LFP Battery Material Prices Surge 100%… Chinese EVs' 'Cost-Effectiveness Strategy' Stumbles Amid Supply Shortage

*This content was translated by AI.

Lithium iron phosphate (LFP), a key cathode material used in electric vehicles (EVs) and energy storage systems (ESS), has shown an upward price trend since the beginning of this year and is now rising sharply. Typically, a sharp increase in raw material prices leads to a contraction in demand, but the current LFP market is recording an unusual "double boom," where demand is surging even as prices have nearly doubled within a year.

According to recent spot market data, the price of one 400kg pack of LFP has surpassed 25,000 yuan (approximately 4.75 million won at Hanwha's exchange rate). This represents a near 100% surge compared to around 10,000 yuan just a year ago. The traditional notion in the LFP market, which long held that "if prices rise, demand dies," has been completely shattered after years of oversupply and downward price pressure.

The primary drivers of this price surge and supply shortage are the strong "demand pull" from battery manufacturers and automakers. In particular, as exports of Chinese EVs accelerate globally, the adoption rate of LFP batteries—known for their safety and cost-effectiveness—has surged in international markets. Meanwhile, large-scale power plant, commercial, and residential ESS projects are expanding worldwide, leading to an explosive increase in orders for long-life and safe LFP batteries. Downstream companies, which had previously maintained minimal inventory, are now rushing to secure long-term contracts and bulk purchases amid fears of further price hikes, further intensifying the spot market shortage.

At the same time, rising upstream raw material costs are pushing LFP prices up from the bottom.

Iron phosphate, which accounts for about 30% of LFP manufacturing costs, has seen significant price hikes due to rising costs of basic chemical raw materials such as sulfuric acid and phosphoric acid. The price of lithium carbonate, another key component, has also shown a recovery trend, further increasing cost burdens for LFP manufacturers. After years of restructuring eliminated uncompetitive small and mid-sized players, the remaining major production companies are operating at full capacity but struggle to secure sufficient supply elasticity to meet the sudden surge in demand.

Industry experts analyze that this LFP price increase is not driven by short-term speculative capital but by a structural shift combining robust demand from upstream industries and rising costs from downstream sectors. The future trajectory of the LFP market depends on whether actual installation volumes of EVs and ESS remain stable and on the supply pace of lithium and phosphate mines. The critical issue is that since LFP determines the battery prices of major EVs, price increases for Chinese EVs are expected to be unavoidable in the near future.

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*This content was translated by AI.