ITOCHU Corporation Reaches Basic Agreement to Invest in NINGBO SHANSHAN in China to Manufacture Lithium Ion Battery Cathode Materials

February 9, 2010

ITOCHU Corporation (“ITOCHU”) and Toda Kogyo Corp. (based at Otake, Hiroshima; president: Toshiyuki Toda; “Toda Kogyo”) have reached a basic agreement to jointly invest in Hunan Shanshan Advanced Material Co., Ltd. (based at ChangSha, HuNan, China; legal representative: Li ZhiHua; “Hunan Shanshan”), a subsidiary of NINGBO SHANSHAN CO., LTD. (based at Ningbo, Zhejiang; legal representative: Zhuang Wei; “NINGBO SHANSHAN”). Hunan Shanshan is one of China’s leading lithium ion battery cathode materials manufacturers.
ITOCHU will make the investment in April this year to gradually bolster the product lineup and increase production capacity.
An SPC to be established jointly by Toda Kogyo and ITOCHU will hold 25% of the shares first, with the aim of holding 50% later.

Market background

The lithium-ion battery market is expected to expand sharply with the widespread adoption of environmentally friendly vehicles (hybrid electric vehicles and electric vehicles, including buses) as well as the growing market penetration of mobile phones and personal computers. Moreover, new demand for lithium-ion batteries for large storage batteries is expected given the expansion of photovoltaic generation facilities. Consequently, the global market for cathode materials is projected to expand from 30,000 to 40,000 tons per year now, to eight or ten times that level in 2020. The cathode materials market in China is also set to grow rapidly. The importance of China is increasing not only as a huge market in its own right but also as a production base for the world.

Position of the joint venture

Toda Kogyo originally launched a cathode materials business for consumer use. The company now manufactures cathode materials for automobiles and large storage batteries. The product lineup includes materials such as cobalt, nickel, a ternary compound system, manganese, and iron. The company has been building a global network of production facilities. It manufactures precursors, materials for nickel cathode materials, in Japan and Canada. Starting 2011, the company plans to manufacture nickel materials in the United States. With the joint venture, the company aims to expand its operations into the enormous Chinese market.
ITOCHU is focusing on environmental and new energy businesses in its medium-term management plan, Frontiere 2010. The Company is focusing particularly on its storage battery business as a key field across the board. ITOCHU has invested in Enerl, with which EnerDel, a U.S. lithium-ion battery manufacturer, is affiliated, and has taken part in a joint demonstration project for a low-carbon transportation system in Tsukuba. In addition to these undertakings, the company will build a value chain including the sourcing of natural resources, the production of storage batteries and materials for storage batteries, and the smart grid business at an accelerated pace.

ITOCHU formed a capital and business alliance with Shanshan Group Co., Ltd., the parent company of NINGBO SHANSHAN, in February 2009 to add value to both companies. The basic agreement is intended to create the strongest cathode materials manufacturer in China using the existing platform of the Shanshan Group and the extensive, advanced techniques and expertise of Toda Kogyo, and is one of the key projects that began to be considered after the forming of the alliance.
NINGBO SHANSHAN has affiliated cathode materials, anode materials, and electrolytic solution plants relating to lithium-ion battery materials and a comprehensive Chinese cell component manufacturing group. Hunan Shanshan, in particular, which manufactures cathode materials, is a leading Chinese cathode materials manufacturer, especially manufacturing cobalt materials, and is capable of producing 4,000 tons of materials per year. The company is highly regarded as a major supplier of major battery manufacturers in China. It plans to meet more diverse needs in the local market, expanding its product lineup, including ternary and manganese products, taking advantage of the alliance with Toda Kogyo and anticipating the expansion of demand for these products.

Developing high-capacity and safe cathode materials is an urgent requirement in new fields in the lithium-ion battery market, especially the part of the market for automobiles. In the circumstances, ITOCHU will meet new demand in the rapidly growing market as much as possible, using the advanced technologies of Toda Kogyo, the excellent production facilities and strong Chinese customer base of Hunan Shanshan, and the global marketing network of ITOCHU.

(For reference) Corporate profile

Corporate name Hunan shanshan advanced material Co., Ltd.
Head office ChangSha, HuNan, China
Representative Li ZhiHua
Established November 2003
Capital 50 million yuan
Net sales 687 million yuan (FY2008)
Investment ratio NINGBO SHANSHAN CO., LTD. 100%
Production items

LCO (lithium cobalt oxide)

LNCM (ternary materials)

LMO (lithium manganese oxide)

LFP (olivine structure)

Production capacity 4,000 tons per year