BYD LFP battery on display in Sydney ©HDC Creative, Shuttlestock
Amid the global energy transition, battery-grade iron phosphate has captured increasing market interest as the precursor used to make lithium iron phosphate (LFP) batteries. LFP demand is growing from electric vehicles (EVs) and energy storage industries as a cheaper and reliable alternative to the nickel cobalt manganese (NCM) battery.
Historically, iron phosphate has garnered less attention than other battery raw materials such as lithium, nickel and cobalt, primarily due to its lower price and apparent abundance of supply.
But there is growing need to understand the market of this China-centric chemical, which plays a critical role in determining energy density in LFP batteries. Read on to learn about the key drivers in this developing market and why there is a need for price transparency.
Surging market
Traditionally, iron phosphate has been mainly used as a catalyst in steel- and glass-making sectors or as a fertilizer in agriculture.
But over the past two years, as many countries made strides in shifting to greener energy, the surging EV market has greatly underpinned usage of iron phosphate in making batteries.
The majority of iron phosphate production and consumption is concentrated within China, the world’s biggest EV producer and market. Central and southern China’s Hubei, Yunnan, Guizhou, Sichuan and Hunan are the five biggest iron phosphate-producing provinces.
China’s iron phosphate production capacity has doubled in a year to hit around 3 million tonnes per year in 2023, according to industry experts. This has brought its output to 1.3 million tonnes in 2023, from 700,000- 800,000 tonnes just a year earlier.
The surge was largely a result of the country’s growing preference for LFP batteries, which are more cost effective and reliable than NCM batteries.
LFP batteries took up around two thirds of China’s overall battery market last year, rising from approximately 60% in 2022, data from China Automotive Battery Innovation Alliance (CABIA) shows.
Of this, a total of 261.0 gigawatt hours (GWh) of LFP batteries were installed in EVs in China last year, a jump of 42.1% from 2022. Almost all of the 87.6 GWh batteries for energy storage sold in January-November 2023 were LFP batteries, CABIA said.
Source: Fastmarkets
International demand to grow
LFP adoption is still under development in markets outside China, which are currently dominated by NCM batteries. But it is also gaining attention in the wider market, as many countries other than China are seeking to localize supply chains and ramp up battery production. This is set to increase demand for iron phosphate.
Automakers Stellantis and Ford have both announced plans to develop LFP battery projects outside China.
Fastmarkets analysts forecast a growing market for LFP internationally, which will bolster the demand for iron phosphate not just in China.
LFP batteries took up 31% of the global battery market, including EVs, energy storage systems and consumer electronics in 2023. This number is expected to increase by 7% to 36% in 2027, according to Fastmarkets analysis.
In addition, lithium manganese iron phosphate (LMFP) batteries, of which iron phosphate is also a key raw material, is forecasted to start taking up global battery market share from 2027 thanks to its cost advantage over NCM and higher energy density than LFP.
Iron phosphate in LFP cost
Iron phosphate makes up a considerable part of the cost of LFP cathode active materials (CAM), meaning it is important to manage the overall economy of producing and using the battery chemistry.
“Considering the total cost of LFP CAM, including raw materials and manufacturing costs, the iron phosphate cost proportion was around 33% in January 2020… and the share was about 23.6% in December 2023”, Muthu Krishna, battery manufacturing cost modeler at Fastmarkets, said.
Fastmarkets is committed to responding to the evolving energy transition market by bringing price transparency to this once-opaque sector.
It has recently added a Chinese iron phosphate price to its existing portfolio of battery raw materials to offer pricing in this rapidly growing EV and battery market to the rest of the world.
The new price enhances market transparency across the battery raw materials sector and broadens the perspective for stakeholders across the region.
By Zihao Li, price reporter, Fastmarkets
