Chinese battery makers are set to gain from global energy changes due to the Iran conflict and ensuing supply shocks, Fitch Ratings said in a recent release.

Continued oil and LNG supply disruptions should boost energy security-linked investment in renewables and battery energy storage systems (BESS) across energy-importing countries, Fitch said.

These have positive effects on volume and utilization for scale Chinese producers, who have a major hold on the global lithium iron phosphate-cathode battery cell market and supply chain, the rating agency said.

The manufacturers' technology and cost leadership should also add to the tailwinds from the ongoing supply disruptions, Fitch said.

Fitch expects demand for BESS to increase even with an end to the Iran conflict, given more expensive electricity following the disruptions and policy priority for energy security.

This energy-security-linked adoption in other countries will provide the upside for the manufacturers, given that China has already progressed well in terms of vehicle electrification and energy transition, Fitch said.

The rating agency expects major manufacturers to better manage input-cost volatility that has effects on near-term profitability.

However, the rating agency forecasts structural policy and fragmented trade as growing constraints even under rising demand, with producers expanding offshore, including Southeast Asia and Europe due to stricter US market-linked regulations and Europe's incentives for local production.