[SMM Analysis] Interpretation of Lithium Battery Policies

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SMM, January 9—The lithium battery industry has ushered in its first major new regulation at the start of 2025. On January 2, 2025, China's Ministry of Commerce released the adjusted content of the "Catalogue of Technologies Prohibited or Restricted from Exporting from China" (hereinafter referred to as the "Restricted Catalogue") and solicited public opinions. Among the adjustments, the preparation technologies for lithium battery cathode materials, phosphate cathode raw materials, and spodumene lithium extraction production technologies have drawn significant market attention and sparked widespread discussion.

The newly added control points for cathode material preparation technologies include the following for LFP: Material powder compaction density under 300MPa ≥ 2.58g/cc, 0.1C reversible capacity ≥ 160mAh/g, and initial Coulombic efficiency ≥ 97%.For LMFP preparation technologies, the control points are: Material powder compaction density under 300MPa ≥ 2.38g/cc, initial Coulombic efficiency at 0.1C ≥ 90%, reversible capacity at 0.1C ≥ 155mAh/g, average voltage at 0.1C ≥ 3.85V, discharge capacity retention rate at 1C ≥ 97%, and discharge capacity retention rate at 2C ≥ 95%.Currently, Chinese enterprises hold a globally leading position in the technologies for these two materials. According to the control requirements in the "Restricted Catalogue," the related preparation technologies are essentially subject to export restrictions.

LFP materials can be roughly categorized as follows:

The higher the powder compaction of LFP materials, the higher the energy density, which also implies higher production costs and relatively higher technical barriers. In the current mainstream LFP market, second-and-a-half-generation and third-generation products dominate, while third-and-a-half-generation and fourth-generation products are key materials for high-end LFP batteries. Chinese enterprises have made rapid technological advancements in this area in recent years, even progressing toward powder compaction levels higher than fourth-generation products. This adjustment primarily targets high-end LFP materials, namely products above the third-and-a-half generation, as well as LMFP materials.This demonstrates the Chinese government's emphasis on protecting patents for cutting-edge technologies, with no restrictions currently indicated for technologies related to products at or below the third-and-a-half generation.

Following this adjustment, SMM has exchanged views with various industry professionals and concluded the following points:

First, China's global leadership in new energy technologies and intellectual property protection.Chinese enterprises have maintained an absolute leading position globally in the development of new energy technologies, particularly in LFP material technologies, reflecting the improvement of China's technological strength. The Chinese government places great importance on and actively protects intellectual property in the lithium battery field, preventing overseas individuals or enterprises from acquiring Chinese companies with such technologies through investments, mergers, or acquisitions, thereby safeguarding corporate decision-making power. This also prevents the leakage or misuse of high-end technologies, protecting China's competitiveness and leading position in this industry globally, and sustaining the momentum for R&D.

Second, Guiding the orderly development of domestic enterprises and international cooperation.The overseas lithium battery industry has long focused on the ternary cathode material technology path. In recent years, frequent safety incidents with ternary battery cells and their relatively high costs have led overseas lithium battery enterprises to plan a shift toward safer and more cost-effective LFP batteries. However, this adjustment, characterized by "additions and reductions," reflects that the national policy of openness and cooperation remains unchanged. The key lies in guiding orderly exports and international cooperation, avoiding disorderly competition and overheating overseas markets, and encouraging domestic enterprises to invest cautiously.

Third, The restrictions target technology exports, not the products themselves, with minimal impact on the industry.There are concerns within the industry about whether this adjustment to the "Restricted Catalogue" will hinder or affect Chinese lithium battery enterprises in building factories abroad and exporting products. Currently, it appears that the trend of Chinese lithium battery enterprises going global remains unchanged. This adjustment does not involve the products themselves but rather restricts technology exports without prohibiting them. Moreover, the control parameter levels for LFP and LMFP technologies in this adjustment are relatively high and have not yet reached the stage of large-scale application, resulting in relatively minimal impact on the domestic lithium battery industry. Additionally, this move poses a relatively significant challenge for Western enterprises seeking to utilize Chinese technologies to produce lithium chemicals.

SMM believes that this adjustment to the "Restricted Catalogue" has no substantial impact on the development of the domestic lithium battery industry for the time being. Meanwhile, SMM reminds Chinese lithium battery enterprises to pay extra attention to technology confidentiality when expanding into overseas markets.

SMM New Energy Research Team

Cong Wang 021-51666838

Xiaodan Yu 021-20707870

Rui Ma 021-51595780

Ying Xu 021-51666707

Disheng Feng 021-51666714

Yujun Liu 021-20707895

Yanlin Lü 021-20707875

Ye Yuan 021-51595792

Zhicheng Zhou 021-51666711

Haohan Zhang 021-51666752

Zihan Wang 021-51666914

Xiaoxuan Ren 021-20707866

Yushuo Liang 021-20707892

Jie Wang 021-51595902

Yang Xu 021-51666760