According to industry feedback cited by CMSC, major wet separator manufacturers are operating at full capacity, and third-party pricing indicates a rebound in wet separators, coated membranes, and dry separators. Currently, the profitability of the separator industry is at a historical low, with the top two companies reporting losses over the past two quarters. Despite strong demand, expansion willingness remains subdued due to heavy asset requirements and long lead times for capacity additions. Industry capital expenditure has been declining since 2023, limiting future capacity expansion, which may lead to tighter supply by 2026.

Key insights from CMSC are as follows:

**Wet Separator Prices Enter Upward Trend** Leading wet separator producers are running at high utilization rates, with the top three manufacturers already at full capacity. Major dry separator players are operating at around 70–80% utilization. Third-party pricing confirms a bottoming-out and reversal, with notable increases for 7μm and 9μm wet separators. Since August, base film prices have risen by RMB 0.07 per square meter, while coated membranes have increased by RMB 0.10 per square meter. Dry separator prices have also started to climb.

**Capital Expenditure Contraction Limits Capacity Expansion** Industry profitability remains weak, with Semcorp and Senior suffering losses in Q2–Q3 2025. High interest-bearing debt ratios among key players further constrain expansion plans. Since 2023, capital expenditure has trended downward, and no listed companies have announced new lithium battery separator capacity plans in 2024. An August industry meeting reinforced a consensus against reckless expansion, with a typical 1.5–2-year lead time for new capacity suggesting limited supply growth ahead.

**Industry Consolidation Accelerates; Focus on 5μm Ultra-Thin High-Strength Films** The top four separator producers accounted for over 70% of market share in H1 2025, up from 2024. Energy storage and ultra-fast EV charging demand higher-performance, thinner, and safer separators. The 5μm ultra-thin high-strength wet separator, offering superior performance and pricing premiums, is expected to gain market share rapidly. Leading firms are also developing next-generation coated separators and deploying wide-format, high-speed production lines to enhance cost and performance advantages, further driving industry consolidation.

**Risks:** Potential downside risks include weaker-than-expected downstream demand and ineffective implementation of industry self-regulation agreements.