Review and Prospect of China's Lithium Ion Battery electrolyte Industry in 2020

Guide: at present, the electrolyte has been basically domesticated, and its shipment is proportional to the shipment of lithium-ion batteries.

1. Review of the operation of the industry

1.1 electrolyte shipments are affected by the battery end: depressed in the first half and better-than-expected recovery in the second half of the year

Classified by application fields, lithium-ion batteries are mainly divided into three categories: automotive power battery (EV Lib), small lithium-ion battery (Small Lib) and energy storage lithium-ion battery (ESS Lib). Among them, the shipments of automotive power batteries are mainly affected by the sales of new energy vehicles. In recent years, countries' attention to environmental protection has gradually increased the penetration of new energy vehicles, although it was affected by the epidemic in the first half of the year. Shipments of automotive power batteries fell 45.8% from the same period last year, but the production and sales of new energy vehicles increased sharply in the second half of the year compared with the same period last year. As of November 2020, China's cumulative shipments of automotive power batteries were 62.5 GWH, a cumulative decline of 7.0% over the same period last year. Small lithium-ion batteries are mainly used in mobile phones, computers, power tools, electric two-wheelers and emerging consumer applications. 2020Q1MuQ3, driven by 5G mobile phones, power tools and batteries for electric two-wheeled vehicles, shipments of small lithium-ion batteries in China reached 39.7 GWH, an increase of 16.5% over the same period last year. Lithium-ion batteries for energy storage are still in the market introduction stage, and the shipments are relatively small, but the growth rate is relatively fast. Driven by the construction of base stations, overseas energy storage and domestic power generation side energy storage projects, the shipment volume of 2020Q1-Q3 energy storage batteries in China is 9.1GWH, which has exceeded the level of the whole year last year.

Electrolyte is one of the four major materials of lithium battery, which is the blood of lithium-ion battery, which is very important in ensuring the safety and long cycle performance of lithium-ion battery. At present, the electrolyte has been basically made in China, and its shipment is proportional to the shipment of lithium-ion batteries. Affected by the epidemic at the beginning of 2020, the demand for lithium batteries was low and the operating rate was low. with the orderly resumption of work and production after the control of the domestic epidemic in the second quarter, the domestic economic recovery exceeded expectations, and the growth in demand for lithium batteries led to a pick-up in electrolyte shipments as of 2020Q3. China's lithium-ion battery electrolyte shipments were 161000 tons, with an average annual growth rate of 34.5 percent in the past six years, of which 82000 tons were shipped for automotive power batteries. The electrolyte shipments of small lithium-ion batteries and lithium-ion batteries for energy storage are 63000 tons and 16000 tons respectively.

1.2 phased mismatch between supply and demand, driving up the price of the electrolyte industry chain

The jump in downstream demand superimposed the lack of new production capacity, and the overall supply and demand of the electrolyte industry chain was tight, driving up the prices of electrolytes and raw materials. The raw materials upstream of the electrolyte mainly include electrolytes, organic solvents, additives, etc. At present, the main electrolyte is lithium hexafluorophosphate, which accounts for about 40% of the cost of the electrolyte, and its price changes have a great impact on the price of the electrolyte. Since the price reached an all-time high in 2016, the market as a whole continues the pattern of oversupply, and the average price in the first half of 2020 is at an all-time low. Affected by the sudden growth in downstream demand and limited new supply in the second half of 2020, the average price of Q4 rebounded to 99700 yuan / ton, an increase of 3.85% over the same period last year and 17.69% month-on-month. The main solvent of the electrolyte is DMC (methyl er carbonate), which accounts for about 18% of the cost of the electrolyte. Affected by environmental protection and other factors, the average price of the electrolyte has been on the rise since 2019. The average price of 2020Q4 is 15200 yuan / ton, an increase of 134.15% over the same period last year and 70.8% compared with the previous year. The average price of electrolyte mainly depends on the price of upstream raw materials and the competition pattern of the industry, which reached its peak in 2016 and then showed a downward trend. since 2020, the price of electrolyte has also shown an upward trend driven by the tight supply of raw materials and rising prices. however, subject to the pressure of downstream power battery customers, the price increase is obviously small, and the gross profit of electrolyte enterprises is affected to a certain extent.

1.3 the competition pattern of the industry is stable and the market concentration is high.

The core barrier of the electrolyte is the ability to guarantee supply. With the advantages of scale, cost, R & D capability and other advantages, the market share of the head enterprises continues to grow, and the industry concentration further increases. The combined market share of the top four enterprises in 2017-2020Q3 are 56.4%, 62.4%, 60.6% and 69.1%, respectively. The combined market share of the top 10 enterprises in 2020Q3 is more than 90%. The distribution of different products of leading enterprises is more balanced, and the market pattern is basically stable. Among them, Divine Materials has a stable leading position with its advantages such as perfect industrial chain layout, strong cost control ability, outstanding customization ability and high customer barriers; the first echelon enterprises such as New Zebang, Cathay Pacific Huarong and Shanshan have obvious increment. Second-tier enterprises such as BYD, Farnlet, Zhuhai Saiwei and Jinguang Hi-Tech are also gradually increasing their market share. Specifically, Tianci ranked first, with a market share of 28.8%, New Zebang ranked second with a market share of 17.5%, Guotai Huarong ranked third with a market share of 13.8%, and Dongguan Shanshan ranked fourth with a market share of 9.1%.

