Battery material prices soar, and upstream companies in the automotive industry are experiencing explosive performance

In the first half of last year, the epidemic caused a decline in demand in the auto market. In addition, the global situation disrupted the supply rhythm of auto companies, and upstream material manufacturers also lowered their supply expectations. Subsequently, the strong growth in auto demand in the second half of the year caused a sharp increase in the shortage of production capacity due to the "time delay" of the industrial chain.

Therefore, in addition to automotive chips, there is a strong bullish sentiment on other component materials, especially battery materials. Related listed companies are also expected to continue last year's highlights in the first quarter of this year and usher in a huge performance explosion.

Battery materials prices soar

In 2020, my country's new energy vehicle market performed outstandingly, with annual sales exceeding 1.36 million units. The momentum remained strong in the first quarter of this year. According to the weekly reports of key enterprises compiled by the China Association of Automobile Manufacturers, the automobile industry is expected to sell 2.38 million vehicles in March 2021, a month-on-month increase of 64.0% and a year-on-year increase of 66.8%. Among them, passenger car sales increased by 73.4% year-on-year.

The performance of electric vehicles has also driven the growth of upstream battery shipments. Around the Spring Festival of 2021, news of a "surge in orders" across the power battery industry chain has fermented in the industry. Behind this is the shortage of raw materials and price increases. Leading companies such as CATL and BYD have stepped up their expansion of production.

The chain reaction of increased battery demand continues to be transmitted to upstream material manufacturers. However, due to the deviation of material manufacturers' prediction of downstream demand since the first half of last year, the supply and demand of materials are unbalanced. Therefore, the key materials in batteries have also seen an increase in both quantity and price.

Among them, the price increase is more obvious in electrolyte materials. Tianjin Jinniu's senior management told Jiwei.com, "Since last year, the prices of both lithium iron phosphate electrolyte and ternary battery electrolyte have increased significantly. Among them, the price increase of ternary power battery electrolyte is more obvious, and the increase has exceeded 40% this year."

However, the price increase of electrolyte this time is a "helpless move". He said, "We don't want to increase too much, because too high a price will affect the number of orders we sign with customers, but the lithium hexafluorophosphate in the electrolyte has jumped sharply, so we can only be forced to follow the increase." Tianjin Jinniu is a long-established electrolyte company in the industry. Tianyancha shows that Tianjin Jinniu Power Materials Co., Ltd. was established in 2001. Its main business is the technical development, research and production of power materials and related products. Its customer relationships have remained stable.

"The price of lithium hexafluorophosphate has indeed jumped sharply recently, with the increase of about 4,000 yuan per ton a while ago. In a bullish atmosphere, downstream electrolyte manufacturers are worried about further price increases, so most of them now have a 'grab the goods' mentality of buying as soon as they are available." Talking about the upward trend of lithium hexafluorophosphate prices, relevant people said.

It is understood that lithium hexafluorophosphate has entered a new round of price increase cycle since September 2020, with the price rising from less than 70,000 yuan/ton to more than 130,000 yuan/ton. Some institutions predict that the average price of lithium hexafluorophosphate in 2021 will exceed 160,000 yuan/ton, and the high point will even exceed 200,000 yuan/ton.

Since the fourth quarter of last year, driven by supply and demand, the price of lithium hexafluorophosphate has increased by more than 40%, making it the "most popular player" in the lithium battery industry chain.

In fact, in addition to the electrolyte, which has seen the most rapid price increase, even the most stable priced positive electrode material, lithium iron phosphate, started to increase in price in November last year.

Since mid-November last year, lithium iron phosphate companies have frequently sent letters to increase prices. The industry average price has increased from 33,000 yuan/ton to 35,000 yuan/ton, an increase of about 2,000 yuan/ton.

In addition to the real increase in demand, one of the reasons for the price increase of lithium iron phosphate is the increase in the price of lithium carbonate required for the preparation of lithium iron phosphate. At that time, the price of battery-grade lithium carbonate had risen to 45,200 yuan/ton, an increase of 3,000-4,000 yuan/ton compared with the price in the middle of the year.

It is worth mentioning that, unlike the overall price increase of electrolyte, the current price increase of lithium iron phosphate products is mostly for small and medium-sized customers, and the actual price for large customers has not changed. However, an industry insider said, "The leading battery companies are more receptive to the price fluctuations of lithium iron phosphate, and the purchase price increase is not ruled out in the future."

Judging from the above-mentioned key materials, bullish sentiment is occurring within the automotive industry chain and is being transmitted step by step.

Listed companies usher in performance highlights

Amid the material price surge, domestic listed companies also enjoyed a performance highlight. According to the annual report, Tianci Materials achieved a revenue of 4.119 billion yuan in 2020, a year-on-year increase of 49.53%; and realized a net profit attributable to the parent of approximately 530 million yuan, a year-on-year increase of 3165.21%. Net operating cash flow increased by 3535.77% year-on-year. Among them, the company's electrolyte shipments in 2020 were approximately 73,000 tons.

As the new energy vehicle market continues to heat up, the industry chain's demand for electrolytes is still rising, and the prices of related products are also rising step by step. Once the upward trend is formed, it will continue into the next quarter as the market improves.

Tianci Materials said that it benefited from the increase in carbomer product prices and sales in the first half of last year, and the increase in electrolyte sales in the second half of the year. Among them, Tianci Materials' electrolyte shipments in 2020 were about 73,000 tons.

"Compared with the performance growth in the first three quarters, which was more derived from the increase in shipments, Tianci Materials' performance in the fourth quarter relied on the dual increase in demand and prices." Analysts said that the sharp price increase of electrolyte actually started in September last year, and the profits brought by this price increase were mainly reflected in Q4.

"The company's electrolyte production capacity exceeds 100,000 tons/year, and the output is mainly arranged according to the needs of the company's customers. It is currently close to full production." Han Heng, secretary of the board of directors of Tianci Materials, said at the annual report performance online briefing a few days ago. As the bullish sentiment of electrolyte continues, its performance in Q1 this year continues to be high, and it is expected to achieve a net profit of 250 million yuan to 300 million yuan attributable to the parent, a year-on-year increase of 502.35%-622.82%.

The leading electrolyte companies performed outstandingly, and lithium iron phosphate also performed well. Defang Nano, the leader in the lithium iron phosphate industry, was sought after in the secondary market. Jiwei.com found that from the beginning of September to December 31, Defang Nano's stock price rose from around 72 yuan to 167.20 yuan, and the stock price rose by more than 1.3 times in more than two months.

Screenshot source: Oriental Fortune

According to Defang Nano, the current energy utilization rate of production has almost reached saturation, and it is hoping that the project will reach full production in the first quarter of this year. It is expected to release 30,000 tons of new production capacity and increase profits through scale expansion.

Regarding the rise in key materials for power batteries, industry insiders believe that there are two main reasons: first, the global demand for new energy vehicles has increased during the peak season on the demand side, and there is an expectation of rush to install at the end of the year; second, the supply side is hindered. Due to the raging overseas epidemic and geopolitical reasons, mines of some materials have been closed or reduced in production, resulting in a supply contraction.

Looking ahead, the development of new energy vehicles around the world is expected to enter a new round of "healthy" growth. The implementation of the new version of the "New Energy Industry Development Plan" released in China has injected a shot in the arm to the industry; at the same time, after taking office, US President Biden has implemented new energy policies to boost industrial development; in addition, the up-and-coming European Union continues to release subsidy dividends and new car model dividends from major brand companies.