The lithium iron phosphate (LFP) track in 2026 has welcomed new entrants. According to incomplete statistics, from January to September 2026, leaders in the phosphate chemical industry launched approximately six cross-sector investment projects in the LFP field, with a total investment of about CNY 15 billion.
The protagonists of the previous capacity expansion wave were cathode material enterprises such as Hunan Yuneng and Fulin Precision; this time, the traditional chemical giants holding phosphate mines have stepped into the center of the stage.
01. Where the Approximately CNY 15 Billion Is Invested and Who the New Protagonists Are
The aforementioned approximately CNY 15 billion is divided into six projects based on the construction entities.
Two of these projects come from Hubei Yihua Group. Its 600,000 tons/year LFP project saw its total investment updated from CNY 4.894 billion in the first EIA public notice at the beginning of the year to CNY 5.039 billion in the draft for comments, making it the project with the largest single planned capacity in this batch. On September 21, Hubei Yihua announced that its wholly-owned subsidiary plans to invest CNY 1.152 billion to build a 150,000 tons/year iron phosphate project to support the precursor segment. Another two projects stem from the joint venture between Yuntianhua and Dangsheng Technology: Juneng New Materials invested CNY 1.839 billion to build a 200,000 tons/year high-performance iron phosphate precursor and supporting project, while Youtian Technology invested CNY 2.654 billion to implement technical transformation and expand an under-construction project into a 150,000 tons/year LFP project.
The remaining two projects come from Xinyangfeng and Xingfa Group. Xinyangfeng invested approximately CNY 3 billion in Dongbao District, Jingmen City, to build LFP and supporting iron phosphate facilities. A wholly-owned subsidiary of Xingfa Group invested CNY 1.381 billion in Wuhai, Inner Mongolia, to build a new 100,000 tons/year battery-grade LFP project, valuing the local coal, wind, and solar resources as well as electricity price advantages.
The commonality of this round of cross-sector entry is that all the entrants have accumulated years of experience in the phosphate chemical industry and hold phosphate mines in their hands.
02. Installed Capacity Share Exceeds 80%: The First Driving Force from the Demand Side
Data from the China Automotive Battery Innovation Alliance shows that in 2025, the domestic installed capacity of LFP batteries reached 625.3 GWh, accounting for 81.2% of the total installed capacity, a year-on-year increase of 52.9%. The upward trend continued in 2026: in August, the domestic installed capacity of power batteries was 79.0 GWh, a year-on-year increase of 26.3%, of which LFP accounted for 67.6 GWh, or 85.6%, a year-on-year increase of 31.0%. From January to August, the cumulative installed capacity was 489.1 GWh, with LFP at 402.7 GWh, accounting for 82.3%, a year-on-year increase of 18.3%.
The market share exceeding 80% indicates that LFP has become the fundamental base of the mainstream technology route. Data from GGII shows that in the first half of 2026, the capacity utilization rate of the top five cathode LFP enterprises has increased to 95% to 100%, a significant improvement from 60% to 65% in the first half of 2025.
The most dramatic growth is in energy storage. Statistics from ICC Xinluo Information show that in the first half of 2026, LFP output reached 2.719 million tons, a year-on-year increase of 61.0%, and is expected to reach 6.2 million tons for the whole year. Data from the China Automotive Battery Innovation Alliance indicates that during the same period, the cumulative installed capacity of LFP power batteries was 272 GWh, a year-on-year increase of 11.5%, while the cumulative sales of energy storage batteries reached 318.1 GWh, a year-on-year increase of 83.4%. With double-digit growth on the power side and nearly doubled growth on the energy storage side, the industry's driving force has shifted from a "single power wheel" to "dual wheels of power and energy storage."
Zhang Xiaofei, Chairman of Gaogong Lithium Battery, stated at the 2026 (19th) Gaogong Lithium Battery Industry Summit that the overall shipment scale of lithium batteries in 2026 will maintain an increase of about 45%, and the total industry volume is expected to reach 3 TWh in 2027. Luo Huanta, founder of Dadong Shidai Think Tank, said, "The most direct driving factor for this round of capacity expansion is the surge in downstream energy storage and power demand."