2. the prospect of the development trend of the industry.

In the next five years, the lithium-ion battery electrolyte industry will still face practical problems such as slow economic recovery, overcapacity, technical bottlenecks, and the development of alternative materials, but with the gradual stabilization of the global epidemic situation, the growth trend of downstream lithium-ion battery demand is obvious, the new production capacity of major raw materials at the supply side is relatively slow, and the mismatch between supply and demand drives the price level of the electrolyte industry chain to pick up and stabilize in the short term. The electrolyte industry is expected to rise steadily, the position of the leading enterprises in the industry is further stable, showing a trend that the strong is always strong, and emerging technologies such as solid-state cells and fuel cells have not yet been commercialized. It has little impact on the pattern of the electrolyte industry in the short and medium term.

2.1 it is estimated that by 2025, China's lithium battery shipments will reach 578.28 GWH and electrolyte shipments will reach 865000 tons.

In the field of automotive power batteries, with the gradual increase in the permeability 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, new consumer fields such as wearable devices, drones and small power will lead to the growth of small lithium-ion battery shipments. it is estimated that by 2025, China's small lithium-ion battery shipments will be 96.0GWh.In the field of small lithium-ion batteries, the shipments of small-sized lithium-ion batteries will increase with the gradual increase of the permeability of new energy vehicles. In the field of lithium-ion batteries for energy storage, with the promotion of power system reform, the reduction of energy storage costs and the acceleration of the process of lithium electricity replacing lead acid, it is estimated that the shipment of energy storage batteries in China will reach 60.0GWh by 2025.

With the growth of downstream new energy vehicle power battery demand, the rapid expansion of emerging consumption fields and the outbreak of energy storage industry during the "14th five-year Plan" period, the strong demand for lithium electricity has led to the rapid growth of electrolyte shipments in China in the future. It is estimated that by 2025, the total shipment of electrolyte in China will reach 865000 tons, with an average annual growth rate of about 31.7%. The overall market scale of electrolyte in China will reach 19.78 billion yuan, with an average annual growth rate of about 18.6%.

2.2 the electrolyte industry chain ushered in the opportunity of price increase, and the price was gradually adjusted back after 2021.

The growth of global lithium-ion battery demand is very certain, and the probability is higher than expected, which will keep the demand of the whole electrolyte industry chain strong. From the perspective of raw material supply, lithium hexafluorophosphate can not be put into production in a short time due to obvious scale effect, high technical barriers and long production expansion cycle, and some small factories shut down production lines under the condition of losses. the gap between supply and demand is difficult to make up in a short time, thus driving up prices. 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 repaired. As market prices rise, previously closed production lines begin to resume, and enterprises that have announced production expansion plans will accelerate their landing. By 2022, a new batch of production expansion capacity will be gradually released, basically achieving a balance between supply and demand. The average price of lithium hexafluorophosphate will be gradually adjusted, and it is expected that the price will enter the downward channel after 2022.

Affected by the requirements of environmental protection, slow progress of new processes and high technical barriers, the domestic DMC new production capacity continues to be lower than expected, the gap between supply and demand is large, the supply situation may be difficult to improve in a short time, and the electrolyte solvent enterprises represented by DMC, such as EC, EMC and DEC, are highly monopolized, the price is difficult to decline in the short term, and it is expected that the average price of battery-level DMC will remain high in 2021. Because the electrolyte is not a heavy asset link, and the construction cycle is fast, its price is mainly affected by changes in the prices of upstream raw materials, but the downstream customers of the electrolyte link are mainly large customers such as Ningde era, Panasonic, Samsung and LG, and it is difficult to raise prices, so the electrolyte link will be forced to increase the cost of raw materials internally, and gross profit is expected to be affected to a certain 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 pattern of strong enterprises and difficult survival of small and medium-sized enterprises. On the one hand, through the deep binding of the downstream lithium battery core enterprises, the electrolyte leading enterprises are expected to further stabilize their industry position; on the other hand, the electrolyte head enterprises gradually extend to the upstream raw material industry, its guarantee and supply capacity will be further strengthened, and the cost will further decline, leading to the continuous growth of the market share of the leading enterprises. The vertical integration of cost advantages, advanced additives and formula synthesis ability and scale matching ability will jointly ensure that the long-term share of the head enterprise will continue to rise, and Tianzhi Materials, Guotai Huarong, New Zebang and other enterprises will remain in the first echelon. The combined market share of the top 10 enterprises will be stable at about 90%, and the competitiveness of tail enterprises in product research and development and cost control will become weaker and weaker, and the Matthew effect of the whole electrolyte industry will be more significant.

In recent years, emerging technologies such as solid state cells and fuel cells have made great progress, but it still takes a long time to achieve large-scale mass production and commercial use, and the impact on the existing electrolyte industry is limited in the short and medium term. In the field of solid-state battery, although compared with the current liquid lithium battery, the energy density and safety performance of all-solid-state battery are greatly improved, but there are still some shortcomings, such as high cost and key technologies have not been broken through. it is unlikely that pure solid electrolyte will completely replace electrolyte in the short and medium term. In the field of new lithium salts, the research and development of new lithium salts, including LiFSI, will be further accelerated, and a large number of new additives will also be gradually applied to the electrolyte, together with a large number of existing additives such as VC, FEC and PS to improve the high and low temperature performance, flame retardant performance and cycle performance of lithium-ion batteries.