On June 8, Shandong Fengyuan Chemical announced that its wholly-owned subsidiary Shandong Fengyuan Lithium Energy Technology would be signing an investment agreement with the government of Gejiu. Located within China’s Yunnan Province, Gejiu is a county-level city that has a large mining industry.

According to the announcement, both parties will jointly develop an integrated production base for manufacturing high-performance cathode materials. The production capacity of the base is set at 500,000 tons per year, and the total investment is estimated around RMB 1.25 billion. The base would be located in a local industrial park, and its area would span around 260 mu.

Gejiu is in the southeastern part of Yunnan and occupies a large belt of polymetallic ores that have a high-tin content. Due to being rich in mineral resources, Gejiu has developed a complete industry for the processing non-ferrous metals. Around 80% of the city’s total industrial output value is related to non-ferrous metals.

The government of Gejiu would be responsible for coordinating the allocating of mineral resources within its jurisdiction and assisting Fengyuan Lithium in obtaining raw materials such as kaolin clay with a high lithium content and lithium ores.                                            

China’s industries for NEVs and energy storage systems are growing rapidly, thereby keeping demand high for cathode materials used in Li-ion batteries. TrendForce’s research finds that the demand for cathode materials used in NEV power batteries is projected to surpass 2.15 million tons by 2025.

Fengyuan Lithium said that the proposed base would be outputting mainly high-performance LFP cathode materials. This investment would expand the company’s production and help the company to obtain economies of scale and improve its market competitiveness.

Moreover, Fengyuan Lithium would be able to secure a stable supply of raw materials such as lithium clay and lithium ores from Gejiu. This, in turn, would not only mitigate the adverse effects of fluctuations in prices of raw materials but also lower production costs. Additionally, Fengyuan Lithium would be in a better position to explore opportunities in the upstream sections of the industry chain for Li-ion batteries. All in all, this investment would have a positive significance in Fengyuan Lithium’s growth stratetgy.

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.