Demand in the lithium battery sector remains strong, with China's copper foil industry's operating rate hitting a new high for the year [SMM Analysis]

SMM August 7 News:

According to SMM, in July 2025, the operating rate of China's copper foil enterprises was 77.28%, up 2.50 percentage points MoM and 11.00 percentage points YoY. Among them, the operating rate of large enterprises was 82.70%, that of medium-sized enterprises was 49.04%, and that of small enterprises was 65.53%. Specifically, in different sectors, the operating rate of electronic circuit copper foil was 77.38%, down 0.14 percentage points MoM and up 4.36 percentage points YoY. The operating rate of lithium battery copper foil was 77.22%, up 3.85 percentage points MoM and 14.61 percentage points YoY. It is expected that the overall operating rate of the copper foil industry will continue to climb to 78.24% in August 2025.

Operating rate of copper foil enterprises in July 2025 was 77.28%

In July 2025, the operating rate of China's copper foil enterprises continued to rise, hitting a new high for the year and significantly surpassing the same period last year. The main factor driving this growth was the strong market demand for lithium battery copper foil. Specifically, demand in the power sector remained relatively stable. Due to the off-season for NEV sales in July and August, there was no significant increase in downstream stocking demand. However, orders in the ESS sector grew significantly. On the one hand, although China has cancelled "mandatory energy storage allocation", subsidy policies in some regions have driven domestic demand. On the other hand, influenced by the US tariff window period, the rush to export has led to an increase in foreign demand. In terms of electronic circuit copper foil, end-use demand showed polarization. The traditional 3C electronics industry entered the off-season, with orders decreasing. However, orders for high-end servers and other products showed high growth.

Product inventories of the copper foil industry declined in July

In July, the finished product inventory/output ratio of the copper foil industry fell by 1.66 percentage points MoM to 14.67%, while the raw material inventory/output ratio rose by 0.07 percentage points MoM to 16.89%. Benefiting from good terminal order performance, shipments of lithium battery copper foil, in particular, surged in July, leading to a decline in industry product inventories. On the raw material side, the increase in enterprise production schedules has led to an increase in inventory reserves.

Operating rate of the copper foil industry in August 2025 is forecasted to rise to 78.24%

SMM forecasts that in August 2025, the overall operating rate of copper foil enterprises will be 78.24%, up 0.96 percentage points MoM and 9.51 percentage points YoY. The operating rate of lithium battery copper foil is expected to be 78.75% in August, up 1.53 percentage points MoM and 9.88 percentage points YoY. The operating rate of electronic circuit copper foil is expected to be 77.23% in August, down 0.15 percentage points MoM and up 8.75 percentage points YoY.

SMM expects that the overall operating rate of China's copper foil enterprises will continue to rise in August, driven mainly by lithium battery copper foil and the increase in capacity utilization rates of large enterprises. In September, the sales season for new energy vehicles will begin, so production will accelerate in August to meet the increased demand from the power sector. In the ESS sector, the installation rush driven by the One Big Beautiful Bill Act (OBBBA) will provide incremental demand.

The OBBBA restricts Chinese supply chain participation through strict "Foreign Entity of Concern" (FEOC) provisions. Projects constructed after December 31, 2025, that involve FEOCs and designated foreign entities (such as specific Chinese battery production entities) will not be eligible for Investment Tax Credits (ITC) and Production Tax Credits (PTC). Nearly 88% of US lithium battery imports come from China, and at least 50% of ESS battery cells also rely on imports from China. This will prompt Chinese ESS enterprises to seize the "window period" for exports to the US, accelerating the implementation of existing projects before the end of this year, with shipments to the US expected to increase in the short term. However, in the long term, new investments may face significant tightening.

For electronic circuit copper foil, as it is currently the traditional off-season, demand from the consumer electronics industry is expected to weaken slightly, but orders for high-end products will remain strong.