On August 29, the new energy sector on China's A-share market experienced a strong breakout, with the ChiNext Index rising over 3%. CATL, the largest weighted stock on the ChiNext, surged more than 13% intraday before closing up 10.37% at 306.18 yuan per share. Additionally, BYD gained 4.34%, EVE Energy rose 6.84%, and Gotion High-Tech hit the daily limit with a 10.02% increase. The battery sector overall climbed 4.36%, with net inflows of nearly 5.4 billion yuan from major funds, demonstrating strong market confidence in the sector.
**Industry Initiative Against Malicious Competition**
Alongside the stock price surge, the industry is actively seeking transformation. Recently, the China Chemical and Physical Power Sources Industry Association released the "Proposal on Maintaining Healthy and Orderly Development of the Lithium Iron Phosphate Material Industry (Draft for Comments)." The initiative was jointly launched by nine industry leaders including Hunan Yuneng, Dynanonic, and Dangsheng Technology.
The proposal explicitly calls to "resolutely resist malicious price competition and maintain fair market order," urging companies to strictly comply with national laws and regulations and eliminate unfair competition practices such as selling below cost and abusing market dominance.
To effectively combat vicious price competition, the association proposes establishing a "Lithium Iron Phosphate Product Cost Price Index" and commissioning third-party institutions to conduct regular cost research and index compilation, providing objective reference points for reasonable pricing.
**Overcapacity Crisis Behind the Initiative**
This proposal addresses the increasingly severe overcapacity problem in the lithium iron phosphate industry. Data shows that domestic lithium iron phosphate utilizable capacity reached 5.32 million tons in the first half of 2025, but overall capacity utilization remained low, exhibiting characteristics of "total surplus, structural shortage."
As of the first half of 2025, China's lithium iron phosphate material capacity accounts for over 95% of global total capacity, occupying a core position in the global industrial chain. However, the industry's rapid development has exposed problems including persistent losses for most companies, severe lithium resource price volatility, and frequent low-level redundant construction. These issues not only damage individual company interests but also pose serious challenges to sustainable industrial chain development and international competitiveness.
**Four Core Measures for Healthy Development**
Beyond resisting malicious price competition, the proposal outlines four core measures to guide the industry toward healthy and orderly development:
The initiative calls for building a positive supply chain ecosystem to collaboratively address raw material market volatility. Severe price fluctuations in key raw materials like lithium and phosphorus have significantly impacted industrial chain stability.
It demands strengthened capacity self-discipline management and improved industry access mechanisms. Dynamic capacity utilization monitoring will be implemented: at the enterprise level, when annual capacity utilization falls below 70%, companies should proactively postpone new capacity investment plans.
The association also calls for companies to shift competitive focus from pricing to comprehensive improvements in technology R&D, product performance, manufacturing processes, and service systems, adhering to innovation-driven development and moving from inefficient homogeneous competition to high-quality new tracks.
**Supply Chain Coordination Against Price Volatility**
Notably, the Lithium Industry Branch issued a similar initiative on August 12, calling on lithium industrial chain-related companies to resist "involutionary" malicious competition, strengthen upstream and downstream coordination, and maintain industrial security.
Following this initiative's release, lithium carbonate futures prices rose sharply for consecutive days, with the main contract's cumulative gains reaching nearly 18% over two days, approaching 90,000 yuan per ton and hitting new highs since July 2024.
Additionally, lithium resource supply has tightened further due to CATL's Yichun project mining license expiration and temporary suspension of operations. CATL confirmed on its interactive platform that mining operations were indeed suspended after the Yichun project's mining permit expired on August 9.
**Energy Storage Industry Development**
Price volatility in the lithium iron phosphate industry may also be linked to rapid energy storage industry development. The booming energy storage industry provides vast market space for lithium iron phosphate materials. According to latest data, China's cumulative installed capacity of new energy storage reached 101.3GW in the first half of this year, doubling year-on-year and surpassing 100GW for the first time.
During the "14th Five-Year Plan" period, energy storage technology route structures have changed significantly, with pumped storage accounting for less than 40% for the first time, while new energy storage represented by lithium batteries achieved leapfrog growth.
Lithium battery energy storage remains the mainstream technology route. In the first half of this year, Chinese companies' global energy storage battery shipments reached 233.6GWh. In energy storage systems, seven of the top ten global companies by shipment volume in the first half were Chinese, including Sungrow, CRRC Zhuzhou Institute, and Highpower Technology.
**Market Outlook**
Market analysis suggests that industry association initiatives will help stabilize product prices and ease corporate operational pressure. Long-term benefits include accelerating backward capacity elimination and promoting resource concentration toward technologically advanced companies.
As initiatives are implemented, industry capacity expansion will become more rational. Quality companies' capacity utilization rates are expected to improve, while technologically backward, high-energy-consumption production lines will be gradually eliminated, potentially accelerating industry concentration.
Leading companies with technological advantages and scale effects will benefit from increased industry concentration, with improved profitability expectations. Meanwhile, supply chain coordination and innovation upgrades promoted by the initiative will provide development momentum for companies in high-end material R&D and intelligent production line transformation.
At market close, the lithium iron phosphate sector saw net inflows of 4.495 billion yuan from major funds, ranking among the top three in A-share markets. Leading companies including CATL, BYD, and EVE Energy posted strong gains. The market is voting with real money for industry self-discipline.