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While rushing to halt projects, they are frequently receiving large orders! Why is the LFP sector "boiling" at both ends?

iconJun 30, 2025 15:52
Source:SMM
Since the beginning of this year, when the market share of LFP power batteries first exceeded 80%, the market share of LFP power batteries and ternary power batteries has consistently maintained a ratio of 80% to 20%. In March, the market share of LFP power batteries even exceeded 83% at one point, dominating the market. While LFP batteries have firmly secured their position as the "top player," the upstream material sector has presented a "divided" picture: on one hand, there have been frequent reports of the suspension or postponement of some newly built or existing LFP-related material projects; on the other hand, there have been a steady stream of order announcements from leading battery producers. This seemingly contradictory phenomenon has become the truest portrayal of the current LFP cathode material market.

Since the beginning of this year, the market share of LFP power batteries has exceeded 80% for the first time, and the market share ratio between LFP and ternary power batteries has remained at 80:20. In March, the share of LFP power batteries even exceeded 83% at one point, making it the dominant force in the market.

While LFP batteries have firmly secured their leading position, the upstream material sector has presented a "divided" picture: on one hand, there are frequent reports of the suspension or postponement of some new or existing LFP-related material projects; on the other hand, there are a steady stream of order announcements from leading battery producers. This seemingly contradictory phenomenon is the truest portrayal of the current LFP cathode material market.

"Suspension" and "taking orders" coexist, is this a contradiction?

Recently, another LFP project has been halted!

On the evening of June 24, Chuanjinuo announced its intention to reallocate the uninvested raised funds totaling 454.7597 million yuan from two LFP cathode material projects to the "Chuanjinuo (Egypt) Suez Phosphorus Chemical Project". The investment entity, implementation method, and location will also undergo changes.

Exiting the lithium battery sector and venturing into phosphorus chemicals overseas, Chuanjinuo's move has sparked diverse opinions within the industry. Some support it, believing that avoiding the risks of the red-hot market and halting the LFP project in time is a wise decision; others are skeptical, thinking that it may miss out on long-term opportunities in the new energy sector and that idle technological reserves may weaken its transformation potential.

As for the reasons behind the suspension, Chuanjinuo has its own practical considerations based on costs and technology. It stated that due to changes in the competitive landscape and market conditions of the new energy sector, the company has prudently judged and actively controlled the progress of industrial construction. As of now, market competition remains fierce, and LFP is a newly laid-out industry for the company. Compared with its traditional phosphorus chemical products, the company still lacks competitive advantages.

It is worth mentioning that on June 2, CNNC Titanium White also halted the raised funds investment project for the "500,000-mt/year Iron Phosphate Project". Unlike Chuanjinuo's reason for halting the LFP project, CNNC Titanium White's rationale seems more rooted in concerns about capacity.

CNNC Titanium White stated that the supply of iron phosphate's main raw materials has been tight in recent years due to factors such as the large-scale expansion of downstream industries and local sales policies, leading to a significant increase in selling prices. After the project is completed, the efficiency of raw material supply and cost control cannot be effectively guaranteed, and the overall profitability of the industry is lower than expected.

Data shows that in 2024, the capacity utilization rate of CNNC Titanium White's iron phosphate project was less than 2%, far lower than the approximately 83% capacity utilization rate of its titanium dioxide products.

Not only Chuanjinnuo and CNNC Titanium White, but since the beginning of this year, Jinpu Titanium Industry has also announced its withdrawal from a billion-yuan LFP-related project. Prior to this, several enterprises, including LB Group and Huiyun Titanium Industry, had already halted some LFP-related projects ahead of schedule.

However, dianchi.cn noticed that, in stark contrast to the project suspensions and withdrawals, an industry insider in the lithium battery materials sector described the current booming production of high-end LFP as follows: "The fourth-generation LFP production line of a top-tier enterprise in Central China is operating at full capacity."

Behind the continuous operation of production lines lies the fact that some LFP enterprises are overwhelmed with orders.

After strategically investing in Jiangxi Shenghua New Materials Co., Ltd., a subsidiary controlled by Fulin Precision Machining, CATL signed another agreement with Fulin Precision Machining in June, proposing to pay 500 million yuan in advance to secure 420,000 mt of LFP from Jiangxi Shenghua. Prior to this, Wanrun New Energy also received a large order for LFP from CATL, with an estimated total supply volume of approximately 1.3231 million mt from May 2025 to 2030. Lopal also signed an annual procurement agreement with CATL, setting the procurement ceiling for 2025 at 7 billion yuan.

In addition to CATL, from January to June this year, Lopal also received large five-year procurement orders for LFP from Blue Oval (Ford's battery factory), CORNEX New Energy, and Eve Energy. The total sales contracts for the latter two are both expected to exceed 5 billion yuan. In April, Shandong Fengyuan Chemical also signed an agreement with Huizhou BYD Battery Co., Ltd., establishing a stable, mutually trusting, and win-win partnership for the procurement and joint development of LFP cathode material products from 2025 to 2028.

