Chinese battery cell manufacturers are poised to benefit from the
US-Israeli war in Iran, according to Fitch Ratings, even as fierce competition, overcapacity and thin margins weigh on some downstream firms.
Global demand for energy storage was set to rise, driven by high oil prices and rapidly expanding artificial intelligence (AI) data centres, said Wang Ying, a managing director at the credit rating agency.
“We believe that China’s leading energy storage cell manufacturers will be the bigger winners because they hold an overwhelming advantage globally,” Wang added.
As an example, she noted that Chinese producers of lithium iron phosphate (LFP) batteries – commonly used in electric vehicles and energy storage systems – possessed “absolute” advantages in technology, cost-efficiency and industrial scale.
“Consequently, it will be difficult for competitors from other countries to replace them in the short term,” Wang said at a media briefing in Beijing on Tuesday, noting that leading Chinese manufacturers should expect a rise in overseas orders.
The global lithium-ion battery market expanded by more than 20 per cent to exceed US$150 billion last year, according to a February report by the International Energy Agency, reflecting the sector’s growing importance in automotive, AI and other strategic sectors.
The report, which warned of concentration risks in the global supply chain, said China produced more than 80 per cent of all batteries and accounted for “almost all global manufacturing capacity and the associated technical expertise” for LFP batteries.
Chinese manufacturers are also much more cost-competitive than Western competitors, with production expenses in the United States and Europe up to 50 per cent higher, even when government support is excluded, according to the report.
The lower costs reflect a hyper-competitive domestic market, where lithium-ion battery producers – one of Beijing’s “new three” sources of green growth alongside photovoltaics and electric vehicles – are locked in cutthroat price wars amid persistent overcapacity.