China's Shenghua Begins Production at Yichun LFP Plant

Shenghua New Material

Jiangxi Shenghua New Material, a leading Chinese manufacturer of lithium-iron-phosphate (LFP), has initiated production at its new LFP facility in Yichun city, located in southeastern China’s Jiangxi province. The facility is being constructed in two phases, with each phase contributing 75,000 tonnes per year of LFP production capacity. The first phase, representing an investment of 1.5 billion yuan ($214 million), includes six production lines. The trial run of the first line has already started, and full production is expected to begin by mid-October. All six production lines are scheduled to be operational by the end of 2024.

Partnership with CATL Strengthens LFP Output

Shenghua has partnered with CATL, China’s largest power battery manufacturer, to build the plant and supply its products. CATL has made an advance payment to support the plant’s construction, and in return, Shenghua has committed to supplying CATL with at least 140,000 tonnes of LFP annually from 2025 to 2027.

Shenghua’s output has rapidly expanded, producing 47,000 tonnes of LFP in the first half of 2024, more than tripling from 15,102 tonnes during the same period in 2023. For the entire year of 2023, Shenghua produced 42,159 tonnes of LFP, with a production capacity of 140,000 tonnes per year. The company supplies LFP to major clients such as CATL, Svolt Energy Technology, and Henan Lithium Power Battery Technology.

LFP batteries continue to dominate China's energy storage market. In August, LFP batteries accounted for 75% of production and 74% of installed battery volumes, according to data from the China Automotive Battery Innovation Alliance.

CATL Secures LFP Supply from Shenghua to Boost Battery Production

LFP

CATL Signs Strategic LFP Supply Agreement

China’s largest battery manufacturer, CATL, has entered into a major supply agreement with Jiangxi Shenghua New Material to secure long-term lithium iron phosphate (LFP) cathode materials. The deal involves a 500mn yuan ($69.6mn) advance payment to help finance Shenghua’s construction of two new LFP production facilities. These will include a 160,000 t/yr plant in Yichun, Jiangxi, and a 200,000 t/yr plant in Sichuan, significantly expanding the company’s capacity.

Priority Supply for CATL Through 2029

Under the agreement, Shenghua will prioritize all designed capacity to meet CATL’s specifications between 2025 and 2029. CATL has committed to purchasing at least 80% of Shenghua’s annual production during this period. Shenghua’s LFP output has surged from 42,159t in 2023 to 128,240t in 2024, with sales climbing at a similar pace. The company currently supplies major battery producers such as CATL, Svolt Energy Technology, and Henan Lithium Power Battery Technology.

Strengthening China’s EV and Energy Storage Market

LFP batteries accounted for nearly half of the global EV battery market in 2024, with an even greater share in China due to their cost advantages and safety profile. As geopolitical tensions and US tariffs limit export opportunities, Chinese manufacturers are intensifying efforts to stimulate domestic demand through new energy vehicle (NEV) and energy storage system (ESS) expansion. This strategic partnership positions CATL to maintain secure material supply and enhance competitiveness in both sectors.

The Metalnomist Commentary

This deal underscores the strategic importance of upstream material control in the rapidly growing EV and ESS sectors. By locking in long-term LFP supply, CATL is mitigating raw material risk while supporting China’s domestic manufacturing resilience. In a market facing geopolitical pressure, vertical integration remains a key competitive advantage.

China's Tsingshan Partners in Major LFP Project

Collaborative Development in Guizhou

China's largest stainless steel producer, Tsingshan, is teaming up with Huayou Cobalt, a leading battery materials and metals producer, and Huafon, an adipic acid manufacturer, to develop a significant phosphate-coal-chemical integration project in Zhijin county, Guizhou province. The project, valued at 73 billion yuan ($10.3 billion), aims to establish a comprehensive production complex.

The new facility will feature a range of production lines, including 1.5 million tons per year of iron phosphate, 800,000 tons per year of lithium iron phosphate (LFP), and 1 million tons per year of dimethyl carbonate. Additionally, it will produce 800,000 tons per year of synthesis ammonia, 500,000 tons per year of methanol from coke oven gas, and 5 million tons per year of coking. Zhijin county, known for its rich mineral resources, is an attractive site due to its coal reserves exceeding 15 billion tons and phosphate rock reserves nearing 3.5 billion tons.

Industry Trends and Government Regulations

The growing demand for LFP materials, driven by the electric vehicle sector, has led many Chinese firms to expand their capacities. For instance, in August, CATL, China's largest power battery manufacturer, announced plans to collaborate with Jiangxi Shenghua New Material on a new plant. However, concerns about potential oversupply have prompted the Chinese government to implement measures to curb overcapacity and encourage technological advancements. Xinjiang International Industry's decision to terminate its LFP energy storage battery project in June reflects these regulatory pressures.