The lithium iron phosphate (LFP) battery market has experienced significant price hikes in 2025, influenced by various factors, including production difficulties and escalating raw material costs. Below is an overview of the main reasons behind this trend:
1. Persistent Losses for LFP Manufacturers
Many LFP manufacturers have faced ongoing financial losses since 2024. Major players, including DeFang Nano and Hubei Wanrun, have reported substantial losses per ton. Despite high production capacity, smaller and mid-sized producers are struggling to maintain output due to financial constraints. In 2025, only a limited number of new projects, such as Jiangxi Shenghua’s 75,000-ton facility, are expected to come online. However, most of these projects are locked into long-term contracts, restricting market supply and contributing to rising prices.
2. Increased Costs for Product Upgrades
Battery manufacturers are demanding higher-quality LFP materials, prompting producers to adopt more advanced—and expensive—production processes. For instance:
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The transition from second-generation to third- and fourth-generation LFP materials has driven up costs by 2,300–2,900 RMB per ton, due to the more complex "double calcination" process.
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Stricter quality controls, including enhanced impurity management, have led to higher scrap rates, further reducing production efficiency and increasing costs.
3. Surge in Raw Material Prices
The prices of essential LFP precursors—ferrous sulfate (FeSO₄) and phosphoric acid (H₃PO₄)—have skyrocketed:
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Ferrous sulfate: Prices surged from 50–100 RMB per ton in Q1 2024 to 505–565 RMB per ton in Q1 2025, marking a dramatic tenfold increase due to tight supply.
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Phosphoric acid (85%): Prices rose from 5,320 RMB per ton in Q1 2024 to 6,475 RMB per ton in Q1 2025, adding an additional 1,016 RMB per ton to production costs.
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Sulfuric acid, a key input for phosphoric acid, also saw a price increase of 500 RMB per ton, indirectly raising LFP production costs by approximately 1,320 RMB per ton.
4. Market Adjustments and Rising Battery Industry Demand
By mid-2025, major battery makers had already agreed to higher LFP prices in their contracts, driven by:
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A shortage of high-performance LFP materials, crucial for fast-charging and energy storage applications.
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More favorable payment terms (e.g., shorter receivables periods) incentivizing suppliers to prioritize premium buyers, further driving up costs.
Conclusion: A Necessary Price Correction
The price hike in LFP batteries reflects a market-driven correction, addressing years of unsustainable losses, rising input costs, and tighter quality standards. Businesses relying on LFP batteries may need to secure long-term supply agreements and explore cost-optimized alternatives to navigate this shift.
What’s Next?
As the industry adapts, innovations in production efficiency and recycling may help stabilize prices. However, the era of ultra-low-cost LFP batteries seems to be coming to an end.
