Behind the Cost Inversion of LFP: The Era of Strategic Premium for Phosphorus Resources Has Begun

In March 2026, the Chinese phosphorus chemical supply chain underwent a severe structural reorganization, triggered by maritime disruptions in the Strait of Hormuz amid the U.S.-Iran conflict. With China’s sulfur import dependency exceeding 50%—and the Middle East accounting for 56% of that supply—the near-total halt of Iranian exports ignited a critical cost crisis at the source. According to data from Shanghai Metals Market (SMM), solid sulfur prices surged to 6,090 RMB/ton by March 31, a staggering increase of over 3,000 RMB/ton since the Lunar New Year. This upstream supply chain shock propagated rapidly downstream, causing wet-process phosphoric acid prices to experience a "triple jump." Industry leaders, such as Wengfu Group, implemented cumulative monthly price hikes of 1,200 to 1,400 RMB/ton, fundamentally rewriting the industry's cost-pricing logic.

This intense cost pressure has triggered a chain reaction within the Lithium Iron Phosphate (LFP) industry. Despite sustained high demand—with the new energy sector's phosphorus ore consumption index reaching 8% in March—midstream iron phosphate manufacturers have fallen into a "cost-pass-through inversion" trap. The price of raw materials, such as phosphoric acid and ferrous sulfate, soared far faster than the adjustment cycles for finished iron phosphate products. This resulted in profit margins being entirely eroded or even becoming negative. Such a brutal cost-transmission mechanism highlights the defensive resilience of leading enterprises with "mine-to-chemical" integration, whose self-sufficiency in resources provides a critical buffer in extreme market environments.

On the macroeconomic policy front, the state has implemented precise interventions to balance food security with industrial demand. Since mid-March, exports of major phosphorus fertilizer varieties, including MAP and DAP, have been suspended until August to prioritize domestic spring farming requirements. While this policy tightening stabilized agricultural fertilizer prices, it intensified the supply-gap expectations for industrial-grade monoammonium phosphate (MAP). As the domestic fertilizing season nears its end in late April, market analysts anticipate a "compensatory" surge in industrial MAP prices, with the price ceiling potentially hitting the 8,000 RMB/ton mark. This dynamic balance—prioritizing agricultural stability while allowing industrial demand to follow—reflects the multi-dimensional strategic importance of phosphorus in the national economy.

Simultaneously, the strategic attributes of phosphorus are extending beyond current LFP technologies toward next-generation battery solutions. The accelerated industrialization of solid-state batteries has spurred technical deployments in phosphorus pentasulfide and novel lithium-phosphorus-sulfur-chlorine (LSCL) sulfide electrolytes. In March, enterprises such as Lishen Battery and FAW Group made significant patent progress in sulfide solid-state electrolytes. Although LSCL and related materials remain in the kilogram-scale production phase with declining prices, the role of phosphorus as a core component in solid-state electrolytes is becoming indisputable. This signifies a transition for phosphorus from a traditional agricultural substrate to a high-energy-density, high-safety strategic material.

Looking ahead to the second quarter, the sulfur supply bottleneck is unlikely to ease in the short term, while new phosphorus ore production remains constrained by a 5-to-7-year mine development cycle. Driven by the dual engines of "agricultural stabilization" and "new energy growth," the tight supply-demand balance of phosphorus ore will persist. Furthermore, as the Ecological Environment Code upgrades carbon emission constraints to a statutory responsibility, high-energy-consuming and high-emission phosphorus chemical capacities will face even stricter supply curbs. Leading enterprises with established resource barriers and technical reserves will not only hold pricing power during this cost cycle but will also secure central influence in the global era of strategic phosphorus premiums.