(Yicai) Dec. 25 -- Major Chinese producers of lithium iron phosphate, one of the most widely used cathodes in lithium-ion batteries, are set to raise prices again next month, seeking to pass on higher costs after a sharp rally in LFP prices this month.

LFP producers and energy storage cell makers recently held talks on price increases, according to an analysis by Shanghai Metals Market, a leading Chinese provider of price reporting, data, and intelligence on the nonferrous and ferrous metals industry. Major companies are in the second round of talks, while many smaller firms have yet to finalize the first round.

Lithium carbonate serves as the key input for LFP cathode production. For every CNY10,000 (USD1,425) per ton increase in the price of lithium carbonate the cost of LFP cathode rises by about CNY2,300 to CNY2,500 (USD325 to USD355) per ton. Current lithium carbonate prices have exceeded the cost tolerance of many downstream materials producers.

The cost, insurance, and freight price of spodumene concentrate, a key source of lithium, was USD1,290 per ton on average as of Dec. 22, up 17 percent over two weeks, according to statistics released by renewable energy and technology market research firm Infolink Consulting. The spot price of battery-grade lithium carbonate climbed 8 percent to about CNY98,000 per ton.

The price of LFP reached CNY34,000 per ton in August, down 80 percent from the end of 2022, Tang Yan, deputy secretary-general of the China Industrial Association of Power Sources, said last month. The entire industry has suffered losses for over 36 straight months, while six listed firms had an average asset-liability ratio of 68 percent, Tang noted.

The majority of LFP producers in China sign long-term agreements with suppliers, so when negotiating with downstream clients, they tend to shift the sustained cost pressure brought about by rising raw material prices by increasing "processing fees."

Before prices recovered this quarter and last, the LFP sector had long been in the "deep winter" of low-price competition, with some suppliers having weak bargaining power against downstream battery makers and being forced to accept low prices to secure orders.

Editor: Martin Kadiev