2020 China lithium battery electrolyte industry review & outlook

1. Review of industry operation

1.1 Electrolyte shipments are affected by the battery side: the first half of the year was sluggish, and the second half of the year recovered more than expected

Classified by application areas, lithium-ion batteries are mainly divided into three categories: automotive power batteries (EV Lib), small lithium-ion batteries (Small Lib) and energy storage lithium-ion batteries (ESS Lib). Among them, automotive power batteries Shipments are mainly affected by the sales of new energy vehicles. In recent years, countries’ emphasis on environmental protection has driven the penetration rate of new energy vehicles to gradually increase. Although in the first half of the year affected by the epidemic, the shipment of automotive power batteries fell by 45.8% year-on-year, but in the second half of the year The production and sales of new energy vehicles have increased significantly year-on-year in a single month. As of November 2020, China's cumulative shipments of automotive power batteries have been 62.5Gwh, and the cumulative year-on-year decline has narrowed to 7.0%. Small-scale lithium-ion batteries are mainly used in mobile phones, computers, power tools, electric two-wheeled vehicles and emerging consumer applications. 2020Q1-Q3, driven by 5G mobile phones, power tools and batteries for electric two-wheelers, China’s small-scale Lithium-ion battery shipments reached 39.7Gwh, a year-on-year increase of 16.5%; lithium-ion batteries for energy storage are still in the market introduction stage, with small shipments but a rapid growth rate. They are used in base station construction, overseas energy storage and domestic power generation. Driven by energy storage projects, China's energy storage battery shipments in 2020Q1-Q3 were 9.1GWh, which has exceeded the level of last year.

Electrolyte is one of the four major materials of lithium batteries and is the blood of lithium-ion batteries. It is essential to ensure the safety and long-term cycle performance of lithium-ion batteries. At present, the electrolyte has basically achieved localization, and its shipments are directly proportional to the shipments of lithium-ion batteries. Affected by the epidemic in early 2020, the demand for lithium batteries was sluggish and the operating rate was low. With the orderly resumption of work and production after the domestic epidemic was controlled in the second quarter, the domestic economic recovery exceeded expectations. The growth in lithium battery demand led to a rebound in electrolyte shipments. As of 2020Q3, China’s lithium-ion battery electrolyte shipments were 161,000 tons, with an average annual growth rate of 34.5% in the past six years. Among them, automobile power battery electrolyte shipments were 82,000 tons, and small lithium-ion battery electrolyte shipments The volume is 63,000 tons, and the shipment of lithium-ion battery electrolyte for energy storage is 16,000 tons.

1.2 The phased mismatch of supply and demand drives up the price of the electrolyte industry chain

The rapid increase in downstream demand combined with insufficient new production capacity, the overall supply and demand of the electrolyte industry chain is tight, driving up the price of electrolyte and raw materials. The upstream raw materials of the electrolyte mainly include electrolytes, organic solvents, additives, etc. At present, the most important electrolyte is lithium hexafluorophosphate, which accounts for about 40% of the cost of the electrolyte. The price change has a greater impact on the price of the electrolyte. Since 2016, the price After reaching a historical high, the market as a whole continues to oversupply. The average price in the first half of 2020 is at a historical low. In the second half of 2020, affected by the sudden increase in downstream demand and limited new supply, the average Q4 price rebounded to 99,700 CNY/ton. , A year-on-year increase of 3.85% and a month-on-month increase of 17.69%; the most important solvent of the electrolyte is DMC (dimethyl carbonate), which accounts for about 18% of the electrolyte cost. Affected by environmental protection and other factors, its average price since 2019 The trend is generally upward. The average price of 2020Q4 is 15,200 CNY/ton, a year-on-year increase of 134.15% and a month-on-month increase of 70.8%; the average price of electrolyte mainly depends on the upstream raw material prices and the industry competition pattern. It peaked in 2016 and then showed a downward trend. Starting from Q3 of 2020, the price of electrolyte has also shown an upward trend driven by the tight supply of raw materials and price increases. However, due to the pressure of downstream power battery customers, the price increase is significantly smaller, and the gross profit of electrolyte companies has been affected. Impact.

1.3 The industry competition pattern is stable and the market concentration is high

The core barrier of electrolyte is the ability to guarantee supply. With the advantages of scale, cost, and research and development capabilities, leading companies have continued to grow their market share, and the industry concentration has further increased. The total market share of the top four companies from 2017 to 2020Q3 is 56.4%. , 62.4%, 60.6% and 69.1%. The total market share of the top ten companies in 2020Q3 exceeds 90%. The distribution of different products of leading companies is relatively balanced, and the market structure is basically stable. Among them, Tianci Materials has a complete industrial chain layout, strong cost control capabilities, outstanding customization capabilities and high customer barriers. Advantages and stable leading positions; the first-tier companies such as Xinzhoubang, Cathay Huarong, and Shanshan have increased significantly; the market shares of second-tier companies such as BYD, Fanwright, Zhuhai Saiwei and Cotai High-tech are also gradually increasing. Specifically, Tianci Materials ranked first, with a market share of 28.8%; Xinzhoubang ranked second with a market share of 17.5%; Cathay Pacific ranked third with a market share of 13.8%; Dongguan Shanshan ranked fourth. The market share is 9.1%.

