China’s battery makers stand to gain as Iran war reshapes energy storage demand: Fitch

According to a Fitch Ratings analysis presented by managing director Wang Ying, China's leading energy storage battery manufacturers are set to be the "bigger winners" from a reshaping global energy landscape. The dual drivers are the US-Israeli war in Iran—which is elevating oil prices and energy security concerns—and the rapidly expanding power demands of artificial intelligence (AI) data centers. This is catalyzing global demand for energy storage systems where Chinese firms, particularly producers of lithium iron phosphate (LFP) batteries, hold an "overwhelming" and "absolute" advantage in technology, cost-efficiency, and industrial scale.

Fitch notes that China produced more than 80% of all batteries globally last year and accounts for nearly all global LFP manufacturing capacity and expertise. This dominance creates a high barrier for international competitors. A key factor is a staggering cost advantage: production expenses in the US and Europe are up to 50% higher than in China, even excluding government subsidies. Consequently, leading Chinese manufacturers can expect a significant rise in overseas orders, as it will be "difficult for competitors from other countries to replace them in the short term."

This positive overseas outlook exists despite a hyper-competitive and challenging domestic market. Chinese lithium-ion battery producers, part of Beijing's "new three" pillars of green growth, are locked in cutthroat price wars amid persistent overcapacity, which squeezes profit margins. The global lithium-ion battery market itself expanded by over 20% to exceed $150 billion last year, underscoring its strategic importance across automotive, AI, and energy sectors. Fitch's assessment highlights how China's entrenched supply chain dominance in a critical technology allows its industry to capitalize on external crises, even while navigating internal economic pressures.