"Dilemma" or "Breakthrough": A Divergence?

While some are busy halting projects, others are frequently receiving large orders! Why is the market exhibiting such a fragmented scenario within the same sector?

Beneath the seemingly contradictory surface, profound structural adjustments are continuously evolving in the LFP sector.

Benefiting from the explosive growth of NEVs in previous years, capital from various sources has poured into the LFP sector. With the influx of numerous new players, planned production capacity has rapidly expanded, far exceeding the growth rate of actual demand. As the growth rate of NEVs gradually returns to a more rational level (though still maintaining a relatively high growth rate), coupled with fluctuations in the growth rate of the ESS market, the over-expanded production capacity from the early stage has begun to face challenges in digestion.

Supply far exceeds demand, leading to a significant decline in overall capacity utilization rates and an inevitable price war. Meanwhile, as the price per ton of lithium carbonate plummeted from 600,000 yuan to 60,000 yuan, the material prices of LFP also dropped sharply in tandem. Amidst fierce competition, corporate profits have been severely compressed.

According to the financial reports previously released by major companies, in 2024, Hunan Yuneng, Dynanonic, Wanrun New Energy, and Lopal all saw revenue declines. Hunan Yuneng was the only profitable company among the four, but its net profit plummeted 62.4% YoY. The other three companies reported losses, though their losses narrowed YoY.

Data from the White Paper on the Development of China's Lithium-Ion Battery Cathode Material Industry (2025), jointly released by research institutions EVTank, the EVI Economic Research Institute, and the China Battery Industry Research Institute, further corroborates this: in 2024, the total output value of China's cathode material industry was 209.62 billion yuan, a sharp decline of 34.9% YoY, halving compared to the industry's peak in 2022. EVTank analyzed that due to significant price drops, the output value of China's lithium-ion battery cathode materials has experienced substantial negative growth for two consecutive years.

Against this backdrop, many new entrants were forced to suspend operations or exit due to the lack of competitiveness of their high-cost capacity, with companies like Sichuan Jinluo, CNNC Hua Yuan Titanium Dioxide, and Jinpu Titanium falling into this category. While these players struggled near the cost line of LFP, top-tier enterprises had already built "cold resistance barriers" through technological iterations.

Lopal launched its fourth-generation high-compaction-density LFP product, with a compaction density exceeding 2.6g/cm³. By adopting a "single sintering" process, the company significantly reduced energy consumption and production cycles. It has prioritized increasing the proportion of this product in 2025, viewing it as a new profit growth point. Fulin Precision Machining's high-compaction-density LFP fast-charging product achieved full production and sales starting in Q2, thanks to its performance advantages. Its overall capacity, production, and vehicle installation volume rebounded significantly YoY, leading to increased LFP sales revenue. Hunan Yuneng's fourth-generation high-compaction-density, high-capacity LFP has entered mass production, while its fifth-generation product completed lab development and is transitioning to batch trial production. Dynanonic's fourth-generation high-compaction-density LFP product has achieved bulk shipments, and its ultra-high-compaction-density LFP product is progressing smoothly in verification...

High-compaction-density products require substantial technical expertise, and currently, only a few top-tier enterprises have achieved bulk shipments. Multiple securities firms predict that the LFP market will further consolidate toward top-tier and low-cost enterprises in 2025.

Indeed, with high-quality capacity and economies of scale, top-tier LFP players can secure and fulfill large orders. Maintaining high operating rates reinforces the Matthew effect, where the strong grow stronger. Entering 2025, the continuous flow of large and long-term contracts further highlights the advantages of these leading LFP enterprises. Therefore, in a certain sense, the booming orders in the LFP sector also represent a highly concentrated structural prosperity.

Conclusion:

Overall, the "paradox" in the LFP market is actually a microcosm of the industry's transition from a period of frenetic and unregulated growth to a phase of high-quality development. On one hand, outdated capacities are quietly exiting the market, while on the other, high-quality capacities are brimming with orders. This differentiation is becoming increasingly clearer under the harsh laws of competition. The market is wielding an invisible hand, driving resources to accelerate concentration towards top-tier enterprises with advanced technologies and large scales.

The future landscape is also foreseeable. Only enterprises that truly master core technologies, possess scale advantages, and can continuously innovate will be able to navigate through the fog of cyclical uncertainties and ultimately become beneficiaries of market consolidation.

In fact, it's not just the LFP sector. In this elimination race involving the entire lithium battery industry chain, no participant can afford to be complacent. They must either climb upwards through technological iterations or sink into the quagmire of overcapacity.

For queries, please contact Lemon Zhao at lemonzhao@smm.cn

For more information on how to access our research reports, please email service.en@smm.cn

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