Why does the price of lithium hexafluorophosphate continue to rise?

Recently, the price of lithium hexafluorophosphate hit a four-year high, with the latest market quotation reaching 315,000 yuan/ton, a 200% increase from 105,000 yuan to 115,000 yuan/ton at the beginning of the year. The price is close to four times the average price of 85,000 yuan/ton in the third quarter of last year.

GGII analysis believes that the main factor that has caused the price of lithium hexafluorophosphate to soar is the mismatch between supply and demand. The downstream market demand has far exceeded expectations, while the supply-side production capacity cannot keep up, and the inventory of lithium hexafluorophosphate has reached the lowest level this year. Companies including Dofluoro and Tianji Holdings are all operating at full production and sales, and the market is in short supply.

In fact, the production process of lithium hexafluorophosphate is difficult, the environmental protection barriers are high, the construction and production cycle of major enterprises is generally 1.5 years, the supply elasticity is small, and some production lines of enterprises are concentrated for maintenance, resulting in limited production capacity. Changes in demand have caused an imbalance between supply and demand, pushing prices into a rapid rise cycle. And some production and sales of enterprises are concentrated for maintenance.

In April, companies including Dofluoro, Tianji Shares, and Jiujiujiu significantly raised their quotations for lithium hexafluorophosphate. For example, Tianji Shares announced that the price of lithium hexafluorophosphate products would be increased by 15%-20% based on the current quotation.

At the end of May, CATL locked in the lithium hexafluorophosphate production capacity of Ningde Kaixin, a subsidiary of Tianci Materials, through a long-term contract. From the effective date of the contract to June 30, 2022, Ningde Kaixin will supply electrolyte corresponding to the estimated use of 15,000 tons of lithium hexafluorophosphate (the two parties can negotiate an increase or decrease of no more than 20%) to CATL.

Based on the calculation that 0.135 tons of lithium hexafluorophosphate are required per ton of electrolyte, 15,000 tons of lithium hexafluorophosphate corresponds to approximately 110,000 tons of electrolyte, which can support 100±20%GWh of lithium battery demand, which means that CATL has secured an electrolyte production capacity corresponding to 100GWh within one year.

The leading battery companies have locked in long-term orders for electrolyte supply and lithium hexafluorophosphate prices, further confirming the improvement in the bargaining power of the lithium hexafluorophosphate segment. It also reflects the strong downstream demand and the current situation of insufficient supply of lithium hexafluorophosphate and electrolyte products.

In addition, since 2021, the supply of electrolyte additive VC has been extremely tight and the price has risen sharply, resulting in increased purchasing pressure on downstream electrolyte manufacturers. Some electrolyte companies have stated frankly that they are currently planning to expand VC production lines and at the same time work with customers to reduce the proportion of VC.

The industry believes that the supply of upstream lithium hexafluorophosphate and VC additives is tight and prices are rising frequently. The shortage of electrolyte supply will be a systematic project. This tight supply situation is likely to continue until next year. For large-scale power battery companies, ensuring a stable supply of electrolyte in the next few years is a more urgent issue facing them.