By Wang Juan, oilchem.net

In recent years, the installed capacity of lithium battery energy storage projects has grown quickly, fueling the development of storage battery. The output of China’s energy storage lithium battery, accounting for 10% of total lithium battery in 2021, increased marginally to more than 13% in 2022. With a thriving energy storage market, in 2027 China’s energy storage lithium battery will account for more than 30% of total output.

At present, the most widespread energy storage application of lithium battery is lithium iron phosphate (LFP) battery, of which in 2021 energy storage LFP battery accounted for around 18% of its total output.

LFP severe competition

With a bright outlook of energy storage market and new energy vehicles, many investors pour money into the lithium battery, carrying out capacity planning and project launch. And LFP is the top-selling in cathode material. According to oilchem.net information, in China the yearly LFP capacity of plants which are under construction and planning exceeded 10 000 000 tons, and more investors are scrambling for this resource. Currently, the capacity planned for under construction and planned plants will be put into production in recent years.

For current LFP, the price is lower than Ternary Material. By Oct 26, 2022, the domestic market average price of NCM523 type ternary material was RMB 340 000/ton, while that of NCM811 type ternary material was at RMB 385 000/ton. At that day, the market price of power LFP was just RMB165 000/ton. But it is worth mentioning that the high price of lithium carbonate, one of the major materials of LFP, greatly affects that of LFP. Therefore, both two have a strong correlation, with the price of LFP closely varying with that of lithium carbonate.

Regarding production capacity, as of the end of September 2022, the total production capacity of China's LFP had reached 1 323 000 t/a, an increase of 183.9% compared with the end of 2021, and the capacity had kept surging. And the capacity in LFP industry highly concentrated, with top 12 enterprises producing 1 051 000 t/a, nationally accounting for 79.44% in total.

Seen from the enterprises carrying out the launch in recent years, apart from some old LFP production enterprises, other enterprises can be divided into 2 categories, one is phoschemical enterprises with phosphorus sources, such as Guizhou Linhua Co., Ltd., Kunming Chuan Jin Nuo Chemical Co., Ltd., etc. The other one is Titanium dioxide enterprises with iron source, such as Henan Baili New Energy Technology Co., Ltd. And joint ventures are preferable for some new capacity, such as the cooperation between Xinyangfeng Agricultural Technology Co., Ltd. and Changzhou LBM Co., Ltd. is to play each side’s resource and technology advantages to produce iron phosphate. Table 1 shows the capacity of Chinese major LFP production enterprises in 2022.

However, what is worth noting is that LFP capacity generally takes three to six months from the launch to consistent production, but affected by the tight supply of lithium carbonate, part of the LFP production capacity can’t be fully put into the production, so the overall operation rate is low. It is expected that China’s total LFP output in 2022 will be about 960 000 tons, with 72.56% of capacity utilization.

Sumary

In the next five years, China's LFP will greet centralized production. According to oilchem.net information, apart from some projects that maybe suspended or terminated, current capacity for planned and ongoing construction plants is expected to reach 10 430 000 t/a. According to the LFP battery demand for new energy vehicles and energy storage batteries, the annual LFP output is predicted to reach 5 515 000 tons in 2027, with the growth of capacity much higher than that of output. Maybe the industry will be in a state of overcapacity.

In the light of LFP market, horizontal competition and quality homogenization will be intensified. The market competition for capacity, output and quality will be transformed into competition comprised of cost, profits, and innovation. With upstream and downstream markets supplying resources, the enterprises will be more favorable in market competition. In addition, there are still more investors putting money into LFP. In all, investors should be moderately cautious about the investment.