“Upstream materials are rising too aggressively.” On the evening of January 6, an insider from Jiangsu Tafel New Energy Technology Co., Ltd. sighed to Times Finance. “This wave of price increases is mainly due to the mismatch of market supply and demand, and downstream demand. Excessively prosperous, the upstream supply is relatively insufficient”. Since 2021, the new energy vehicle market has ushered in explosive growth, and the price of battery-grade lithium carbonate, the main raw material for new energy vehicle power batteries, has risen even more.
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It is understood that the price of battery-grade lithium carbonate has increased by about 420% in the past year. For reference, the price of battery-grade lithium carbonate in January last year was 72,000 yuan/ton.
Since the beginning of this year, lithium carbonate has even risen to the “seafood price”, one price per day. According to data released by Shanghai Nonferrous Network on January 6, after a single day increase of 10,000 yuan/ton on January 5, the price of battery-grade lithium carbonate went up again on January 6, reaching 292,000 yuan/ton to 300,000 yuan. At the price of RMB 296,000/ton, the average price of RMB 296,000/ton has risen by RMB 8,000 from the previous day and 6.47% from the beginning of the year.
In addition, the growth rate of other lithium battery materials in the past year is also very alarming. According to business agency data, in 2021 the prices of lithium hydroxide and magnesium will achieve annual increases of 317% and 214%, respectively.
It is worth mentioning that the new energy industry chain ecology has been tested under multiple rounds of price increases for lithium materials. Some insiders in the new energy industry said, “The focus of the industry in 2022 should be on how to sustainably and healthily develop the industry chain. If the upstream price rises so severely, the downstream will have a hard time, but how can we talk about development?”
Lithium resource price increase, battery factory bears?
“This price increase is mainly due to the mismatch of supply and demand, and the market gap is too large. Now the development of new energy vehicles is too fast. At present, industrial grade or brine (lithium carbonate) are used as battery grade lithium carbonate on the market.” On the evening of January 6, Li Chao (pseudonym), the person in charge of an upstream material supplier, told Times Finance and Economics.
It is understood that lithium is called “industrial monosodium glutamate”, and it has been limited to traditional industrial applications for a long time, and the supply and demand are relatively stable. However, in recent years, driven by the electric vehicle industry, the demand for lithium has seen explosive growth, and its price has also risen linearly, which has squeezed the demand of traditional industries.
“(Lithium price increase) has lost many old customers, and new (customers) have added in. Generally speaking, there is no problem (company development) under this trend.” Li Chao said.
“In our industry, if the market is predicted in advance, it will stock up more or less, and it will definitely make money under this big market. If there is no stock, we may make a small profit. We have a certain stock of stock, but The volume of imports and exports is relatively large, and the current stockpiling is not much.” Because of the early prediction of the price increase of lithium materials, Li Chao’s company has made some preparations. For the company’s development in 2022, Li Chao said, “This year’s The market is definitely profitable for us, and it’s pretty good.”
Perhaps because of the status of the upstream business, or benefited from early foreseeing the market, the price increase of materials has little effect on Li Chao’s company, but the power battery factories and car companies in the middle and lower reaches are under great pressure.
“In 2021, we are basically not making money.” On the evening of January 6, an insider of Jiangsu Tafel New Energy Technology Co., Ltd. told Times Finance and Economics, “Our battery factory almost bears the cost of lithium resource price increase in 2021. Most of the cost”.
Tianfeng Securities previously issued a research report stating that because the prices of raw materials are quoted in the market, the actual purchase price of battery companies is lower than the market quote, and the improvement of product performance, yield, and grouping rate of battery companies can hedge some of the increase in material costs. pressure. It is predicted that the actual cost increase of battery companies is about 20%-25%. Taking into account that long-term cooperation, bargaining power, purchase volume, billing period, etc. will also affect the actual battery price of the OEM, and the OEM may form a compensation agreement with the battery manufacturer for the price difference. The increased cost will be transmitted downstream but not all of it will be passed on to downstream OEMs. Eventually, the purchase price of batteries at the end of OEMs may actually increase by about 10%-20%.
The 2021 semi-annual report shows that the battery manufacturer Funeng Technology’s revenue in the first half of the year was 877 million yuan, a year-on-year increase of 207%, while the net profit attributable to shareholders of listed companies was 226 million yuan, with a loss of 175 million yuan in the same period last year. The net profit growth rate of battery companies such as Xuan Hi-Tech also cannot keep up with the revenue growth rate. The upstream material suppliers such as Ganfeng Lithium and Luoyang Molybdenum are indeed a different story. Among them, Ganfeng Lithium’s net profit growth rate is more than 10 times the revenue growth rate.
“Lithium material prices will increase, and costs will increase. We predict that this year’s lithium price increase may be similar to 2021. From the perspective of the entire industry, whether it is to increase prices or control costs, it is impossible for you to keep yourself at a loss for a long time.” The aforementioned Tafel insider also said, “I believe that under this market situation, every battery factory will want to increase prices, but whether it can succeed or not depends on comprehensive factors. This depends on the overall cost of the company, the wishes of customers, etc. “.
