New energy vehicles have a battery shortage, and Chinese companies are "crazy" to grab glo

Posted in 2021.11.8, Issue 1019, China News Weekly
​"Lithium prices are crazy right now." That worries Li Nanping, chairman of Jiangsu Ronghui Lithium. With "soaring" to describe the price of lithium ore this year is not too much, on October 26, Pilbara Mining, one of Australia's largest lithium concentrate producers, opened the third lithium concentrate auction, and the final auction price was set at $2350 / ton, hitting a record high. Lithium concentrate is the main raw material for the production of lithium carbonate and lithium hydroxide, both also known as "lithium salt", are important raw materials for the manufacture of lithium batteries. Skyrocketing mine prices are brought about by the high cost of the entire industrial chain, the current domestic battery grade lithium carbonate market mainstream offer between 194,000 yuan to 197,000 yuan per ton, only 41,000 yuan in the same period last year.
​As one of the core elements of power batteries, global lithium resources have been seized by Chinese companies in the past two years. In the past month, Chinese companies have participated in eight lithium mining investment deals, with a total amount of nearly 20 billion yuan, of which five deals are located overseas, involving Argentina, Canada, Brazil and other countries. Yu Qingjiao, secretary-general of Zhongguancun new battery Technology Innovation Alliance and chairman of the Battery 100, told China News Weekly that the long-term strategy of new energy has been set, and the battle for mineral resources has been continuing, "there is no panic at home, and global mining will become the norm."
​"Lack of lithium" becomes the bottleneck of battery shortage
​The advent of the "battery shortage" in the industry is not unforeseen. As early as March this year, Li Bin, chairman of NiO, predicted that compared with chips, battery supply will be the biggest bottleneck in the second quarter of this year. At the latest economic operation analysis meeting, Changan Automobile particularly emphasized the problem of coping with the shortage of battery supply and ensuring that orders are not lost.
​According to SNE Research's forecast, by 2023, the global demand for power batteries for electric vehicles will reach 406GWh, while the power battery supply is expected to be 335GWh, a gap of about 18%; By 2025, that gap will grow to about 40 percent. According to a recent research report from the Global research department of the Bank of America, the power battery supply or "sold out" in 2025 to 2026. This year, including He Xiaopeng, Li Bin, and even Musk have said in public that the lack of battery supply has affected the production schedule.
​Cao Guangping, an independent researcher in the new energy and intelligent connected automobile industry, told China News Weekly that the dual-point policy implemented by the automobile industry has forced car companies to vigorously shift to the production and sales of new energy vehicles, which has exacerbated the "battery shortage." Data show that in September, China's new energy passenger vehicle retail sales of 334,000 units, an increase of 202.1%, the market penetration rate of 20.4%. From January to September, China's power battery production accumulated 134.7GWh, a cumulative increase of 195.0%; The loading capacity was 92.0GWh, a cumulative increase of 169.1%. However, a report by the Saidi think tank pointed out that battery manufacturers failed to realize the expansion plan as expected due to the misassessment of the situation, and when facing the explosive growth of new energy vehicles, they could not follow the development speed of the car enterprises and encountered the bottleneck of production increase.
​"Battery supply and demand are relatively tight, but the gap is another story." Cui Dongshu, secretary general of the National Passenger Car Market Information Association, told China News Weekly that the supply gap is mainly concentrated in several head battery manufacturers such as Ningde Times and BYD. At present, the average production rate of a battery pack every 2.5 minutes in the Ningde era is still unable to meet demand. According to the latest information, Ningde Times has recently raised its shipment guidance again, and it is expected that battery shipments may reach 350GWh next year. This is the third time that Ningde Times has raised its expectations this year, and it has fully increased by 100GWh from the second quarter.
