While demand for new energy vehicles and energy storage continues to grow, the lithium iron phosphate (LFP) materials industry faces a paradoxical situation: robust market demand coexists with widespread losses across the sector.
Multiple leading companies have begun adjusting product prices, according to exclusive information obtained from the first third council meeting of the LFP Materials Branch under the China Industrial Association of Power Sources.
This pricing shift reflects the industry's efforts to reverse three consecutive years of losses. Companies including Hunan Yuneng (301358.SZ), Hubei Wanrun New Energy (688275.SH), Shenzhen Dynanonic (300769.SZ), and Shandong Fengyuan Chemical (002805.SZ) noted that key upstream chemical materials for LFP production face shortages and rapid price increases, leading to significantly slower capacity expansion across the industry.
In response, the LFP Materials Branch announced plans to establish a comprehensive standard system from group standards to industry standards by 2026, aiming to create technical barriers. The association will also initiate industry technology roadmap development to assess actual production capacity and technological status. Participating companies pledged to maintain cautious approaches to capacity expansion and jointly uphold market order.
The LFP materials industry is thus transitioning from simple price adjustments to deeper standard-setting, exploring a new path toward sustainable development.
Strong Demand, Weak Profits The LFP industry is currently experiencing a wave of price increases. Multiple industry chain sources confirmed that leading manufacturers have issued formal price hike notices to customers. One major producer has announced unified processing fee increases across all LFP products starting 2026, while others have already implemented price adjustments. Some companies remain in active negotiations but acknowledge that price increases have become inevitable, which should help restore industry profitability.
Market data confirms this trend. Third-party figures show that as of December 1, the average spot price for power-grade LFP had risen to 39,950 yuan/ton, with energy storage-grade LFP reaching 36,950 yuan/ton.
The immediate driver comes from across-the-board raw material cost increases. An industry insider revealed that key inputs including sulfur and sulfuric acid have risen significantly. Companies purchasing iron phosphate directly face those cost pressures, while integrated producers confront higher expenses for phosphorus and sulfur resources like ferrous sulfate. This trend is expected to continue into next year, making downstream cost pass-through reasonable.
Strong demand provides additional justification for price hikes. Multiple participants noted that energy storage demand exceeded expectations in the second half, becoming a major driver alongside steady growth in electric vehicle demand. With high capacity utilization rates and leading producers operating beyond nameplate capacity, industry output value could surpass 3 trillion yuan, supported by 26.75% growth in lithium-ion battery exports (reaching $55.38 billion January-September 2025) and 60% surge in domestic energy storage installations.
The deeper rationale lies in addressing chronic structural overcapacity. Attendees described an industry caught between strong demand growth and widespread losses, exacerbated by continuous capital inflows from cross-sector investors. "Companies from titanium dioxide, steel and chemical sectors have announced entries, but most remain unverified," one representative noted, adding that while outsiders see a lucrative field, insiders face persistent losses.
LFP Materials Branch Secretary-General Zhou Bo revealed that top-ten producers carry high debt ratios and mostly operate at losses, with even leading players earning just 400 yuan/ton—an unsustainable situation. Financial reports confirm this: Hubei Wanrun New Energy posted cumulative losses of 2.72 billion yuan over nine months 2025, following larger deficits in 2023-24, with similar patterns at other major producers.
Years of price competition have pushed average debt ratios among six listed companies to 67.81%, after 36 consecutive months of industry-wide losses. An executive at a leading firm noted that after two to three years of losses, capacity expansion has slowed, leaving companies with strong order books but urgent need to recover losses through pricing.
From Chaotic Competition to Standards Leadership Policy signals have emerged to address industry challenges. At a November 28 forum, MIIT Minister Li Lecheng emphasized regulating competition in power and energy storage batteries, opposing "race-to-the-bottom" practices that disregard technology, cost and quality. Association Secretary-General Wang Zeshen stressed that transparency and comprehensive standards represent the solution pathway.
The association is advancing systemic measures. Zhou outlined 2026 priorities including: 1) Proposing entry thresholds covering capacity, technology, environmental protection, quality and safety; 2) Guiding new capacity toward advanced products like fourth-generation high-density LFP; 3) Establishing green standards including product carbon footprints.
Additionally, the association will develop technology roadmaps and industry reports through visits to 10-20 key firms, analyzing global technology trends, actual capacity, innovation directions and raw material supply/price fluctuations. A comprehensive report due by year-end will inform policy-making, guide rational investment and support corporate planning.
The association also plans to build an industry service platform and host a dedicated LFP summit during the 2026 China International Battery Fair.
"Standards represent the industry's most critical moat," Wang emphasized, advocating interconnected standards from group to national levels. This view has gained broad support, particularly for establishing unified technical standards in advanced areas like high-density fourth-generation LFP materials—which could guide investment toward next-generation products rather than exacerbating oversupply in older technologies.
Companies have shown growing restraint toward capacity expansion. Multiple leaders jointly called for maintaining market order during this critical period, avoiding destructive low-price contracts and refraining from exporting domestic cutthroat competition overseas—thereby protecting both profitability and the "Made in China" brand in international markets.
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