According to the Commodity Market Analysis System of Business Society, the market for mixed xylene (1.5-1.26) has recently risen. On January 26th, the benchmark price of mixed xylene was 7390 yuan/ton, an increase of 4.38% from 7080 yuan/ton on January 5th.

International crude oil and mixed xylene prices rise, with mixed xylene receiving some support

Recently (1.5-1.26), international crude oil prices have risen from a low level due to the impact of the Red Sea incident, which has strengthened the cost support for mixed xylene. As of January 26th, WTI03 contract settlement is $77.36 per barrel; Brent 04 contract settlement is $81.96 per barrel. The price increase of mixed xylene in Asia has supported the domestic market, with prices of heterogeneous grade xylene in Asia ranging from $942 to $943 per ton as of January 26th.

Continuous increase in mixed xylene port inventory and increased supply pressure

The continued increase in mixed xylene port inventory has put pressure on the supply side of mixed xylene. It is understood that as of January 26th, the total inventory of xylene in East and South China amounted to 81000 tons, a significant increase from 56000 tons in early January.

Temporary stability of xylene production and necessary support for mixed xylene production

The domestic supply of xylene is relatively normal, with a domestic PX operating rate of over 80%. A 750000 ton unit of Pengzhou Petrochemical has restarted, but some units are still undergoing maintenance. The spot supply is normal. This week, the international crude oil price trend has fluctuated, and the external PX price has not changed much. As of the 26th, the closing price in Asia is 1000-1002 yuan/ton FOB South Korea and 1041-1043 US dollars/ton CFR China. Recently, the operating rate of PX plants in Asia has remained high. Overall, the operating rate of xylene plants in the Asian region is nearly 80%. The supply of PX goods in the Asian region is normal, and the price range of crude oil has fluctuated recently. The domestic xylene market price trend is temporarily stable.

The market for phthalic anhydride saw a slight increase, with stable production and stable demand support for mixed xylene

The operation of domestic phthalic anhydride units is stable, but some units are still in a shutdown state. Currently, the operating rate of phthalic anhydride in China is around 60%. Recently, the price of industrial naphthalene has increased, and the supply of naphthalene based phthalic anhydride has increased. As a result, the price trend of ortho phthalic anhydride has increased.

Small fluctuations in the domestic mixed blending market, weak support for mixed xylene demand

Since the fourth quarter, the domestic mixed blending market has entered a low season, with weak downstream inquiries and weak demand for mixed xylene. As of late January, the operating rate of refinery facilities nationwide was around 7.3%.

Market forecast: In the short term, international crude oil will fluctuate widely, and there is a high risk of changes in the cost of mixed xylene. Domestic port inventories will continue to increase, and the demand for mixed xylene will be weak. In the short term, the mixed xylene market will be mainly affected by the crude oil market, and it is expected that mixed xylene will continue to rise in the future.

Introduction: Urea, also known as urea or carbamide, is an organic compound composed of carbon, nitrogen, oxygen, and hydrogen, and is a white crystal. Urea is a neutral fertilizer that is suitable for various soils and plants. Because it has the advantages of easy preservation, convenient use, and minimal soil damage, it is a widely used chemical nitrogen fertilizer and also the nitrogen fertilizer with the highest nitrogen content.

The upstream production raw materials for urea are coal or natural gas. The intermediate process involves reacting high-purity carbon dioxide and synthetic ammonia to produce urea under certain conditions. The downstream of urea is mainly used for agriculture and industry. Among them, agricultural demand accounts for the main position, accounting for about 70%. Most of it is directly applied as nitrogen fertilizer to crops, grains, fruits and vegetables, and a small portion is synthesized with phosphorus and potassium fertilizers to form compound fertilizers and reused in agriculture. The industrial demand is mainly for urea formaldehyde resin, accounting for about 20%, and urea can also be used for melamine and desulfurization and denitrification in power plants.

The 2023 urea market in Shandong Province experienced a V-shaped fluctuation

According to the Commodity Market Analysis System of Shengyishe, the urea market in 2023 will generally show a V-shaped trend of first falling and then rising. Narrow rise in the first quarter, significant decline in the second quarter, significant increase in the third quarter, and first rise and then fall in the fourth quarter. The highest point of the year was in early March, with an average market price of around 2841.88 yuan/ton. The lowest point of the year was in mid June, with a price of around 2210 yuan/ton. The maximum decline for the year was 22.23%.