According to Times Finance, under this market situation, Funeng Technology, Guoxuan Hi-Tech and other power battery manufacturers have also made price adjustment plans. Earlier, some analysts told Times Finance and Economics, “Under this market, electric cars will either increase in price or reduce allocations in 2022.” An insider of a mainstream new auto company told Times Finance and Economics on January 7th, “Recently, some of our products have also been available. Adjusting prices, but mainly to deal with the decline in subsidies.”
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“The price of lithium materials will definitely continue to rise in recent years. There may be fine adjustments in the middle, but the price will go up after all, and it will be very strong.” Li Chao said, “but this is all market behavior and it is difficult. Human intervention. For us, it is best for us to maintain the price of lithium carbonate and other materials at a price of more than 100,000 yuan per ton. The customer group will be more stable, and we will live more comfortably, and everyone is happy. The desperate price increase of materials will affect the whole The industry is unhealthy, and we certainly hope that material prices can stabilize.”
A securities institution with the same attitude as Li Chao. According to the research report of Zhongtai Securities, the stock market at the end of the year pushed up the price of lithium carbonate and accelerated the upward trend. In addition, the global new energy industry continues to rise, the electric vehicle market in China, the United States and Europe resonates, and the upward trend of upstream raw material prices continues to strengthen. Recently, IFC issued a lithium expert exchange report saying that the increase in lithium carbonate production is quite limited, but the demand increase is sufficient, and it is likely to rise to 500,000/ton.
“There are reasons for the excessive downstream demand that far exceeds the current supply, as well as geopolitical factors. At the same time, the US dollar release has also pushed up the price of lithium materials.” As for the mismatch of supply and demand of lithium materials and the tight supply side, there are senior industry analysts. say. Mo Ke, the founder of Real Lithium Research Institute, pointed out that there are more and more speculative behaviors for the purpose of capital market arbitrage, small and medium-sized enterprises are increasingly difficult to withdraw, and sellers are reluctant to sell and buyers’ hoarding phenomenon has become the norm this year, and other factors have also intensified. As a result, the supply of lithium resources is tight.
Jiangxi Xinyu Factory of Ganfeng Lithium Industry | Tuyuan Enterprise Website
Guotai Junan Securities stated in a research report that 70% of China’s lithium resources need to be imported. The aforementioned lithium battery industry veteran analyzed to Times Finance and Economics, “Although the domestic reserves of lithium resources are considerable, they are limited by mining technology and costs, and raw materials are mainly imported. However, the foreign epidemic situation is serious, the output of lithium miners is relatively low, and the domestic supply is mainly Depends on domestic output, but the country is ultimately limited.”
“Maybe everyone will be a bit miserable in 2022. Next year’s market should have a more obvious improvement. Supply will be released and prices will fall. It may be better in 2024 and 2025. However, shortages will still exist, roughly In dynamic equilibrium, the situation will be better than it is now.” Unlike Li Chao and some institutions’ analysis of the continued bullish lithium price, the aforementioned Tafel insider said, “It takes time for material manufacturers to expand, expand, and even release production capacity. The extraction cycle of lithium ore is 5-7 years, and the extraction cycle of a lithium salt is two to three years. According to the current situation, there are lithium mines. Some upstream manufacturers have gradually expanded their production capacity in 2020. It is estimated that in 2023, The supply of market resources will be significantly improved.”
It is understood that Ganfeng Lithium, the largest producer of lithium compounds in China and the largest producer of lithium metal in the world, has started to expand production since 2020. In 2021, more than 10 upstream material suppliers such as Tianqi Stock, Fulin Precision, Chuanfa Lomon, Bank of China Cashmere, Tianyuan Stock, etc. also issued announcements to accelerate the construction and expansion of lithium carbonate and lithium iron phosphate related projects.
China International Finance Securities released a lithium expert exchange report stating that many projects on the supply side will be put into production in the second half of 2023 or even at the end of the year. After the production line is completed, it will take time to debug. There will not be much increase in 2023, and the supply will still be in short supply. The supply shortage will be alleviated in 2024 or 2025, but it is not that the situation of short supply is completely reversed. This phenomenon will not happen yet, at best, the severity of the short-term shortage will be weakened.
In addition, another industry insider pointed out that even if the supply is short in two or three years, the resulting price increase will cause incalculable damage to the entire industry. Mo Ke said in a statement that the downstream demand is too strong, and resource jams may be more prominent in 2022. The competent authorities will not be willing to see the development results of the domestic new energy industry being harvested by foreign countries. Perhaps by then, demand will be appropriately curbed, and some policies will be introduced to curb the overheated development of electric vehicles.
“The government has already intervened a lot to support the development of the new energy industry. In the current situation, (the government) will not necessarily intervene again, and may be led by the market.” The aforementioned Tafel insider said that the current short-term cost is mainly To be undertaken by the battery factory. But in 2022, the price of batteries will definitely increase, and the leading new energy car companies will definitely increase their prices appropriately. This will give battery factories a certain amount of space. When the next round of price increases comes, battery factories can support them. a period of time. In the entire industrial chain, the upper, middle and lower reaches of each stage will bear a little bit. It will definitely be no problem until 2023, and there will be no big impact on the ecology of the industrial chain. (Times Finance)
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