Strive for Cutting-edge: Inside the LFP Devalopment Rate

At the CLNB 2025 (10th) New Energy Industry Chain Expo - Battery Materials Forum hosted by SMM Information & Technology Co., Ltd., Guorong Hu, Chief Scientist of Sichuan Development Longmang Co., Ltd. and Professor at Central South University, shared insights on the topic "Technical Progress and Opportunities of LFP Materials."

He stated that cathode material is the core key material for lithium-ion batteries, determining their performance and cost; LFP has become the market mainstream due to its cost and safety advantages, with a market share exceeding 70%. Due to advancements in lithium battery manufacturing technology and automotive manufacturing technology, the application of LFP blade batteries, CTP, CTC, CTB, and the introduction of high-compaction density LFP, the energy density of LFP has significantly increased.

As a result, LFP batteries have begun to be widely used in the EV passenger vehicle market and the ESS market; The production technology routes for LFP and iron phosphate coexist in a diversified manner. In the future, the development of LFP will require technological advancements in raw materials, production processes, and key production equipment to significantly reduce production costs and improve product performance. High-compaction density LFP, high C-rate LFP, and low-cost LFP represent future development opportunities.

1. Application Market for Lithium-Ion Batteries and Cathode Materials

1.1 Huge Potential for Electrification

The electrification of transportation and large-scale renewable energy storage have enormous potential. China's new energy vehicle sales: 3.52 million units in 2021 (penetration rate 13%); 9.8 million units in 2023 (penetration rate 31%); August 2024 (penetration rate over 50%) 2024: Sales: approximately 12 million units (CAAM data), up 25%-30% YoY.

1.2 LFP Batteries Continue to Be the Mainstream Route

Statistics show that by August 2024, the LFP installation share reached 74.2%, setting a new record for installation share.

Ternary batteries and LFP batteries, as two technical routes for EVs, are increasingly diverging, with the market share of LFP batteries rising while that of ternary batteries declines.

1.3 ESS Market

By the end of 2023, the cumulative installed capacity of new-type ESS projects nationwide reached 31.39 GW/66.87 GWh. In 2023, the newly installed capacity was 22.6 GW/48.7 GWh, an increase of over 260% from the end of 2022, nearly 10 times the installed capacity at the end of the 13th Five-Year Plan, and already surpassing the 2025 installation target.

In 2024, the global ESS cell shipment scale is 314.7 GWh, up 60% YoY.

The ESS cell industry has officially entered the "0.35 yuan/Wh" era, and may enter the 0.15 yuan era in the future.

From 2021 to now, the players in the LFP market have become more diverse, and traditional ternary material companies such as Easpring Technology, Hunan Changyuan Lico, Guangdong Brunp, and Nantong Reshine have also begun to emerge since 2024. Brunp will build a new LFP capacity of 450,000 mt/year in Yichang, Hubei.

On February 26, 2024, the Yichang Environmental Protection Bureau conducted the first public notice of the environmental impact assessment for Brunp's 450,000 mt/year new-generation LFP project.

Affected by the low tender prices in H2 2023, the mainstream processing fee for LFP in July 2024 approached 15,500 yuan/mt. Meanwhile, the price of lithium carbonate fell by more than 15,000 yuan/mt, and the LFP transaction price broke through 40,000 yuan/mt, entering the 30,000 yuan/mt range. In October-November 2024, the processing fee excluding lithium carbonate was around 14,000 yuan/mt.

Mainstream Selling Price Range:

Tier One: Hunan Yuneng, Dynanonic, Fulin Precision Machining

Tier Two: Anda Technology, Hubei Wanrun, Lopal, Youshan Technology, Rongtong High-Tech

Other New Entrants

From the perspective of processing fees, as operating rates consistently remained above 50%, companies gradually narrowed the discount coefficient for lithium carbonate, reducing loss-making low-price orders and attempting more high-price orders, resulting in a slight increase in overall processing fees.

Starting from H2 2024, a large volume of high-compaction density LFP products will be shipped. Due to the high process barriers, these products will command a premium, with profits 1,000-2,000 yuan higher: the mainstream supply of high-compaction density products uses a second sintering process, with Yuneng products commanding a 2,000-3,000 yuan premium, and costs expected to be 1,000-2,000 yuan higher, resulting in an overall profit 1,000-2,000 yuan higher.

