"Nickel Demon" and "Cobalt Grandma" cool down and ternary metals "rise" again?

Data shows that in May this year, the installed capacity of ternary batteries in the domestic market was 8.3GWh, a sharp increase of 90.3% month-on-month; the installed capacity of lithium iron phosphate batteries was 10.2GWh, a month-on-month increase of 15.1%; in terms of output, the output of ternary batteries increased by 58.2% month-on-month, and the output of lithium iron phosphate batteries increased by 3.3% month-on-month. The growth rate of ternary batteries has rebounded significantly.

Since the cost of positive electrode materials accounts for about 40% of the cost of battery cells, it has a significant impact on the cost of battery cells. Therefore, due to factors such as the decline in domestic subsidies and the cost advantage of raw materials, lithium iron phosphate batteries have returned and are favored by OEMs. The installed capacity of batteries has continued to rise since 2020, and by July 2021, it exceeded the monthly installed capacity of ternary batteries, achieving a "counterattack" and maintaining it to this day.

However, success is also due to cost, and "change" is also due to cost. Against the backdrop of rising prices of key materials such as lithium carbonate and phosphate rock, the cost advantage of lithium iron phosphate has begun to shrink. The average price of lithium iron phosphate materials has risen from about 49,000 yuan/ton on April 1 last year to about 168,000 yuan/ton on April 1 this year, an increase of 243%, and has remained at a high level of about 155,000 yuan/ton for a long time.

As for ternary materials, taking the ternary 5 series (power type) as an example, the average price was about 160,000 yuan/ton on April 1 last year, and 367,000 yuan/ton on April 1 this year, an increase of about 129%. It has now dropped to about 332,000 yuan/ton. Affected by factors such as the release of production capacity, the market situation often lags behind the changes in the long-term contract prices of enterprises for a period of time, and the price reaction on the enterprise side is much earlier. "The price of lithium iron phosphate materials has risen sharply and remains at a high level, while the decline of ternary materials from high prices is more obvious," industry insiders said about the price trend of materials.

Judging from the market performance in May, the growth rate of ternary batteries cannot be underestimated. It seems that there is a trend of "regrouping" to turn the situation around?

In addition to Tesla and other companies with large lithium iron phosphate battery consumption whose overall installed capacity of lithium iron phosphate batteries has been affected by the epidemic in recent months, the steady growth in the installed capacity of ternary batteries also has its internal factors: the prices of key materials for ternary batteries are still falling, and costs are expected to be further reduced.

In terms of price, institutional data show that since the beginning of this year, domestic nickel sulfate and cobalt sulfate prices have reached a peak in March and then started to decline. On July 5, the domestic nickel sulfate price fell to 38,250 yuan/ton, a drop of more than 31% from the high of around 56,000 yuan/ton in March; the cobalt sulfate price fell to 76,500 yuan/ton, a drop of more than 36% from the price of more than 120,000 yuan/ton in March.

From the perspective of battery costs, the cost pressure of ternary positive electrode materials may continue to ease due to the downward trend in prices of nickel and cobalt raw materials.

On the supply side, as nickel ore production capacity in the Philippines recovers after the rainy season, companies such as Yiwei Lithium Energy, Huayou Cobalt, Zhongwei Holdings, and GEM will continue to heat up their enthusiasm for investing in nickel smelting projects in Indonesia. As production capacity is gradually released in the later stage, it is expected to push nickel prices down further.

At the same time, the price of lithium iron phosphate materials is unlikely to fall sharply in the short term. After reaching a high point this year, the price of lithium iron phosphate materials has fallen slightly, and the recent continuous price increases of domestic phosphate mines have made it difficult to shake the price of lithium iron phosphate raw materials.

Generally speaking, 1GWh lithium iron phosphate battery requires about 2,200 tons to 2,500 tons of lithium iron phosphate materials. The average price of lithium iron phosphate materials on July 5 was 155,000 yuan/ton. The cost of the positive electrode material of a 1kWh lithium iron phosphate battery is about 341-388 yuan.

1GWh ternary battery requires about 1500 tons to 1800 tons of ternary materials. The average price of ternary material 5 series (power type) on July 5 was 332,000 yuan/ton. The cost of the positive electrode material of 1kWh ternary battery (5 series) is about 498-598 yuan.

According to rough estimates, for a single kWh lithium battery, the cost difference between ternary (5 series) and lithium iron phosphate materials has narrowed to around RMB 200. Taking a 60kWh battery pack as an example, the cost difference between the two types of battery packs is around RMB 12,000.

As ternary materials show a downward trend in price and lithium iron phosphate materials are expected to remain expensive, institutions predict that the cost gap between ternary and lithium iron phosphate may further narrow.

On the market side, with the increase in the penetration rate of electric vehicles, especially as mainstream automakers have begun to get involved in mid-to-high-end models, the performance advantages of ternary materials have become more prominent within a controllable cost range.

On the one hand, users have an increasing demand for mid-to-high-end electric vehicles with a range of more than 600 kilometers. GAC, NIO, SAIC, Daimler and other complete machine manufacturers have successively launched a number of mid-to-high-end models with a range of more than 800km, which are generally equipped with high-energy-density high-nickel ternary batteries. The trend of long battery life also puts forward higher demands on the energy density of power batteries. On the other hand, in the era of intelligent pure electric vehicles, additional functions such as smart cockpits make the load on power batteries higher and higher. In order to further improve the vehicle's endurance performance, the industry is generally optimistic about the technical path of increasing the nickel content in ternary batteries to achieve ultra-high nickel.

From a technical perspective, the energy density of lithium iron phosphate battery cells can theoretically exceed 200Wh/kg, but the technology is difficult. In contrast, the energy density of mass-produced ternary 8 series batteries has exceeded 270Wh/kg, and the energy density of ternary batteries built with ultra-high nickel + silicon-carbon technology has exceeded 330Wh/kg, indicating that high-nickel ternary batteries have more room for improvement and provide strong support for meeting long-range battery life requirements. The market demand for high-nickel ternary batteries will continue to increase.

Driven by downstream demand, in terms of battery companies, the recently released ternary Kirin battery of CATL will continue to boost the installation of high-nickel ternary batteries; leading companies such as Yiwei Lithium Energy and BYD Power have also expressed that high-nickel ternary batteries have great potential and are increasing production capacity release; the energy density of mass-produced ternary battery cells of Farasis Energy has reached 285Wh/kg.

In terms of cathode material enterprises, the performance of leading ternary cathode enterprises has improved, which also confirms the high prosperity of the ternary material field. According to the first half performance forecast of Dangsheng Technology, it is expected to achieve a net profit attributable to the parent company of 900 million yuan to 1 billion yuan, a year-on-year increase of 101.33%-123.70%, and a non-net profit of 900 million yuan to 1 billion yuan, a year-on-year increase of 208.97%-243.29%, even exceeding the non-net profit of 824 million yuan in the whole of last year.

Next, it is expected that more OEMs hoping to seize the high ground in the mid-to-high-end pure electric market and improve their brand power will make greater "invitations" to ultra-high nickel ternary batteries.

It is worth noting that the diversified market demand will continue to play the advantages of lithium iron phosphate batteries in many aspects. Its safety advantage is unquestionable. Although the cost difference with ternary materials is narrowing, its cost-effectiveness advantage still exists. With the continuous breakthroughs in lithium iron phosphate material technology, both batteries will further expand their installed capacity in their respective suitable markets.