In-Depth Analysis of Capacity Terms in the Cooperation Between Fulin Precision and CATL

Based on the latest announcements and news materials, I will provide an in-depth analysis of the capacity terms in the cooperation between Fulin Precision and CATL.

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On the evening of January 5, 2025, Fulin Precision (300432) issued an announcement stating that its subsidiary, Jiangxi Shenghua New Materials Co., Ltd., plans to invest in the

in Ejin Horo Banner, Ordos City, Inner Mongolia, with a total investment of RMB 6 billion. The project will be constructed in two phases, each with a planned capacity of 250,000 tons, and the construction period is expected to be 12 months [1].

At the same time, Jiangxi Shenghua also plans to build supporting projects in Wushen Banner: a 400,000-ton-per-year new lithium iron phosphate precursor oxalic acid project (with an investment of RMB 1.2 billion) and a 600,000-ton-per-year new lithium iron phosphate precursor ferrous oxalate project (with an investment of RMB 1.5 billion) [1].

According to the announcement, CATL will pay

to Jiangxi Shenghua in September 2025 to lock in the supply volume of lithium iron phosphate and support Jiangxi Shenghua’s raw material layout [1][2]. The specific payment schedule is: RMB 500 million will be paid in September 2025, and RMB 1 billion will be paid in November 2025. This fund can support the expansion of 100,000 tons of capacity [2].

In June 2025, the two parties made a major revision to the business cooperation agreement [1]:

Item	Original Agreement	Revised Agreement
Supply Term	2025 to 2027	2025 to 2029 (extended by 2 years)
Annual Procurement Volume	At least 140,000 tons/year	No less than 80% of Jiangxi Shenghua’s promised capacity

In addition to business cooperation, CATL also plans to

of Jiangxi Shenghua: it plans to inject RMB 2.56338 billion to subscribe for the increased registered capital. After the transaction is completed, it will hold of Jiangxi Shenghua and become the controlling shareholder; Fulin Precision’s shareholding ratio will be reduced to 47.4096% [3].

• The RMB 1.5 billion advance payment effectively alleviates Jiangxi Shenghua’s
  financial pressure
  . Especially against the background of the RMB 6 billion capacity expansion project, this “certain” fund greatly reduces the project’s financial risks
• The advance payment can support the expansion of 100,000 tons of capacity, which is equivalent to providing
  about 25% of financial support
  for the capacity expansion project

Perspective	Interpretation
Certain Revenue	80% of the promised capacity is guaranteed, which means there is a bottom line for capacity utilization, reducing the risk of inventory backlog
Transfer of Pricing Power	The procurement volume is linked to the price, so the supplier may be in a passive position in pricing negotiations
Exclusive Constraints	As the largest customer, CATL makes Jiangxi Shenghua’s customer structure tend to be concentrated
Pressure on Capacity Expansion	If CATL’s procurement volume reaches 80%, Jiangxi Shenghua must maintain sufficient capacity, increasing the rigidity of fixed asset investment

From an industry perspective, the terms that CATL applies to Jiangxi Shenghua are not the harshest. Comparing with its cooperation models with other suppliers:

Supplier	Cooperation Content	Term Features
Longpan Technology	157,500 tons of lithium iron phosphate, over RMB 6 billion	For sales to CATL’s overseas factories, the agreement is intentional and non-binding [2]
Ronbay Technology	Sodium-ion cathode powder	CATL commits that the annual procurement volume is no less than 60% of the total procurement volume [2]
Jiayuan Technology	626,000 tons of negative electrode current collectors, approximately RMB 66 billion	Priority guarantee of capacity from 2026 to 2028, with clearer quantitative constraints [2]
Kandi Technology	Battery swap cooperation	Order lock-in in the battery swap field [2]

: The “no less than 80% of promised capacity” clause that CATL applies to Jiangxi Shenghua is more than the “priority guarantee of at least 626,000 tons” clause for Jiayuan Technology, leaving certain independent space for the supplier.

1. Upstream Layout Positioning
   : Through the dual means of advance payment + equity control, CATL is
   deeply integrating the lithium iron phosphate supply chain
2. Capacity Guarantee
   : The mass production of the fifth-generation lithium iron phosphate product is imminent, ensuring stable upstream supply
3. Technical Synergy
   : Jiangxi Shenghua leads the market share in the field of
   high tap density lithium iron phosphate
   , which is in line with CATL’s high-end strategy

Evaluation Dimension	Terms for Fulin Precision	Industry Comparison
Advance Payment Intensity	RMB 1.5 billion (large-scale support)	Belongs to high-quality terms
Procurement Volume Commitment	80% capacity guarantee (flexible)	Belongs to medium-level terms
Supply Term	5 years (2025-2029)	Belongs to conventional terms
Equity Arrangement	51% equity control (transfer of control)	Relatively strong terms
Exclusivity	No explicit exclusivity	Relatively friendly

: The terms are not the harshest, but have obvious strategic binding attributes

• Positive Aspects
  : The RMB 1.5 billion advance payment provides
  strong financial support
  , reducing the risk of capacity expansion; the 80% procurement commitment guarantees the bottom line of capacity utilization
• Restrictive Aspects
  : The 51% equity control arrangement means
  Fulin Precision has transferred the controlling stake
  ; the long-term supply agreement limits the supplier’s flexibility

From a business logic perspective, this is a

:

• CATL obtains
  capacity guarantee and technical synergy
  from a core lithium iron phosphate supplier
• Jiangxi Shenghua obtains
  financial support and certainty of large orders

Against the backdrop of the “long-term order wave” in the current lithium battery industry chain, such deep binding models are becoming the mainstream cooperation method between leading battery manufacturers and material suppliers.

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[1] Sina Finance - Fulin Precision’s Subsidiary Plans to Invest RMB 6 Billion in a Lithium Iron Phosphate Project (https://finance.sina.com.cn/roll/2026-01-06/doc-inhfikqz5931463.shtml)

[2] Sina Finance - CATL Locks in These Big Orders in 2025 | Annual Observation (https://finance.sina.com.cn/roll/2025-12-27/doc-inhefzef9805342.shtml)

[3] Sina Finance - Weekly Investment Highlights: CATL/Capchem/Hengchuang Nano Expand Capacity Again (https://finance.sina.com.cn/roll/2026-01-03/doc-inheyxtr2805521.shtml)