CATL "attacks" lithium carbonate, BYD "fishes" negative electrodes

Previously, there was the CATL's "lithium mine rebate" promotion order, and now there is BYD's "negative electrode profit sharing" operation. Both "Ning Wang" and "Di Wang" have stirred up the price of lithium battery materials in their own unique ways.

King Ning: Lithium carbonate, your price is too high. I am going to knock you down.

King Di: Negative electrode, your price is too low, let me help you out.

It is a common practice for car companies, battery manufacturers and other buyers to lower the purchase price of lithium battery materials. However, BYD, which has always been particular about extreme cost control, has rarely "raised prices" for suppliers.

According to Cailianshe, BYD has begun to raise prices for "ultra-low-price orders" from leading manufacturers of negative electrode materials, with an estimated increase of about 10%. Industry insiders pointed out that negative electrode manufacturers suffered losses in ordering orders before the New Year, resulting in too low bidding order prices. Enterprises are facing production losses, and most orders are difficult to execute.

In fact, vicious competition has already turned the negative electrode industry into a red ocean, and the stampede of low-price orders has "broken the bottom line". Over the past year or so, with the change in the supply and demand structure, the price of negative electrode materials has continued to fall. Today, the price of low- and medium-end negative electrode material products has approached or even fallen below the cost red line.

Industry data show that in January 2023, the reference price of China's lithium battery negative electrode materials market was about 5,300 yuan/ton; among them, the mainstream price of high-end negative electrodes was 68,000-75,000 yuan/ton, the mainstream price of mid-range negative electrodes was 48,000-58,000 yuan/ton, and the mainstream price of low-end negative electrodes was 32,000-35,000 yuan/ton.

By January 2024, the reference price of negative electrode materials in the market is about 3,500 yuan/ton; the mainstream price of high-end negative electrode materials is 54,000-65,000 yuan/ton, the mainstream price of mid-range negative electrode materials is 26,000-34,000 yuan/ton, and the mainstream price of low-end negative electrode materials has dropped to 15,000-20,000 yuan/ton. In just one year, the price of mid- and low-end negative electrode materials has fallen by 40-50%.

BYD's logic for raising prices for upstream suppliers is not difficult to understand. To use an inappropriate analogy, there is a term in fishery economics called "fishing and hunting moratorium". Excessive fishing will damage the foundation, so it is necessary to rest and recuperate in time. "Fishing out the pond" is not a wise approach.

Industry insiders pointed out that by raising the purchase price, BYD can help improve the financial situation of negative electrode manufacturers and thus ensure their continuous supply capacity. After all, BYD has set a goal of increasing its car sales by more than 20% in 2024 from 3.02 million units sold in 2023, that is, to reach more than 3.6 million units. But this is not easy. BYD Chairman Wang Chuanfu bluntly said, "The industry has entered a brutal elimination stage."

As the saying goes, everything turns to its opposite when it reaches its extreme. For negative electrode manufacturers currently struggling in the mire of low prices, BYD's price increase is undoubtedly a lifeline. As a major purchaser of negative electrode materials, BYD's "active price increase" may reflect that it has already seen the changes in certain industry trends, and may have a certain impact on the recovery of negative electrode material prices.

There are precedents of the "butterfly effect" of battery giants causing changes in material prices.

At the beginning of 2023, CATL, the "King of Ning", issued a "Lithium Battery Board Promotion Order" - a "Lithium Mine Rebate" plan: to give discounts to some high-quality downstream customers such as Ideal, NIO, Huawei, and Zeekr, and set the settlement price of lithium carbonate at 200,000 yuan/ton, which is 50% off the market price. At that time, the price of lithium carbonate was as high as 400,000 yuan/ton.

CATL's intention to "hit the price of lithium carbonate" is obvious. Just a few months later, the price of lithium carbonate quickly fell below the 200,000 yuan/ton mark. Today, the price of lithium carbonate has fallen to about 100,000 yuan/ton. Compared with the high point of about 600,000 yuan/ton at the end of 2022, the decline is more than 80%.

Of course, the fundamental reason for the decline in lithium carbonate prices is still overcapacity, but CATL’s “lithium mine rebates” are undoubtedly a huge driving force.

