Lithium iron phosphate batteries have become popular, and the price of battery-grade lithium carbonate continues to rise

In recent years, new energy vehicles have been very popular. Driven by policies, technologies and markets, more cost-effective lithium iron phosphate batteries have returned to the public eye.

It is reported that lithium iron phosphate batteries became the only type of power battery whose sales increased year-on-year in 2020. Due to the shortage of supply, the price of domestic battery-grade lithium carbonate has continued to rise since January 2021, and the current quotation is generally between 62,000 and 67,000 yuan per ton.

According to data released by the China Automotive Power Battery Industry Innovation Alliance, my country's cumulative power battery sales in 2020 were 65.9GWh, a year-on-year decrease of 12.9%. Among them, the cumulative sales of ternary lithium batteries were 34.8GWh, a year-on-year decrease of 34.4%; the cumulative sales of lithium iron phosphate batteries were 30.8GWh, a year-on-year increase of 49.2%.

In the past two years, ternary batteries have been in the limelight due to subsidies favoring long-life batteries. In 2018, the installed capacity of lithium iron phosphate batteries accounted for 39%, a year-on-year decrease of 10 percentage points, and the market shrank significantly; in 2019, the installed capacity of lithium iron phosphate batteries was about 19.98GWh, a year-on-year decrease of 7%, and the installed capacity continued to decrease.

Since the second half of 2020, lithium iron phosphate batteries have begun to rebound. In April 2020, the new energy subsidy policy was released, which comprehensively optimized and adjusted the new energy vehicle subsidy policy for the next two years from multiple dimensions, such as extending the subsidy period and optimizing technical indicators. Industry insiders believe that after the subsidy reduction gradually stabilized, the industry began to shift from strong policy-driven to market-driven, and the pressure on companies to reduce costs increased, which led to a sharp increase in the proportion of relatively low-priced lithium iron phosphate power batteries, and the market demand was strong.

In 2020, many popular models used lithium iron phosphate batteries. For example, Tesla Model 3 is equipped with Ningde Times lithium iron phosphate batteries; BYD "Han" is equipped with lithium iron phosphate blade batteries for the first time, with monthly sales hitting new highs and annual cumulative sales of 40,600 units. In addition, the trendy single product Wuling Hongguang MINI EV has been the sales champion of China's new energy vehicles for four consecutive months, with annual cumulative sales of 127,700 units since its launch in July 2020. Most of its vehicles are also equipped with lithium iron phosphate batteries.

Many companies said that their orders were full. Penghui Energy recently stated on an interactive platform that the company's power batteries continued to be shipped, the power battery production line was at full capacity, and sales continued to increase. All the new energy vehicle power batteries produced and sold by the company are lithium iron phosphate batteries.

Galaxy Securities believes that as the research and development technology of power battery companies continues to mature, the promotion and application of CATL's CTP technology and BYD's blade battery technology can both reduce costs and increase the energy density of the battery system, making lithium iron phosphate batteries both highly safe and low-cost, thereby enhancing their market competitiveness. At the same time, competition in the domestic new energy vehicle market is becoming increasingly fierce, and lithium iron phosphate has a cost advantage over ternary materials, prompting automakers to use more lithium iron phosphate batteries to reduce production costs and seize market share.

The agency predicts that global sales of new energy vehicles are expected to reach 4.31 million units in 2021, corresponding to power battery shipments of 267GWh, a year-on-year increase of 45.1%. From the perspective of market segments, the lithium iron phosphate battery market is expected to continue to recover, benefiting from technological updates and cost advantages.

Full orders

The price of lithium iron phosphate materials has been rising steadily. Industry insiders revealed to China Securities Journal reporters that a domestic trader quoted a high price of 80,000 yuan/ton for battery-grade lithium carbonate on January 19, a sharp increase of 17,000 yuan/ton from the 63,000 yuan/ton quoted on January 14, an increase of 26.98%.

As the main raw material for positive electrode materials, the price of domestic battery-grade lithium carbonate has been falling all the way from 41,000 yuan/ton to 34,000 yuan/ton in the first half of 2020. Since August 2020, the price of lithium carbonate has risen from the bottom of 39,500 yuan/ton to 66,500 yuan/ton, an increase of 68.35%.