CITIC Securities estimates that the global shipment volume of LFP cathode materials in 2026 is expected to reach 5.25 million tons, a year-on-year increase of 36%.
03. Re-evaluation of Phosphate Mine Value: The Second Driving Force from the Resource Side
According to data from Shengyi She, the average price of power-grade LFP rose from CNY 35,771/ton in the third quarter of 2025 to CNY 58,178/ton in the second quarter of 2026, an increase of 63%; energy storage-grade LFP rose from CNY 29,000/ton to CNY 57,016/ton, an increase of 97%. The highest price for power-grade LFP within the year appeared in June, once exceeding CNY 67,000/ton. As of September 23, the transaction prices for power-grade were CNY 52,200 to 55,500/ton, and for energy storage-grade were CNY 51,800 to 53,000/ton, showing some decline from the June peak. Therefore, this round of investment is mostly concentrated around the second quarter, which was a window period for price bottoming out and profit recovery.
Phosphate mines are a typical example of China's resource endowment being "abundant but not rich": according to USGS data, China's phosphate mine reserves in 2025 were about 3.4 billion tons, a year-on-year decrease of 300 million tons, a drop of 8.1%. According to estimates by Kaiyuan Securities, the reserves of high-grade phosphate mines (with a phosphorus pentoxide content of no less than 30%) account for only 20% of the total reserves. At the current mining rate, the exploitable lifespan is less than 40 years. In June 2026, the "Regulations for the Implementation of the Mineral Resources Law of the People's Republic of China" came into effect. According to the China Cooperative Economic News, phosphate mines, along with 35 other key minerals such as lithium, cobalt, and rare earths, have been included in the national strategic mineral resources catalog.
Kaiyuan Securities estimates that the domestic supply-demand gap for phosphate rock from 2026 to 2028 will be 320,000 tons, 1.31 million tons, and 9.75 million tons, respectively. The supply and demand will remain tight from 2026 to 2027, and will tend to ease in 2028.
The significance of phosphate mines is changing—from "raw materials for fertilizers" to "tickets for new energy materials." Zhenli Research analyzes that phosphate chemical enterprises such as Yuntianhua, Xingfa Group, and Chuanfa Longmang are extending downstream by relying on their own phosphate mine advantages, re-evaluating traditional phosphate resources as new energy material assets, and obtaining higher product added value.
04. The Cost Account of Integration: Deciding Who Can Enter the Market at This Point
Data from Xingfa Group can serve as a sample: its third-generation LFP products ship an average of 7,000 tons per month, and its fourth-generation products have on-hand orders averaging over 10,000 tons per month. The 80,000 tons/year capacity at the new energy Yichang base is fully saturated, but there are no spare production lines for large-scale verification of fourth-generation and above specification products. After the completion of the new project, the company's total LFP capacity will increase from 80,000 tons/year to 180,000 tons/year.
Xinyangfeng also provides empirical evidence of capacity utilization. The company has built and stably operates two sets of iron phosphate facilities with a total capacity of 100,000 tons/year, achieving full production and sales with supply falling short of demand. The products are mainly supplied to downstream enterprises such as Jintang Shidai, Changzhou Liyuan, Wanrun Yichang Brunp, Wanhua Chemical, and Jinquan New Materials. The company stated in its 2026 semi-annual report that the first phase of the Dongbao project will invest CNY 800 million to build a 100,000 tons/year LFP project, which will be put into production within 18 months after obtaining the construction permit. This project "will realize the company's vertical integration of the industrial chain from upstream phosphate mine resources and iron phosphate precursors to LFP cathode materials... significantly enhancing product added value and comprehensive competitiveness."
