Orient Securities released a research report highlighting the potential upward revision in the phosphorus industry's growth expectations amid rapid energy storage demand expansion. The firm is most optimistic about the phosphorus ore segment, which has the most rigid supply, and recommends focusing on companies with significant future phosphorus mine capacity additions or existing large-scale production. For the lithium iron phosphate (LFP) sector, the report suggests monitoring potential recovery opportunities driven by demand-supply mismatches.

Key insights from Orient Securities include:

**Energy Storage Growth Boosts Phosphorus Ore Demand** As the global energy landscape undergoes transformation, energy storage development has elevated phosphorus resources as a critical component in the energy transition. From food security to energy security, phosphorus ore is undergoing a value reassessment. Recent market attention on the phosphorus chemical sector stems from rising expectations of demand growth driven by energy storage.

In H1 2025, global energy storage battery shipments exceeded 260GWh, with full-year projections surpassing 500GWh—a 60% year-on-year increase. Approximately 95% of these batteries use LFP technology. Based on an estimated 0.25 million tons of LFP required per GWh, energy storage demand could drive ~1.2 million tons of LFP consumption in 2025.

Within the LFP supply chain, phosphorus ore remains the most supply-constrained segment. Orient Securities estimates that each ton of LFP requires ~3.5 tons of raw phosphorus ore, translating to ~4.4 million tons of additional phosphorus ore demand in 2025—over 4% of China’s current total output. Every incremental 100GWh in storage shipments could further drive nearly 1% growth in phosphorus ore demand.

**Supply-Side Pricing Power Strengthens Tight Balance** Market concerns over phosphorus ore’s sustainability persist due to potential oversupply from new projects post-2021’s price surge. While resilient prices and uncertain project timelines have eased some worries, investors largely anticipate a post-peak decline. However, Orient Securities argues that systemic supply-demand imbalances are unlikely in the coming years, given orderly capacity expansions and enhanced supplier pricing power. Rising emerging demand could further lift the phosphorus ore growth curve.

**Energy Storage May Revise Phosphorus Industry Growth Expectations** Under high-growth energy storage scenarios, storage-driven phosphorus ore demand could surpass that of electric vehicles, becoming a core demand driver. This shift may delay feared oversupply thresholds and even create temporary shortages. If storage growth exceeds expectations, phosphorus ore’s outlook could see further upward revisions.

Additionally, midstream material utilization rates may recover moderately, with recent industry improvements already observed. If supply expansions remain disciplined, LFP and other key materials could rebound from current depressed levels.

**Risks:** Slower-than-expected demand growth; excessive capacity expansions; model uncertainties.