"From the demand side, the domestic new energy vehicle market saw strong production and sales in the fourth quarter of last year, and is expected to continue its high growth trend in the first quarter of this year. Downstream power battery companies have full orders on hand. Battery companies are stepping up product delivery and accelerating the release of production capacity. The demand for upstream raw materials is strong, supporting the rise in lithium carbonate prices." said Wei Wenzhu, a lithium battery analyst at Gaogong.

Wei Wenzhu believes that the shipments of lithium batteries in the fields of small power, electric light vehicles, base station energy storage, ships, etc. have increased significantly in 2020, driving the growth of upstream lithium salt shipments. It is expected that the shipments of lithium batteries in the above fields will continue to grow in 2021, becoming an important force driving the shipments and prices of lithium carbonate.

As downstream demand continues to grow, lithium salt companies will accelerate the construction of new production capacity and ensure a stable supply of raw materials. From the current situation, Ganfeng Lithium, Tianqi Lithium, Shengxin Lithium Energy, Yongxing New Energy, Zhiyuan Lithium, Lanke Lithium and other companies all have plans to expand production.

Ganfeng Lithium's recent investor relations activity record shows that the company's lithium product supply is currently tight, especially in January and February due to the Spring Festival holiday, and the product is in short supply. It is expected that lithium salt products will be in a tight supply this year. Defang Nano announced on January 18 that Defang Nano, CATL and Jiang'an County People's Government signed an investment agreement, agreeing to invest in the construction of an "annual production of 80,000 tons of lithium iron phosphate project" in Jiang'an County, Yibin City, Sichuan Province, with a total investment of approximately 1.8 billion yuan, which will be built in two phases with a total construction period of 36 months.

Upstream leading enterprises may benefit

Everbright Securities said that the current subsidy policy for new energy vehicles is gradually declining, and the sensitivity is gradually decreasing. Automakers are more likely to choose the best batteries according to market-oriented strategies, and lithium iron phosphate with higher cost performance is gradually becoming a better choice. At the same time, in areas other than passenger cars, emerging application areas such as buses, logistics vehicles, communication energy storage, and photovoltaic energy storage are less sensitive to energy density and have higher requirements for safety and cost performance, and lithium iron phosphate will benefit further. The above factors make the long-term trend of lithium iron phosphate positive.

According to CITIC Securities' estimates, the demand for lithium iron phosphate cathode materials is expected to be 130,000 tons, 240,000 tons and 340,000 tons in 2020, 2021 and 2022 respectively. Taking into account the future global demand for power batteries and energy storage batteries, it is estimated that the global demand for lithium iron phosphate cathode materials will be about 980,000 tons in 2025, with a corresponding market size of about 28 billion yuan, and an average annual compound growth rate of 43% from 2020 to 2025, which is growing rapidly.

Shengang Securities pointed out that due to the rebound of lithium iron phosphate prices and the dual driving forces of direct demand increase and terminal application structure adjustment, lithium iron phosphate will usher in a situation of rising volume and price. In particular, the penetration rate of lithium iron phosphate in domestic new energy passenger cars has increased, the rapid development of renewable energy power generation has increased the demand for energy storage installations, and the accelerated construction of 5G base stations have become the main sources of demand for lithium iron phosphate in the future. As the market competition of lithium batteries intensifies, high-quality manufacturers are expected to continue to expand their market share with their cost and technological advantages.

CITIC Securities also pointed out that after the industry cleanup in the past few years, the concentration of the lithium iron phosphate material industry has continued to increase. Even in the state of overall oversupply, the production capacity of high-quality companies is still tight. Future competition will mainly rely on cost advantages, and the industry's leading companies are expected to improve their profitability by relying on scale advantages and cost-reduction processes.

Technological breakthrough

Leading manufacturers are working hard to make up for the shortcomings in energy density of lithium iron phosphate batteries.

At the 10th Technology Conference and Supplier Conference of Guoxuan High-tech, Guoxuan High-tech released the lithium iron phosphate 210Wh/Kg single battery, which achieved key technological innovations in many aspects. Guoxuan High-tech said that the energy density of the lithium iron phosphate 210Wh/Kg single battery has reached the highest level known for lithium iron phosphate system products, with safer performance and promising market application prospects.