Leading Heavyweight Acquisition! This super track is experiencing a wave of mergers and acquisitions along with rising prices! Supply and demand are expected to balance out.

Securities Times Network Ye Lingzhen

Recently, the lithium battery separator industry has experienced a wave of mergers and acquisitions, with Enjie Co., Ltd. planning to acquire Zhongke Hualian to initiate integrated industry consolidation; Foshan Plastics Technology’s acquisition of Jinli Co., Ltd. has been approved by the Shenzhen Stock Exchange, signaling a new round of expansion in the “separator market” in the capital market.

Behind the accelerated industry consolidation, many separator manufacturers are raising prices, and industry prosperity continues to rise. Most interviewees believe that current downstream market demand is steadily growing, but the industry’s expansion momentum is insufficient. In the future, supply and demand are expected to gradually improve, leading to rising product prices and corporate profit recovery.

In the context of “anti-involution,” the competition focus in the separator industry has shifted from scale expansion to structural upgrading. Companies with the ability to develop and mass-produce ultra-thin high-strength separators and deliver globally will leverage differentiated competitive advantages to seize opportunities amid industry reshuffling.

Mergers, acquisitions, and price hikes are happening in turn

Recently, the lithium battery separator sector has seen a series of “merger waves” and “price hikes,” significantly increasing market activity.

In mid-December, leading separator company Enjie announced a restructuring plan to acquire 100% equity of Zhongke Hualian through share issuance and raise supporting funds. Data shows that Zhongke Hualian is a leading domestic manufacturer of lithium battery separator equipment and owns the high-performance wet-process separator brand “Lanketu.” In 2024, its domestic market share of wet-process separators is about 4.5%, ranking sixth in the industry.

Enjie stated that this acquisition will leverage upstream and downstream synergies in the industry chain, reduce production costs, shorten equipment procurement cycles, and expand its product matrix to strengthen its technological “moat.”

Similarly, on December 9, Foshan Plastics Technology received approval from the Shenzhen Stock Exchange’s M&A and restructuring committee for its proposed 5.08 billion yuan acquisition of Jinli Co., Ltd. Jinli specializes in wet-process separators, with an estimated domestic market share of about 18% in 2024, ranking second in the industry.

Through these transactions, Jinli will achieve “backdoor listing,” and Foshan Plastics can extend its industry chain into the lithium battery separator market, enhancing profitability.

“Leading companies are choosing to acquire at this point because the industry is currently at a bottom, offering opportunities to acquire quality assets at lower costs; additionally, signs of stabilization have appeared in various segments of the lithium battery industry, and mergers could quickly realize integration benefits,” said Mo Ke, chief analyst at Zhenli Research, in an interview with Securities Times.

A separator industry insider in East China said that industry mergers are an important means of “anti-involution.” “Compared to building new capacity, mergers can optimize existing capacity structures and promote a continued positive supply-demand pattern,” he said.

Behind the price increases is real demand support.

“The supply of separators has been tight since late October. Currently, leading companies are operating at full capacity and full sales, with orders gradually spilling over to second- and third-tier manufacturers. Overall industry capacity utilization is rising, and some separator factories are even experiencing ‘customer waiting for delivery’ phenomena,” said the insider.

Chen Leiyu, senior researcher at Xinluo Information, said that the current round of price increases has been well accepted by customers. Apart from a few top battery companies, most other clients have achieved different levels of price hikes.

Supply and demand are expected to balance

During interviews, Securities Times learned that downstream demand for power batteries and energy storage continues to grow, while the willingness to expand capacity in the separator industry remains subdued. The scarcity of high-quality existing capacity will gradually become more apparent, and the supply-demand pattern in the industry is expected to move toward balance.

From the demand side, Dongwu Securities’ research report predicts that by 2026, global demand for power batteries will reach 1,704 GWh, a 19.5% increase year-over-year; energy storage demand will rise to nearly 1,000 GWh, with an approximate 64% growth rate. Overall, global demand for power and energy storage batteries is expected to grow by over 30% in 2026, maintaining over 20% growth in 2027.

In contrast to the rapid expansion of downstream markets, separator supply is shrinking.

“Separators are a heavy asset industry with large initial fixed asset investments and long payback periods,” said the industry insider. “Currently, a single wet-process separator production line costs about 200 million yuan. Even considering the profit levels after recent price hikes, most manufacturers still face a payback period of over ten years.”

