Analysis of power battery/four major materials shipments in Q3 2021

In the third quarter of 2021, the domestic new energy vehicle market maintained the hot market in the first half of the year. According to the data from the China Association of Automobile Manufacturers, China's new energy vehicle production in the third quarter of 2021 was 945,000 units, a year-on-year increase of 177%. Driven by the rapid growth of the new energy vehicle market, my country's power battery shipments have also continued to increase.

Preliminary survey data from GGII shows that China's power battery shipments in Q3 2021 were 56GWh, a year-on-year increase of nearly 150% and a month-on-month increase of 36%.

China’s power battery shipments from 2019 to Q3 2021 (GWh)

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

Driven by the growth in power battery shipments, the shipments of the four main materials for lithium batteries in 2021Q3 also maintained a year-on-year growth of more than 50%, but the month-on-month growth rate was slower. The main reasons are:

1) The new production capacity of main material-related enterprises in 2021Q3 was lower than expected, and the high capacity utilization rate in 2021Q2 resulted in less new capacity release;

2) The “double reduction” has led to a certain reduction in production in the negative electrode industry chain and the electrolyte industry chain, restricted some production capacity, and caused some companies’ production capacity to be released less than expected.

From the perspective of the supply of upstream raw materials of main materials, in 2021Q3, affected by terminal demand and dual control, upstream raw materials were in short supply. Graphitization was affected by the "double reduction", Inner Mongolia and Shandong were severely restricted in production (Inner Mongolia's production restriction exceeded 30%), and the supply of graphitization capacity itself was tight, resulting in a decline in shipments of negative electrode material companies without graphitization layout; solvents and additives belong to the chemical field, with high environmental protection requirements, and production restrictions directly restricted the production of electrolyte companies; affected by power restrictions, price increases and insufficient production capacity of upstream lithium mines, phosphate mines and bulk chemicals (including liquid alkali, phosphoric acid, etc.), the processing cost of positive electrode materials in 2021Q3 increased by more than 35% month-on-month.

Market share of positive electrode materials in 2020 and 2021H1 (by product)

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

Judging from the price trend of positive electrode materials, the overall price of positive electrode materials in 2021Q3 increased, with an average increase of more than 20%. The main reasons are:

1) The rising prices of upstream raw materials such as cobalt, nickel and lithium ore have led to rising prices of precursors and lithium salts. Among them, the prices of lithium carbonate and lithium hydroxide have increased by more than 50%, driving the cost of positive electrode materials to increase by more than 20%; 2) The downstream market demand is strong, and products are in short supply. The demand for upstream positive electrode materials has increased, and tight supply has led to price increases.

Shipment volume of the four major materials in Q3 2020-2021 (10,000 tons, 100 million square meters)

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

Due to the "double reduction" and strong market demand, the prices of the four major main materials and upstream key raw materials rose to varying degrees in 2021Q3. The electrolyte and its upstream main raw materials, especially solvents and additives, saw the highest price increase month-on-month, with an average price increase of more than 20%, and some materials increased by more than 40%; the price of positive electrode materials rose by more than 20% month-on-month, and the shortage of upstream lithium mines and the production restrictions of bulk chemicals (including liquid alkali, phosphoric acid, etc.) also drove up the price of positive electrode materials.

Price trends of the four main materials in Q1-Q3 2021

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

Judging from the price trend of power batteries, power battery prices have also risen across the board in 2021Q3, especially for small OEMs with weak bargaining power, who are under greater pressure from price increases. The main reasons for the rise in power battery prices are:

1) The average price increase of upstream materials exceeded 20%, resulting in an increase of more than 15% in battery production costs; 2) The demand for new energy vehicles grew strongly in the third quarter of 2021, and the demand for power battery products continued to grow rapidly, resulting in a tight supply of power battery products, which pushed up power battery prices; 3) Some companies were affected by the "double reduction" policy, and their power battery production capacity was limited, affecting product supply.

Price trend of capacity-type ternary and lithium iron phosphate power battery systems excluding tax (yuan/Wh)

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

GGII predicts that the domestic new energy vehicle market will continue to maintain rapid growth momentum in Q4 2021. However, due to the expected upward trend in upstream raw material production capacity and prices of related raw material products, GGII predicts that my country's lithium battery new energy industry will present the following characteristics in Q4 2021:

1) Due to the weak voice in the industry and the impact of production and power restrictions, some small and medium-sized enterprises will face the risk of suspension of production, and market concentration will further concentrate on leading enterprises;

2) In the case of tight supply of raw materials, large factories give priority to supplying first- and second-tier battery companies, and the cost of obtaining materials for third- and fourth-tier battery companies further increases;

3) Material manufacturers have increasingly strict requirements on the reconciliation period, and there are more and more purchasing methods such as cash on delivery and prepayment. The tight supply and demand situation in the upstream industry chain of main materials will continue;

4) The production and sales volume of new energy vehicles in China and the world will further increase, and the export scale of domestic lithium batteries and materials will continue to grow steadily;

5) The prices of lithium batteries, four main materials and sub-materials are expected to continue to rise. The price of ternary 5 series positive electrode materials is expected to exceed 220,000 yuan/ton, and the price of lithium iron phosphate is expected to exceed 70,000 yuan/ton. Driven by the increase in graphitization and needle coke prices, the price of the negative electrode is expected to increase by more than 10% month-on-month, and the price of graphitization is expected to exceed 28,000 yuan/ton. The price of lithium hexafluorophosphate is expected to exceed 600,000 yuan/ton, and the price of electrolyte is expected to continue to increase by more than 15% month-on-month. The price of lithium salts and diaphragms will increase by more than 10%. The price of lithium batteries is expected to increase by 5-10% month-on-month;

6) In Q4 2021, graphitization, lithium salt, and electrolyte solvent supply will still be the main factors limiting the growth of power battery shipments, and the current tight supply and demand situation will be difficult to alleviate in the short term.