Shenghua, Backed by CATL, Funds $1.2B Expansion in Lithium Material Production

Select Language:

Shenghua New Material, a Chinese provider of high-quality lithium iron phosphate (LFP) cathode materials supported by a leading battery manufacturer, is planning a major expansion with a capital investment of approximately 8.7 billion RMB (around 1.2 billion USD). The company aims to increase its production capabilities with the construction of three new facilities in Ordos, located in Inner Mongolia.

One of the new sites will produce up to 500,000 tons annually of premium LFP for energy storage applications, while another will generate 600,000 tons of ferrous oxalate each year—an essential precursor for LFP manufacturing. In addition, Shenghua will collaborate with local partners to establish a joint venture factory in Ordos dedicated to producing 400,000 tons of oxalic acid annually, with the company holding a 40% stake in this venture.

LFP is vital for manufacturing cathodes used in both energy storage and power batteries. Ferrous oxalate serves as a raw material in LFP production, while oxalic acid is used to produce ferrous oxalate.

This project marks Shenghua’s second significant capacity expansion for LFP within three months, reflecting the increasing demand for battery materials as energy storage infrastructure expands. The company’s recent efforts follow a previous plan announced last October, involving a joint investment of nearly 6 billion RMB with regional partners in Sichuan to build two high-density LFP factories with a combined capacity of 525,000 tons.

The rising demand for LFP batteries in the energy storage sector is driving Chinese lithium battery component manufacturers to bolster production. For example, Jiangsu Lopal Tech revealed in early January that it would invest 2 billion RMB to boost its annual high-end LFP output by 240,000 tons.

Shenghua supplies cathode materials for CATL, one of the largest battery producers, which has been supporting Shenghua’s growth through financial means including equity injections and advance payments since March of last year. A recent capital increase plan announced at the end of September aims to raise CATL’s ownership in Shenghua to 51%, further strengthening its supply chain dominance.

Shares of supporting companies showed mixed reactions to the news. As of midday trading, the stock of the supplier was down 1.3% at 17.61 RMB (about 2.52 USD), despite opening with a 2.8% increase. Meanwhile, CATL’s stock declined by 1.4% to 372.31 RMB (approximately 53.31 USD).