How did LFP cathode material industry develop in 2022 H1-analysis and future forecast

Lithium iron phosphate becomes mainstream battery

Benefiting from the innovation of battery structure, the market demand for lithium iron phosphate (LFP) has been expanding since 2021, eventually surpassing the ternary battery.

Before 2016, China’s bus electrification layout has been implemented one after another, and the demand for LFP has grown rapidly; In 2016, the growth of demand for new energy commercial vehicles slowed down, and the growth of LFP demand declined rapidly.

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After 2019, CATL and BYD successively released CTP and blade battery structure innovation technology, which greatly improved the energy density of LFP battery and accelerated the application of LFP in passenger vehicles. This paper will analyze the industry of lithium iron phosphate cathode materials in China in H1 2022.

In the first half of 2021/2022, the sales volume of lithium iron phosphate batteries increased by+244/+294% year on year, and the penetration rate of LFP batteries increased significantly, gradually surpassing that of ternary batteries.

The demand for lithium iron phosphate power end and energy storage end grew rapidly, and many manufacturers expanded their production significantly. Compared with ternary, lithium cobalate and other cathode materials, lithium iron phosphate has the advantages of high cycle life, high safety, low cost and high cost performance.

Benefiting from the innovation of battery structure, the energy density of lithium iron phosphate battery was significantly improved, and the gap with ternary battery was narrowed.

In addition, the marketization process of new energy vehicles has been accelerated, and the cost consideration has become a factor that manufacturers pay more attention to, so that more and more manufacturers begin to layout lithium iron phosphate batteries.

LFP cathode materials are commonly used in lithium energy storage batteries

In addition to power batteries, lithium iron phosphate cathode materials are also often used in energy storage lithium batteries. Because the energy storage battery pays more attention to the economy, cycle life, safety and other factors of the battery cost, and has low requirements for the energy density and volume of the battery, the lithium iron phosphate anode is the first choice for the energy storage battery.

From the perspective of output, from January to July 2022, China produced 153.8 GWh of lithium iron phosphate batteries, a year-on-year increase of 227.1%, accounting for 60.6%. From the perspective of installed capacity, from January to July 2021/2022, the proportion of lithium iron phosphate installed capacity directly increased from 43.9% to 58.6%,+333.0%/+180.9% year-on-year.

LFP loading has been increasing in the past two years, which shows the urgent demand of Chinese manufacturers for cost reduction. With the development of the energy storage market in the future, the demand for lithium iron phosphate will also greatly increase.

In the first half of 2022, the sales volume of lithium iron phosphate power battery was 121 GWh, and in the first half of this year, the sales volume exceeded that of last year. On the whole, lithium iron phosphate will maintain a rapid growth trend in the next 3-5 years.

The shipment of lithium iron phosphate cathode materials soared in 2022 H1

The demand for lithium iron phosphate cathode materials continues to grow. In the first half of 2022, the shipment of lithium iron phosphate cathode materials in China was 770000 tons. Statistics show that the shipment of lithium iron phosphate cathode materials in China was 415000 tons in 2021, with a year-on-year growth of 132.6%, accounting for more than 50% of the shipment of lithium battery cathode materials.

From the perspective of shipping volume, Chinese lithium iron phosphate cathode material companies can be roughly divided into three echelons. Yuneng and Dynanonic are the first echelons of companies, with an annual shipping volume of 100000 tons. In 2021, the two shipments were 1204/91200 tons.

In the first half of 2022, Yuneng’s shipping volume exceeded 100000 tons, and Dynanonic reached 73000 tons. In July, the capacity of lithium iron phosphate that has been built and completed by Dynanonic company is 265000 tons/year, with sufficient orders in hand. With sufficient downstream demand, Dynanonic shipments are expected to reach 140000 tons within the year.

The second echelon is mainly companies with an annual shipment of 10000 to 50000, mainly including Lopal, RT High Tech, Wanrun, Gotion High Tech, Anda, Fulin SH, BYD, Shengfan Technology, Terui and Pulead, among which two battery manufacturers take the lead.

It is worth noting that Lopal acquired BTR’s lithium iron phosphate cathode material business in 21 years, becoming one of the top five suppliers of lithium iron phosphate cathode materials.

The third echelon is an company with an annual shipment of less than 10000 tons, of which GHTECH’s revenue of lithium iron phosphate in the first half of the year was 724 million RMB, more than twice that of the whole year last year,+488.62% compared with the same period last year.

The revenue of lithium iron phosphate industry in 2022 H1 exceeded that in 2021

The first half of 2022 can be said to be the half year when the lithium iron phosphate industry broke out dividends. The half year revenue of major manufacturers in the industry exceeded the annual revenue of last year, and even more than quadrupled.

Yuneng is the first company in the top 10 lithium iron phosphate materials companies in China. It is reported that Yuneng, expects its operating revenue from January to June 2022 to be 12.56 billion RMB to 13.96 billion RMB, an increase of 769.27% to 865.94% over the same period of last year, nearly twice the annual revenue of last year.

