Five major changes in the lithium battery material industry

The drastic changes in the capacity of the lithium battery industry track, as well as the accelerated evolution of industry competition, technical demand, and ecological structure, will bring unprecedented challenges to the lithium battery materials supply chain. With the acceleration of global automobile electrification and energy system transformation, the demand for lithium batteries continues to grow, and the expansion of power battery production is likely to intensify, which will bring huge industrial opportunities to lithium battery material companies.

The drastic changes in the capacity of the lithium battery industry track, as well as the accelerated evolution of industry competition, technical demand, and ecological structure, will bring unprecedented challenges to the lithium battery material supply chain. At the same time, new opportunities and windows will also bring new changes to the supply chain of lithium battery materials.

1. Lithium battery material price rise and fall

In the past 1-2 years, the price of lithium battery materials has continued to change with changes in supply and demand. In 2021, the explosive growth of new energy vehicles and lithium battery energy storage markets will drive a substantial increase in lithium battery shipments, which in turn will generate strong demand for various upstream lithium battery materials. The overall lithium battery material link will be in a state of tight supply and rising prices. Among them, the prices of lithium carbonate, lithium hexafluorophosphate, PVDF, and lithium iron phosphate will increase by more than 750%, 420%, 400%, and 350% in 2021 compared with the end of 2020, respectively.

The prices of raw materials such as graphitization, iron phosphate, and monoammonium phosphate also increased by 1-2 times. However, with the accelerated expansion of upstream enterprises and the adjustment of downstream market demand, the prices of the above-mentioned materials will gradually fall in 2022. Due to the increase in production capacity, the prices of major materials have declined to varying degrees in the fourth quarter.

Among the cathode materials, although the price of lithium salt once exceeded 600,000 RMB/ton, the price began to decline in November, driving lithium iron phosphate, ternary materials, lithium manganese oxide and lithium cobalt oxide materials to all begin to decline. Anode artificial graphite is affected by the price of graphitization processing, needle coke and other prices, superimposed on the launch of negative electrode production capacity, the price first rose and then fell. The supply and demand of battery separators are tightly balanced throughout the year, and the price is relatively stable.

Affected by the decline in the price of raw materials 6F and VC, the price of electrolyte continued to fall, which was more than 50% lower than that at the beginning of the year. With the launch of new production capacity of copper foil, the industry's processing fee continued to fall. In terms of upstream raw materials, lithium salt began to decline in November, and fell by more than 20% by the end of December. 6F, VC, and PVDF fell by more than 50% for the whole year, and the price of graphitization processing dropped by more than 30%, mainly in the second half of the year.

2. Crazy influx of companies and lithium battery materials overcapacity

In 2021, the supply of many materials for lithium batteries will be tight and prices will soar, and cross-border companies will flock here. Especially in the field of LFP materials, in addition to traditional LFP cathode material companies, including lithium battery ternary material companies, phosphorus chemical, titanium dioxide chemical companies and cross-border companies have also joined the army of LFP material expansion. For traditional materials companies, the more cross-border entrants and new production capacity, the market competition and price impact they face will inevitably intensify.

For new entrants in the new cycle, the other side of the highlight moment is high risk. It will face multiple challenges such as talent shortage, sudden impact of the epidemic, smooth approval of projects, and release of production capacity verification. Taking LFP materials as an example, only companies that take the lead in integrated projects, rapidly expand production, have cost advantages, and are deeply bound to downstream companies can expect to enjoy the market dividends in the high-boom stage of the industry.

3. Battery performance requirements increase

The need to increase the energy density of power batteries, reduce manufacturing costs, and improve safety performance puts forward higher requirements for the performance improvement of lithium battery materials such as cathode, anode, separators, electrolytes, copper and aluminum foils, and structural parts. At the same time, power battery companies in the world are also uniting with material companies to build an industrial ecological chain and demonstrate their material innovation capabilities to the world.

Therefore, breaking through the bottleneck of product performance and developing new materials has become a new challenge for lithium battery material enterprises to be solved urgently. On the other hand, the barriers to competition in the lithium battery material industry will continue to rise.

4. Midstream and downstream companies control over upstream resources intensifies

Based on the vigilance of the stable supply of upstream raw materials and price fluctuations, more and more battery companies have begun to bypass the first-tier suppliers of midstream materials and directly carry out diversified cooperation with upstream material companies, including joint ventures, mergers and acquisitions, and long-term order binding.

Even on the OEM side, they have begun to directly connect to global lithium, cobalt, and nickel resources, and start a game with battery companies in terms of the right to speak on the cost side in the medium and long term. Under the new cycle, the new ecology of the lithium battery industry chain is also constantly forming. How to deal with the relationship with terminal companies under the situation of short supply and oversupply requires material companies to respond to the market with a more open and new thinking.

5. Lithium battery material supply digitalization and zero carbonization transformation

With the evolution of demand for lithium battery materials at the level of millions of tons, creating digital, environmentally friendly, low-carbon, and sustainable production will become the core of competition for enterprises under the new supply chain. At the same time, zero-carbonization has become a new label to participate in the competition of the global power battery industry, and the construction of zero-carbon factories has gradually penetrated the upstream and downstream of the entire industrial chain. Building a zero-carbon factory has also become a new proposition for material companies to participate in global competition.

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