Major Chinese battery manufacturer CATL is rapidly expanding its presence in the upstream part of the Li-ion battery supply chain. On September 7, Chinese battery material producer Lopal Technology announced that it will be developing a project for manufacturing lithium carbonate with two wholly-owned subsidiaries of CATL. The production capacity of the project is set at 300,000 tons per year. The total investment in the project is projected to be no more than RMB 1.5 billion. CATL arranged this joint project with Lopal right after it had terminated another similar project that it intended to develop with Yongxing Materials.
According to Lopal’s announcement, the new lithium carbonate project will be implemented through a joint venture that it formed with one of the two subsidiaries under CATL this March. Regarding the shareholding structure of the joint venture, Lopal and the subsidiaries will be transferring shares amongst themselves at a price of RMB 1.
Cathode materials used in LFP batteries are among Lopal’s main offerings. As for CATL’s two subsidiaries, one specializes in additional processing of upstream raw materials and has been supplying lithium carbonate to Lopal. The other subsidiary mines and sells spodumene ores that contain lithium. Meanwhile, CATL has been Lopal’s top customer for cathode materials used in LFP batteries.
Under the joint project agreement, the three parties will work together to set up 300,000 tons per year of production capacity for lithium carbonate. Moreover, CATL will provide the joint venture with a guaranteed level of supply for sopodumene ores.
Lopal stated that the joint project agreement is an extension of the supply-chain ties among the three signatories. Lopal and CATL will consolidate their resources and synergize their existing advantages in order to enhance the stability of the shared supply chain. By working together, Lopal and CATL will also minimize the negative effects resulting from fluctuations in prices of upstream raw materials.
CATL and Yongxing’s Joint Project Was Terminated Three Days Earlier
Just three days ago on September 5, Yongxing announced that it was terminating a lithium carbonate project that it had been developing with CATL. The production capacity of that project was set at 50,000 tons per year.
Yongxing and CATL signed a joint venture agreement on January 26 this year to set up production capacity for lithium carbonate. The total investment was limited within RMB 2.5 billion. According to the original development plan, the first phase would set up 30,000 tons per year and entail an investment of no more than RMB 1.5 billion. Once the first phase entered operation, Yongxing and CATL will begin the second phase that would set up the remaining production capacity. The agreement between Yongxing and CATL also encompassed collaborations in the development and supply of lithium carbonate products.
As for the reason behind the termination of the project, Yongxing said due to unforeseen developments in the fundraising process, both sides pursued further discussions and eventually agreed to this outcome. However, Yongxing is not ruling other forms of partnership with CATL depending on the actual market circumstances.
At an online shareholders meeting on September 7, CATL said that the project with Yongxing was terminated “amicably” as both parties realized that there are unresolvable issues related to fundraising and construction. Moreover, CATL pointed out that there are many potential partners that have the capacity to manufacture lithium carbonate, so this setback will not significantly affect its progress in product development.
Lopal as New Participant in CATL’s Supply Chain
CATL and Lopal’s lithium carbonate project will be implemented through the joint venture. Currently, Lopal has the controlling stake (i.e., 69%) in the joint venture. Established in 2003 and headquartered in the Nanjing Economic and Technological Development Zone, Lopal manufactures and sells chemical products for a wide range of applications (e.g., green energy and “environment-friendly automotive solutions”). The company was listed in the domestic stock exchange in 2017. Then, in 2020, the company formally entered the markets for cathode materials used in LFP batteries and hydrogen production. Through its holding subsidiary Changzhou Liyuan New Energy Technology, Lopal acquired BTR’s lithium carbonate business in 2021.
Lopal began collaborating with CATL in November 2021. At that time, CATL paid RMB 350 million to book the entire production capacity of one of Lopal’s subsidiaries. This subsidiary is setting up 500,000 tons per year of production capacity for lithium carbonate. Through its subsidiaries, CATL also made several strategic investments in Changzhou Liyuan in December 2021. These investments support the development of a project in China’s Shandong Province for manufacturing cathode materials used in LFP batteries.
Around the same time, CATL arranged an advancement payment agreement to book the entire production capacity of Changzhou Liyuan’s subsidiary in Shandong from the date that it enters operation to December 31, 2023. The amount that CATL will be acquiring is estimated at 75,000 tons.
Since entering the market for cathode materials used in LFP batteries, Lopal saw a rapid improvement in its financial performance. For 2021, its annual total revenue grew by 111.72% year on year to reach a record high of RMB 4.054 billion. Its net profit for the same year also climbed 72.98% year on year to RMB 350 million. Its subsidiary Changzhou Liyuan generated RMB 1.895 billion in revenue and RMB 225 million in net profit for 2021. The net profit that was attributable to the parent company came to RMB 176 million.
Turning to the first half of this year, Lopal’s revenue for the period registered a massive year-on-year growth of 371.12% to around RMB 6 billion. Its net profit jumped 196.32% year on year to RMB 433 million. Furthermore, the company’s sales of cathode materials used in LFP batteries totaled around 45,000 tons, translating to a revenue of RMB 5.083 billion. Cathode materials used in LFP batteries now comprise more than 85% of Lopal’s revenue stream.
This article is a translation of a Chinese article posted by TrendForce. It contains information that is either sourced from other news outlets or accessible in the public domain. Some Chinese names are transcribed into English using Hanyu Pinyin.