Both enterprises "first produce iron phosphate, and then produce LFP." The cost controllability brought by integration is precisely what is hardest for new entrants to replicate. Guo Kai, a researcher at Zhongyan Puhua, stated that after the implementation of Xingfa Group's 100,000 tons battery-grade LFP project, it will achieve integrated production from iron phosphate to LFP, strengthen industrial chain advantages, reduce upstream and downstream supply chain costs, and improve overall profitability.
The pressure on traditional main businesses is also emerging. Semi-annual report data shows that affected by the surging price of raw material sulfur, the gross profit margin of Hubei Yihua's phosphate and compound fertilizer segment decreased by 11.37 percentage points year-on-year to 7.05%, and Yuntianhua's phosphate fertilizer gross profit margin decreased by 9.9 percentage points year-on-year to 29.3%. In contrast, extending to the higher added-value new energy material segment is a realistic choice for phosphate chemical enterprises to smooth out business cycles.
05. Differences from the Previous Round: The Industry Is Shifting from Capacity Competition to Value Competition
This round of investment easily reminds people of 2021 to 2022: at that time, multiple enterprises concentrated on cross-sector investments, and planned capacity expanded rapidly. After the concentrated release of capacity, they encountered a slowdown in demand growth. According to statistics from the research institution EVTank, by the end of 2023, China's LFP capacity reached 3.417 million tons, with an overall capacity utilization rate of less than 50%. Since then, previous cross-sector projects have been terminated or changed one after another: Yuntu Holdings terminated the unbuilt 150,000 tons refined phosphoric acid and 300,000 tons iron phosphate production lines in April 2024; Chuanjinnuo changed approximately CNY 455 million in raised funds to an Egyptian phosphate chemical project in June 2025; and Chuanfa Longmang's 175,000 tons/year high-compaction LFP project was terminated in August 2026.
What is different about this round? GGII analysis believes that this round of LFP capacity expansion presents two major characteristics: first, the speed of production and implementation is fast, and the deviation between planned capacity and actual implemented capacity is smaller than in the previous capacity expansion cycle; second, the overall implementation and realization rate of this round of capacity expansion projects is expected to exceed 70%. At the same time, it is believed that it will be difficult for LFP materials to reproduce the supply shortage situation within this industrial cycle.
The second difference lies in the structure: GGII data shows that as of the end of May 2026, the nominal in-production capacity of the domestic LFP cathode material industry (excluding the overseas capacity of Chinese-funded enterprises) has reached 8.16 million tons, and the capacity in planning and expansion totals 11.38 million tons. What is scarce is not the total volume but high-end products: third-generation conventional products still account for about 43% of the market share, and the processing fees for second-generation and below products have fallen below the cash cost lines of most enterprises; the proportion of third-and-a-half-generation and fourth-generation high-compaction products reaches a combined 36%, among which the number of stable suppliers for fourth-generation products is in the single digits, and the premium per ton can reach CNY 2,000 to 5,000.
This is precisely why phosphate chemical industry leaders are targeting high-end products: the new 100,000 tons project by Xingfa Group is directly positioned for battery-grade products; Xinyangfeng's Dongbao project is directly equipped with iron phosphate facilities, taking the "iron phosphate-LFP" integration route.
The trend of capacity utilization still needs to be tracked. GGII expects that from the second half of 2025 to 2026, the industry's capacity utilization rate will be maintained at 70% to 75%; in early 2027, the domestic industry's capacity utilization rate may fall below 60%. Whether the approximately CNY 15 billion can be transformed into effective capacity depends on several checkpoints: funding, technology, cost, and customer validation.
From a longer-term perspective, the competitive logic of LFP is switching—in the past, it was about competing in the speed of capacity expansion; now, it is about competing in the depth of the entire industrial chain integration and the efficiency of technology iteration. Enterprises holding phosphate mine resources, possessing integrated supporting facilities and high-end technology reserves, occupy a relatively advantageous position in this round of structural adjustment. The logic behind the approximately CNY 15 billion is not to chase the trend, but to turn resource advantages into material capabilities.