Tianci Materials has recently achieved a significant milestone by passing the approval process for listing on the Hong Kong Stock Exchange, although the capital raising for the expansion of its production capacities overseas is still under review. According to reports from Foresee Energy, Tianci Materials is set to issue no more than 413 million H-shares, with major financial institutions such as JPMorgan Chase, Citic Securities, and GF Securities acting as joint sponsors. The company is projected to raise between $400 million and $500 million, with approximately 80% of the funds earmarked for the development of production capacities in Morocco and the United States.
For the past decade, Tianci Materials has maintained its position as the world’s leading supplier of electrolytes, recording a net profit attributable to shareholders of 2.861 billion yuan in the first half of the year, marking an astounding increase of 967.91% compared to the previous year. However, despite this impressive profit growth, the company's stock price has seen a significant decline from a high of 64.98 yuan in May to 35.68 yuan, representing nearly a 40% drop at the time of publication. This disparity between soaring profits and a falling stock price indicates that the market is not currently reflecting the company's performance but is instead focused on supply and demand expectations for 2027 and beyond.
By raising capital in Hong Kong, Tianci Materials aims to secure sufficient funding ahead of the operational launch of its overseas production capacities in 2028. The effective utilization of these funds will depend on several factors, including the sustainability of demand for energy storage solutions, compliance with EU regulations, and the ability of Chinese electrolyte manufacturers to establish a strong presence abroad.
In the first half of the year, Tianci Materials exceeded 440,000 tons in electrolyte sales, with sales for energy storage batteries more than doubling compared to the previous year. The capacity utilization rate is nearing full production. The company anticipates that as AI data centers continue to expand, driving up electricity consumption, the demand for electrolytes for energy storage batteries will likely grow faster in the next two to three years compared to that of electrolytes for propulsion batteries.
This assumption is grounded in clear industrial logic. Energy storage is no longer just a supplementary component for renewable energy power plants; it is becoming a critical player in peak load regulation and frequency stabilization within the power system. The simultaneous increase in demand across three sectors—AI data centers, independent grid-level energy storage, and commercial and industrial energy storage—draws demand for electrolytes more intensely than for propulsion batteries. Propulsion batteries are heavily influenced by fluctuations on the consumer side, while energy storage demand stems from the rigid configuration at the grid level.
However, the actual situation for Tianci Materials is not as optimistic as anticipated, and a detailed analysis of the quality of its profits is necessary. In the second quarter, the net profit attributable to shareholders decreased by about 27% compared to the previous quarter, influenced by two factors: the rising price of lithium carbonate on the raw material side is driving costs up, while the decline in the selling price of lithium hexafluorophosphate is constraining profit margins.
As widely known, the price of lithium hexafluorophosphate peaked at 170,000 yuan per ton in the fourth quarter of 2025, only to fall to a range of 90,000 to 110,000 yuan per ton by the end of June 2026. These price fluctuations have exceeded market expectations. Morgan Stanley noted in a report at the end of September that market expectations for a weaker supply and demand situation for lithium hexafluorophosphate in 2027 are evident.
Furthermore, Foresee Energy points out a crucial yet often overlooked fact: the substantial gain in profits for Tianci Materials this round is largely due to a base effect from the previous year. Compared to the peak of 5.714 billion yuan in 2022, there remains a gap for Tianci Materials to bridge.
It is possible that the cyclical nature of the electrolyte market has not disappeared but has merely been temporarily obscured by the demand for energy storage. For the entire industry, this recovery appears to be more of a structural repair than a cyclical reversal.
According to the announcement, 80% of the funds raised by Tianci Materials will be directed overseas, with Morocco being the primary focus. The company has already made several overseas investments. For instance, in June 2025, Tianci Materials signed an agreement with Morocco to invest approximately $280 million in constructing an integrated site with an annual production capacity of 150,000 tons of electrolyte, set to commence operations in the first half of 2028. In the United States, Tianci Materials is establishing a joint venture with Honeywell to develop projects with annual production capacities of 200,000 tons of electrolyte and 100,000 tons of liquid lithium hexafluorophosphate, which are also expected to be operational by 2028.
The question arises: why Morocco? One reason is its geographical location; Morocco's proximity to Europe across the sea offers advantages in logistics costs and response efficiency. Phosphate resources are another factor considered by Tianci Materials: Morocco possesses the largest phosphate reserves globally, making it a crucial raw material source for lithium hexafluorophosphate.
However, the fate of the Morocco project will be determined by EU regulations regarding CO₂ footprints. Annex II of the EU Battery and Waste Battery Regulation explicitly states that activity data for electrolytes must not use standard values but must refer to specific battery models and specific production sites. This means that the CO₂ footprint of the electrolyte must be traceable back to measured data at the factory and batch levels; industry averages are insufficient. A compliance statement can only be generated if upstream cell manufacturers, material manufacturers, and smelting operators transmit their data sequentially.