From the monthly K-bar chart, it can be seen that urea has experienced more decline than increase throughout the year. The largest decline was in May, a decrease of 8.08%, and the highest increase was in July, an increase of 15.86%.

First quarter: ups and downs. After New Year’s Day, the logistics and transportation situation improved, and agriculture began to prepare fertilizers. Downstream compound fertilizer factories made up their positions at low prices, and the market began to warm up. In early February, daily urea production remained high, but coal prices fell and cost support was insufficient, resulting in a slight decline in urea prices. In late February, as spring plowing approaches and agricultural demand is strong, urea prices usher in a new round of increase. But in mid March, there was a decrease in spring plowing and fertilizer supplementation, while the price of raw coal continued to decline. The downstream compound fertilizer market was average, and downstream demand weakened. Urea showed a characteristic of not being prosperous during the peak season, and urea prices began a downward trend.

Q2: All the way down. In April and May, agricultural demand continued to weaken, entering the off-season of agricultural demand. Urea companies started at a high level, causing serious accumulation of urea stocks. Urea manufacturers significantly lowered their prices, creating a strong bearish market atmosphere. The summer fertilizer production of composite fertilizers was delayed, and the composite fertilizer industry started below expectations. The production of sheet factories continued to be sluggish, coupled with insufficient cost support, multiple negative factors led to a continuous decline in urea prices. In early June, agricultural demand was concentrated and replenished, coupled with the impact of a new round of bidding in India, market sentiment improved, and urea prices surged.

Third quarter: Significant increase. Affected by the sharp drop in urea prices in the second quarter, the social inventory of urea remained low, and planned maintenance and malfunctions led to a decrease in the operating rate of enterprises. But with the outbreak of fertilizer demand in summer, coupled with a significantly higher than expected number of bids in India, the market trading atmosphere is hot, urea supply is in short supply, and urea prices continue to fluctuate and rise, showing a characteristic of not being weak in the off-season.

Fourth quarter: first rising and then falling. In late October, urea prices saw a significant increase again due to the favorable export performance of India and the slow start of winter storage. In the futures market, on November 16th, the main contract price for urea futures was 2383 yuan/ton, an increase of over 40% compared to mid June. In order to bring urea prices back to rationality, maintain normal production and sales profits, and ensure the supply of winter storage and spring plowing fertilizers in 2024, policy efforts have begun. On November 17th, twelve companies including Sinochem Chemical Fertilizer issued a joint initiative to promote the supply and price stability of urea in the market. They will not hoard or pursue price increases, and if necessary, take timely measures to serve the supply and price stability. Once the initiative was launched, the domestic urea market began to fluctuate and decline.

How will the urea market develop in 2024?

From the perspective of production capacity and output: According to data statistics, urea production in China entered a concentrated period in 2023, with a domestic urea production capacity of about 73.81 million tons, an increase of 2.16 million tons compared to 2022. In 2023, the domestic urea production was around 60.16 million tons, an increase of 6.44% compared to 2022. In 2024, there are still plans to increase production capacity in the northwest, central, and eastern regions. It is expected that the production capacity increment of the urea industry will be 4.25 million tons in 2024. However, the production progress of downstream compound fertilizers is slower than that of urea, and the board industry is mainly focused on regional transfer with limited new production capacity. The supply and demand relationship in the domestic urea market will shift from a basic balance of supply and demand to an oversupply, or may shift the price center of the domestic urea market downwards

From the perspective of imports and exports: In terms of urea exports in the past five years, the export volume has been fluctuating. The annual urea export volume in 2023 was 4.25 million tons, an increase of 50.18% compared to 2022. Among them, September had the highest exports, with a monthly export of 1.18 million tons. The country with the highest annual export volume is still India, with an export volume of 1.93 million tons, accounting for 45.49% of the total export volume. The export volume of urea in China may decrease in 2024. Firstly, global urea production capacity continues to expand, and the international urea price center may shift downwards. Secondly, India will have one 1.27 million ton unit put into operation in 2024, which may reduce the import demand for urea in China. The third is the impact of the policy of ensuring supply and stabilizing prices. The “legal inspection” policy is becoming stricter, and the export volume of urea will decrease.

From the perspective of market demand, the estimated total demand for urea in 2024 is around 58 million tons. Agricultural demand has always been the main flow of urea in China. As of the end of 2023, the national grain sowing area was 118969 thousand hectares (1784.53 million mu), an increase of 636 thousand hectares (9.55 million mu) or 0.5% compared to 2022. The cultivated land area is steadily increasing, and the agricultural demand for urea is constantly increasing. Industrial demand may increase slightly. In 2024, the urea demand for melamine, urea formaldehyde resin, and automotive urea showed a stable state, with little or no change. In terms of thermal power shortage, due to policy guidance, urea will be used as a reducing agent to further replace synthetic ammonia in 2024, and it is expected that the demand for urea will further increase.

