Fengyuan Corporation recently announced the termination of its Yunnan annual production of 50000 tons of lithium iron phosphate project.

The integrated project of high-energy positive electrode materials for lithium batteries with a total investment of 1.25 billion yuan is undertaken by Fengyuan Lithium Energy, a wholly-owned subsidiary of the company. Since the signing of the "Investment Agreement" between Fengyuan Lithium Energy and the Gejiu Municipal Government in June 2023, it has been planned for two years.

When planning this project, Fengyuan Corporation had clear considerations: to leverage the advantages of lithium mineral resources in Gejiu City, especially the local Gaoling sand associated lithium mine, to stabilize raw material supply, reduce production costs, and expand the production capacity of positive electrode materials.

According to the agreement, the project will be located in Chongposhao New Materials Industrial Park in Gejiu City, with the main product being high-performance lithium iron phosphate.

However, the project did not proceed smoothly. As of the end of 2024, although the project has been signed, no substantial progress has been made. Finally, in August 2025, after mutual agreement, the project was officially terminated.

Regarding the reasons for termination, Fengyuan Shares stated that due to factors such as changes in policy environment, the preliminary approval procedures for the project were not completed, resulting in the inability to proceed with the project.

Meanwhile, the company's performance in the first half of the year was poor, with a net profit loss of 243 million yuan attributable to shareholders of the listed company, further expanding from the loss of 80.7374 million yuan in the same period last year.

Considering the small initial investment of the project and the lack of sustained funding in the future, in order to control investment risks, allocate funds reasonably, and protect shareholder interests, based on the principle of prudence, the company has decided to terminate the project.

The termination of projects by Fengyuan Corporation is not an isolated case. Since the beginning of this year, several companies have made adjustments to lithium iron phosphate related projects.

On June 24th, Chuanjinnuo announced that it plans to change the approximately RMB 455 million in fundraising from the "50000 tons/year battery grade lithium iron phosphate cathode material precursor material iron phosphate and supporting 600000 tons/year sulfur based sulfuric acid project" to the "Chuanjinnuo (Egypt) Suez Phosphorus Chemical Project";

On June 2nd, China Nuclear Titanium Dioxide announced the termination of its fundraising projects, including an annual production of 500000 tons of iron phosphate, and will use the remaining 1.666 billion yuan raised to improve the company's liquidity. The reason for this is due to changes in downstream market supply and demand, as well as a slowdown in demand growth;

On April 17th, Fangyuan Co., Ltd. terminated its investment of no more than 3 billion yuan in the "Battery grade Lithium Carbonate Production and Comprehensive Utilization Project of Waste Lithium Iron Phosphate Batteries" due to changes in market environment and company's business development strategy;

On April 7th, Jinpu Titanium Industry decided to terminate its investment in the 200000 ton/year lithium iron phosphate project, considering the current financial situation of its wholly-owned subsidiary Nanjing Titanium Dioxide and the temporary suspension of the project.

Sorting out the termination announcements of these projects, "market changes" has become the core keyword throughout.

In the past two years, the prices of lithium battery industry chain products have remained low, and market competition has been fierce. The prices of some products in certain links have fallen below the enterprise cost line. In order to avoid cost inversion and inventory backlog, enterprises have had to adjust their production capacity release schedule.

Meanwhile, the continuous iteration of lithium battery and material technology has also posed challenges for some enterprises. Due to insufficient R&D investment, some companies' originally planned expansion products have become outdated.

At present, lithium iron phosphate materials have developed into the fourth generation of highly compacted products, and the powder compaction density has increased from 2.40g/cm ³ in the second generation to about 2.60g/cm ³.

With the increasing demand for ultra fast charging, long cycle and other performance requirements of batteries, mainstream products in the market have shifted to high-density products of third generation and above. Leading enterprises have also begun to layout fourth generation, fifth generation and higher compacted second fired lithium iron phosphate. Projects with outdated products naturally face the fate of adjustment or termination.

In addition, the development model of the industry is also undergoing a transformation. In the early days, local policies and state-owned capital played a key role in investment in the lithium battery industry, and the introduction of the National Unified Market Construction and Fair Competition Act in 2024 is forcing the industry to shift from "scale expansion" to "quality priority".

Currently, the lithium iron phosphate track is showing a trend of differentiated development.

From the perspective of market demand, GGII data shows that in the first half of 2025, the shipment volume of lithium iron phosphate cathode materials in China was 1.61 million tons, a year-on-year increase of 68%. The capacity utilization rate has significantly improved, and it is expected that the shipment volume will reach 3.5 million tons by 2025, with an effective capacity utilization rate of over 70%. By 2027, this proportion is expected to exceed 75%.

However, the high capacity utilization rate is mainly concentrated in a few top enterprises. GGII analysis shows that the capacity utilization rates of top tier manufacturers such as Hunan Yuneng, Fulin Precision, and Defang Nano have all exceeded 90%. In order to increase shipment volume, expanding production has become inevitable.

On August 20th, Longpan Technology disclosed plans to raise no more than 2 billion yuan through a non-public offering, to invest in two high-performance phosphate positive electrode material projects in Shandong and Hubei, with a total annual production capacity of 195000 tons. The new production line will prioritize the production of fourth generation ultra-high energy density lithium iron phosphate products;

A month ago, Chuanfa Longmang and Fulin Precision announced the establishment of a joint venture company, planning to build a new 100000 ton/year high-pressure solid density lithium iron phosphate project in Mianzhu, Sichuan, and to build a precursor production line;

In June, Hunan Yuneng launched a fundraising plan of 4.8 billion yuan to expand the supply capacity of new products such as ultra-high energy density and ultra long cycle life lithium iron phosphate.

In sharp contrast to the active expansion of production by leading enterprises, a large number of small and medium-sized enterprises have been idle for a long time due to product performance not meeting the requirements of mainstream battery manufacturers.

The structural contradiction of "low-end overcapacity and high-end capacity shortage" not only explains why projects of companies such as Fengyuan Corporation have failed, but also indicates that the reshuffle of the lithium iron phosphate industry will further intensify.