The battle between China, Japan and South Korea in the lithium battery industry chain

In June 2017, CATL announced that it would soon be listed on the A-share market, with a valuation of more than 120 billion yuan.

The changes in the strength of China, Japan and South Korea in the field of lithium batteries may be more intuitive with the following chart. We have surpassed Japan and South Korea in terms of amount, but the top three in the world are still occupied by Japanese and South Korean companies. BYD and CATL are fourth and fifth respectively, and the gap with the top three is not big. It is expected that both will quickly rush into the top three in the world.

Next, we need to pay attention to the localization of upstream materials and equipment of lithium batteries. Let's look at the localization of upstream materials of lithium batteries. We can use the following figure as a reference. Note that it is just a reference. The four core raw materials are: positive electrode materials, negative electrode materials, electrolytes, and diaphragms.

One thing is certain, the cathode material is the core and most expensive part of lithium batteries. It can be said that it is the core material that affects the energy density and performance of lithium batteries, accounting for 30%-40% of the cost. At present, among the four core raw materials, except for the diaphragm, the localization rate is currently low, and the other three have achieved independent localization.

China accounts for more than 50% of the world's cathode materials

There are many types of positive electrode materials. The lithium iron phosphate and ternary lithium batteries used in electric vehicles, the lithium cobalt oxide batteries and lithium manganese oxide batteries used in mobile phones and tablets, etc., are actually different positive electrode materials.

In 2015, China's output of positive electrode materials was 106,500 tons, accounting for 47.67% of the global output, but the leading manufacturers are still Japanese and Korean manufacturers.

According to the statistics of the 2017 China Lithium Battery Cathode Material Industry Research Report, in 2016, the total output of lithium battery cathode materials in China reached 162,000 tons, a year-on-year increase of 51.4%, including 57,000 tons of LFP, 61,000 tons of NCM, 35,000 tons of LCO and 9,000 tons of LMO.

In terms of global market competition, Japanese and Korean companies mainly use ternary materials as cathode materials, and China is also gradually starting to use ternary materials. The following figure shows the cathode material share of major companies in the world in 2015. Foreign competitors are mainly Korean companies Umicore and L&F, and Japanese companies Nichia Chemical and Sumitomo Metal, both of which mainly use ternary materials. For example, most of Nichia Chemical's products are NCM, and Sumitomo Metal's NCA is mainly supplied to Panasonic, which is a supplier of Tesla.

It can be seen that all Chinese lithium battery cathode material companies have achieved rapid growth. China's Shanshan Energy has become the world's largest cathode material supplier in 2016.

In 2016, Shanshan Energy, a cathode material company, achieved a main business income of 2.503 billion yuan, up 8.12% year-on-year; the net profit attributable to shareholders of the listed company was 174 million yuan, up 121.48% year-on-year. It is worth mentioning that in addition to providing cathode materials to domestic battery manufacturers, Shanshan Energy is also a supplier of Panasonic batteries.

Xiamen Tungsten's battery materials business achieved operating revenue of 2.55 billion yuan in 2016, compared with only 1.085 billion yuan in 2015, an increase of 135%. 60% of the company's production capacity is ternary materials, and it is a supplier to South Korea's Samsung SDI, LG and Japan's Panasonic, and China's CATL.

In 2016, Dangsheng Technology achieved operating income of 1.335 billion yuan, a year-on-year increase of 55.10%; and achieved a net profit attributable to shareholders of the listed company of 99.2878 million yuan, a year-on-year increase of 647.56%. Dangsheng Technology's operating income includes the income from lithium battery production equipment.

In 2016, PKU achieved sales revenue of approximately RMB 1.1 billion, an increase of more than 50%. PKU mainly serves domestic customers.

Hunan Ruixiang achieved sales revenue of approximately RMB 900 million in the first half of 2016, providing cathode materials for Samsung SDI, LG, Toshiba, Lishen, BYD, etc.

In addition, there is also a company called GEM in China that makes ternary material cathodes, mainly NCM and NCA.

In 2016, GEM's battery materials segment achieved operating revenue of RMB 2.07 billion, an increase of RMB 541 million or 35.37% over 2015, and contributed a gross profit of RMB 462 million.