Looking at the future: urea supply will increase in 2024, demand will be weak, and exports will be tight. It is expected that the price center of the domestic urea market will fluctuate downward in 2024.

According to the Commodity Market Analysis System of Business Society, the domestic PTA market in 2023 showed an upward trend of “M” – shaped fluctuations. As of December 31, the average market price in East China was 5930 yuan/ton, an increase of 5.58% from the beginning of the year. It can be roughly divided into four stages:

From January to mid April, PTA continued its upward trend from December of the previous year, with prices gradually rising to the highest point of 6520 yuan/ton for the year. In terms of segmentation, from January to February, the expectation of demand recovery is positive, and all links in the PTA industry chain are steadily rising. Entering March April, the upstream PX domestic and foreign equipment underwent centralized maintenance, and the PX import volume in April reached the lowest level of the year. At the same time, the PTA’s own circulation of goods has gradually tightened, leading to a rapid increase in prices.

From mid April to mid May, it only took a month for PTA to decline by more than 15%. On the one hand, the crude oil center of gravity has fallen, and the speculation in the PX market has cooled down. On the other hand, the fundamentals of PTA have also weakened overall, especially with the recovery of demand for gold, silver, and four falling short of market expectations. Faced with high priced raw materials, terminal weaving and downstream polyester have seen a decrease in production and demand, leading to a decrease in willingness to purchase PTA and a clear bearish market sentiment.

From June to mid September, there was another upward trend, and as the center of gravity of crude oil prices shifted upwards, PX also rebounded to high levels and fluctuated. In addition, the downstream polyester industry has maintained a high operating rate after profit recovery, leading to an increase in demand for PTA.

From mid September to December, crude oil prices plummeted significantly and PX prices fell from high levels, causing the cost side to lose positive support and driving downstream polyester industry chain prices down. During this period, although the PTA market experienced a temporary recovery due to factors such as the strengthening of crude oil and the reduction of PTA main suppliers, the overall adjustment was still mainly weak.

Looking ahead to 2024:

PTA production capacity is still in an overcapacity cycle, increasing pressure on accumulated inventory

By the end of 2023, the total production capacity of PTA reached 80.615 million tons, with a growth rate of 16.4%. In terms of production, the domestic PTA production in 2023 was about 64 million tons, an increase of 9.9 million tons compared to 2022, with a growth rate of 18.3%.

The annual average operating rate is 76.68%, a significant increase from 73.93% in 2022. This is mainly due to the release of downstream polyester production capacity and the high polyester operating rate throughout the year, resulting in a significant increase in domestic demand for PTA. There are still many production capacity investment plans in the PTA industry in 2024, totaling 9.5 million tons. If the production progress is smooth, the total production capacity will reach about 90 million tons, with a growth rate of about 11.8%, and it is still in an excess cycle. In addition, the growth rate of downstream polyester production in 2024 will be slightly lower than that of PTA, so the accumulation pressure of PTA throughout the year will also increase.

PTA exports are expected to become an important channel for digesting domestic overcapacity

In terms of import and export, PTA has a relatively low import dependence, almost zero. In 2023, PTA exports reached a new historical high, with a total annual export volume of 3.5094 million tons, an increase of 1.82% year-on-year. The main reason for the record high export volume of PTA is that there are too many old PTA devices abroad, and the operation of the devices is unstable. However, the continuous production of large PTA devices in China has enhanced the comprehensive competitiveness of PTA enterprises with integrated production capacity support. However, India used to be China’s largest exporter, but due to the restrictions of BIS certification, the growth rate of PTA exports in China has slowed down. But we believe that the PTA export market is expected to become an important channel for digesting domestic overcapacity in the future.

The industry concentration is constantly increasing, and the trend will continue

In recent years, the concentration of PTA industry has been continuously increasing, with the top six enterprises accounting for over 75%. The PTA industry is showing an oligopoly pattern, with production enterprises having increasingly strong pricing power, and the trend will continue in 2024.