2. Production Technology Routes for LFP

2.1 Ferrous Oxalate Route

The ferrous oxalate process is the earliest LFP production method, initially using ferrous oxalate, monoammonium phosphate (MAP), and lithium carbonate as raw materials, which produced a large amount of CO2 gas, significant carbon loss, and inconsistent product quality, with low tap density. Additionally, it released ammonia, polluting the environment.

Currently, some companies use an improved process, reacting ferrous oxalate with lithium dihydrogen phosphate. Without the release of ammonia, this method produces LFP with high compaction density.

Currently, only a few companies in China, such as Fulin Precision Machining and Hunan Pengbo New Energy, use this method. The cost of ferrous oxalate is relatively high, and organic solvents are needed as dispersants, making the overall cost high. However, when the price of lithium carbonate was high, the cost of ferrous oxalate had little impact on the total cost. Now, as the price of lithium carbonate returns to rational levels, this technology route faces cost pressures. Currently, LFP products produced by this technology route can achieve a compaction density of 2.65-2.70, with a higher selling price compared to conventional products.

Currently, the industry is experiencing cut-throat competition, with LFP companies operating below capacity and most incurring losses, but Fulin Precision Machining remains fully operational and profitable.

2.2 Iron Oxide Red Route

Early on, US-based VALENCE and Taiwan-based Changyuan Technology used this technology route to produce LFP, initially using iron oxide red, MAP, and lithium carbonate as raw materials, which released ammonia, polluting the environment. Later, they used iron oxide red and lithium dihydrogen phosphate to produce LFP, overcoming the issue of ammonia generation.

Advantages of this route: lower cost, good coating performance during battery production.

Disadvantages: lower capacity, risk of incomplete reduction of trivalent iron, limited supply of high-quality, low-cost iron oxide red, and as the cost of iron phosphate gradually decreases, the cost advantage of iron oxide red will diminish.

Currently, only a few companies in China, such as Chongqing Tery and GCL New Energy, use this technology route.

It is said that Chongqing Tery and GCL use a secondary sintering method, improving the electrochemical performance of the product.

Currently, with the low price of iron phosphate, the cost advantage of the iron oxide red process is no longer significant.

2.3 Phosphoric Acid Route

Hubei Wanrun and BYD were the first in China to use this technology route to produce LFP. Initially, the price of iron phosphate was very high, reaching 38,000 yuan/mt. With the involvement of phosphorus and titanium chemical enterprises, the price of iron phosphate has significantly decreased, and this technology route has become the mainstream, accounting for over 85% of the market share.

Advantages of this route: high yield, excellent product performance, clean and environmentally friendly.

Disadvantages: slightly higher cost, large amounts of wastewater need to be concentrated and crystallized during iron phosphate production.

Currently, most companies in China, including Hunan Yuneng, Hubei Wanrun, BYD, CATL, Lopal, and Hubei Rongtong, use this technology route.

Currently, the products made using this process can achieve a compaction density of 2.6 and a capacity of 145.

Currently, among the companies using this process, only Hunan Yuneng is profitable, while the rest are mostly incurring losses.

Recently, the price of ferrous sulphate has increased, leading to a rise in the price of iron phosphate, which has been passed down to downstream LFP, increasing by 300-500 yuan/mt.

2.4 Fe(NO₃)₃ Route

2.5 Hydrothermal Method

3. Production Technology Routes for Iron Phosphate

3.3 FeCl₃ Method

Steel mills generate a large amount of wastewater from acid washing steel plates, containing high concentrations of FeCl₃. Previously, this was used to produce low-value iron oxide red, but now it can be used to produce high-value iron phosphate.

FeCl₃ + H₃PO₄ + 3NH₃ = FePO₄ + 3NH₄Cl

This method produces high-purity iron phosphate, achieving the level of a two-step process using ferrous sulphate in one step.

4. Cost Analysis of LFP

5. Profitability of LFP

In H1 2024, the overall operating performance of the LFP industry remained poor, with only Hunan Yuneng achieving profitability. However, the loss margin for most companies significantly narrowed compared to the same period last year, with Wanrun New Energy and Fulin Precision Machining turning their gross margins from negative to positive.

Currently, the LFP industry is still in a supply-demand imbalance phase. Manufacturing costs are a core factor affecting competitiveness, mainly including direct materials, manufacturing expenses, and energy costs, with the cost of lithium carbonate being the largest component. Therefore, stable lithium carbonate prices are decisive for business performance.

