(Yicai Global) March 2 -- China’s Yahua Industrial Group said it will spend CNY2.6 billion (USD371 million) to increase its capacity to produce high-grade lithium salts by 70,000 tons a year despite the recent drop in prices of the key raw material for lithium-ion batteries.

The investment will mainly fund a third phase capacity increase at Yahua’s plant in Ya'an, Sichuan province, the firm said late yesterday. The plant will add 30,000 tons of battery-grade lithium hydroxide and 40,000 tons of lithium carbonate to its annual capacity, Yahua noted, citing a deal signed with the local government on Feb. 28.

Chengdu-based Yahua previously announced a 30,000-ton battery-grade hydroxide second phase expansion at the Ya'an plant, which has not started construction yet. Yahua's total lithium salts capacity will increase to over 170,000 tons a year when both phases are complete and operational, it added without disclosing any further details.

Yahua can currently turn out 73,000 tons of lithium salts a year, according to the firm’s website.

The capacity expansion will help Yahua achieve its aim of becoming a battery materials supplier with global influence and achieve sustainable operational growth, it pointed out.

Lithium hydroxide is the main raw ingredient used for ternary lithium-ion battery cathode, while lithium carbonate is mainly used to make cathode for lithium iron phosphate batteries.

Yahua, an industrial and civil explosives maker, has been rapidly expanding into the power battery sector’s upstream industry chain in recent years. Besides producing lithium salts, it also part owns a lithium mine in Sichuan. Since 2020, it has signed several long-term battery-grade lithium hydroxide supply deals with major ternary battery suppliers such as Tesla, SK On's Chinese unit, and LG Chem.

Thanks to the rapid increase in lithium carbonate prices last year, Yahua's annual net profit likely soared 380 percent to 402 percent to between CNY4.5 billion and CNY4.7 billion (USD652.2 million and USD681.2 million) from 2021, it said in January.

Shares of Yahua [SHE: 002497] closed down 0.7 percent at CNY24.31 (USD3.52) each today, after opening higher. The broader Shenzhen market fell 0.5 percent.

Editor: Martin Kadiev