Tesla's new battery capacity increased by more than 30%, and the new electrolyte solvent DMC is in short supply

On September 23, Tesla's "Battery Day", known as the "Apple conference in the automotive industry", will arrive as scheduled. Musk said on Twitter that the event will be "very crazy". Earlier, it was reported that the capacity of Tesla's new battery will increase by at least 30%, and the production cost will be reduced several times. Moreover, the production process will be very efficient and will greatly save the capital cost of the equipment. In this case, a 130kWh battery pack is also possible.

Tesla's only supplier of new electrolyte solvents

Recently, according to Hong Kong media reports, a technical expert from Mitsubishi Chemical (MTLHY) revealed that the important innovations of Tesla's new battery are the positive and negative electrodes and the new electrolyte. The new electrolyte was developed by Mitsubishi Chemical and uses advanced additive technology. By controlling the side reactions on the electrode surface, the electrolyte can maintain high yield even in low temperature environments and has excellent durability and safety.

The report quoted a technical expert as saying that the solvent in the new electrolyte will still be provided by China's Shida Shenghua, and the content of DMC (dimethyl carbonate, a chemical raw material with low toxicity and excellent environmental performance) in the solvent will be greatly increased. The expert revealed that as early as 2017, Mitsubishi Chemical and Shida Shenghua jointly developed a new solute; now the product is about to be mass-produced, which can effectively increase the battery cycle time and energy density.

In addition, according to ACN Newswire, a Tesla technical expert mentioned that Shida Shenghua will become the exclusive supplier of Tesla's new battery solvents and additives; the proportion of solvent DMC added in Tesla batteries has increased to 70%, 6 times higher than before. This also further confirms the report of Hong Kong media.

On September 21, a relevant person in charge of Shida Shenghua said that the company occupies an important position in the supply chain of electrolyte solvents for Tesla batteries. In terms of regions, Tesla in the United States uses Panasonic batteries, and Panasonic purchases electrolytes from Mitsubishi Chemical of Japan. Shida Shenghua is the only supplier of Mitsubishi Chemical in the Chinese market (battery-grade DMC).

In the Chinese market, Tesla (Shanghai) currently uses lithium iron phosphate batteries from CATL. CATL purchases electrolytes from Jiangsu Guotai and Tianci Materials, while Shida Shenghua accounts for 90% of Jiangsu Guotai's battery-grade DMC purchases and over 50% of Tianci Materials' battery-grade DMC purchases. This shows that Shida Shenghua is the only company that dominates the battery-grade DMC market.

Battery-grade DMC prices continue to hit record highs

It is understood that Shida Shenghua is currently the world's largest supplier of electrolyte solvents. In 2019, the company's electrolyte solvents accounted for about 40% of the global market, and its exports accounted for 80% of the domestic electrolyte solvent exports. So far, Shida Shenghua has established stable cooperative relations with well-known domestic and foreign electrolyte companies such as Tianci Materials, Jiangsu Guotai, International Mitsubishi Chemical, and Enchem, and has entered Tesla, BYD, BMW, Mercedes-Benz and other world-renowned new energy vehicle companies through battery companies.

According to Baichuan Yingfu data, Shida Shenghua currently has a DMC production capacity of 125,000 tons/year, of which battery-grade DMC production capacity is 75,000 tons/year, and the domestic market share accounts for about 70%. In the first half of 2020, affected by the global COVID-19 pandemic, the company's dimethyl carbonate series products achieved sales revenue of 957 million yuan, a year-on-year decline of 14.32%. However, with the gradual increase in demand for power battery products from new energy vehicles since June this year, DMC prices have bottomed out and continued to rise.

On September 15, the mainstream price of domestic battery-grade DMC was 11,000 yuan/ton, up more than 100% from the low of around 5,000 yuan/ton in July, setting a new record high. Industry analysts said that the continued improvement in terminal demand for new energy vehicles and the substantial increase in the installation of lithium iron phosphate batteries, which consume a large amount of DMC in China, are the main reasons for the continued growth in DMC demand.

Just one day later, Baichuan Yingfu data showed that Shida Shenghua's battery-grade DMC long-term contract orders were completed, and the price jumped another 500 yuan, with the offer price of 11,500 yuan/ton hitting a new record high. Entering the peak season for production and sales, Shida Shenghua began to implement individual sales. Baichuan Yingfu analyzed that the price of raw material propylene oxide has risen sharply recently, and the demand for downstream lithium battery electrolyte has increased significantly. The DMC market is tight and is in a price increase period.

As of the day before publication (September 21), according to Baichuan Yingfu data, the price of Shida Shenghua's battery-grade DMC has again increased by a total of 1,500 yuan/ton, with a quoted price of 13,000 yuan/ton, all of which are sold in individual orders.

In addition, Baichuan data shows that the Dongying Haike facility, the second largest battery-grade DMC manufacturer in China, stopped for maintenance in September this year. Battery-grade DMCs of some other small companies also have problems such as poor start-up. The tightening of the supply side has exacerbated the imbalance between supply and demand, and accelerated the continued rise in battery-grade DMC prices.

Today, Tesla's new batteries use up to 70% DMC, which will continue to drive demand for DMC in the future. The tight spot situation in the DMC market will not be alleviated in the short term, and the price of individual orders will continue to rise in the future.

Many securities institutions are optimistic about the market prospects of DMC. Zhongtai Securities said that as a world-class leader in electrolyte solvents, Shida Shenghua is expected to maintain rapid growth in the next few years for products such as DMC in the dimethyl carbonate series. Huaxi Securities expects that the price of battery-grade DMC series products is expected to continue to rise.

It is worth noting that as the price of battery-grade DMC continues to rise, in the secondary market, the share price of Shida Shenghua has been crazily sought after by various capitals, soaring from a low of 24 yuan in June this year to 56 yuan on September 20, an increase of more than 130% in just three months. However, after reaching a high again on September 21, it quickly plummeted and closed at the limit down on the same day; as of press time today, the share price of Shida Shenghua has fallen by more than 6%.

There seems to be a suspicion that Shida Shenghua was over-hyped during the rise in DMC prices.