GGII: China's lithium battery separator industry has experienced rapid growth in shipments. Supply and demand tension will continue until 2027.

GGII data shows that the shipment volume of lithium battery separators in China will grow rapidly in 2025, with a total annual shipment volume reaching 32.3 billion square meters, an increase of 45.4% year-on-year. The supply and demand in the separator industry is shifting from loose to tight balance, with leading companies operating at full capacity driving up capacity utilization rates. However, under the constraints of expansion cycles, a supply-demand gap is expected to emerge in 2027. Prices remain low, with only a slight rebound in the second half of the year for wet process separators, indicating that a comprehensive uptrend has not yet begun. China's Separator Shipment Volume (Billion Square Meters) from 2021 to 2026 Source: GGII Lithium Battery Research Institute, January 2026 Structural Differentiation: Dry process ratio falls below 18%, wet process becomes the absolute dominant leader In 2025, the structure of the separator industry is rapidly reshaping, with the share of dry process separators continuing to decline. In 2024, dry process separators accounted for 22% (equivalent to 5.9 billion square meters), but by 2025, it had dropped by nearly 5 percentage points to below 18%; wet process separators increased their share from 78% (17.2 billion square meters) to 82.6%, becoming the growth core. Key driving factors include: 1) Cost-effectiveness is highlighted, with a price war in the first half of the year leading to a narrowing price difference between mainstream wet and dry process base films to 0.15 RMB/square meter, accelerating customer switching; in the second half of the year, prices for wet process separators slightly rebounded with improvements in supply and demand, but still remained historically low. 2) Upgraded downstream demand, with 314Ah lithium batteries accounting for over 70% in the energy storage sector, which requires higher stability and consistency in separators, driving the increased application of wet process separators. Supply-Demand Pattern: From loose to tight balance, full capacity operation of leading companies drives capacity utilization rates The capacity utilization rate of the separator industry in 2025 has been gradually increasing. Starting from September, leading wet process companies have been operating at full capacity, with some outsourcing processing, but due to the high industry concentration and few small and medium-sized enterprises, the outsourcing demand has shifted to second-tier wet process companies. In Q4, lithium battery companies accelerated the validation of products from small and medium-sized wet process enterprises, with some temporarily switching to dry process separators. GGII data shows that in Q4 of 2025, the capacity utilization rate of wet process separators exceeded 80%, approaching the peak in 2022, indicating that the industry has entered a tight balance phase. According to GGII research, current separator companies are cautious about expanding their production, mainly due to the expected substitution of solid-state batteries, which to some extent are seen as a declining industry, and separators require heavy investment with a long investment payback period, leading companies to have a firm stance on recovery and equipment investment. In terms of equipment, leading separator companies mainly use imported production lines from companies like Toshiba and Bruckner; although some domestic suppliers such as Zhuoqin and Zhongke Hualian have their own equipment suppliers, they still rely on imported key components for assembly, making it impossible to achieve 100% domestic production. Overseas equipment typically takes around a year to deliver from order confirmation, lengthening the expansion cycle. With increasing demand and limited large-scale capacity expansion, it is expected that the separator industry will still face supply shortages in 2026-2027. Technological Iteration: Focus on high-end demand, accelerate multi-dimensional performance upgrades In 2025, separator technological iterations have focused on downstream demand, with breakthroughs in multiple dimensions: 1) The application ratio of high-puncture strength 5m wet process separators has been increasing month by month, with over 30% of the leading battery companies in Q4 applying them, and second-tier companies accelerating their validation. 2) 500/600Ah+ energy storage battery cells are driving the requirement for improved separator flatness. 3) Under the fast-charging trend, the porosity of separators for power batteries has increased from <50% to 50-55%, enhancing lithium-ion conductivity efficiency. In addition, the demand for separators with high thermal shrinkage properties has risen with the mass application of silicon-carbon negative electrodes, with significant differences in requirements depending on the positive and negative electrode materials. Different positive and negative electrode materials affect separator thermal shrinkage performance Source: GGII Lithium Battery Research Institute, January 2026 Looking ahead to 2026, the separator industry will continue to experience high prosperity, with four main trends emerging: 1) Capacity utilization rates will continue to increase, with a yearly increase of 7-10 percentage points, reaching a wet process peak of over 85% in H2 (85-90% is considered full capacity), exacerbating the supply shortage of wet process separators and prompting battery companies to accelerate the purchase of dry process separators. 2) Prices are expected to rebound from their low levels, with prices of both wet and dry process separators gradually moving away from the bottom in 2026, and the mainstream wet process prices expected to increase by 10-20% year-on-year, leading to profit recovery. 3) Penetration of high-end products will accelerate, with the application ratio of 5m high-puncture wet process separators from leading companies breaking 50%, and the popularization of energy storage products with high flatness and fast-charging products with high porosity. 4) The demand for separators with high thermal shrinkage performance is rising, with the expected share of separators with a 180C thermal shrinkage capability breaking 0.5%, becoming a technological competition focus.