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

Lead

Chinese battery cell manufacturers are expected to be the primary beneficiaries of rising global demand for energy storage, a trend accelerated by the US-Israeli conflict in Iran and the rapid expansion of artificial intelligence (AI) data centres, according to Fitch Ratings.

The credit rating agency said high oil prices and the growing electricity needs of AI infrastructure are pushing demand for energy storage systems to new heights, with China's leading producers of lithium iron phosphate (LFP) batteries holding a commanding edge in technology, cost efficiency and industrial scale.

The assessment comes as separate customs data shows Chinese exports of energy storage equipment continue to climb, with the value of inverter shipments jumping 57 per cent year on year to US$1.66 billion in the first two months of 2026.

Coverage Comparison

Reporting from the South China Morning Post highlights two interlocking narratives: one focuses on the strategic advantage of Chinese battery manufacturers as identified by Fitch Ratings, while the other examines the surge in Chinese inverter exports and the role of the Iran conflict in amplifying energy security concerns.

Both articles draw on official data and expert commentary, though they emphasize different aspects of the story. The Fitch-focused piece presents a bullish outlook for Chinese cell makers, citing the agency's managing director Wang Ying. The export-oriented piece, meanwhile, quotes industry insiders and analysts who point to AI demand as the primary driver, with the Iran war acting as an additional catalyst.

Key Claims

• China's energy storage exports are rising. The total export value of Chinese inverters – which convert electricity from batteries and solar panels into usable power – reached US$1.66 billion in the first two months of 2026, a 57 per cent increase year on year, according to Chinese customs data as reported by the South China Morning Post.

• Fitch predicts Chinese cell makers will be the bigger winners. At a media briefing in Beijing on Tuesday, Wang Ying of Fitch Ratings said leading Chinese energy storage cell manufacturers are poised to benefit from an "overwhelming advantage" globally, making it difficult for foreign competitors to replace them in the short term. She said these manufacturers should expect a rise in overseas orders.

• The global lithium-ion battery market exceeded US$150 billion last year. According to a February report by the International Energy Agency (IEA) cited in one article, the market expanded by more than 20 per cent, reflecting the sector's growing importance in automotive, AI and other strategic industries.

• China dominates lithium-ion battery production, especially LFP. The IEA report said China produced more than 80 per cent of all batteries and accounted for "almost all global manufacturing capacity and the associated technical expertise" for LFP batteries.

• Chinese manufacturers are more cost-competitive than Western rivals. Production expenses in the United States and Europe are up to 50 per cent higher than in China, even excluding government support, according to the IEA report.

• The Iran conflict has intensified energy security concerns. The closure of the Strait of Hormuz – which handles about 20 per cent of the world's oil supply – has spotlighted the need for energy independence, according to analysts cited in the South China Morning Post. Tehran announced it would reopen the strait under a two-week ceasefire agreement with the United States, brokered by Pakistan, though the situation remains fluid.

Perspectives

Industry analysts and trading experts see the current geopolitical tensions as a catalyst for accelerating the global shift toward electrification and decarbonization. Tim Buckley, director of the Climate Energy Finance think tank in Sydney, said the war has reinforced the need for energy independence and he expects a surge in Chinese battery and electric vehicle exports this year.

Freight forwarder Xu Jianzhong linked rising demand for energy storage systems primarily to global AI development, but added that the Iran war "may push it to a new high." He also noted that the Middle East conflict could increase input costs, including raw materials.

Fitch Ratings' Wang Ying emphasized the structural advantages of Chinese manufacturers, particularly in LFP technology, which is widely used in electric vehicles and energy storage systems. She pointed to the combination of technology leadership, cost efficiency and industrial scale as reasons why competitors from other countries will struggle to displace Chinese suppliers in the near term.

The IEA report, while acknowledging China's dominance, warned of concentration risks in the global supply chain – a point that has become more salient as governments in the US and Europe seek to diversify their battery sourcing.

Temporal Context

As of the latest reporting, the reopening of the Strait of Hormuz was announced under a two-week ceasefire between the US and Iran, brokered by Pakistan. However, the strait was closed again a day later in response to Israeli attacks on Lebanon, according to Associated Press reports cited by the South China Morning Post. Both sides have agreed to begin negotiations in Islamabad on Friday. The evolving situation continues to affect energy markets and, by extension, the economics of energy storage deployment.