(Yicai) June 11 -- Chinese fine chemicals supplier Lopal Tech plans to invest USD160 million expanding production capacity at its Indonesian factory that makes lithium battery materials, betting that overseas demand and long-term supply deals will keep growing the business outside of China.

The expansion will be handled by Lopal's project company PT LBM Energi Baru Indonesia Batang, and will add 120,000 tons of second- and third-generation lithium iron phosphate cathode materials for power and energy storage batteries, its Nanjing-based parent company announced yesterday.

The new project will be sited within the Batang Industrial Park in Central Java. Construction work is expected to start next month, take 12 months, and have an estimated return on investment of 24.4 percent.

Lopal's shares [SHE: 603906] closed 0.9 percent higher at CNY23.38 (USD3.45) each today, with the wider Shanghai market down 0.2 percent. Its Hong Kong-listed stock [HKG: 2465] added 3.3 percent to end at HKD12.55 (USD1.60), while the benchmark Hang Seng Index gave up 0.7 percent.

The first phase of Lopal's LFP cathode materials factory in Indonesia, with an annual production capacity of 30,000 tons, was completed and put into operation last year. 

The second phase, with 90,000 tons of annual capacity, is still undergoing equipment commissioning and has not yet entered commercial production. Both are sited within Kendal Industrial Park, about 75 kilometers to the east of Batang Industrial Park.

Lopal is enlarging its Indonesian factory to meet strong demand. It signed an agreement with LG Energy Solution in February 2024 to supply the South Korean firm with 160,000 tons of LFP cathode materials over five years. By the end of 2024, the deal had increased to 260,000 tons.

Last September, Lopal also announced that its Indonesia plant would supply the overseas plants of Chinese battery giant Contemporary Amperex Technology with a total of 157,500 tons from this month through the end of 2031.

All three project companies of Lopal's Indonesian factory are controlled by a Singapore-registered joint venture backed by a Lopal subsidiary, an Indonesian sovereign fund, and an external investor. Lopal has an indirect 56 percent stake in the second and third phases, while its interest in the third was diluted to 45 percent because LG Energy also invested in that project.

Editor: Futura Costaglione