Cost support still exists, and the PX market is relatively easy to rise but difficult to fall

In terms of cost, WTI crude oil prices fell by 8.46% and Brent crude oil prices fell by 7.56% in 2023. The changing international situation and expected decrease in demand in 2023 have constrained the market, resulting in ups and downs. The global crude oil supply will continue to shrink in 2024, mainly due to the OPEC+policy of reducing crude oil production continuing until the end of 2024. In terms of demand, boosted by the gradual stabilization of the global economic situation, there is room for sustained amplification of global crude oil demand in 2024. This is mainly due to the stable recovery of the economic situation in the Asian region, but the inflation rate in Europe and America is still high, so the economic situation is still not optimistic. Therefore, it is expected that the average oil price in 2024 may still be slightly higher than in 2023, but the increase will not be too significant.

With the joint assistance of centralized maintenance of domestic and foreign equipment, unexpected demand, and fluctuations in crude oil prices, the domestic PX market price has increased significantly in 2023. The average price at the beginning of the year was 7450 yuan/ton, and the average price at the end of the year was 8600 yuan/ton, with a year-on-year increase of 15.44%. From the perspective of PX’s own supply and demand, it is in a production window period in 2024. Only one set of Yulong Petrochemical’s 3 million ton unit is planned to be put into operation in the second half of the year, but there is still some uncertainty about whether the project can be smoothly put into operation and released. The peak of PX production in 2023 has passed, and the future increase in production capacity is limited. However, the downstream PTA production capacity is still in a continuous expansion pattern, so the temporary gap in PX is still present. The overall pattern preference and supply shortage are the biggest upward drivers for PX in 2024, and prices are also prone to rise but difficult to fall.

The growth rate of downstream polyester will decrease, and it is expected that it will not be able to provide a significant increase in consumption for PTA

The polyester market in 2023 has shown characteristics of high production, high output, high exports, and improved capacity utilization. In 2023, a total of 10.35 million tons of polyester production capacity was added, excluding 1.37 million tons of eliminated production capacity. By the end of the year, the total production capacity reached 79.32 million tons, with a growth rate of 12.3%, which is the highest level in recent years.

In terms of production, the annual operating rate in 2023 was 83.89%, an increase of 4.19% year-on-year. The cumulative production of polyester is expected to be 66.58 million tons, an increase of 8.87 million tons compared to 2022, with a year-on-year growth rate of 15.4%. The growth rate of polyester production is already high, coupled with a significant increase in capacity utilization. This year’s polyester production growth rate is the highest in recent years.

In 2023, there will be a significant amount of actual polyester production capacity, some of which will be delayed in 2022. The record breaking expansion of polyester production in 2023 has had a direct impact on a decrease in polyester product production profits or an increase in production losses. The planned polyester production capacity for 2024 is over 7 million tons. Due to concerns about the profits of some polyester products, it is estimated that the actual production will significantly decrease compared to 2023. Therefore, the growth rate of PTA consumption will significantly decline.

The increase in polyester exports in 2023 is still significant, with an estimated export volume of 10.92 million tons and a net export volume of 10.09 million tons, an increase of 12.1% year-on-year. But compared to last year, there is still a slight decline. Affected by India’s BIS trade certification and other factors, the future import and export situation of polyester in 2024 is still worth paying attention to. The main tone for the recovery of domestic and international demand for terminal textile clothing in 2024

From the perspective of weaving, the operating rate of weaving machines has significantly increased in 2023, at around 64%, a year-on-year increase of 16%. From a seasonal perspective, apart from the periodic negative reduction in April, the overall operating rate of weaving machines this year is around 70%.

From the perspective of terminal consumption of textile and clothing, the overall trend is showing a mild recovery. The annual retail sales of clothing, shoes and hats, and knitted textiles reached 1.4 trillion yuan, a year-on-year increase of 12.9%. The growth rate of domestic clothing and textiles is relatively high. On the one hand, the base was relatively low in the previous year, and on the other hand, there has been significant improvement in the production and operation of domestic enterprises, leading to a gradual recovery of domestic demand.

In terms of exports, the global economy has recovered slowly in 2023 due to the impact of the epidemic, and weak demand in major markets has led to a decrease in orders, resulting in a lack of momentum for the growth of China’s textile and clothing exports. In addition, changes in the geopolitical landscape and fluctuations in the RMB exchange rate have brought heavy pressure to the development of textile and clothing foreign trade. In 2023, China’s cumulative exports of textile and clothing reached 293.64 billion US dollars, a decrease of 8% 1%, including textile exports of $134.50 billion, a decrease of 8.3%, and clothing exports of $159.14 billion, a decrease of 7.8%. In 2024, domestic clothing consumption will remain resilient, and domestic demand may continue to recover. The “the Belt and Road” countries will become a new growth point to drive exports, and textile exports are also expected to bottom out.

