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 industry integration; 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 increasing, but the industry’s expansion motivation 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 track 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 separator brand “Lanketu.” In 2024, its domestic market share of wet 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 announced that its proposed acquisition of Jinli Co., Ltd. for 5.08 billion yuan was approved by the M&A review committee of the Shenzhen Stock Exchange. Jinli specializes in wet separators, with a domestic market share of about 18% in 2024, ranking second in the industry.

Through these transactions, Jinli will achieve “market 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 at a bottom phase, offering opportunities to acquire quality assets at lower costs; meanwhile, signs of stabilization are emerging in various segments of the lithium battery industry, making mergers and acquisitions likely to quickly realize integration benefits,” said Mo Ke, chief analyst at Zhenli Research, to 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 genuine 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 aforementioned industry 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 customers have achieved price hikes to varying degrees.

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-on-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 in 2026 is expected to grow by over 30%, maintaining over 20% growth in 2027.

Contrasting with the rapid expansion of downstream markets, the supply of separators 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 separator production line requires about 200 million yuan. Even considering the profit levels after recent price hikes, most manufacturers have a payback period of over ten years.”

In addition to large investment amounts, long production cycles also suppress 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 and wet lithium battery separator companies held symposiums to reach a series of consensus on “anti-involution.” Leading dry separator companies announced plans to scientifically release capacity, aiming for a reasonable supply-demand ratio of around 60%, and to suspend expansion, focusing on digesting existing capacity over the next two years. Wet 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 an annual 650 million square meters to 350 million square meters, and cut its “annual capacity of 400 million square meters for lithium separators for energy storage and power batteries” 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 and demand for separators will improve significantly next year, with product prices likely to steadily recover to reasonable levels. High-quality wet separator capacity may even face supply shortages,” said the industry 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 capability 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 and demand, 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 reported that, under fixed battery volume, thinner separators with higher porosity create more effective space between electrodes, reduce internal resistance, and improve energy density and high-rate charge-discharge performance. The core technological challenge is how to reduce thickness while increasing strength and ensuring safety.

“Recently, with the clear trend of longer-range, ultra-fast charging new energy vehicles, combined with the accelerated implementation of large-capacity energy storage batteries, separator products are moving toward ultra-thinization,” said the industry insider. “The industry is rapidly upgrading product specifications 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 and acquisitions, Enjie and Foshan Plastics are both focusing on 5μm products. Zhongke Hualian and Jinli, the main targets, produce 5μm ultra-high-strength lithium separators, which have entered CATL’s supply chain. Jinli is expected to hold the largest market share in this segment in 2024. Additionally, Enjie’s 5μm ultra-thin high-strength separator line in Yuxi, Yunnan, has already been put into production.

Regarding profitability, 5μm ultra-thin separators command a higher technological premium. According to Shanghai Nonferrous Metals Network, the average price of 5μm wet-based membranes is 1.39 yuan per square meter, 70% higher than the average price of 7μm products.

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

On the market side, overseas expansion capability has become another core competitive advantage. “Overseas markets offer 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 progressing, with samples sent to customers for verification. The company is also planning a 1 billion square meter capacity in Malaysia.

Xingyuan 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 Chemical Corporation announced in April this year that it will build a 640 million square meter wet-coated separator plant in Hungary, with an investment of 114 million euros.