(Yicai) April 16 -- Ronbay New Energy Technology’s shares rose after the Chinese battery materials maker unveiled a plan to invest CNY4.3 billion (USD590 million) to expand its capacity to meet growing demand for lithium iron phosphate cathodes used in batteries for electric vehicles and energy storage systems.

After gaining by as much as 3.6 percent in Shanghai this morning, Ronbay’s shares [SHA: 688005] closed 1.1 percent higher at CNY31.14 (USD4.56) each. The stock is still down 12 percent since the end of last year.

Ronbay will spend CNY2 billion to build a new facility with an annual production capacity of 520,000 tons of lithium iron phosphate precursors at its existing LFP cathode plant in Liupanshui, Guizhou province, the Ningbo-based company announced late yesterday.

The plan also includes a CNY2.3 billion investment in a new LFP cathodes plant with an annual output of 340,000 tons at Ronbay’s complex in nearby Bijie. Construction work on both projects is scheduled to start this month.

LFP precursors are the feedstock used to produce LFP cathode materials, which are a key raw material for LFP batteries.

Demand is growing fast for high-compaction-density LFP, with a tap density above 2.6 grams per cubic centimeter, which is a high-end core material for power batteries and energy storage batteries, Ronbay said. It added that current capacity for high-end LFP material remains inadequate and that the imbalance between supply and demand could widen further.

The new investment will help Ronbay seize the growth opportunity presented by the shortage of high-end lithium iron phosphate capacity and quickly scale up output, it said.

The expansion plan follows regulatory penalties imposed on the company and its senior executives for disclosing misleading information about a lithium iron phosphate supply agreement with battery giant Contemporary Amperex Technology that was signed in January.

On Jan. 13, Ronbay said it had secured an order to supply 3.05 million tons of LFP cathodes, valued at CNY120 billion (USD17.6 billion), to CATL, with deliveries and related services scheduled to begin this quarter and run through 2030.

The announcement was immediately challenged by regulators and investors, as Ronbay’s production capacity is heavily concentrated in ternary cathodes, with only limited LFP capacity, thereby casting doubt on its ability to execute a contract of that scale.

Following an investigation, the China Securities Regulatory Commission concluded that the company had misled investors about the value of the deal. In early February, Ronbay acknowledged that the disclosed supply volume and contract value were internal company estimates and were not stipulated in the agreement with CATL.

As a result, Ronbay and its executives were fined a combined CNY9 million (USD1.3 million) in February. The penalties were made official after the CSRC rejected appeals filed by the firm and its senior management last week.

Editor: Futura Costaglione