​China currently has more than 1,000 battery production plants, but there are only about a dozen companies that can produce power batteries on a scale. According to the data of the China Automotive power Battery Industry Innovation Alliance, from January to June this year, China's power battery production accumulated 74.7GWh, and the loading volume accumulated 52.5GWh, which means that 22.2GWh of capacity has not yet been utilized. The focus of the "battery shortage" is structural shortage. Taking the data of the first half of this year as an example, the top ten enterprises in the entire automotive power battery industry occupied 92.5% of the market share, and the market is highly concentrated, while the total capacity of the top ten enterprises accounted for less than 50% in the entire industry. The capacity utilization rate of several leading enterprises has been as high as more than 80%, while most enterprises outside the top ten, capacity utilization rate as low as 10% or even below, are being phased out. Yu Qingjiao believes that the structural imbalance between supply and demand of power batteries has existed for a long time, and high-end production capacity has been in short supply.
​Another reality is that the demand for power batteries is rising, but the raw materials for lithium batteries are facing a shortage. The current lithium battery raw material market is roughly divided into two sub-markets, the lithium carbonate market represented by lithium iron phosphate batteries, and the lithium hydroxide market represented by high-nickel ternary batteries. Since May this year, the lithium iron phosphate battery first exceeded the ternary lithium battery in output, and then exceeded the ternary lithium battery in the load volume in July. By September, the output of lithium iron phosphate batteries was 1.4 times that of ternary lithium batteries and 1.6 times that of installed units. At present, the bottleneck of power battery production capacity is lithium carbonate, lithium carbonate production capacity is full, and the price is soaring all the way.
​"Lithium carbonate is more scarce now and we are producing at full capacity." Sun Hongbo, director and general manager of Qinghai Citic Guoan Lithium Development Co, told China Newsweek that the explosive growth of mid - and low-end new energy vehicles using lithium iron phosphate batteries has driven demand for lithium carbonate. At present, the company's production of lithium carbonate trading price has exceeded 185,000 yuan/ton, and this year's 6,000 tons of lithium carbonate production capacity has been divided by customers. Sun Hongbo told reporters that at present, the capacity of the head lithium salt enterprise is to serve large customers, and does not accept retail investors. This means that small and medium-sized customers can only get goods at high prices in the market.
​In Yichun, known as the "Asian lithium capital", the actual transaction price of battery-grade lithium carbonate per ton has already exceeded 190,000 yuan. The local lithium carbonate production company told the media that battery grade lithium carbonate and industrial grade lithium carbonate have no spot and need to schedule production. Industry insiders believe that from the supply side, the general construction cycle of lithium salt new projects is more than 18 months, and the production of new projects may be concentrated in 2023, and lithium carbonate is still in a tight balance this year and next.
​Upstream lithium prices are crazy
​At the time of supply shortage, lithium concentrate is usually the most heavily relied on new supply sources of the industrial chain, especially the "Western Australia lithium mine + China lithium salt plant" this pair of efficient industry combination.
​But Li Nanping found that the landed price of lithium concentrate imported from Australia had soared to $2,500 a tonne, while the cost of mining Australian lithium concentrate was only $400 a tonne. Lithium is mainly found in two places: salt lakes and lithium mines. At present, there are two main routes for the global output of lithium resources, one is from mining in Australia, and then shipped to China for processing into lithium compounds; The other is to extract brine from South American salt lakes and directly process it into lithium compounds such as lithium carbonate locally, and then sell it to other countries.
​In the global lithium supply chain, lithium concentrate plays a key role, accounting for 56% of the global lithium supply in 2020. According to the statistics of West China Securities, most of the world's lithium concentrate new projects are expected to put into operation around 2024, the next 1 to 2 years of global lithium concentrate will be in a strong seller's market, quarterly prices are likely to continue to rise. The agency predicted that the spot price of lithium salt in the fourth quarter of this year is likely to exceed 200,000 yuan/ton, hitting a record high.
