CATL Invests $211M in Shenghua New Materials for LFP Cathode Supply

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Contemporary Amperex Technology is set to make an initial payment of 1.5 billion CNY (about $211 million) to Jiangxi Shenghua New Materials, where it holds a significant stake alongside Fulin Precision, to ensure a steady supply of lithium iron phosphate (LFP) cathodes and other essential battery components. This month, CATL will allocate 500 million CNY (approximately $70.3 million) to Shenghua, followed by an additional 1 billion CNY in November. These funds will support the development of new manufacturing lines dedicated to LFP cathodes and related battery materials, which will eventually be supplied exclusively to the Chinese battery manufacturer. Shenghua is expected to repay CATL through product shipments starting three months after March next year.

This advance payment is designed to secure LFP cathode supplies for CATL and to assist Shenghua in completing the setup of new production facilities on schedule. If the project progresses smoothly, it could significantly increase Shenghua’s capacity for producing LFP cathodes and expand its sales.

Shares of Fulin Precision, an auto parts and cathode materials producer, rose 3 percent today in Shenzhen, closing at 16.35 CNY (around $2.30), while CATL increased slightly by 0.4 percent, ending the day at 368.49 CNY (about $51.81).

In March, CATL invested 339 million CNY (roughly $47.6 million) to acquire an 18.7 percent stake in Shenghua, making it the second-largest shareholder. The companies renewed their supply agreement in June, with Shenghua committed to prioritizing the production of LFP cathodes that meet CATL’s specifications from this year through 2029. As part of the partnership, CATL will support Shenghua’s capacity expansion efforts via advance payments.

Last year, Shenghua sold approximately 126,200 tons of LFP cathodes, which generated around 4.8 billion CNY ($674 million) in revenue, accounting for roughly 57 percent of Fulin Precision’s total annual sales.

Compared to the more common ternary lithium batteries used widely in electric vehicles around the world, lithium-iron phosphate batteries are less expensive, safer, and environmentally friendlier. They currently dominate China’s new-energy vehicle market in terms of installed capacity and application.