[SMM Analysis] European new energy stimulus policy will also benefit China's ternary material market.

SMM, May 20:

According to the draft EU document reported by foreign media, the EU is considering introducing a series of policies to stimulate the development of new energy vehicles, including:

1. Invest 20 billion euros in two years to reduce carbon emissions;

2. Invest 400-60 billion euros to accelerate the investment of the three power systems and build 2 million public charging stations by 2025;

3. Zero-emission cars will be exempted from the value-added theory.

The value-added tax in major EU countries is about 20%. If the policy is implemented, sales of new energy vehicles in Europe are expected to rise rapidly. Under the influence of the epidemic in the first quarter of 2020, the sales data of traditional fuel vehicles in Europe were poor, with a cumulative decline of 40% in new car sales in Europe in the first four months. But electric car sales in Britain, France, Germany and other places grew by more than 50% in the first four months compared with the same period a year earlier, mainly due to the stimulus of European policies starting in 2019.

SMM believes that the introduction of the new draft will also further promote the development of the European electric vehicle market and drive the market demand for ternary materials and precursors in China.

From the perspective of the global new energy vehicle industry chain, China is the main producer of lithium salts and ternary precursors, Japan and South Korea are the main producers of batteries, and the final end consumers are China and European and American markets. the sales volume of the terminal market directly determines the demand of the upstream raw material market. Although the downstream demand of China's new energy vehicles was poorly affected by the epidemic in the first four months, the overseas market demand is better, reflecting the Chinese and Japanese and South Korean markets, it can be seen that the demand of China's ternary precursor export market is still good in the first quarter of 2020.

Note: China exported more ternary material precursors in the past. With Japanese and Korean battery companies investing and building factories in China in the past two years, the import of ternary materials has also gradually increased. )

At present, the demand for new energy vehicles in the Chinese market is weak, the orders of some battery companies have decreased, and the manufacturers of ternary materials and precursors have also reported a slight decline in orders in the lower reaches of May. SMM forecasts that the output of ternary materials will fall by about 6 per cent month-on-month in May. With the resumption of work by overseas car companies at the end of April, the EU policy will further stimulate the demand for electric cars in Europe. It is expected that orders for battery companies in Japan and South Korea will also gradually resume, and orders for ternary materials and precursors in China will grow slowly.