Therefore, in summary, there is a positive expectation of domestic and international demand for textile and clothing in China from the perspective of terminal demand. In the first half of the year, the supply and demand of PX on the cost side were tight, and there was strong support. In the second half of the year, we will focus on the production process of new production capacity. Under the pattern of slowdown in polyester production capacity growth and continued pressure on PTA’s own supply side accumulation, it is expected that PTA prices will be better in the first half of 2024 than in the second half, with an overall narrow range of downward fluctuations.

Overview of ethylene oxide prices in 2023

In 2023, the price of ethylene oxide remained relatively low, with an operating range of 6000-7200 yuan/ton. According to data from Business Society, as of December 31, the average price of ethylene oxide in the domestic market was 6400 yuan/ton; The decline within the year was 5.88%.

In 2023, the annual price of ethylene oxide remained at a low level in the past three years, and the market average for the year remained at a weak level throughout the historical cycle.

Overview of the ethylene oxide industry chain

The price trend of ethylene oxide is relatively close to that of the main downstream polycarboxylate water reducing agents, and the impact factor of the demand side on the price is more obvious in 2023. Single enterprise inventory is not high, production is relatively stable, demand for ethylene oxide is relatively stable, and downstream production is mainly stable; From the recent upstream and downstream product prices, it can be seen that downstream prices have started to rise, increasing profit margins and strengthening support for the price of raw material ethylene oxide in the short term.

Since mid to late December 2023, the price of ethylene glycol has remained strong, and some factories have begun to operate the appropriate conversion of ethylene glycol. There is a certain negative feedback on the output of ethylene oxide production.

Low starting point of ethylene oxide production may improve in 2024

Due to price and profit factors, the operating rate (capacity utilization) of ethylene oxide in 2023 has been running at 50-60%.

In terms of production capacity changes, in December 2023, 15 sets of maintenance equipment were installed, involving a total production capacity of 2.126 million tons per year, with a total production capacity of 8.6 million tons per year. The production of new production capacity in 2024 is mainly concentrated in the second half of the year.

The incomplete statistics of ongoing projects in the ethylene oxide industry chain are as follows:

The price of ethylene oxide is expected to rise in 2024, but there is not much room for upward movement

Due to the influence of overseas ethylene glycol equipment factors, the fundamentals of ethylene glycol have improved, prices have moved up, and the demand for production conversion may have negative feedback on the supply of ethylene oxide. On the other hand, the uncertainty of terminal demand in real estate is strong, leading to strong uncertainty in the demand for polycarboxylate water reducing agents in the main downstream, which to some extent suppresses the price of ethylene oxide. It is expected that the price of ethylene oxide will rise in 2024, but there is not much room for upward movement.

1、 Price trend

In 2023, the market for lithium iron phosphate continued to decline, showing a downward trend throughout the year. The price peaked at the beginning of 2023, with a price of 166000 yuan/ton and a low point at the end of December at 46000 yuan/ton, with a decline of 72.29% throughout the year. There was only a slight rebound in May, and the trend of lithium iron phosphate declined significantly in 2023. In the past two years, lithium iron phosphate seems to have experienced a roller coaster ride, and the entire industry has undergone earth shaking changes. Since the shortage of supply in 2021, With rapid development and oversupply by 2023, crowded enterprises, and intensified competition, what will happen to the lithium iron phosphate market in 2024?

2、 Review of the 2023 lithium iron phosphate market

Lithium iron phosphate prices first fell and then rose in the first half of the year

From the bar chart, it can be seen that in 2023, lithium iron phosphate experienced more decline than increase throughout the year, with only May and June showing an upward trend in the second quarter. The overall price in the first quarter fell by 39.76%, from 166000 yuan/ton at the beginning of January to 100000 yuan/ton by the end of March. The low decline in the second quarter slowed down, mainly due to the influence of upstream lithium carbonate. At the end of April, the supply of upstream raw material lithium mica was very tight, and the price of imported spodumene concentrate from overseas remained high, Lithium carbonate rebounded from its decline at the end of April, while lithium carbonate was in an upward trend. Lithium iron phosphate passively followed suit, although there was a slight rebound in April and May, driving up prices. However, the overall trend in the second quarter still showed a downward trend, with a decrease of 5%. The price dropped from 100000 yuan/ton in early April to 95000 yuan/ton at the end of June. The overall price of lithium iron phosphate fell by 42.77% in the first half of the year.

