CATL, Fulin Precision Gain on JV’s Plans for New USD216 Million Battery Feedstock Plant

(Yicai) Feb. 4 -- Shares of Contemporary Amperex Technology, the world's biggest maker of electric vehicle batteries, and Fulin Precision rose after the supplier of raw materials for power batteries said their joint venture will invest CNY1.5 billion (USD216 million) in a new factory for high-quality lithium-iron phosphate cathodes.CATL [SHE: 300750] closed up 4.9 percent at CNY365.03 (USD52.61) per share in Shenzhen today, while Fulin Precision [SHE: 300432] surged 8.5 percent to end at CNY18.49 (USD2.66).Shenghua New Material will partner with local firms to build the new plant in Tongren in China’s southwestern Guizhou province, Fulin Precision said late yesterday. The factory will be able to produce 500,000 tons of ferrous oxalate a year and is scheduled to be completed and enter mass production by the end of September, with all output bought by the JV or its affiliated parties.Jiangxi province-based Shenghua will set up a joint venture project with local lithium-battery materials supplier Dalong Huicheng New Material to invest in, build, and run the plant, with Shenghua holding a 90 percent stake in the new company.Ferrous oxalate is a key feedstock used in the production of lithium iron phosphate, one of the main cathode materials for lithium-ion batteries. The Tongren plant will use waste slag from copper smelting to produce ferrous oxalate, leveraging Shenghua and Dalong's respective technical capabilities and resource advantages.The output will be used to supply Shenghua’s high tap-density LFP precursor facilities, ensuring the supply of upstream raw materials while helping to optimize production costs, Fulin Precision said.Capital InjectionIn a separate announcement the same day, Fulin Precision said it and CATL will inject capital into Shenghua to fund the Tongren project, other capacity expansion plans, and new product development. Under the arrangement, Fulin Precision will contribute CNY500 million (USD72.1 million) by converting debt claims into equity, while CATL will invest CNY747 million in cash.Fulin Precision's stake in Shenghua will drop to 64.4 percent from 79.6 percent following the capital injection, while that of CATL will increase to 33 percent from 18.7 percent.In late September, Fulin Precision announced plans to jointly invest CNY3.1 billion with CATL to increase Shenghua’s capital, a move that would have made the battery giant the controlling shareholder with 51 percent. That plan was pulled on Jan. 13, with the partners instead announcing that Fulin Precision would receive about CNY3.18 billion in strategic investment from CATL.Following the investment, CATL will become Fulin Precision’s second-largest shareholder with a 12 percent equity holding.The Tongren project is the second big investment in lithium battery feedstock announced by Fulin Precision in less than a month. Early in January, it said Shenghua plans to invest CNY8.7 billion in Ordos, Inner Mongolia Autonomous Region, to build a high-end energy storage LFP plant with an annual capacity of 500,000 tons and a ferrous oxalate factory with an annual capacity of 600,000 tons.That project will also involve teaming up with a local partner to build a JV plant with annual output of 400,000 tons of oxalic acid, a key raw material used in the production of ferrous oxalate.Rapid growth in energy storage demand for LFP batteries is driving Chinese suppliers to expand production capacity for cathode materials and is also pushing Ningde-based CATL to deepen cooperation with key upstream partners such as Shenghua to secure feedstock supplies.Editor: Martin Kadiev