(Yicai Global) Nov. 26 -- Fengyuan Chemical’s shares soared by the exchange-imposed limit after the Chinese manufacturer of chemical raw materials unveiled a CNY3 billion (USD470 million) plan to expand production capacity of lithium battery cathode materials and announced a big supply deal.

Fengyuan’s stock price [SHE: 002805] climbed 10 percent today to end at CNY42.24 (USD6.61).

Fengyuan signed an investment deal with the government of Taierzhuang, in China’s northern Shandong province, to build a plant over two years with annual capacity of 75,000 tons of lithium-ion battery cathode materials, the Shandong-based firm said in a statement late yesterday. The pair will set up a joint venture, Fengyuan added. No financial details or schedules were provided.

Producers of raw materials used in power batteries are speeding up their expansion plans amid surging demand for power packs in electric vehicles.

Fengyuan has a total annual capacity of 25,000 tons of lithium battery cathode materials, 15,000 tons of ternary cathode materials, and 10,000 tons of lithium iron phosphate both completed and under construction, per its website.

The company also announced yesterday the signing of a CNY800 million (USD125.2 million) lithium battery cathode materials supply deal with Chinese power battery maker Guangzhou Great Power Energy and Technology, valid from next month to December 2022.

Great Power Energy bought CNY73.8 million (USD11.5 million) of battery raw materials from Fengyuan in the first 10 months of the year, accounting for over 18 percent of its revenue in the period, according to Fengyuan’s own figures. The new contract will have a significant impact on the supplier’s operating results next year.

Great Power Energy also announced on Nov. 24 a CNY6 billion plan to hike its annual power battery capacity by 20 gigawatts.

Editor: Futura Costaglione