Longpan Technology Lithium Iron Phosphate Production Cut Maintenance and Industry Supply-Demand Analysis Report

According to the announcement released by Longpan Technology (603906.SZ) on December 29, 2025, the lithium iron phosphate production lines of Changzhou Liyuan New Energy Technology Co., Ltd., a holding subsidiary of the company, have been operating at full capacity since the fourth quarter of 2025. To ensure safe, stable and efficient operation of the production lines, it was decided to carry out production cut maintenance on some lines starting from January 1, 2026. The maintenance is expected to last one month, reducing lithium iron phosphate production by approximately 5,000 tons [1][2]. The company clearly stated that this production cut maintenance will not have a significant impact on its 2026 operating performance.

Notably, this production cut maintenance is not an isolated case. Several leading lithium iron phosphate enterprises including Hunan Yuneng, Desay Nanomix, Wanrun New Energy, and Anda Technology have also issued similar announcements. The maintenance periods are all concentrated in January 2026, with expected production reductions ranging from 3,000 tons to 35,000 tons [1]. This highly coincident timing of concentrated maintenance by leading enterprises has sparked market attention on implicit collaborative games in the industry.

From January to November 2025, China’s cumulative lithium iron phosphate production reached 3.1129 million tons, a year-on-year increase of 59.28%, and the industry’s capacity utilization rate rose to 75.75% [3]. Leading enterprises generally achieved a capacity utilization rate of over 90%, with high operating loads for first- and second-tier enterprises, while some small and medium-sized enterprises still have room to improve their operating rates. This pattern of ‘full production for leading enterprises, pressure for small and medium-sized enterprises’ reflects obvious structural characteristics of the industry.

In terms of production growth rate, the industry’s production growth rate was about 35.2% in 2024, while in 2025, benefiting from the increase in new energy vehicle penetration and the爆发 of the energy storage market, the production growth rate jumped to nearly 60% [3]. SMM predicts that lithium iron phosphate material production will reach 4.6906 million tons in 2026, with a year-on-year growth rate falling to around 25%, and the supply-side growth rate will slow down significantly.

Although the lithium iron phosphate production volume has increased by nearly 60% year-on-year on the surface, the actual supply and demand show a structural characteristic of ‘tight supply of high-end products, oversupply of low-end products’ [3]. Downstream battery enterprises have strong demand for high-end products with high compaction density and long cycle life. Products such as Hunan Yuneng’s CN-5 series and Desay Nanomix’s fourth-generation products are in short supply, with orders scheduled until the first half of 2026. However, the capacity utilization rate of a large number of small and medium-sized enterprises that have not completed technological upgrading remains low, and there is an actual gap in the industry’s effective capacity.

This structural contradiction directly led the industry into a dilemma of ‘volume growth but profit decline’. According to Fubao Information’s calculation, the average gross profit margin of lithium iron phosphate capacity-type products was only 0.93% in the first half of 2025, further falling to 0.4% at the end of November. Most enterprises are trapped in the dilemma of ‘losing money if they take orders, and also losing money if they don’t take orders’ [3].

The downstream demand shows a strong growth trend. In the power battery market, the cumulative installed capacity of domestic power batteries from January to October 2025 reached 578.0 GWh, a year-on-year increase of 42.4%, of which lithium iron phosphate batteries accounted for 81.3% with an installed capacity of 470.2 GWh, a year-on-year surge of 59.7% [3]. The energy storage battery market also performed well. According to JPMorgan Chase’s report, the global energy storage battery shipment volume reached 489.9 GWh in the first 10 months of 2025, a year-on-year increase of 99%, almost all using lithium iron phosphate routes.

From the financial data, Longpan Technology has been under continuous pressure in recent years. In 2023, 2024, and January-September 2025, the company’s net profit attributable to parent company was -1.233 billion yuan, -636 million yuan, and -110 million yuan respectively, with the loss margin continuing to narrow [3]. The 2025 third-quarter report shows that the company’s EPS was -0.04 yuan, which was lower than the market expectation of 0.10 yuan, but has improved significantly compared to the previous period.

The company’s current market capitalization is 11.31 billion US dollars, with a stock price of about 20.01 yuan and a P/E ratio of -30.75 times, reflecting the market’s concern about the company’s failure to achieve profitability [0]. It is worth noting that the company’s stock price has performed strongly since 2025, with an annual increase of more than 100%, reflecting the market’s expectation of the recovery of the new energy track.