​"It's definitely inflated right now. It's a very unreasonable price." In Li Nanping's view, the promotion of capital and the expected demand have jointly boosted the high operation of lithium prices. Last time, the historical high point of lithium price appeared in 2017, the high price of 180,000 yuan per ton of lithium salt was only maintained for two weeks, with the Galaxy resources and Marion mine successively put into production, as well as the substantial expansion of smelting capacity, lithium prices began to fall, and fell to about 120,000 yuan per ton in two months.
​However, with the main lithium mining company in Australia - Pilbara Mining online electronic trading platform, in Li Nanping's view, lithium prices have become completely uncontrolled. The last two final auctions of lithium concentrate achieved a record FOB price. Some industry insiders told China News Weekly that at present, a large number of lithium resources have not entered the market for circulation, but are held in the hands of some trading companies, waiting for price increases.
​"At the end of the day, it's all upstream. It's just not enough ore." Ganfeng Lithium related person Liu Tao told "China News Weekly", different from "salt lake lithium", domestic spodumene lithium extraction enterprises basically rely on imported spodumene, procurement cost is the most critical indicator, "mine price rise is actually equivalent to a form of increase in our cost."
​Li Nanping revealed that at present, due to the soaring price of ore, the increased cost of lithium carbonate per ton has exceeded 10,000 yuan. A number of institutions said in the research report that although lithium carbonate rose sharply, because lithium metal has doubled this year, it has severely compressed profit margins. Therefore, companies with upstream lithium resources such as Ganfeng Lithium and Tianqi Lithium have more obvious cost advantages in producing lithium salt.
​For Tianqi Lithium, a giant that was once weighed down by huge debts, the surge in lithium prices is a good time to turn the wind against the wind. In 2018, Tianqi Lithium launched a "snake swallow elephant" merger that shocked the industry. Tianqi Lithium acquired Sociedad Qumiicay Minerade Chile S.A. (hereinafter referred to as "SQM") 23.77% equity of new merger and acquisition loans of $3.5 billion, the company's asset-liability ratio increased significantly. In 2020, Tianqi Lithium's debt ratio is as high as 82.32%. But on October 29, Tianqi announced that its operating revenue in the first three quarters was 3.873 billion yuan, up 59.58% from a year earlier, and its net profit was 530 million yuan. Compared with a net loss of 1.103 billion yuan in the same period last year, it has turned a loss into a profit.
​As another domestic lithium giant, Ganfeng Lithium's net profit attributable to listed company shareholders in the first three quarters of this year was 2.473 billion yuan, an increase of 648.24% year-on-year. Ganfeng's global "ring mining" is also accelerating, having made four acquisitions this year. Liu Tao told China News Weekly that in order to reach the production target of 600,000 tons of lithium carbonate equivalent, more raw materials need to be mastered.
​A battery manufacturer is seen at a high-tech zone in Suzhou, Jiangsu province, on Nov 1. Figure /IC
​​Plywood in the battery enterprise
​Lithium prices are soaring all the way, and battery companies are also producing at full capacity, but the increase in battery installed capacity is not matched by the corresponding profit growth of battery companies. Billion Wei Lithium energy, Guoxuan High-tech, Xinwang Da and Penghui Energy recently released financial results show that the gross profit margin of four battery companies in the third quarter has declined quarter-on-quarter. Among them, Yiwei lithium energy's gross margin in the third quarter was 21.53%, which has declined for four consecutive quarters, down nearly ten percentage points from the same period last year. The gross margin of Guoxuan High-tech and Penghui Energy declined for two consecutive quarters, falling by 9% and 3%, respectively.
​The tight supply of lithium battery raw materials has triggered a chain of butterfly effects, putting pressure on the entire supply chain. On October 10, Ganfeng Lithium announced an increase in the price of all its lithium metal products, and the unit price of the company's full range of lithium metal products increased by 100,000 yuan/ton. Companies such as Hongli Power and Shengli High-tech Energy have also raised the prices of battery cells and other products.