In addition, Dynanonic and Lopal have shown outstanding performance. The revenue of Dynanonic in the first half of this year was 7.523 billion RMB, a year-on-year increase of 492.89%, an increase of 2.681 billion RMB over the whole year of last year. Lopal has exceeded 5 billion RMB in the first half of this year, an increase of 3.191 billion RMB over the whole year of last year due to the acquisition of BTR.

Besides, RT High Tech has also performed very well. Its revenue in the first quarter alone exceeded that of the whole year of last year. Its revenue in the first quarter was 1.81 billion RMB, while that in the 21st year was 1.1 billion RMB.

It is reported that RT High Tech has completed the D-round financing of more than 5 billion RMB, is expanding more than 300000 tons of lithium iron phosphate materials and recycling production lines, and its operating revenue is expected to exceed 10 billion RMB this year.

The substantial growth of revenue benefited from the rise of both the volume and price of lithium iron phosphate products. Since the breakthrough of 100000 RMB/ton in December 2021, it has been rising all the way, and has remained at a high level of 150000 RMB/ton from March to August this year.

The pattern of lithium iron phosphate industry has been relatively stable in recent years

In recent years, the structure of lithium iron phosphate industry has been relatively stable, with the share of the first tier companies basically maintained at about 40%. From the perspective of the historical structure of lithium iron phosphate cathode material industry, the share of leading companies has been relatively stable, with Yuneng basically at around 25%, and Dynanonic in the range of 15% – 20%, steadily occupying the top two.

In 2021 and the first half of 2022, the industry CR2 will be 45% and 42.9% respectively, both of which will remain above 40%. In the first half of the year, the second tier companies continued to make efforts. RT High Tech’s market share rose from 7.0% to 9.5%, and Lopal’s share rose to the top three, from 6.5% to 9.6%. The companies ranked first in the second tier have the momentum to enter the first tier.

In 2021 and the first half of 2022, the industry CR5 was 67.3% and 67.9%, respectively. The industry concentration has improved, and the industry CR10 accounts for about 90% of the market share, High concentration.

LFP cathode companies invested to expand production by more than one million tons in 2022

With the explosion of demand for lithium iron phosphate in 2021, the shipment volume of lithium iron phosphate cathode companies will increase dramatically, and the high profit of companies will greatly stimulate the power of company expansion.

According to statistics, the scale of investment expansion in 2022 exceeded 1 million tons, and the capacity of the original lithium iron phosphate cathode companies will reach about 1.71 million tons by 2022. In addition, it also greatly attracts large-scale cross-border layout of production companies including titanium dioxide, phosphorus chemical industry, ternary cathode materials, etc.

The sharp increase of production capacity in the future may reshape the market pattern of the industry, and companies with technology and cost advantages can take the lead in the fierce competition. As a result, there will be overcapacity at the supply side.

However, in the short term, due to the time required for capacity construction, climbing and product certification, existing companies will still benefit from the increased demand for lithium iron phosphate in the past two years. From the first half of the year, the current lithium iron phosphate industry is still in a period of concentrated production capacity. 

Top 5 lithium iron phosphate companies, such as Yuneng, are expanding rapidly and most of them are deeply bound with the leading companies of downstream electric cores. The supply volume is growing rapidly. The nominal capacity of Yuneng has risen to more than 400000 tons, forming a fault leading position for other lithium iron phosphate companies.

And Dynanonic, Lopal and other companies still have several production lines of 100000 to 150000 tons to be released in the future. In contrast, although the second tier lithium iron phosphate companies have also expanded their production capacity rapidly, their overall expansion speed and scale are not as fast as those of the leading companies.

In the future, the competition will be more intense. The market share of the second and third tier companies will be diluted in a certain degree, and the market share will further concentrate on the leading companies.

Deep cooperation with leading companies is the way to win

From Yuneng and Dynanonic, we can easily find that there is a trail to follow in becoming a leading company in a echelon, that is, to conduct in-depth cooperation with CATL or BYD, the leading lithium battery companies. Yuneng, which is currently listed, is the third largest shareholder of the company, with CATL holding 10.54% of its shares.

BYD holds 5.27% of the shares of Yuneng, which is the seventh largest shareholder of the company. CATL and BYD purchase up to 95.98% of the shares. With the return of lithium iron phosphate to mainstream installation, Yuneng has become the king in a flurry. The revenue in the first half of the year is expected to reach 12.56 billion RMB to 13.96 billion RMB, an increase of 769.27% to 865.94% compared with the same period last year.

Dynanonic has cooperated with CATL on a large scale since 2014 to provide nano lithium iron phosphate. In the past five years, the sales of Dynanonic to CATL have maintained 60% – 70%, which is the company’s largest customer. The cooperation between the two sides is relatively stable. In addition, the company also cooperates with high-quality customers such as EVE and BYD. The sales of the top five customers account for a relatively high proportion, maintaining a level of about 90%.

In addition to high-quality customers, joint ventures are not uncommon. For example, Dynanonic, CATL and EVE invested in joint ventures, and the lithium iron phosphate put into production by the joint ventures was given priority to their respective battery companies, which ensured long-term stable sales of customers.