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Competitive Landscape of Lithium Iron Phosphate (LFP) Cathodes
July 15, 2024Let’s do an overview of the Lithium Iron Phosphate (LFP) Cathodes landscape.
In 2020, the production of lithium iron phosphate (LFP) cathodes was relatively dispersed. The market share among the second to fifth largest producers was quite similar:
– CR3 (Concentration Ratio of the top 3 producers): 49.8%
– CR5 (Concentration Ratio of the top 5 producers): 76.3%
Compared to 2019, where CR3 was 54.06% and CR5 was 62.92%, the CR3 ratio decreased while the CR5 ratio increased. This shift is mainly due to large orders from major companies like CATL and BYD, which boosted the production of second-tier manufacturers such as Yuneng and Wanrun.
Future Production Capacity
With the expansion plans of leading manufacturers, the concentration of LFP cathodes is expected to increase significantly by 2023:
– CR3: 69.32%
– CR5: 84.10%
German Nanometer will have the largest production capacity, contributing 30.25% of the total industry capacity.
Gross Profit Margins
The industry has seen a decline in gross profit margins, primarily due to competition from ternary lithium batteries. However, as shipments and prices of LFP batteries rise, these margins are expected to recover. Companies like Defang Nano, which utilize a liquid phase method and have high capacity utilization rates, tend to have higher profit margins compared to other firms.
Supply and Demand Dynamics
Rebounding Demand
The low cost of LFP batteries and advancements in technology have led to a resurgence in demand since the end of 2020. In 2021, demand for LFP batteries skyrocketed:
Installed Capacity:
– 2021: 126.3 GWh
– 2022: 189.6 GWh
– 2023: 251.6 GWh
Year-on-Year Growth:
– 2021: +153.80%
– 2022: +50.05%
– 2023: +32.73%
Cathode Material Shipments
Shipments of LFP cathode materials have also increased significantly:
Demand:
– 2021: 29.06 thousand tons
– 2022: 43.61 thousand tons
– 2023: 578.8 thousand tons
Supply:
– 2021: 37.2 thousand tons
– 2022: 64.7 thousand tons
– 2023: 1.157 million tons
In 2021, the supply of LFP cathode material was tightly balanced with demand.
Leading Suppliers
Leading battery manufacturers are securing high-quality LFP cathode production capacity. The rising prices of upstream lithium carbonate are being successfully passed down, allowing top LFP suppliers to benefit from both increased volume and higher prices.
Industry Outlook
The new energy vehicle and energy storage markets are driving rapid growth in the LFP industry. Technologies like CTP (cell-to-pack), blade batteries, and JTM (joint technology mode) are closing the energy density gap between LFP and ternary battery systems. Vehicle manufacturers are increasingly adopting LFP batteries, and the industry is under pressure to reduce costs.
By 2025, the shipment of LFP cathode materials is expected to reach 2.4 million tons, approximately five times the 2021 volume, with a compound annual growth rate (CAGR) of 49.5% from 2021 to 2025.