The regulation further indicates that from February 2028, products whose CO₂ footprint exceeds the limits set by the EU will be directly excluded from sale within the EU. Tianci Materials' Morocco project is slated to commence operations in the first half of 2028, creating a very tight timeline. If the CO₂ footprint calculation system is not operational upon commissioning, the completed production capacity may be at risk of lacking market access.
This challenge is not unique to Tianci Materials; other competitive firms in the industry face similar obstacles. The first phase of Sinopoly's electrolyte production capacity in Poland has already been commissioned, and the expansion of the second phase, adding another 50,000 tons per year, is underway. BYD is pursuing an in-house production model for its own needs: over 90% of the electrolyte required for new energy vehicles is produced internally, while its progress in overseas expansion is relatively delayed.
In this international competition among electrolyte manufacturers, the race is on to see whose production capacity comes online first and whose compliance system becomes operational first. Tianci Materials opted for Morocco rather than building production facilities directly within the EU to strike a balance between costs and compliance. Labor and land costs in Morocco are lower than in Europe, but the complexity of calculating the CO₂ footprint is higher than domestic production in Europe.
From its perspective, Tianci Materials' strongest asset is its self-sufficiency rate of lithium hexafluorophosphate, which stands at an impressive 98%. It is the first and only company globally to achieve large-scale industrial production of liquid lithium hexafluorophosphate, with the costs of the liquid process being 15% to 20% lower than the industry average. However, whether this system can be replicated abroad remains a pressing question.
Establishing overseas production facilities necessitates building the supply chain from scratch. The Morocco site must address a series of challenges, including sourcing phosphate ore, bringing lithium hexafluorophosphate production lines online, and obtaining customer certifications. The transport radius for liquid lithium hexafluorophosphate is limited, requiring foreign plants to be equipped with production lines for liquid lithium hexafluorophosphate rather than simply importing solid lithium salt and then dissolving it.
The joint venture project with Honeywell in the United States includes a production line for liquid lithium hexafluorophosphate with an annual capacity of 100,000 tons, showcasing that Tianci Materials is replicating its integrated model abroad and not merely a pure electrolyte mixing capacity.
Moreover, the competitive landscape in the market is shifting. Currently, Tianci Materials leads with a global market share of 32.2%, followed by BYD at 13.4% and Sinopoly at 13%. The supply volumes of second-tier companies such as Kunlun New Materials, Zhuhai Saiwei, and Shida Shenghua have each grown by over 70% compared to the previous year, significantly outpacing industry growth.
Although the base for these companies is small, their growth indicates a shift in market share. Kunlun New Materials, for instance, has already risen to fourth place globally in supply volume by 2025, with its market share increasing from 3.0% in 2021 to 4.5% in 2025.
Compared to competing firms, Tianci Materials’ advantage lies in vertical integration—controlling the entire chain from upstream lithium resources through lithium hexafluorophosphate to electrolytes. The establishment of foreign lithium resources is still in the phase of processing investment formalities, and mining projects in Nigeria and Zimbabwe have yet to achieve actual production capacity. Until the foreign supply chain is fully operational, Tianci Materials’ cost advantage in international markets will be diminished.
For the entire Chinese electrolyte industry, expanding overseas is not as simple as relocating domestic production capacities; it necessitates the reconstruction of an entire supply chain system from raw materials to finished products abroad.
Foresee Energy suggests that the core issue for Tianci Materials' capital raising in Hong Kong lies in whether the market environment will remain as favorable at the commissioning of its overseas plants in 2028 as it is today.
The sustainability of the growth rate of demand for energy storage is the first variable. The current rapid increase in supply of energy storage cells is driven by both politically motivated early installations and genuine demand from the expansion of AI data centers. The relationship between these two factors will determine the slope of the demand curve for electrolytes.
The absorption of overseas production capacities is the second variable. Currently, foreign revenues account for only about 3% of total sales, equating to 444 million yuan. Even if the overseas revenue from electrolytes grows over 126% compared to the previous year, the base remains very low. The planned capacities of 150,000 tons in Morocco and 200,000 tons in the United States must be absorbed by localized demand from the foreign energy storage market.
The price trend of lithium hexafluorophosphate is the third variable. The industry generally anticipates a weaker supply and demand situation in 2027, but the elimination of inefficient production capacities and cautious expansion of new capacities may also alter the supply curve. Tianci Materials’ Nantong project has been actively terminated, and the industry-wide expansion projects are being slowed down, which could lead to a tighter supply side occurring faster than expected. If supply tightens quicker than demand decreases, the price may not necessarily continue to fall as pessimistically anticipated.
By raising several hundred million dollars, Tianci Materials is not only acquiring production capacities but also the time window to transition from a Chinese electrolyte leader to a global electrolyte provider. How large and how long this window remains open will depend on the actual resilience of demand for energy storage, the progress in establishing the EU compliance system, and the actual willingness of foreign customers for localized deliveries.
This move by Tianci Materials also serves as a litmus test for whether Chinese companies in the lithium battery material sector can transition from product exportation to the internationalization of the entire supply chain.
As reported by eu.36kr.com.
