GGII: Review of China's lithium battery negative electrode material market in the first half of 2021

A survey by Gaogong Industry Research Institute of Lithium Battery (GGII) shows that the shipment volume of China's lithium battery negative electrode market in the first half of 2021 was 332,000 tons, a year-on-year increase of 170%, and shipments in the second quarter increased by 38.1% month-on-month.

From the perspective of market size, the reasons for the substantial increase in China's lithium battery negative electrode shipments in the first half of 2021 are:

1) Driven by terminal demand, the global power battery market is expected to exceed 150GWh in terms of shipments, driving an increase in overseas demand for negative electrode materials;

2) China's power battery market shipments in the first half of the year reached nearly 80GWh, driving the growth of domestic negative electrode demand;

3) Shipments in segmented markets (such as small power, energy storage and digital markets) increased by more than 30% year-on-year, driving an increase in shipments of negative electrode materials.

China’s negative electrode material shipments from 2018 to 2021H1 (10,000 tons)

Source: Gaogong Industry Research Institute of Lithium Battery (GGII), July 2021

From the perspective of product shipment structure, the proportion of artificial graphite products continued to increase, with the market share rising to 85%, while natural graphite fell to 14%. The main reasons are:

1) Compared with natural graphite, artificial graphite has better consistency and recyclability and is more suitable for the power and energy storage markets. Driven by the demand of the power and energy storage markets, the proportion of artificial graphite has increased;

2) The proportion of compound products of artificial graphite and natural graphite increased (the compound proportion is mainly artificial graphite, and the statistical caliber is classified as artificial graphite), resulting in a gradual decline in the proportion of natural graphite;

3) Natural graphite is mainly supplied to overseas companies such as Panasonic and SDI, while domestic companies are gradually turning to artificial graphite.

2021H1 Negative Electrode Market Share (by Product)

Data source: Gaogong Industry Research Institute of Lithium Battery (GGII), July 2021

From the price trend, the price of negative electrode finished products in the first half of 2021 showed that the price of mid- and low-end products increased by more than 15%; the price of high-end products increased by more than 20%. The main reasons are:

1) The price of oil-based calcined needle coke exceeded RMB 9,000/ton, with a six-month increase of more than 50%. The price of graphitization processing exceeded RMB 20,000/ton, with a six-month increase of more than 50%, resulting in an increase of more than 30% in the cost of negative electrode raw materials;

2) Downstream market demand is strong, leading negative electrode manufacturers are operating at full capacity, small and medium-sized enterprises are increasing capacity utilization, and the industry supply and demand are tight;

3) Downstream battery manufacturers are under great pressure to reduce costs, and their mid- and low-end products are highly substitutable and have weak bargaining power. With raw material costs rising by more than 30%, the prices of mid- and low-end finished products have risen by more than 15%;

4) High-end negative electrodes (355mah/g and above) are mainly produced by leading manufacturers. Leading companies have strong voice in the industry, obvious product differentiation, and prices have risen by more than 20%.

Price trend of mid-range lithium battery negative electrode from 2018 to 2021Q2 (10,000 yuan/ton)

Note: The above prices are based on mid-range negative electrode products.

Data source: Gaogong Industry Research Institute of Lithium Battery (GGII), July 2021

From the perspective of market competition, the CR3 industry concentration in the first half of 2021 was 49%, and the CR6 industry concentration was 79%. Compared with 2020, the CR3 market concentration declined, while the CR6 market concentration increased. The main reasons are:

1) The TOP3 companies are producing and selling at full capacity, and the second-tier and lower-tier companies have sufficient orders, with their shipment growth rate exceeding that of the top companies, squeezing out the CR3 market share;

2) The newly added capacity of second-tier enterprises exceeds 60,000 tons/year, and the capacity increase is greater than that of the top three enterprises. At the same time, there are sufficient orders, and the capacity utilization rate is close to full production, and the gap in shipments with the top three enterprises is narrowing;

3) Third-tier and lower-tier enterprises have weak voice in the industry, and graphitization processing companies give priority to supplying leading enterprises, resulting in a shortage of graphitization supply for small and medium-sized enterprises and lower capacity utilization than first- and second-tier enterprises, which in turn leads to an increase in CR6 industry concentration.

CR3 and CR6 concentration in 2020-2021H1

Data source: Gaogong Industry Research Institute of Lithium Battery (GGII), July 2021

It is expected that the lithium battery negative electrode material industry will have the following characteristics in the second half of 2021:

1) The new energy industry will continue to maintain a high growth trend in the second half of the year, and the demand for negative electrode materials is expected to exceed 15% year-on-year;

2) The tight supply and demand relationship in the industry is unlikely to ease in the short term (such as graphitization), and the price of graphitization processing and negative electrode products is expected to rise by more than 10%;

3) Driven by the growth of global energy storage and power battery fields, the proportion of artificial graphite is expected to exceed 86%;

4) The capacity release of second-tier and above enterprises has accelerated, and the new capacity is expected to exceed 80,000 tons.