(Yicai Global) Jan. 27 -- Shares in Yongxing Special Materials Technology surged by as much as 7.1 percent today after the Chinese stainless steel rod maker said it is teaming up with electric car battery titan Contemporary Amperex Technology to construct a facility that will produce lithium carbonate, a key raw material used in lithium batteries.

Yongxing Special Materials' share price [SHE:002756] closed up 2.24 percent at CNY119.01 (USD18.74). Earlier in the day it had hit CNY124.76.

Costing CNY2.5 billion (USD396 million), the factory will have an annual capacity of 50,000 tons and will be operated by a joint venture in which Yongxing Special Materials and CATL will hold a 30 percent and 70 percent stake respectively, Huzhou, eastern Zhejiang province-based Yongxing Special Materials said yesterday.

The plant will be located in Yichun, eastern Jiangxi province where there are abundant resources of lithium ore and will be constructed in two phases, it said. The first phase will cost CNY1.5 billion (USD226.3 million) and will have an annual output of 30,000 tons of lithium carbonate once completed. No timetable was given for the construction.

Ningde, southeastern Fujian province-based CATL will get first priority to buy the plant’s products. The JV will also be the contract operator of some of CATL’s mines in Yichun, which will supply the factory with raw materials, it added.

CATL will be responsible for the JV’s overall operations, while Yongxing Special Materials will be in charge of day-to-day management as well as equipment upgrading, the latter said.

Both parties already have resources in Yichun. CATL is currently building a new battery manufacturing base there and Yongxing Special Materials has a lithium carbonate plant with an annual output of 30,000 tons.

The new partnership can help leverage the two parties’ respective advantages, boost brand awareness and help increase market share, Yongxing Special Materials said. The firm, which mainly makes stainless steel rods and wires, started to branch out into the battery raw materials field in 2017.

Editor: Kim Taylor