Iron phosphate rose from approximately RMB 10,000/MT at year-end 2025 to RMB 14,500–15,000/MT by mid-July, per SMM's H1 LFP cathode review (July 13) and Hunan Yuneng's own client letter (SMM, July 16). The driver is sulfur, not lithium. Hunan Yuneng states iron phosphate now accounts for over 70% of LFP processing fees and announced a +RMB 2,000/MT processing fee increase across all LFP product series effective August 1.
The settlement basis is shifting underneath this. Per SMM's July 13 review, some leading and mid-sized cell manufacturers began accepting iron-phosphate-linked settlement in April–May 2026, using SMM's monthly average iron phosphate price as the benchmark. Adoption is partial. Most tier-one and tier-two battery plants have not switched. But the model exists, and SMM flags its expansion as "the core variable" for H2.
A contract indexed only to lithium carbonate captures one input while the other moves against you. Lithium carbonate fell 7.2% WoW through late July. Iron phosphate processing fees rose. If your supplier's cathode costs are settling on an iron phosphate index upstream while your cell contract references lithium, that divergence will compress someone's margin. The question is whose, and whether your contract makes that explicit or leaves it to the next negotiation cycle.
Iron phosphate, YTD: ~RMB 10,000/MT → RMB 14,500–15,000/MT (+40–50%), per SMM July 13 and Hunan Yuneng via SMM July 16
Share of LFP processing fees: >70%, per Hunan Yuneng's client letter
August 1 increase: +RMB 2,000/MT on all Hunan Yuneng LFP series; industry operating rate at ~90%, high-end capacity "particularly constrained"
Gen 3 processing fees: broke through RMB 19,000/MT before the August increase; Gen 3.5+ already above RMB 20,000/MT
Cost chain lithium doesn't capture: sulfur → phosphoric acid / ferrous sulphate → iron phosphate → LFP processing fee
Settlement shift: some cell makers now accept monthly iron phosphate linkage (SMM benchmark); most top-tier plants have not yet adopted
H2 outlook (SMM, July 13): sulfur unlikely to pull back short-term; iron phosphate supply "relatively tight"; prices "highly likely to stay high"
Ask your supplier: Does your processing fee clause reference lithium carbonate only, or does it capture iron phosphate exposure? Has the supplier accepted iron-phosphate-linked settlement upstream?