Orient Securities released a research report highlighting that CATL (300750.SZ) has increased its focus on the high-density lithium iron phosphate (LFP) supply chain. The oxalate-iron method for LFP production demonstrates performance and process advantages in high-density applications, and the report expects its demand growth to outpace the overall LFP market, with rising industry penetration. Overall, the firm is optimistic about oxalic acid's growth prospects driven by increasing demand for high-density LFP. It recommends Hualu Hengsheng (600426.SH, Buy) and WanKai New Materials (301216.SZ, Buy).
Key insights from Orient Securities include:
**CATL's Growing Emphasis on Oxalate-Iron High-Density LFP Supply Chain** While the LFP market as a whole is becoming commoditized, limiting sustained high growth, structural opportunities remain. In September, CATL planned to increase its stake in Fulin Precision’s subsidiary Jiangxi Shenghua, signaling heightened attention to securing high-density LFP supply. Fulin Precision is a leading player in oxalate-iron LFP production, a key technology for fourth- and fifth-generation high-density LFP.
Since 2021, CATL has supported Shenghua’s expansion through capital injections and prepayments, locking in production capacity. If the restructuring proceeds, their relationship will shift from a buyer-supplier dynamic to an integrated supply chain. Jiangxi Shenghua also plans a CNY 4 billion investment to expand oxalate-iron LFP capacity, reflecting rising demand expectations.
**Performance and Process Advantages of Oxalate-Iron LFP** The push for material performance upgrades stems from fast-charging EV and high-capacity energy storage needs, driving demand for high-density LFP. High-density LFP commands a premium of CNY 1,000–3,000 per ton, significantly impacting profitability in a margin-sensitive industry.
Oxalate-iron LFP offers advantages in purity, crystallinity, and bonding strength, ensuring better capacity and rate performance. The process requires only one sintering step, avoiding efficiency losses from secondary sintering and reducing energy consumption—critical as the EU’s new Battery Regulation raises carbon footprint standards.
Orient Securities expects oxalate-iron LFP demand growth to surpass the broader LFP market, with increasing adoption. This explains CATL’s supply chain focus, which may also boost oxalic acid demand.
**Oxalic Acid Faces Tightening Supply-Demand Dynamics** Oxalic acid’s primary applications include rare earths, pharmaceuticals, and new energy. With oxalate-iron LFP output surging, new energy could become its largest end-use sector. Fulin Precision and Pengbo New Materials plan 550,000 tons of combined oxalate-iron LFP capacity (phased rollout). Assuming first-phase production and inventory buildup, full operation could add over 180,000 tons of oxalic acid demand (at 0.65 consumption ratio).
New oxalic acid supply is limited until late 2026, with only Tianye Huihe (a subsidiary of Xinjiang Tianye) and Tongliao Jinmei adding 30,000 and 100,000 tons, respectively, in H1 2025. Despite potential delays, supply-demand tightening is likely, supporting price increases.
**Risks** Lower-than-expected oxalic acid demand; faster-than-expected supply expansion; statistical inaccuracies in capacity data.
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