become the mainstream trend in the industry. By enhancing product compaction density, enterprises can not only strengthen their pricing power in the market but also achieve higher profitability amid intense market competition.

SMM New Energy Research Team

Cong Wang 021-51666838

Xiaodan Yu 021-20707870

Rui Ma 021-51595780

Disheng Feng 021-51666714

Yujun Liu 021-20707895

Yanlin Lü 021-20707875

Zhicheng Zhou 021-51666711

Haohan Zhang 021-51666752

Zihan Wang 021-51666914

Xiaoxuan Ren 021-20707866

Jie Wang 021-51595902

Yang Xu 021-51666760

Boling Chen 021-51666836