2. Prospects of industry development trends

In the next five years, the lithium-ion battery electrolyte industry will still face practical problems such as slow economic recovery, overcapacity, technological bottlenecks, and the development of alternative materials. However, as the global epidemic situation gradually stabilizes, the demand for downstream lithium-ion batteries will increase significantly, and the supply The new production capacity of main raw materials at the end is slower, and the mismatch of supply and demand drives the price level of the electrolyte industry chain to rebound and stabilize in the short term. The electrolyte industry is expected to achieve a steady rise. The position of the leading enterprises in the industry will be further stabilized, showing a strong position. The situation is that emerging technologies such as solid-state batteries and fuel cells have not yet achieved commercial applications, and will have little impact on the electrolyte industry in the short to medium term.

2.1 It is estimated that by 2025, my country’s lithium battery shipments will reach 578.28GWh, and electrolyte shipments will reach 865,000 tons

In the field of automotive power batteries, with the gradual increase in the penetration rate of new energy vehicles, it is estimated that by 2025, China’s power battery shipments will reach 422.28GWh; in the field of small lithium-ion batteries, wearable devices, drones, and small Emerging consumer areas such as power will drive the growth of small-scale lithium-ion battery shipments. It is estimated that by 2025, China’s small-scale lithium-ion battery shipments will be 96.0GWh; in the field of lithium-ion batteries for energy storage, as the power system reform advances , Energy storage costs are reduced and the process of replacing lead-acid with lithium batteries is accelerating. It is estimated that by 2025, China's energy storage battery shipments will reach 60.0GWh.

With the growth of downstream new energy vehicle power battery demand, the rapid expansion of emerging consumer areas and the explosion of the energy storage industry during the "14th Five-Year Plan" period, the strong demand for lithium batteries will drive my country's electrolyte shipments to maintain rapid growth in the future. It is estimated that by 2025, my country's overall electrolyte shipments will reach 865,000 tons, with an average annual growth rate of about 31.7%, and my country's overall electrolyte market size will reach 19.78 billion yuan, with an average annual growth rate of about 18.6%.

2.2 The electrolyte industry chain ushered in an opportunity for price increases, and prices will gradually adjust after 2021

The growth of the global demand for lithium-ion batteries is very certain, and most likely to exceed expectations, which will continue to maintain strong demand for the entire electrolyte industry chain. From the perspective of the raw material supply side, due to the obvious scale effect, high technical barriers and long expansion period of lithium hexafluorophosphate, the new capacity cannot be put into production in a short time. In addition, some small factories shut down production lines in the case of losses, and there is a gap in supply and demand. It is difficult to make up for the short-term, which will drive the price increase. It is expected that the average price of lithium hexafluorophosphate will continue to operate at a high level in 2021, and the profitability of the industry will be restored; as the market price rises, the previously shut down production line has begun to restart, and the expansion plan has been announced Of enterprises will accelerate the implementation. By 2022, a new batch of expanded production capacity will be gradually released, and the balance of supply and demand will be basically achieved. The average price of lithium hexafluorophosphate will gradually adjust, and the price is expected to enter a downward channel after 2022.

Affected by factors such as environmental protection requirements, slow progress in new processes and high technical barriers, domestic DMC's newly-built production capacity has been continuously lower than expected, and the supply and demand gap is large. The supply situation may be difficult to improve in a short period of time, and DMC and other representatives include EC and EMC Electrolyte solvent companies such as DEC and others are highly monopolized, and prices are unlikely to fall in the short term. It is expected that the average price of battery-grade DMC will also remain high in 2021. Since electrolyte is not an asset-heavy link and the construction cycle is relatively fast, its price is mainly affected by the price changes of upstream raw materials. However, the downstream customers of the electrolyte link are mainly large customers such as CATL, Panasonic, Samsung and LG, so it is difficult to increase prices. Therefore, the electrolyte link will be forced to consume raw materials internally and increase costs, and gross profit is expected to be affected to some extent.

2.3 The Matthew effect in the industry is significant, and the impact of new battery technology is limited in the short term

In the future, the electrolyte industry will continue the competitive landscape of Hengqiang, a strong leader, and small and medium-sized enterprises with difficult survival. On the one hand, leading electrolyte companies are expected to further consolidate their position in the industry through deep binding of downstream lithium battery core companies; on the other hand, leading electrolyte companies are gradually extending to the upstream raw material industry, and their ability to ensure supply is further strengthened , The cost will further drop, driving the continued growth of the market share of leading companies. Vertically integrated cost advantages, advanced additives and formula synthesis capabilities, and scale matching capabilities will jointly ensure the continued upward growth of the long-term share of leading companies. Companies such as Tianci Materials, Cathay Huarong, and Xinzhoubang will remain in the first echelon. The total market share of the ten enterprises will stabilize at around 90%, and the competitiveness of the tail enterprises in product development and cost control will become weaker and weaker, and the Matthew effect of the entire electrolyte industry will become more significant.

In recent years, emerging technologies such as solid-state batteries and fuel cells have made great progress, but it will take a long time to achieve large-scale mass production and commercial use, and the impact on the existing electrolyte industry in the short to medium term is limited. In the field of solid-state batteries, although the energy density and safety performance of all-solid-state batteries have been greatly improved compared with the current liquid-system lithium batteries, there are still shortcomings such as high cost and key technology breakthroughs. In the short to medium term, pure solid electrolytes will completely replace electrolysis. In the field of new lithium salts, the research and development of new lithium salts including LiFSI will be further accelerated. In addition, a large number of new additives will be gradually applied to the electrolyte, which is compatible with the existing large-scale use of VC and FEC. Together with PS and other additives to improve the high and low temperature performance, flame retardancy, and cycle performance of lithium-ion batteries.