SMM News: the retreating slope of the subsidy policy in 2019 and the spread of the global epidemic at the beginning of this year have raised concerns about the future development of the new energy vehicle market. Most upstream power battery manufacturers also showed a year-on-year decline in annual installed capacity-national new energy vehicle sales and power battery installation fell by more than 50 per cent in January and February 2020 compared with the same period last year. The low demand downstream and the downtime of the upstream industry chain have led to the continuous decline in the price of battery-grade lithium materials, which has cast a shadow over the future of the lithium industry.
Zhejiang Securities Viewpoint
We have long been firmly optimistic about the global new energy vehicle market: first, the development of new energy vehicles is in line with the energy security strategy of governments; at the same time, at the enterprise level, stringent emission fines and points policies mean that the development of new energy vehicles is fundamental to maintaining the company's long-term profitability. Europe, the United States, Japan and South Korea have made more than expected progress in supporting the subsidy policy in 2019 and early 2020. China has also launched policies to promote automobile consumption and stimulate the development of new energy vehicle industry.
Lithium battery technology is ever-changing, but the demand for lithium is constant: whether it is lithium cobalt LCO, for 3C consumer electronic batteries or lithium iron phosphate LFP/ for power batteries, the fundamental principle of ternary lithium NCM and NCA, is still based on the exchange of lithium ions between positive and negative electrodes. Lithium is still an indispensable basic element for different lithium battery technologies. At the same time, the new pre-lithium / lithium replenishment process will also bring new increments to lithium demand.
In the short and medium term, lithium hydroxide will become a new starting point in the industrial chain: in the synthesis and production of high nickel ternary cathode materials, lithium hydroxide has obvious advantages over lithium carbonate in the production process. With the continuous increase of the market share of high nickel ternary cathode materials in the field of power batteries, we believe that the demand for battery grade lithium hydroxide will continue to increase in the future. At the same time, the global power battery manufacturers are in step in the expansion of high nickel ternary capacity, which provides kinetic energy for the growth of lithium hydroxide demand.
Investment suggestion
We believe that the demand for lithium downstream will continue to rise in the future, and the extensive application of high nickel ternary will bring a new round of capacity expansion of lithium hydroxide. We propose to focus on Ganfeng lithium industry and Tianqi lithium industry, which are the leading targets of lithium resources industry.
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