In 2024, cathode materials will have a supply-demand imbalance. Due to a price war among major automakers, the use of ternary lithium batteries has dropped. In contrast, demand for lithium iron phosphate materials has soared. Their use has risen rapidly. At the same time, lithium iron phosphate has become the “king of the king of volume”.
Either higher, lower, or more durable! Some companies have already shouted “prepare for 10 years of losses”.
A new round of industrial upgrading elimination in 2024 has begun! Where will it go in 2025?
Ternary materials: cost support, stop loss and turn profit
In 2024, ternary materials’ performance is first worrying, then stable. In the first half of the year, it is still “half profitable and half loss”. In the second half of the year, as prices recover, it will gradually stop losing money and turn to profit.
Data shows that, from January to November 2024, lithium batteries had a 473GWh capacity. This is a 39% increase from last year. The popularity is only in lithium iron phosphate. The share of ternary lithium batteries has fallen.
Due to slower demand growth, ternary cathode material prices stagnated. In the year’s second half, they showed signs of stabilizing. Ternary materials can be produced in high volumes. But, there is little new capacity. Existing companies’ prices are low due to costs and industry consolidation. As low-cost new energy vehicles flood the market, ternary lithium batteries can’t profit. Top ternary material firms, like Dangsheng and Rongbai, eye overseas markets.
Lithium iron phosphate: crazy internal competition and false price increases
Lithium iron phosphate is now in the spotlight, with high demand and supply. This is better than ternary materials. The rise of heat pump air conditioners has improved lithium iron phosphate batteries. Their low-temperature performance is better. Battery tech and thermal management systems have advanced too. As a result, more electric vehicles use these batteries. Their low-temperature endurance is now higher, and more models with them are available.
In Q1-Q3 2024, lithium prices rose. So, the lithium iron phosphate industry needed to restock cheap inventories. The lithium battery industry’s production schedule and operating rate gradually recovered. Lithium iron phosphate’s output and production capacity have risen a lot since last year. In Q1-Q3 2024, lithium iron phosphate batteries produced twice their installed capacity. This was higher than the overall market demand. There was a certain time mismatch between supply and demand. The industry is deep in destocking. It’s under severe pressure to cut costs.
In 2024, lithium iron phosphate production capacity will be 5.2 million tons. Actual output will be 2.4 million tons. So, capacity utilization will be under 50%.
In 2024, lithium iron phosphate will be a very complex type of lithium battery. Absolute overcapacity has become an indelible shadow on product prices and corporate profits.
Recent Developments in Lithium Iron Phosphate Materials
The lithium iron phosphate industry has grown in popularity. Some high-end lithium iron phosphate products are now in short supply. Some companies are close to full production, and prices have risen. This is mainly due to higher demand for product compaction. Also, process upgrades caused a “false price increase.”
Lithium iron phosphate materials can burn once. To boost energy density, manufacturers now upgrade the first to a second sintering. This increases the compaction density of the materials. This greatly raises the cost and the line’s utilization. The original production capacity is equivalent to being 50% off. However, if sintered again, one ton of material will require an extra 2,000 yuan fee. So, it seems the price of lithium iron phosphate materials is rising, by 1,000 to 2,000 yuan. But, the increase in price can’t offset the higher costs after the “second burning.”
It seems the industry is recovering and product prices are rising. But, a new round of tech upgrades and price cuts has begun in secret. This will lead to a situation in 2025. Major companies may face embarrassment then. They may have to invest more, expand production, and upgrade products. But, they won’t make money. This elimination game has suddenly intensified.
Going to both ends: high-end high performance, low-end cost performance
The lithium battery positive electrode material industry is at a crossroads. There is high demand for ternary materials, but costs are high. So, developers are pursuing two extremes: “high-end, high-performance” and “low-end, cost-effective” materials.
One goal is to profit from high-performance products. These include high-nickel semi-solid batteries, full-ear large cylindrical batteries, and high-end tools, electric supercars, and flying cars.
The other direction is to “stick to” cost performance. It is to develop lithium iron manganese phosphate materials and “open new branches” based on manganese materials. After mass production, lithium iron manganese phosphate will be the best for EV batteries. It will have the benefits of ternary and iron lithium batteries, with almost none of their drawbacks.
For lithium iron phosphate, both preparation and cost must improve. Since material-level optimization is near its limit, focus on optimizing the process. Now, we aim to optimize equipment and processes. We are also using secondary sintering to improve material use. A new approach is to replace lithium carbonate with lithium dihydrogen phosphate to cut energy use and emissions.
Market forecast for lithium battery cathode materials next year
A recent survey shows a strong demand for price increases next year. Positive electrode material factories want an increase of about 3,000 yuan/ton. Battery factories, however, will likely accept an increase of only 1,500 yuan/ton, half of the demanded price.
Preliminary results show that lithium carbonate factories have cut or ended long-term discounts for next year. Also, the price of iron phosphate raw materials is rising. Phosphate factories have a clear attitude of supporting prices. It can be inferred that lithium iron phosphate positive electrode materials will trend upward in price. The key is the final price increase.
From the detailed analysis, products with powder pressure of 2.45 and 2.50 occupy the main market share. Their homogeneity and low technical threshold will make it difficult to change the fact of losses.
However, products with high powder pressure (three and a half generations and above) have a small market share. The high technical threshold and product energy density will boost demand. Factories that make high-pressure positive electrode materials will gain bargaining power. They should be able to turn losses into profits in the second half of next year.
The iron-lithium market will stabilize and grow next year. But, the Spring Festival holiday and high 2024 inventory will weaken supply and demand in early 2025. The second half of 2025 is expected to be strong.
