In-Depth Analysis of CATL's Lithium Iron Phosphate Lock-Up Strategy and Industry Risks

Based on the collected data and industry information, I now provide you with a systematic and comprehensive analysis report.

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In January 2025, CATL successively announced heavyweight collaborations in the lithium iron phosphate (LFP) sector, attracting widespread market attention[1][2][3]:

Counterparty	Agreement Date	Lock-Up Volume	Contract Value	Term
Ronbay Technology	Jan 2026	3.05 million metric tons	Over RMB 120 billion	2026-2031
Fulin Seiko	Jan 2026	3 million metric tons	RMB 3.175 billion equity investment	3 years
Wanrun New Energy	May 2025	1.3231 million metric tons	Not disclosed	2025-2030
Hunan Yoneng	Ongoing	Strategic Cooperation	Connected transactions ≤ RMB 18 billion	Ongoing
Dynanonic	Ongoing	Joint Venture	Co-investment	Long-term

• The combined lock-up volume of Ronbay Technology, Fulin Seiko, and Wanrun New Energy alone reaches
  7.37 million metric tons
• Based on all public information, CATL’s total locked-up volume is
  estimated to exceed 8 million metric tons, even close to 10 million metric tons
  [1]
• Calculated at an average price of RMB 55,000 per metric ton, the value of the locked-up large orders
  surpasses RMB 500 billion

Based on 2025 industry data[4][5]:

• 2025 Global LFP Production
  : Approximately 3.77 million metric tons
• 2025 LFP Consumption by CATL
  : Approximately 1 million metric tons (market share 35%-37%)
• CATL’s Lock-Up Volume
  ≈
  2-3 times
  global production, and
  10 times
  its own consumption

This ultra-large-scale lock-up behavior has inevitably raised market concerns: Will the industry repeat the historical mistake of blind capacity expansion in the photovoltaic (PV) industry?

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Based on data from authoritative institutions such as Zeyan Consulting and SMM[4][6]:

Year	Production Capacity (10,000 metric tons/year)	Output (10,000 metric tons)	Demand (10,000 metric tons)	Capacity Utilization Rate
2022	250	180	170	72.0%
2023	420	210	200	50.0%
2024	545.5	241.28	230	44.2%
2025	639.9	392.02	350	69.87%
2026E	950	560	500	58.9%

1. 2024 capacity utilization rate was only 44.2%
   , indicating severe overcapacity
2. It rebounded significantly to 69.87% in 2025
   , mainly driven by the explosive growth in energy storage demand
3. Production capacity is expected to exceed 9.5 million metric tons in 2026
   , and the capacity utilization rate may decline again

The industry shows obvious

[6][7]:

• The proportion of 4th-generation products was only 10.3% in 2025
• Demand is expected to reach 1.5 million metric tons in 2026, while supply will only be 1-1.2 million metric tons
• Tight supply and demand, strong pricing power

• 3rd-generation products account for 44.8%, while 2nd-generation products account for 33.5%
• Sales prices have fallen below the cost line
• Most enterprises experience “revenue growth without profit growth”

• The top 10 enterprises are almost
  operating at full capacity
  , with some exceeding production
• Small and medium-sized enterprises still have low capacity utilization rates
• There is a
  structural gap
  in the industry’s effective production capacity

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The photovoltaic industry has experienced

in the past decade[8][9]:

• Global PV production capacity exceeded 60GW, while actual demand was only 27GW
• Europe and the United States launched “double anti-dumping and countervailing” investigations into Chinese PV products (the U.S. imposed tariffs of 30%-250%)
• Wuxi Suntech went bankrupt, Jiangxi LDK defaulted on its debts
• The price of polysilicon plummeted from $400/kg to $50/kg

• Polysilicon production capacity expanded from 1 million metric tons to 2.3 million metric tons
• The price fell below RMB 100/kg from RMB 300/kg
• Module prices continued to fall, leading to losses across the entire industry
• A large number of cross-industry entrants lost all their investments

Factor	Specific Performance
Local Government Support	Driven by tax revenue, employment, and output value, local governments provided a large number of preferential policies
Aggressive Capacity Expansion by Leading Enterprises	Longi, Tongwei, JinkoSolar, etc., expanded successively to maintain their advantages
Betting on Technical Routes	Enterprises repeatedly switched between PERC, TOPCon, and HJT technologies
Deviation in Demand Expectations	Actual demand growth was lower than the speed of capacity expansion
Vicious Price War Competition	Enterprises sold at a loss to seize market share

[8]:

• In 2006, its stock price rose to $40, and Shi Zhengrong became China’s richest man
• In 2008, the stock price peaked at $90
• Aggressive capacity expansion + misjudgment of polysilicon price trends + heavy debt burden
• The stock price fell by more than 99%
  , and it eventually went bankrupt and underwent restructuring

1. Blind expansion is fatal
2. Long-term price-locked contracts carry huge risks
3. Selection of technical routes is crucial
4. Cash flow management cannot be ignored

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Comparison Dimension	Photovoltaic Industry	Lithium Battery/LFP Industry
Capacity Expansion Speed	Production capacity doubled from 2021 to 2023	Production capacity will increase by over 70% from 2024 to 2026
Led by Leading Enterprises	Longi, Tongwei, etc. expanded capacity	CATL’s lock-up + suppliers’ capacity expansion
Local Government Support	Local governments attracted investment in new energy projects across the country	Lithium battery industrial parks are springing up everywhere
Technical Iteration Pressure	PERC → TOPCon → HJT	2nd → 3rd → 4th-Generation LFP
Sharp Price Fluctuations	Polysilicon price fell from $400/kg to $50/kg	LFP price fell from RMB 173,000/metric ton to RMB 30,000/metric ton

Dimension	Photovoltaic Industry	Lithium Battery Industry
Certainty of Demand Growth	Highly affected by policies and subsidies	Driven by both new energy vehicles and energy storage, with more certain growth
Technical Iteration Speed	One generation every 3-5 years	One generation every 1-2 years, with continuous shortage of high-end products
Timing of Policy Intervention	Intervention occurred after overcapacity emerged	MIIT intervened in advance to “anti-involution”
Strategy of Leading Enterprises	Pure capacity expansion competition	Lock-up + equity investment to integrate the supply chain
Industry Concentration	Relatively dispersed	CR5 is about 55%, with relatively high concentration
Downstream Customer Binding	Relatively loose	CATL is deeply bound with suppliers

[2][3]:

1. Locking High-Quality Production Capacity
   : Pre-binding over 8 million metric tons of LFP production capacity
2. Supporting Strategic Suppliers
   : Empowering suppliers through equity investment (RMB 3.175 billion in Fulin Seiko) and advance payments (RMB 1.5 billion to Fulin Seiko)
3. Collaborative Technology Development
   : Jointly developing 4th-generation high-density LFP with suppliers
4. Ensuring Supply Security
   : Responding to the explosive demand for energy storage and power batteries
5. Squeezing Competitors
   : Enhancing competitive barriers through supply chain integration

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• Production capacity is expected to reach 9.5 million metric tons in 2026, with output of 5.6 million metric tons
• If demand falls short of expectations, the capacity utilization rate may drop below 50%
• Low-end products may fall into a price war again

• Ronbay Technology currently has only 60,000 metric tons of production capacity and needs to expand to 610,000 metric tons/year within 6 years
• The Shanghai Stock Exchange has issued an inquiry letter questioning its performance capability[10]
• Aggressive capacity expansion by suppliers may repeat the PV industry’s mistakes

• Fluctuations in lithium carbonate prices directly affect LFP costs
• In 2025, the LFP price rebounded from RMB 30,000/metric ton to RMB 55,000/metric ton
• If prices fall sharply, long-term contracts may become a burden

• The “anti-involution” policy continues to advance
• Local government financing constraints may be tightened
• Changes in energy storage policies and new energy vehicle subsidy policies

• The supply-demand gap for 4th-generation high-density LFP will be approximately 300,000-500,000 metric tons in 2026
• Technical barriers protect the profits of leading enterprises

• The shipment volume of power + energy storage batteries is expected to increase by 21%-29% year-on-year in 2026
• The large-scale development of energy storage batteries drives demand for high-density LFP

• CATL adopts a “volume-locked but not price-locked” model
• Diversifies suppliers to reduce reliance on a single supplier
• Binds interests through equity investment

• MIIT held an “anti-involution” symposium in November 2025
• In January 2026, 20 anti-involution measures were deployed
• Strictly controls local blind investment attraction and redundant construction

Risk Dimension	Risk Level	Remarks
Low-End Overcapacity	High	Industry utilization rate is less than 50%, with price pressure
Aggressive Capacity Expansion by Suppliers	Medium-High	Ronbay Technology and others need to significantly expand capacity
Price Fluctuation	Medium	Lithium carbonate price is still the key variable
Policy Risk	Medium-Low	MIIT has already intervened in advance
Technical Iteration	Medium	There is still a gap in 4th-generation products

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1. High-End LFP Suppliers
   : Enterprises with mass production capacity of 4th-generation products
2. Core Suppliers of CATL
   : Hunan Yoneng, Dynanonic, etc.
3. Leading Energy Storage Battery Enterprises
   : CATL, EVE Energy, etc.

