Lithium iron phosphate (LFP), a key cathode material for both power and energy storage batteries, has seen its price rise steadily throughout the year. In the spot market, a standard package of approximately 400 kg now sells for over RMB 25,000—nearly double the price of around RMB 10,000 a year ago. Despite the sharp increase, downstream buyers remain highly active, and overall market supply remains tight. This round of price hikes is primarily driven by two factors: first, robust export growth in new energy vehicles (NEVs) and energy storage products has significantly boosted rigid demand for LFP; second, rising costs of upstream raw materials have forced producers to pass on higher input costs through price increases. On the demand side, accelerating exports of domestic NEVs and growing international acceptance of LFP-based vehicle models have prompted battery makers to expand production and stockpile inventory. Meanwhile, large-scale energy storage projects—spanning utility-scale, commercial/industrial, and residential segments—are being deployed both domestically and overseas. Thanks to its superior safety and cycle life, LFP has become the dominant cell chemistry choice, generating steady incremental orders. Additionally, after two years of declining prices that left mid- and downstream inventories at historically low levels, the recent demand recovery has led companies to lock in prices early and place bulk orders, further tightening spot market availability. On the supply side, most LFP producers are operating at full capacity, with shortened delivery lead times and extended order backlogs. The industry previously underwent significant capacity rationalization, during which inefficient production lines were phased out, reducing supply elasticity. As a result, it is difficult to quickly resolve the current supply-demand imbalance through rapid capacity expansion in the short term. From a cost perspective, LFP’s primary raw materials are iron phosphate and lithium carbonate. This year, iron phosphate prices have risen notably due to higher costs of upstream phosphorus chemical intermediates such as sulfur and phosphoric acid. Lithium carbonate prices have also continued to rebound. Given that these two materials constitute a substantial share of total raw material costs, their combined price increases have created dual cost pressures, squeezing manufacturers’ profit margins. Overall, the current price surge reflects genuine downstream demand supported by strong fundamentals across the supply chain, rather than speculative activity. Future price trends will hinge on the sustainability of NEV sales and energy storage deployment, as well as the pace at which upstream resources—particularly phosphate rock and lithium carbonate—expand supply. To enhance resilience, industry players are increasingly integrating upstream into resource development and building vertically integrated operations. Meanwhile, downstream battery makers and automakers are favoring long-term contracts with fixed pricing mechanisms to mitigate cost volatility.