01

Overcapacity, project termination, and declining profits

The same logic as the price of lithium carbonate fell from the altar, negative electrode materials have also fallen into the quagmire of overcapacity. In the past two years, investment and expansion in the field of negative electrode materials have been in full swing, and the production capacity of leading manufacturers such as Shanshan Technology, B&T, and Kaijin New Energy is more than 600,000 tons. At the same time, cross-border players such as Shangwei Co., Ltd., Longbai Group, Baofeng Energy, Baowu Carbon, Jerry Co., Ltd., Fuan Co., Ltd., Baichuan Co., Ltd., and Dow Technology have also entered the market. The trend of structural overcapacity in the industry is inevitable.

According to industry forecasts, the global demand for negative electrode materials will reach 3.3 million tons in 2025. But in fact, according to industry statistics, the production capacity of the negative electrode material industry will reach 3.9875 million tons in 2023. The production capacity planning of industry enterprises by 2025 is even more exaggerated, exceeding 20 million tons, and the supply will exceed the actual demand by several times.

"In 2023, the average capacity utilization rate of the entire negative electrode industry will be less than 50%. In the first quarter of 2024, the operating rate of negative electrode material companies has dropped to only about 40%." Industry insiders analyzed. Battery China noted that in 2023, the global output of negative electrode materials was about 1.76 million tons, a year-on-year increase of 20%, of which China's negative electrode material output accounted for 97.3%. It can be inferred that in 2023, the global negative electrode industry capacity utilization rate will be only about 44%.

According to statistics from industry organizations, the market share of the top three companies in the negative electrode industry will be 49% in 2023, and the market share of the top six companies will be 73%. As of now, there are more than 90 negative electrode companies in production, but less than 15 negative electrode manufacturers have monthly shipments exceeding 1,000 tons, accounting for more than 80% of the market share of the entire industry, while the other approximately 80 companies are competing for the remaining approximately 20% of the market. It is conceivable that the competition is fierce.

"The negative electrode industry has an oversupply of production capacity, and demand from downstream battery customers has slowed down. The industry is generally facing pressure to absorb production capacity and reduce prices. In addition, the competitive landscape with a high degree of market concentration makes it even more difficult for small and medium-sized players," industry insiders pointed out.

In fact, not only small and medium-sized manufacturers, but also the entire negative electrode industry, including leading manufacturers, have not had optimistic operating performance in recent years.

According to the financial report, Bettery achieved a net profit attributable to shareholders of RMB 1.651 billion in 2023, a year-on-year decrease of 28.5%; Xiangfenghua expects its net profit attributable to shareholders of RMB 75 million to RMB 95 million in 2023, a year-on-year decrease of 40.86% to 53.31%; Zhongke Electric expects its net profit attributable to shareholders of RMB 32.78 million to RMB 47.34 million in 2023, a year-on-year decrease of 87% to 91%; Putailai's net profit attributable to shareholders of RMB 1.629 billion in the first three quarters of 2023, a year-on-year decrease of 28.35%; Shangtai Technology's net profit attributable to shareholders of approximately RMB 568 million in the first three quarters of 2023, a year-on-year decrease of 45.72%.

The deteriorating competitive environment has calmed down many cross-border manufacturers who were excited at the beginning. For example, Zhongyuan Shares, which mainly engages in power grid equipment business, decided to terminate the lithium battery private placement project. In August 2023, Zhongyuan Shares announced that it planned to terminate the private placement to Luoyang Zhenghao to raise no more than 772 million yuan. The private placement was originally planned to be used for the integrated construction project of high-performance lithium-ion battery negative electrode materials with an annual output of 200,000 tons. According to the plan, the total investment of the project is 3.443 billion yuan.

Shangtai Technology, which has been deeply involved in the negative electrode industry for more than ten years and has entered the supply chain of CATL and BYD and ranks among the top five in the market, chose to stop production to "stop losses". In March 2023, Shangtai Technology announced that the company's Lichengdao base had stopped production. The base was its earliest production base with an annual production capacity of over 10,000 tons.

"The supply and demand of the entire negative electrode material industry has reversed, and it is facing a situation of overcapacity. When demand growth falls short of expectations and supply increases significantly, reducing costs and increasing efficiency have become key measures for companies to cope with fierce market competition." Shangtai Technology said bluntly.