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When looking at the global battery chemistry including electric vehicle (EV), energy storage system (ESS) and consumer electronics (CE) markets, LFP batteries will take the biggest market share at 48% in 2033, according to Fastmarkets battery raw materials analyst Phoebe O’Hara.
It will then be followed by nickel cobalt manganese (NCM) batteries at 43% market share of the entire global battery market, O’Hara told delegates at the recent Fastmarkets’ China Battery Raw Materials Conference in Shanghai.
LFP batteries are well known for their stable and safe performance as well as being more cost effective, despite their overall low energy density compared with NCM batteries.
LFP batteries are currently the dominant chemistry in China’s domestic market primarily due to their cost advantage over NCM batteries. In the first 11 months of 2023, 339.7 GWh of EV batteries were installed in China, with 229.8 GWh (67.6%) of these LFP batteries, according to the China Automotive Battery Innovation Alliance (CABIA).
LFP battery adoption outside of China is still at an early stage. But with its distinct advantage over NCM batteries, LFP is expected to grow as global economies take strides to promote the adoption of EVs and ESSs to help fuel the energy transition.
LFP cathode material – feeding on lithium carbonate and the precursor iron phosphate – is needed especially in large-scale energy-storage battery segment and is used for battery packs in EVs with shorter driving ranges.
Transparency in lithium chemicals, such as lithium carbonate, have firmly solidified in recent years giving market participants a clearer picture on costs and also exchange derivatives to manage their risk.
With LFP gaining market share, especially outside of China, market participants want a wider picture of the overall economy of producing and using the battery chemistry.
Fastmarkets launched a price assessment for battery grade iron phosphate on Friday December 15.
China’s iron phosphate prices have been weak since Fastmarkets started assessing the market. Prices have been under pressure from overcapacity and weak demand, with the current prices close to the production cost, sources said.
Fastmarkets’ weekly assessment of iron phosphate anhydrous 0.96-0.98 Fe/P, battery grade, delivered China was 10,000-11,300 yuan ($1,412-1,596) per tonne on Friday, unchanged from a week earlier, but down by from 10,300-11,500 yuan per tonne two weeks earlier, according to Fastmarkets pricing data.
Increased transparency will be essential to driving the anticipated growth in the LFP market.
Delegates at Fastmarkets’ China battery raw materials conferences said ESS is a market with huge growth potential, which will be an increasing driver of battery demand – especially for LFP batteries which is the dominant chemistry in the ESS market.
“The ESS market is still very small at the moment, so there is a lot of room for the market to grow in the years to come,” a delegate at the conference said.
“We expect LFP is going to remain the most dominant form in that industry [ESS], and that’s largely due to the fact that LFP is cost-effective. It’s affordable and stable, and it’s trusted,” O’Hara said.
The ESS market demand is 140 GWh in 2023, up from 66 GWh in 2022, according to O’Hara. And the demand is forecast to jump further to around 840 GWh in 2033, with around 87% of that to be LFP batteries, O’Hara said.
In the first 11 months of 2023, 87.6 GWh of batteries for ESS was sold in China, and 86.6 GWh of that was LFP batteries, according to CABIA.
Over the past two years alone, the ESS market has witnessed rapid growth amid various governments’ efforts to transition to greener energy.
“Renewable energy growth, particularly in Europe and the US, has really expanded over the past year. We’ve seen 86 terawatt hours of additional electricity from wind or solar production [in Europe] coming online this year alone… Therefore, major energy storage systems and batteries are essentially required and demanded in these markets,” O’Hara said.
“As a result, the energy storage system [market] saw over 90% annual growth [of global ESS demand] last year – a doubling of the market,” O’Hara added.
China installed 8,630 megawatt (MW) of ESS capacity in the first six months of 2023, taking its cumulative ESS capacity – including all the capacity installed before 2023 – to 17,330MW at the end of June.
This was ultimately the result of Beijing’s efforts to achieve the goal carbon emissions in China peaking by 2030 and for the country to achieve carbon neutrality by 2060.
“We’re expecting LFP to grow quite rapidly in the decade [for passenger EV (PEV) sector],” O’Hara said, adding that LFP will take 43% of the PEV market in 2033.
“However, we do expect NCM is going to remain the key market for [PEV] chemistries with 54% of market share in 2033. That’s largely due to the fact that in the US and Europe more original equipment manufacturers (OEMS) are still holding on to NCM as the answer to their range anxiety among consumers,” O’Hara added.
But O’Hara highlighted that the current dominance of NCM in the global PEV market is going to change by 2033, since already from last year more and OEMs started to utilize LFP cathodes.
Tim Hotz, principal at management consulting company Rolan Berger, said at the conference that the LFP and lithium manganese iron phosphate (LMFP) battery chemistries to account for 37% of the total light vehicles’ battery market, up by 10% from 27% in 2023.
LFP and LMFP will be the most popular battery chemistry used in light vehicles in 2030, followed by high-nickel NCM or nickel cobalt manganese aluminium (NCMA) whose market share in light vehicles is forecast at 28% in 2030, Hotz added.
“LFP [market share in light vehicles is expected] to grow significantly, addressing low or entry market segments and even up to mid segments [of light vehicles] due to cost advantage,” Hotz said.
On November 21, automaker Stellantis NV and Chinese battery maker CATL said they would partner for the local supply of LFP battery cells and modules to power Stellantis’ EV production in Europe. Stellantis said of the project: “Featuring a long service life and high thermal stability, LFP technology can enable Stellantis to offer high-quality, durable, and affordable electric vehicles.”
US automaker Ford’s announcement in February this year of its US LFP plant also cited LFP’s lower costs compared with NCM batteries, which it said “will help Ford contain or even further reduce EV prices for customers.”
Fastmarkets has announced the launch of its new LFP price. Find out more about all our lithium prices now.