SMM Analysis: lithium demand burst Raw material prices soar how should Enterprises deal with [SMM Annual meeting]

SMM November 12: at the 2021 annual meeting of the non-ferrous metals industry jointly held by the Shanghai Futures Exchange and SMM, Yi Yanting, director of new energy research and consulting at SMM, explained how to deal with the skyrocketing price of raw materials under the mismatch between supply and demand in 2021. She said that driven by battery demand, the demand for lithium materials has increased significantly, and because the growth rate of the supply side is not as fast as the growth rate of demand, the prices of all major materials have increased by varying degrees.

First, the demand for lithium electricity breaks out.

Prices soar: driven by battery demand, the demand for lithium materials has increased significantly, and because the growth rate of the supply side is lower than the growth rate of demand, the prices of all major materials have increased by varying degrees. According to SMM spot prices, the price of battery-grade lithium carbonate has risen by as much as 275 per cent since the beginning of the year. It is mainly due to the lack of lithium ore, the rising price of raw materials and the demand for batteries.

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The price of electrolyte has increased by about 200% since the beginning of the year due to the shortage of VC, the rising price of raw materials and the demand for batteries, while the price of power lithium iron phosphate has increased by about 133% since the beginning of the year due to the shortage of iron phosphate, high cost and demand for lithium iron.

New energy vehicles:

Due to the support of national policy, the layout and investment of battery enterprises and automobile enterprises, as well as the increased acceptance of new energy vehicles by consumers, the global production of new energy vehicles has increased rapidly in 2021. In 2021, the total global sales of new energy vehicles are expected to be 6.8 million, an increase of nearly 115% over the same period last year, of which China is expected to sell 3 million vehicles for the whole year, with a penetration rate of 12%.

SMM predicts that the penetration rate of domestic new energy vehicles is expected to rise to 25 per cent by 2025.

Demand for lithium batteries: driven by new energy vehicles in 2021, ternary and iron lithium batteries in China are growing rapidly. With its obvious cost and safety performance advantages, the market share of iron lithium batteries will gradually increase in 21-23 years, and ternary lithium iron batteries in 24-25 years will occupy different market segments according to their technical characteristics.

Shipments in China's lithium battery market grew by 38 per cent from 2018 to 2021 and are expected to slow slightly to 25 per cent from 2021 to 2025.

Compared with lithium iron phosphate, the former has the characteristics of high energy density and good low temperature performance, while lithium iron phosphate battery has the advantages of high cost and good safety performance.

2. analysis of the factors of shortage at the end of raw materials

1. Resource constraints: the new capacity of lithium resources in the future will be released after 2022-23, and it is expected that there will still be a supply gap of-21000 tons of LCE in 2022.

According to SMM research, the current lithium resources to increase the production capacity of the node has not arrived. The global new capacity of spodumene will be concentrated between 2022 and 2024, while the new capacity of global salt lakes will be launched between 2023 and 2025. The new capacity of lithium mica is concentrated in China and is expected to maintain slow growth in the future.

SMM expects global lithium capacity to grow 27 per cent year-on-year from 2021 to 2022 and 41 per cent year-on-year from 2022 to 2023.

At the same time, SMM predicts that the gap between supply and demand for lithium will persist from 2021 to 2023.

(2) Environmental protection restrictions: the pressure of environmental assessment of upstream chemical products such as VC and phosphoric acid is great, the audit cycle of new projects is long, and the situation that supply falls short of demand is expected to continue.

In recent years, chemical products in the upper reaches of the new energy industry chain have been strictly controlled by the state. Among them, iron phosphate, since 2019, has issued relevant policies on "tri-phosphorus regulation" and strictly controlled the construction of domestic "three-phosphorus" projects. In terms of VC, due to the long construction cycle, difficult production, difficult environmental protection examination and approval, strict product verification and high process requirements, and battery-level PVDF, Because R142b is an ODS under national key control, the production scale of the production quota system has been gradually reduced since 2014, the domestic production expansion of R142b is limited, and the production quota is only reduced. It is expected that the above three will produce varying degrees of supply and demand gap in 2021.

(3) Technical bottleneck: limited by equipment capacity, the diaphragm is expected to be short of supply and demand in 2022, while lithium hexafluorosulfate is not expected to be released until 2022 because of its high technical threshold and its increment concentrated to the head.

According to SMM research, the expansion of lithium diaphragm production, there are global equipment production capacity is limited, equipment delivery and commissioning cycle is long and other factors, 2021 lithium diaphragm market in a tight balance, supply can still meet demand; it is expected that by 2020, the diaphragm market will be in short supply.

As for lithium hexafluorophosphate, it is faced with the technical threshold of complex and difficult synthesis process of hydrogen fluoride solvent method and very high purity of raw materials, the gap between supply and demand still exists in 2021, and the tight balance is expected to be alleviated in 2022.

(4) Power restriction and production limit: since the second half of this year, double control documents on energy consumption have been issued in many places across the country, and some industries with high energy consumption and pollution have stopped production and work one after another, among which the production of various materials in the lithium power industry has also been affected by production restrictions.

The picture above shows the situation of October power restrictions across the country compiled by SMM, in which the impact of October power cuts in Shandong continues, and the overall output of cathode materials is expected to remain limited, which is expected to be greatly reduced by more than 30%. Some lithium manganate enterprises in Henan received a notice on October 10 that the overall power supply was limited by about 50%, and the recovery date was uncertain. It is expected that the overall production and marketing in that month will be greatly affected.

(5) China is highly dependent on cobalt and lithium raw materials, and the uncertainty of raw material supply will increase due to the influence of epidemic situation, geopolitics and other factors in the future.

As we all know, China is highly dependent on cobalt and lithium raw materials, but affected by the epidemic, the control of the epidemic in Africa, Zambia, South Africa and other important countries for the supply or transportation of cobalt raw materials is not optimistic, and the quarantine measures in mining areas throughout the year are stricter. The efficiency of transportation is relatively low: the average delay of land transportation is 7-10 days, and the port capacity is 5-60% unable to release capacity.

In terms of geopolitics, in recent years, Sino-Australian relations have remained tense, and calls for "decoupling" in the economic and trade field have been strengthened, which has cast a shadow over China's import of spodumene raw materials, and the risk of lithium raw material supply has increased.

To sum up, the uncertainty of raw material supply will increase in the future.

Third, how to deal with the high cost?

Outlook: to grasp the market opportunity and deal with the risk of market fluctuation, downstream lithium power enterprises should consider three key issues.

SMM provides customers with the following three major convenience services:

Weekly / monthly market tracking report: SMM high-frequency price and balance information database is built, which is convenient for enterprises to monitor market trends in time.

Raw material price linkage report: track the prices of the four main materials and batteries from the raw material end to realize the linkage of the whole industry chain.

Cell cost tracking report: this report monitors the price changes of the four main materials, reasonably detects the cell cost, and controls the risk.

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