Core Viewpoint - The company is expanding its production capacity by investing approximately RMB 9.5 billion in a new project to produce 60,000 tons of vinyl carbonate (VC) annually, which is expected to enhance its market share and strengthen its position in the lithium battery electrolyte additive industry [1][2]. Group 1: Project Details - The new project will be implemented in two phases, with the first phase involving the construction of a 30,000-ton VC production line, expected to take about 18 months from the start of land acquisition [1]. - The total investment for the 60,000-ton VC project is approximately RMB 16 billion, with the project covering an area of about 230 acres [1]. Group 2: Market Context - The company has been deeply involved in the lithium battery electrolyte additive industry and has benefited from the rapid growth of the lithium battery sector, leading to significant improvements in its scale and operational capabilities [2]. - Despite the growth, the company faces increasing competition in the industry, resulting in a decline in its market share [2]. - The expansion is aimed at meeting the growing supply demands from upstream customers and providing better supply chain assurance [2]. Group 3: Production Synergy - The company’s subsidiary, Hubei Huasheng Xianghe New Energy Materials Co., Ltd., has successfully entered the trial production phase for its 80,000-ton chlorinated vinyl carbonate project, which will supply stable intermediate products for the new VC project [2]. - The production of chlorinated vinyl carbonate will leverage existing infrastructure, effectively reducing marginal costs and improving the economic viability of the new VC project [2].

Core Viewpoint - The lithium battery key material, vinylene carbonate (VC), is experiencing a wave of capacity expansion led by industry leaders, highlighting robust long-term demand expectations for lithium batteries [2][7]. Group 1: Capacity Expansion Plans - Major companies are announcing large-scale VC expansion plans, with Huasheng Lithium Battery planning to invest approximately 950 million RMB to build a 60,000-ton VC production project in Hubei Province [3]. - Shandong Genyuan New Materials, backed by CATL, has unveiled a more ambitious expansion plan to construct a total of 200,000 tons of VC capacity in three phases, with a total investment of 5 billion RMB [3][4]. - Other companies are also planning smaller-scale expansions, such as Ulaanbaatar Jinda Fine Chemicals and Zaozhuang Huabo Chemical, each planning to add 3,000 tons of VC capacity [4]. Group 2: Market Demand and Trends - The concentrated expansion of VC capacity is interpreted as strong evidence of the lithium battery industry's robust long-term demand, with lithium battery production demand remaining strong [4]. - In April, the production of electrolytes increased by over 5% month-on-month, driven by the release of new electric vehicle models and the implementation of "old-for-new" policies [4][5]. - The addition ratio of VC varies across different types of lithium batteries, with higher ratios in lithium iron phosphate batteries, indicating a growing demand for VC [5]. Group 3: New Growth Drivers - The commercialization of silicon-based anode materials is creating new growth points for VC, as adding VC helps stabilize the solid electrolyte interphase (SEI) membrane, crucial for enhancing battery performance [6]. - The shipment volume of silicon-based composite materials for lithium batteries in China is expected to reach 21,000 tons in 2024, reflecting an 11% year-on-year growth, indicating the increasing demand for VC [6]. Group 4: Market Conditions and Quality Requirements - Despite the expansion wave, VC market prices have remained low, with an average price of approximately 50,000 RMB per ton, although there has been a slight recovery [6]. - Downstream battery manufacturers are raising quality standards for VC products, with some leading companies increasing purity requirements from 99.95% to 99.995% [6].