It can be seen that in the field of positive electrode materials, China basically has a monopoly on lithium iron phosphate, but in the field of ternary materials, Japan and South Korea have advantages in technology and market share. Of course, in addition to maintaining its dominant position in lithium iron phosphate, China is also catching up in the field of ternary materials.

China and Japan monopolize 95% of the global market for negative electrode materials, and China is constantly eroding Japan's share.

Unlike other materials which are dominated by China, Japan and South Korea, negative electrode materials are dominated by China and Japan.

The negative electrode material of lithium batteries is graphite. Currently, China and Japan have formed a monopoly on the world market, with companies from the two countries accounting for more than 95% of the global market share, and China's market share is higher than that of Japan.

The top three in the world are Shenzhen BTR, Japan's Hitachi Chemical, and Shanghai Shanshan, accounting for 70% of the global market share.

In addition to the top three, there are other companies such as Nippon Carbon, Mitsubishi Chemical, and JFE Japan.

According to the statistics of the global negative electrode material market share in 2014 by Yano Keizai, B&T's market share was 31.8%, ranking first in the world. It provides customized solutions for world-class companies such as Samsung, Panasonic, LG, and BYD in terms of battery raw materials.

In 2016, BTR achieved revenue of 2.136 billion yuan, a year-on-year increase of 42.28%; and realized a net profit of 261 million yuan attributable to shareholders of the listed company, a year-on-year increase of 47.12%.

In 2016, Shanshan's revenue from lithium battery negative electrode materials was approximately 1.59 billion yuan, an increase of about 47%, which is much faster than the growth rate of Japanese companies.

This means that market share continues to play a zero-sum game, that is, it is shifting from Japanese companies to Chinese companies.

Chinese electrolyte manufacturers gradually form a monopoly

In the electrolyte market, my country's main international competitors are four companies: Mitsubishi Chemical and Ube Industries of Japan, LG Chem and Asahi Chemical of South Korea, but the market shares of these four companies are declining.

In 2015, the global electrolyte production was 111,000 tons, a year-on-year increase of 34.3%; China's electrolyte production was 69,000 tons, a year-on-year increase of 52.7%; China accounted for 62.2% of the world's total. In terms of growth rate, China's electrolyte production growth rate was significantly higher than the global level.

Xinzhoubang, the domestic leader in electrolyte, achieved operating income of 1.59 billion yuan in 2016, an increase of 70.1%, and a net profit of 256 million yuan. It was at 100.45% and its global market share reached 10%. The company is an excellent supplier for Samsung and Sony.

Guangzhou Tianci, the second largest electrolyte manufacturer in China, had an operating income of 1.837 billion yuan in 2016, an increase of 94.25%, and a net profit of 395 million yuan, an increase of 296.87%. Of course, Tianci not only produces electrolytes, but also produces lithium hexafluorophosphate, the upstream material of electrolytes. Therefore, its gross profit margin is higher than that of Xinzhoubang, and its net profit margin is as high as over 20%, reaching the level of Apple.

Huarong Chemical, the third largest domestic electrolyte manufacturer, achieved operating income of 1.067 billion yuan, a year-on-year increase of 109.3%, and net profit of 144 million yuan, a year-on-year increase of 51.47%.

The electrolyte of the electrolyte is mainly lithium hexafluorophosphate. It can be said that lithium hexafluorophosphate is the upstream product of the electrolyte. Since Chinese companies mastered this technology, the market share of Japanese and Korean companies began to decline rapidly.

Before 2004, Japan's Ruixing Chemical, Morita Chemical and Kanto Denka monopolized the lithium hexafluorophosphate industry, and the price of lithium hexafluorophosphate was over 600,000 yuan per ton. In 2004, Tianjin Jinniu Company put its 80-ton annual production facility into operation, breaking the Japanese monopoly and reducing the price of lithium hexafluorophosphate to 300,000-400,000 yuan per ton.

However, due to the lack of breakthroughs in my country's production technology, it is impossible to form large-scale mass production capabilities and can only carry out costly small-scale trial production. Therefore, before 2011, Japan's Rising Chemical, Morita Chemical and Kanto Denka still almost monopolized the lithium hexafluorophosphate industry. At that time, the gross profit margin of lithium hexafluorophosphate was as high as 80%.

Since 2011, domestic manufacturers led by Dofluoro have successfully broken through the production process of lithium hexafluorophosphate and entered the supply chain of domestic electrolyte companies with their price advantage.