(Yicai) Dec. 25 -- Multiple major Chinese suppliers of lithium iron phosphate battery materials and manufacturers of such cells will further hike prices next month to offset the pressure of increasing supply chain costs after LFP prices surged this month.

LFP material suppliers and downstream manufacturers held talks regarding price increases recently, according to analysis by China's top integrated platform provider of nonferrous and ferrous metals Shanghai Metals Market. While major firms are going through a second round of such negotiations, most others have not finalized the first round yet.

For every CNY10,000 (USD1,425) per ton increase in the price of lithium carbonate, a core raw material in LFP batteries, the cost of LFP cathode materials rises by about CNY2,300 to CNY2,500 (USD325 to USD355) per ton. However, lithium carbonate prices have significantly exceeded the tolerable range of firms in the downstream of the supply chain.

The cost, insurance, and freight quote for spodumene concentrate, a key raw material for lithium extraction, was on average USD1,290 per ton as of Dec. 22, up 17 percent from two weeks prior, according to statistics released by industry agency Infolink Consulting. The average spot price of battery-grade lithium carbonate climbed 8 percent to about CNY98,000 per ton.

The price of LFP materials 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 and last quarter, 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