Additionally, in a market with low gross margins, companies must continuously maintain capacity advantages, ensure high-load operation, and reduce unit production costs.

6. LFP Pricing Mechanism

Current LFP pricing mechanism in the industry

BYD Tender Model:

Lithium carbonate cost + processing fee (including iron phosphate and other auxiliary materials)

10% discount on lithium carbonate price + 13,000-16,000 yuan/mt

75,000 x 0.9 x 0.245 + 16,000 = 32,537 yuan/mt

75,000 x 0.245 + 14,000 = 32,375 yuan/mt

Currently, with this quote, there is a loss of 2,000-5,000 yuan/mt.

7. Development Opportunities for LFP

7.1 High-Compaction Density LFP

To increase the energy density of batteries without changing the volume, the compaction density of the LFP cathode sheet needs to be enhanced. CATL's Shenhao Plus uses particle grading technology in the cathode to achieve ultra-high compaction density.

High-compaction density LFP (phosphoric acid method) adds a secondary sintering process, requiring higher standards for precursor preparation and particle size grading.

The secondary sintering process involves two different temperature and/or atmosphere sintering steps during LFP preparation to optimize the microstructure, improve crystallinity, density, compaction density, and enhance electrochemical performance. Each sintering time must be precisely controlled to ensure full reaction and densification, while avoiding excessive sintering that leads to grain growth. The compaction density of LFP can be improved through a secondary sintering process.

High-compaction density LFP: Currently, the main process routes are the iron phosphate method and the ferrous oxalate method. The advantages of both the iron phosphate method and the ferrous oxalate method lie in their ability to achieve higher energy density, with the ferrous oxalate method being the first to achieve mass supply, while most companies adopt the iron phosphate method.

7.2 High C-Rate LFP for Low-Temperature Applications

LFP currently still faces issues with fast charging and poor low-temperature performance. SD Lomon has developed high C-rate LFP with nano-sized particles, which can address the bottlenecks in fast charging and low-temperature discharge.

7.3 High Energy Density LFMP

In 2024, the LFMP market is largely dominated by three companies: Hengchuang Nano, Ronbay Skoltech, and Dynanonic, with other companies having minimal shipments, mostly focused on sample delivery.

Although the market size of LFMP remains relatively small, industry investment in it continues to be fervent.

7.4 Large-Scale and Intelligent LFP Production Line

As LFP capacity continues to grow, there are increasing demands for production equipment to be large-scale, intelligent, and more efficient.

(1) Large Vertical Sand Mill

In terms of manufacturing difficulty, vertical sand mills are easier to produce as they avoid sealing issues, resulting in lower manufacturing costs. Therefore, vertical sand mills are more suitable for products with lower requirements but high production volumes.

The vertical design of the sand mill's grinding rotor also avoids the spindle deformation issues common in traditional horizontal sand mills. Additionally, the increased pressure from the accumulation of grinding media offers potential for improved grinding efficiency.

(2) Large Rotary Kiln

A rotary kiln produced by a certain company has a furnace tube approximately 40 meters long and a diameter of about 2 meters. A single unit can produce over 10,000 mt of LFP annually. The equipment is specifically designed for continuous high-temperature processing of LFP, utilizing an electrically heated external rotary furnace structure. It continuously heats the product through temperature-controlled sections within the furnace, ensuring uniform heating, thorough reaction, consistent product quality, stable and reliable operation, simple maintenance, and low operating costs.

8. Conclusion

1. The cathode material is the core and key material of lithium-ion batteries, determining their performance and cost.

2. Due to its cost and safety advantages, LFP has become the market mainstream, with a market share exceeding 70%.

3. Due to advancements in lithium battery manufacturing technology and automotive manufacturing technology, the application of LFP blade batteries, CTP, CTC, CTB, and the introduction of high-compaction density LFP, the energy density of LFP has significantly increased. As a result, LFP batteries have begun to be widely used in the EV passenger vehicle market and the ESS market.

4. The production technology routes for LFP and iron phosphate coexist in a diversified manner. In the future, the development of LFP will require technological advancements in raw materials, production processes, and key production equipment to significantly reduce production costs and improve product performance. High-compaction density LFP, high C-rate LFP, and low-cost LFP represent future development opportunities.

5. High-compaction density LFP, high C-rate LFP, and low-cost LFP represent future development opportunities.