Financial analysis shows that the company’s current debt risk level is ‘high risk’ [0]. In terms of key financial indicators, ROE is -14.74%, net profit margin is -5.66%, operating profit margin is -7.13%, current ratio and quick ratio are 0.91 and 0.77 respectively, all below healthy levels. The company adopts conservative accounting policies, and the high depreciation and capital expenditure ratio indicate that it is in the investment recovery period, with large room for future profit improvement.

Concentrated production cut maintenance by leading enterprises is expected to have the following effects in the short term:

• January 2026
  : Industry supply will contract by approximately 50,000-70,000 tons (annualized). Combined with the Spring Festival holiday factor, the supply-side pressure will be significantly relieved
• Price Support
  : The production cut news will form short-term support for lithium carbonate and lithium iron phosphate prices, and the price center is expected to move upward
• Inventory De-stocking
  : According to SMM data, as of early December, the inventory of lithium iron phosphate materials was 103,700 tons, an increase of 5.49% compared to the end of the previous quarter. Production cuts will help digest inventory

Time Node	Demand Growth Rate	Supply Growth Rate	Supply-Demand Status	Driving Factors
Q4 2025	45%	60%	Oversupply	Concentrated capacity release period
Q1 2026	35%	25%	Marginal Improvement	Production cut maintenance + peak demand season
Q2 2026	30%	22%	Gradual Balance	Sustained demand growth + slowing supply
H2 2026	28%	20%	Expected Balance	Elimination of outdated capacity
2027	25%	18%	Tight Supply-Demand Balance	Stable demand growth rate

:<br>- Accelerated elimination of high-cost capacity (continuous withdrawal of lithium extraction capacity from lithium mica)<br>- Global lithium resource increment is expected to be less than 300,000 tons of LCE in 2026<br>- The gap between outdated capacity and enterprises that have completed technological upgrading is widening

:<br>- Continuous increase in new energy vehicle penetration rate (expected to exceed 45% in 2026)<br>- High growth in energy storage market (expected growth rate of 40%-50% in 2026)<br>- Overseas market expansion (lithium iron phosphate trend in Europe and the United States)

The lithium iron phosphate industry is at a key node of transformation from ‘volume growth and price decline’ to ‘volume and quality improvement’. Leading enterprises conduct supply-side regulation through joint production cuts, which is essentially a tacit behavior to avoid further deterioration of profits due to ‘price wars’ [1]. It is expected that the industry will gradually achieve supply-demand balance in the second half of 2026, and enterprises with technical advantages and cost control capabilities will stand out in industry integration.

Against this background, Longpan Technology is simultaneously advancing its expansion plan, intending to increase the total capacity of the Sichuan Suining project to 187,500 tons/year, and plans to raise no more than 2 billion yuan for the construction of high-performance phosphate-type cathode material projects [1], showing the company’s confidence in the long-term development of the industry.

• Overcapacity Risk
  : New industry capacity is still being released, and the capacity utilization rate of small and medium-sized enterprises remains low
• Price Volatility Risk
  : Lithium carbonate price fluctuations have a significant impact on lithium iron phosphate costs
• Technology Iteration Risk
  : Technological progress of ternary batteries may erode the market share of lithium iron phosphate
• Policy Risk
  : Changes in new energy vehicle subsidy policies may affect demand expectations

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[1] East Money - Anchoring the Cycle Inflection Point of the Lithium Iron Phosphate Industry: Longpan Technology Advances Production Cut Maintenance and Expansion Simultaneously (https://finance.eastmoney.com/a/202512313606939723.html)

[2] Daily Economic News - Longpan Technology: Holding Subsidiary Changzhou Liyuan Conducts Production Cut Maintenance on Some Lithium Iron Phosphate Lines (https://www.nbd.com.cn/articles/2025-12-29/4199969.html)

[3] Futu News - Lithium Iron Phosphate Price Hike Surges: Supply-Demand Reconstruction Under Demand Outbreak, Rise May Continue Until 2026 (https://news.futunn.com/post/66618919)

[0] Jinling API - Longpan Technology (603906.SS) Company Overview and Financial Data