1. Enterprises with a high proportion of low-end LFP production capacity
2. Small and medium-sized enterprises with weak technical iteration capabilities
3. Suppliers with a single customer structure

• Global LFP production is expected to reach 5.6-5.8 million metric tons, a year-on-year increase of 55%
• The proportion of high-end (4th-generation) products will increase to 16%-20%
• The industry’s CR5 may further increase to over 60%
• Outdated production capacity will be eliminated at an accelerated pace

• The penetration rate of new energy vehicles continues to increase
• Energy storage will become the largest incremental market
• Overseas LFP production capacity will be gradually put into operation (50,000-100,000 metric tons/year)
• Technical iteration continues, and high-end products maintain a price premium

1. New energy vehicle sales fall short of expectations
2. Energy storage policies are tightened
3. Changes in technical routes (such as replacement by sodium-ion batteries)
4. Sharp fluctuations in raw material prices
5. Intensified international trade frictions

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CATL’s move to lock up large-scale LFP production capacity

.

1. The lithium battery industry is supported by
   dual demand from new energy vehicles and energy storage
   , with higher certainty of demand growth
2. Technical iteration is faster
   , high-end products are in continuous shortage, and low-end overcapacity is a structural problem
3. MIIT intervened in advance to “anti-involution”
   , and the policy environment is different
4. CATL adopts a
   lock-up + equity investment
   model, rather than pure capacity expansion competition

• In the short term
  , CATL’s lock-up behavior may indeed stimulate suppliers to accelerate capacity expansion, leading to overcapacity risks
• In the long term
  , the lithium battery industry’s demand growth certainty, technical iteration characteristics, and timing of policy intervention are all better than those of the PV industry at that time
• Key Variables
  : Whether the demand for new energy vehicles and energy storage in 2026 can absorb the new production capacity, and the implementation effect of the “anti-involution” policy

: The probability of the lithium battery industry repeating the PV industry’s mistakes is , but the industry will accelerate internal differentiation. Leading enterprises are expected to ride through the cycle, while low-end production capacity will face elimination.

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[1] OFweek - What’s Ronbay Technology’s RMB 120 Billion Order? CATL Has Locked in Over RMB 500 Billion Worth of Lithium Iron Phosphate (https://mp.ofweek.com/chuneng/a356714850637)

[2] Sina Finance - CATL Locks in RMB 120 Billion to Build an Industrial Chain Moat (https://finance.sina.com.cn/roll/2026-01-16/doc-inhhmxqx7056747.shtml)

[3] Changjiang Business Daily - CATL Locks in RMB 120 Billion to Build an Industrial Chain Moat (https://www.caiwennews.com/article/1413180.shtml)

[4] Zeyan Consulting - 2025 Lithium Iron Phosphate Production Reaches 3.9202 Million Metric Tons (https://finance.sina.com.cn/stock/relnews/cn/2026-01-05/doc-inhffmxu6849092.shtml)

[5] SMM - Comprehensive Review and Analysis of the 2025 Lithium Iron Phosphate Industry (https://newenergy.smm.cn/h5/content/14042/103725096)

[6] Futu NiuNiu - Amidst the Capacity Expansion Wave of Over 4.1 Million Metric Tons: Overcapacity, Frenzy, and “Fragmentation” of Lithium Iron Phosphate (https://news.futunn.com/post/67635573)

[7] Gilin AI Analysis - Analysis of Hunan Yoneng’s Lithium Iron Phosphate Capacity Expansion Risk and Industry Overcapacity (https://www.gilin.com.cn/essence1226155.html)

[8] Pacific Securities Research Institute - Learning from History: Looking for PV Companies That Can Ride Through the Cycle (https://pdf.dfcfw.com/pdf/H3_AP202310251603469127_1.pdf)

[9] Huatai Futures - Review of the Photovoltaic Industry Development Cycle and Analysis of the Impact of Anti-Involution Self-Disciplinary Production Cuts (https://www.htfc.com/wz_upload/png_upload/20250227/1740586633881793cbb.pdf)

[10] 21st Century Business Herald - A RMB 26 Billion Leading Enterprise Secures a RMB 120 Billion Lithium Iron Phosphate Large Order, and the Shanghai Stock Exchange Launches an Urgent Inquiry (https://www.21jingji.com/article/20260114/herald/e4a9602dc899b175b496f8301286ad45.html)

[11] Minmetals Securities - Four Key Focuses of the Lithium Battery Industry in 2026 (https://pdf.dfcfw.com/pdf/H3_AP202512311811875727_1.pdf)