Lithium iron phosphate prices continue to decline in the second half of the year

In the second half of the year, lithium iron phosphate has shown a continuous downward trend, mainly due to the influence of upstream lithium carbonate. From the comparison chart between upstream and downstream, it can be seen that the price of lithium iron phosphate is closely related to upstream lithium carbonate. Lithium carbonate has plummeted sharply, and the cost side of lithium iron phosphate lacks strong support. In the third quarter, the price of lithium iron phosphate dropped from 95000 yuan/ton in early July to 70800 yuan/ton at the end of September, with an overall decline of 25.47%, The price of lithium iron phosphate in the fourth quarter dropped from 70800 yuan/ton in early October to 46000 yuan/ton at the end of December, with an overall decline of 51.58% in the second half of the year.

3、 Development Trends of Lithium Iron Phosphate in 2024

In terms of production capacity: by the end of 2022, the production capacity of lithium iron phosphate was 2.12 million tons, and by the end of 2023, the production capacity of lithium iron phosphate was 4.27 million tons. Sichuan region has a relatively high concentration of lithium iron phosphate production capacity, with Yuneng, Wanrun, Youshan, Germany, and Rongtong accounting for 60%. Currently, there is an overcapacity of lithium iron phosphate in various regions, with a clear trend and low operating rates. The main operating rates are concentrated in top enterprises. In 2023, lithium iron phosphate experienced overcapacity and low prices, Compressing costs and seizing market share, the investment heat is gradually entering a cooling off period, and there will be a significant cooling down in investment in lithium iron phosphate in 2024.

In terms of production growth rate: In 2023, the annual growth rate of production capacity was lower than expected, with growth rates of -40%, 61%, 19%, and -15% in the four quarters, respectively. The peak season of demand was in the 2.3 quarter, with a relatively fast growth rate, while the first and fourth quarters were relatively slow. In the first quarter, the domestic environment was mainly relaxed by clearing inventory, with upstream operating at a high level and downstream demand insufficient. In the second quarter, it entered the traditional peak season, and demand recovered. At the same time, the upstream price recovery drove the upward trend of lithium iron phosphate, In the third and fourth quarters, there was insufficient terminal demand, and the overall lithium iron phosphate market was sluggish. Weak inventories remained high, and consumption was slow. The industry’s pessimistic attitude was obvious.

In terms of imports: In the first half of 2023, the total import volume of lithium iron phosphate was 21.186 tons, and in the second half of the year, the import volume was 19.3 tons, with an annual import volume of about 40.4 tons. Due to the impact of upstream raw material prices and weak overall demand, the overall import volume significantly declined in 2023, and the import volume significantly decreased in the third quarter, mainly due to relatively saturated domestic supply, weak downstream demand, and less import demand.

In terms of exports: In the first half of 2023, the total export volume of lithium iron phosphate in China was 610.415 tons, and in the second half of the year, the export volume was about 554 tons. The annual export volume was about 1164 tons, with more exports in the first quarter and a slowdown in the second quarter. The reasons are: 1. High upstream raw material prices. 2. Some battery manufacturers have started to expand overseas, which has to some extent driven the export volume of lithium iron phosphate.

In terms of supply and demand: In 2023, the domestic supply of lithium iron phosphate is sufficient, and the tight supply situation has significantly eased. The total supply in 2023 reached 1.2 million tons, a year-on-year increase of 80%. In the past three years, the demand side of lithium iron phosphate has continuously released production capacity, and the industry has gradually shifted from supply shortage to oversupply. Currently, it is difficult for the lithium iron phosphate market to rise, and prices may maintain the current situation or continue to decline.

In summary, the production capacity of lithium iron phosphate in China has been in short supply since 2021, and the price has been rising all the way. By 2022, the demand for lithium iron phosphate was scarce, and the price continued to rise. At the end of 2022, the price of lithium iron phosphate reached a high market level, and the production capacity of lithium iron phosphate continued to increase. Too much new production capacity was invested, resulting in severe overcapacity. The built capacity is sufficient to meet the demand for the next 3-5 years, and the phenomenon of overcapacity is obvious. Secondly, driven by high profits, Numerous enterprises have joined the lithium iron phosphate industry, including not only new energy industry enterprises, but also emerging manufacturers who have entered and laid out lithium iron phosphate production lines, hoping to share a share of the new energy market. This phenomenon has caused congestion in lithium iron phosphate enterprises, increased competitive pressure, and lithium iron phosphate may continue to operate under pressure in 2024.