(Yicai) May 11 -- Shares of Mingzhu Plastic surged by the daily trading limit after the Chinese plastic materials and lithium battery separator supplier announced plans to invest almost CNY3.4 billion (USD497.4 million) to build a South China production base that will sharply expand its lithium battery separator capacity.

Mingzhu Plastic [SHE: 002108] closed up 10 percent higher at CNY6.44 (US 95 cents) today after remaining limit up throughout the trading session. The project is expected to lift the BYD supplier's designed annual lithium battery separator capacity to 4.2 billion square meters from current levels, helping it move into the top tier of global suppliers.

The company said late during the previous trading day that it plans to build the production base in the Zengcheng Economic and Technological Development Zone in Guangzhou. The project will include eight wet-process lithium-ion battery separator production lines and seven polyethylene (PE) pipe production lines.

After the project is completed and put into operation, the facility is expected to produce 2.4 billion square meters of wet-process lithium-ion battery separators and 30,000 tons of PE pipes annually. The expansion will also raise the company’s designed annual PE pipe capacity to 229,500 tons.

Mingzhu Plastic plans to establish a joint venture project company with an investment firm owned by the Zengcheng district government to oversee the investment, construction, and operation of the project. The joint venture will have registered capital of CNY1.2 billion, with Mingzhu Plastic holding a 75 percent stake based on its investment contribution, according to the company announcement.

The South China production base will help the company capture growth opportunities arising from the development of the Guangdong-Hong Kong-Macao Greater Bay Area, improve economies of scale in its related businesses, and expand its market share in South China, the announcement said.

Mingzhu Plastic, whose main business is plastic processing, had an annual lithium battery separator production capacity of 740 million square meters last year, with the segment contributing more than a quarter of total revenue. Battery giants Contemporary Amperex Technology and BYD are among its core customers.

After the South China base begins operations, Mingzhu Plastic's annual lithium battery separator capacity is expected to rank among the world’s leading suppliers, making it one of the top players after China's SEMCORP Advanced Materials Group and Shenzhen Senior Technology Material.

Editor: Emmi Laine