​However, the cost pressure caused by the rise in raw materials is unable to be transmitted downstream, and it is jammed in the battery production end, which is carried by the battery enterprises. Yu Qingjiao said that the cost pressure is difficult to transmit to the terminal, despite the shortage of high-end power battery production capacity, but the voice of car companies is still strong, for most battery companies, they can only digest the cost pressure.
​This directly led to a decline in the gross profit margin of battery manufacturers, and the profit space was squeezed. Cao Guangping told China News Weekly that the current bottleneck in the development of the new energy automobile industry is mainly the battery, the cost of the battery pack accounts for 30% to 50% of the vehicle, which removes the battery case, battery management system, thermal management system and cables and other accessories, mainly the battery cell and its internal lithium, nickel, cobalt and other metals cost, can be said "electricity itself is not expensive, But the materials for storing electricity in containers are too expensive."
​According to the tracking statistics of true lithium research, the current power battery cost increase is generally between 30% and 40%, which has exceeded the gross margin level of the vast majority of power battery companies. If you can't raise prices, most battery companies have a hard time making money. At the "Third World New Energy Vehicle Conference" held in Haikou, Hainan Province on September 16, Xin Guobin, Vice Minister of Industry and Information Technology, proposed that the current cost of new energy vehicles in China is still high. In addition, the key components of electric vehicle power battery facing lithium cobalt nickel and other mineral resources security and price upward pressure, the Ministry of Industry and Information Technology will work with relevant departments to speed up the overall planning, improve the support capacity.
​Cao Guangping said that the current pure electric vehicle business segment is not profitable, because the cost of the battery pack is basically equal to the cost of an ordinary oil vehicle. But the subsidies given by national policies and the sale of new energy vehicle points can "make money". "Although the proportion of profits made by the tram business of various car companies on industry subsidies, industry positive points and brand premium is not the same, the money earned by these companies must balance the rising cost of battery procurement and raw materials."
​After suffering for more than half a year, the head of the power battery companies are collectively brewing price increases. Recently, a BYD's "battery price increase contact letter" was widely spread online. Penghui Energy, Guoxuan high-tech issued a price adjustment letter is more straightforward, the reason for the price increase directly refers to the rise in raw material prices and shortages, resulting in high production costs. However, the long-cherished hope of higher prices is not so easy to realize. Some insiders explain: car power battery orders are generally signed once a year, and the temporary price adjustment needs to communicate with the OEM, but it is generally difficult to get their consent.
​However, this round of price increases, the industry giant Ningde era did not follow. Cao Guangping believes that the Ningde era, as the largest supplier of the lithium battery industry, insists on not raising prices, the reason is that the early Ningde era has carried out a deep layout of the raw material industry, and has also carried out a deep capital cooperation with car companies, and the interests have been tied together. Since 2018, Ningde Times has subscribed for the equity of North American lithium and Australian lithium mining companies, and has also established a joint venture with Defang Nano, a leading company in lithium iron phosphate cathode materials. Last year, Ningde Times participated in the capital increase of Hunan Yuleng, Jiangxi Sublimation and other lithium iron phosphate material enterprises.
​Scramble for lithium
​For more battery companies that do not have mines at home, entering upstream resources can stiffen their backs.
​Battery companies are in a cleat and are forced to buy mines, which has become a trend. In August this year, Ganfeng Lithium planned to invest 8.4 billion yuan with its own funds to build a new lithium battery project with an annual output of 15GWh. At present, Guoxuan High-tech has successively laid out the positive electrode, negative electrode, copper foil, diaphragm, electrolyte and other upstream raw materials and battery recycling, hoping to establish the vertical layout of the whole industrial chain.
​Whale Platform think tank expert, true lithium Research Institute founder Mo Ke told "China News Weekly", battery companies next "sweep mining", the core strategy is to ensure the security of the supply chain, "to ensure a stable production, and the continuity and stability of lithium raw material supply is not affected."
​The battlefield of "sweeping mines" has been fought internationally. At the end of September, Canada's Millennium Lithium paid $10 million