Besides the large investment, the long production cycle also suppresses expansion enthusiasm. “Some core equipment for separator production lines still depends on imports, and procurement takes a long time. Generally, from civil construction, equipment procurement, debugging to producing qualified products, it takes about 1.5 to 2 years,” the insider explained. “Unless there are very clear signals or capacity has been pre-locked, most separator manufacturers are reluctant to expand capacity easily.”

In August this year, dry-process and wet-process lithium battery separator companies held symposiums to reach consensus on “anti-involution.” Leading dry-process separator companies announced plans to release capacity scientifically, maintaining a reasonable supply-demand ratio of around 60%, and to pause expansion, focusing on digesting existing capacity over the next two years. Wet-process separator companies also indicated they would regulate capacity to avoid redundant deployment of low-quality, inefficient capacity.

Currently, the “anti-involution” movement is intensively underway in the industry. On August 26, Changyang Technology announced it would reduce its previously planned separator capacity from 650 million square meters annually to 350 million square meters, and its lithium battery separator project for energy storage and power batteries from 400 million to 200 million square meters. Additionally, reviewing public disclosures of listed separator companies since 2025, few have announced expansion plans, indicating limited new capacity in the next 1-2 years.

“It is expected that the supply-demand situation for separators will improve significantly next year, with product prices gradually returning to reasonable levels, and a potential supply gap for high-quality wet-process separators,” said the insider.

As expansion strategies adjust, the competitive landscape in the separator industry is quietly changing. Enjie stated that small and medium-sized enterprises lack confidence and capacity to expand, and future incremental supply will mainly come from leading companies, further increasing industry concentration.

Differentiated competition as a breakthrough

In addition to the recovery of supply-demand patterns, the current industry consolidation and price hikes are accompanied by product structure upgrades. Competition has shifted from scale and price to technological innovation, product performance, and customer resources.

On the product front, the industry is moving toward “ultra-thin high-strength” separators, with 5μm (micrometer) ultra-thin separators becoming a key battleground.

It is understood that, under fixed battery volume, thinner separators with higher porosity create more effective space between electrodes, reducing internal resistance and increasing energy density and high-rate charge-discharge performance. At the process level, the core technological challenge is how to reduce separator thickness while enhancing strength and ensuring safety.

“Recently, the trend toward longer range and ultra-fast charging in new energy vehicles has become clear, coupled with the rapid implementation of large-cell energy storage technology, driving separators toward ultra-thin specifications,” said the industry insider. “The industry is accelerating the upgrade from 9μm and 7μm to 5μm, but due to high technical difficulty, only a few manufacturers can mass-produce these.”

The Securities Times noted that in this wave of mergers, Enjie and Foshan Plastics are both focusing on 5μm products. Zhongke Hualian and Jinli, the main targets, produce 5μm ultra-high-strength lithium separators, have entered CATL’s supply chain, and Jinli is the market leader in this segment in 2024. Additionally, Enjie’s 5μm ultra-thin high-strength separator line in Yuxi, Yunnan, has already been put into operation.

Regarding profitability, 5μm ultra-thin separators command a higher technological premium. Shanghai Nonferrous Metals Network reports that the average price of 5μm wet-process base film is 1.39 yuan per square meter, 70% higher than the 7μm product.

Chen Leiyu told Securities Times that CATL is already using large quantities of 5μm separators, and it is expected that by 2026, this product will account for over 50% of its separator procurement, potentially prompting more manufacturers to follow suit.

On the market side, overseas expansion capability has become another core competitive advantage. “Overseas markets have higher gross margins and larger growth potential. Separator companies that can quickly localize supply abroad are likely to capture more market share,” said Mo Ke.

Looking at the strategies of leading manufacturers, overseas production bases are flourishing. Enjie’s first-phase plant in Hungary, with an annual capacity of 400 million square meters, has been commissioned; a 700 million square meter coated separator project in the U.S. is underway, with samples sent to customers for verification. Meanwhile, the company is also planning a 1 billion square meter capacity in Malaysia.

Xinyuan Materials has established production bases in Sweden, the U.S., and Malaysia, with the Malaysian plant expected to become a “super factory” producing 2 billion square meters of wet and coated separators annually. China National Materials (Sinoma) announced in April this year that it would build a 640 million square meter wet-process coated separator plant in Hungary, with an investment of 114 million euros.