Post-2024 Spring Festival, iron phosphate firms resumed with notices of price hikes to downstream partners.
Insights and Perspectives:
1. Dec 2023 to early Feb 2024 saw lower iron phosphate prices due to seasonal demand dip, cheap raw materials, and major industry bids driving prices down.
2. Recent price hikes in iron phosphate reflect raw material cost surges and strategies to mitigate losses, with costs up by over 500 yuan/mt and actual prices rising by around 300 yuan/mt.
3. Given stable raw material expenses, iron phosphate is forecasted to cost between 10,000 to 11,000 yuan/mt in H1 2024.
Firms are raising iron phosphate prices cautiously yet firmly. Mindful of LFP businesses' capacity to absorb costs, they've alerted clients about impending hikes due to increased costs, with final adjustments to follow discussions.
Iron phosphate transaction prices are genuinely climbing as firms navigate price hike implementations, shifting the market's pricing upward.
Extent of price rise, reasons for the hike, and H1 2024 price outlook?
SMM offers a concise market analysis.
1. Butterfly Effect Reflections: Price Hike? Strategy Shift? Shift in Business Strategy—Stop widening losses!
Post-2024 Spring Festival, a firm spurred a price rebound by alerting downstream clients of hikes to 'stop widening losses,' ready to cut or cease production if needed.
The event set off a market butterfly effect: a unified price surge. This prompted LFP companies to question why they can't raise prices for downstream battery cell firms.
Price hike reason: Shift in business strategy to halt loss expansion. Iron phosphate firms reject gaining market share at the expense of heavy losses, aiming for reduced losses as a sustainable strategy for future growth.
2. Price Trends 2022-2024: From scarcity-driven profits to overcapacity and deepening losses—expanding losses harm all!
Prices of iron phosphate have been declining since H2 2022. The dip from Dec 2023 to early Feb 2024 was due to off-season effects and low raw material costs, exacerbated by leading firms' bidding pressure. Post-Spring Festival, however, there's a uniform move by producers to sustain and raise prices.
Two Key Milestones:
1. Mid-Q4 2023 to Mid-Q1 2024
Weakened downstream demand led to lower-than-anticipated prices from major lithium battery cell firms' December 2023 tenders, prompting a swift drop in iron phosphate prices.
2. Mid-Q1 2024 to Q2 2024
Rising phosphoric acid costs enabled iron phosphate firms to maintain robust prices and cut losses. Despite tough resistance, higher costs were transferred downstream. Q2 2024 is expected to see continued tug-of-war, with iron phosphate prices hovering around 10,000 to 11,000 yuan/mt.
3. Iron Phosphate Outlook: Aligning with raw material costs, shifting from price wars to rationality, which may impact downstream operations sensibly.
Sustained losses may force businesses to cut production or shut down, inevitably affecting supply, demand, and the overall LFP industry development.
1. Raw material dynamics and cost link: prices changes with costs
Figure 3: Correlation between phosphate source price fluctuations and iron phosphate pricing
In the near term, iron phosphate prices are poised to oscillate in line with raw and auxiliary material costs such as phosphoric acid, monoammonium phosphate, and hydrogen peroxide. Post-Spring Festival, expanded export prospects and spring fertilizer demand, along with higher sulfuric acid prices, have pushed up raw material costs. This has led to a cost rise of over 500 yuan/mt for iron phosphate producers. Yet, transferring these hikes downstream is challenging, with increases around 300 yuan/mt.
2. Assuming stable raw material costs, rational pricing should lead to iron phosphate prices settling between 10,000 to 11,000 yuan/mt, despite producers facing losses of 1,000 to 2,000 yuan/mt. After the recent price hikes, without major cost shifts, prices are expected to remain within this range.
1. Production Reductions and Stops: Should prices exceed 11,000 yuan/mt, more companies will start operations and production. If prices drop below 10,000 yuan/mt without a cost shift, more will cut back or halt production.
2. Raw Material-Driven Price Changes: Overcapacity is expected to persist short-term, preventing iron phosphate prices from rising; they depend on raw material cost hikes for upward movement.
3. Supply Chain Stabilization: Following the price hike, iron phosphate and LFP firms are likely to reassess supply chains. In 2024's competitive landscape, these companies are expected to steer clear of destructive competition, limiting losses as market shares stabilize. LFP firms will pivot from exclusive to diversified partnerships, enhancing supply chain robustness to ensure stability, order, and mutual benefit.
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