According to data from Zeyan Consulting, China's lithium iron phosphate (LFP) output reached 2.445 million tons and 3.06 million tons in 2024 and the first ten months of 2025, respectively, marking year-on-year growth of 54% and 59%. In October, LFP and ferric phosphate production hit 400,000 tons and 335,000 tons, with capacity utilization rates reaching 75.9% and 76.7%. CICC predicts that the rapid growth in energy storage demand will continue to drive strong expansion in LFP production and sales in 2026.
Meanwhile, as demand continues to rise, capacity utilization among traditional chemical companies producing ferric phosphate has improved significantly. Since 2025, most firms have seen substantial reductions in losses. Looking ahead to 2026, CICC recommends focusing on industry leader Wanhua Chemical (600309.SH) as its LFP capacity ramps up and profitability recovers. Key insights from CICC include:
1. **Sustained High Profitability for Phosphate Rock Due to LFP Growth** Given LFP's high phosphate rock consumption and stringent quality requirements, it will remain a major driver of demand. However, due to long lead times for new phosphate rock capacity, major producers such as Chengdu Wintrue Holding and Guizhou Chanhen Chemical are unlikely to bring significant new supply online until 2027–2028. With LFP demand growing rapidly, phosphate rock profitability is expected to remain elevated for an extended period.
2. **Profit Recovery for Ferric Phosphate, Industrial MAP, and Purified Phosphoric Acid** Rising demand has boosted capacity utilization for ferric phosphate, narrowing losses for most producers. While profitability for industrial monoammonium phosphate (MAP) and purified phosphoric acid has declined from 2021–2022 peaks due to high phosphate rock prices and capacity expansion, a rebound is anticipated as LFP demand accelerates.
3. **Wanhua Chemical’s LFP Capacity Expansion and Profit Recovery** With upgrades at its Meishan base and new fourth-generation LFP capacity in Haiyang, Wanhua Chemical is projected to reach 800,000–900,000 tons of LFP production by late 2026. Strong demand growth, coupled with cost optimization, is expected to drive a recovery in profitability.
**Investment Recommendations** Key stocks to watch include Wanhua Chemical (600309.SH), LB Group (002601.SZ), Yonfer Agricultural Technology (000902.SZ), Hubei Xingfa Chemicals (600141.SH), and Hubei Yihua Chemical (000422.SZ). Companies with significant upcoming phosphate rock capacity additions include Guizhou Chanhen Chemical (002895.SZ), Chengdu Wintrue Holding (002539.SZ), and Shenzhen Batian Ecotypic Engineering (002170.SZ).
**Risks** Potential downside risks include slower-than-expected LFP production/sales growth and a sharp decline in phosphate rock prices.
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