Core Viewpoint - The Chinese lithium battery separator industry is expected to experience significant growth, with a projected shipment volume of 32.3 billion square meters in 2025, representing a year-on-year increase of 45.4% [4]. Supply and Demand Dynamics - The supply-demand situation is shifting from a loose balance to a tight balance, with leading companies operating at full capacity, resulting in a surge in capacity utilization rates. However, due to limitations in expansion cycles, a supply gap is anticipated to emerge by 2027 [5][13]. - The industry is currently experiencing a high capacity utilization rate, with the utilization rate for wet-process separators expected to exceed 80% by Q4 2025, approaching the high point of 2022 [12]. Price Trends - Prices remain low, with only a slight rebound in the second half of the year for wet-process separators, indicating that a comprehensive price increase cycle has not yet begun [6]. Market Structure Changes - The market structure is undergoing a transformation, with the share of dry-process separators expected to drop below 18% in 2025, while wet-process separators will dominate with an increase to 82.6% [9]. Key Driving Factors - The cost-performance advantage of wet-process separators is becoming more pronounced, leading to a shift in customer preferences. The price difference between mainstream wet and dry-process base films has narrowed to within 0.15 yuan per square meter [10]. - Upgraded downstream demand, particularly in the energy storage sector, is driving the increased application of wet-process separators, which require higher stability and consistency [11]. Technological Advancements - The industry is focusing on high-end demands, with significant performance upgrades expected in 2025. The application of high puncture strength 5μm wet-process separators is increasing, with over 30% usage among leading battery companies by Q4 [14]. - The demand for separators with high heat shrinkage performance is rising, particularly with the scaling of silicon-carbon anodes, which is becoming a focal point for technological competition [14]. Future Outlook - The separator industry is expected to maintain high prosperity in 2026, with several key trends anticipated: 1. Continued increase in capacity utilization rates, with an expected rise of 7-10 percentage points, and peak utilization for wet-process separators exceeding 85% [14]. 2. A rebound in prices, with mainstream wet-process separator prices expected to increase by 10-20% year-on-year as the market tightens [14]. 3. Accelerated penetration of high-end products, with the application of 5μm high puncture wet-process separators among leading companies expected to exceed 50% [14]. 4. A rise in demand for separators with high heat shrinkage performance, with the proportion of 180℃ heat shrinkable separators expected to surpass 0.5% [14].