Battery-grade DMC High Prosperity induces capacity expansion Competition low-cost New Technology may break the competitive pattern of the Industry

The refurbishment with new energy vehicles keeps the attention of lithium iron phosphate battery market high. Dimethyl carbonate, the main component of electrolyte solvent for lithium iron phosphate battery, is being chased by capital, and the share price of 603026.SH, the only listed company with dimethyl carbonate as its main business, recently hit a new high.

In the face of the high prosperity of the industry, people in the industry are worried about the future of carbonate. A senior figure in the carbonate industry in Shandong told the Financial Associated Press, "the popularity of the industry has led to the expansion of many enterprises, and the risk of overcapacity is intensifying. At the same time, the fighting between different technological routes will also break the inherent pattern of the carbonate industry. The current head enterprises are likely to be overtaken at any time."

The demand for battery-level DMC is hot.

Dimethyl carbonate ((DMC)) is an important organic solvent and chemical intermediate, which is widely used downstream. In addition to traditional adhesives, coatings, developers and polycarbonates, lithium battery electrolyte solvents have recently accounted for 30% of the downstream applications of DMC, which has become the main application field of the product. In terms of product purity, low-purity industrial-grade dimethyl carbonate is mainly used in traditional downstream and polycarbonate (PC), while lithium battery electrolyte needs higher purity of battery-grade dimethyl carbonate.

With the breakthrough of the deficiency of energy density, lithium iron phosphate battery is favored by the market again because of its higher safety and economy and longer cycle life. Data show that in March this year, the number of power batteries loaded in China was 9.0 GWH, up 224.8% from the same period last year, of which lithium iron phosphate batteries totaled 3.9GWH, up 627.9% from the same period last year. The market share of lithium iron phosphate batteries has risen from less than 15% at the beginning of 2020 to more than 40%. The amount of DMC is the highest in lithium iron phosphate battery electrolyte, which is about 550t DMC, which is 4-5 times that of ternary battery.

The hot market of lithium iron phosphate battery has also ignited the demand for DMC, and the price of DMC has been rising since the second half of 2020. The latest price for battery-grade DMC is 11500-12500 yuan per tonne, up nearly 80 per cent from the same period last year, according to the China Chemical and physical Power Industry Association.

As the leader of the DMC industry, Shi Da Shenghua has become the biggest beneficiary of this round of high business cycle. According to the company's quarterly report released on the 29th, Shida Shenghua achieved an operating income of 1.683 billion yuan in the first quarter, an increase of 93.5 percent over the same period last year, and a net profit of 232 million yuan, an increase of 14.09 times over the same period last year.

Capacity competition may lead to changes in the pattern of supply and demand.

Behind the price rise caused by supply and demand, the crazy production capacity competition among enterprises in the industry has begun.

At present, in the domestic battery-grade DMC market, Shi Da Shenghua occupies the first place with a production capacity of 75000 tons / year. In 2019, the company announced the new DMC project of Dongying Port second Base, Sinochem Quanzhou Petrochemical Co., Ltd. joint venture construction of 440000 tons / year new energy materials project and so on. According to the latest announcement of the company, the procurement, installation and commissioning of production equipment and materials as well as installation and commissioning of Sinochem Quanzhou Phase I project, which was originally planned to be completed in April 2021, will be delayed in 2020 due to novel coronavirus's epidemic situation. The company expects to complete the civil engineering and equipment installation work of the first phase of the project in September 2021 and enter the trial production phase after completing equipment installation and commissioning in November 2021.

300037.SZ, an electrolyte enterprise, has an annual production capacity of about 50, 000 tons of carbonate green solvents in the Huizhou project; 300082.SZ (300082.SZ) has an annual production capacity of 20, 000 tons of DMC production equipment has successfully produced battery-grade DMC, in the fourth quarter of 2020, the production and sales of electrolyte solvents reached 95% in the fourth quarter.

In addition, Zhejiang Sinopec's annual production capacity of 200000 tons of dimethyl carbonate and 132000 tons of ethylene glycol was successfully started in October 2020, with the largest single unit capacity in the world; Jiangsu Sipai's 70,000 tons of DMC capacity is expected to be completed in the third quarter of 2021, and the second phase of the project 70,000 tons of DMC capacity has also been planned.

Coal chemical giant Hualu Hengsheng (600426.SH) through technical transformation to form a 3 ton / year dimethyl carbonate production capacity. According to the information of China bidding and Purchasing Network, the company carried out public bidding for the civil construction of the carbon ester transformation project of ethylene glycol workshop in November 2020. After revamping, Hualu Hengsheng will add a 300000 t / a DMC plant for oxidative carbonylation of methanol.

In addition to the above-mentioned enterprises, according to incomplete statistics, Shandong Depp, Yulin Yunhua, Zhongke Hongye, Taixing Teda and other enterprises all have plans to expand production or technological transformation to increase production, and the new project capacity of domestic carbonate products in the next 3-5 years will exceed 4 million tons / year.

The industry insiders said that the frenzied capacity expansion of various companies could break the inherent pattern of the carbonate industry, which is accelerating the transformation from fine chemicals to bulk chemicals. At present, the prices of industrial-grade DMC products have shown a downward trend, and battery-grade DMC may soon have overcapacity.

The new low-cost technology may break the situation.

At present, the mainstream DMC production process in the market is transesterification, which is divided into epoxy propylene finishing process and epoxy ethylene finishing process, among which epoxy propylene finishing process is the main process route at present. However, the price of epoxy propylene has remained high for a long time, which brings a lot of cost pressure to the manufacturers of the epoxy finishing process, while the price of epoxy ethylene is stable and relatively low, so it is a more recognized process route in the transesterification process at present.

Oak shares 20, 000 tons / year DMC production capacity is the use of epoxy finish line, with a significant cost advantage. Guosheng Securities research shows that based on the current market price and unit consumption of raw materials, the raw material cost of the epoxy route is more than 50% lower than that of the epoxy route.

In addition, the coal chemical process route is more likely to break the industry pattern. The method of oxidative carbonylation of methanol is used to prepare DMC from coal, and the prepared methanol makes full use of by-product gases such as oxygen and carbon monoxide at the same time, so the raw material cost is more advantageous. At the same time, under the background of large overcapacity of coal-to-ethylene glycol plant, it can be completed through the technical transformation of coal-to-ethylene glycol plant. CICC also pointed out in its research report that the non-transesterification route using syngas as raw material is highly competitive in cost.

Hualu Hengsheng's 30,000t DMC production capacity was formed through the technical transformation of the coal-to-ethylene glycol plant. The relevant person in charge of the company said that the company's DMC products have reached the battery grade purity standard, and the current products are fully produced and are mainly used in lithium battery electrolyte solvents. The new 300000 tons / year methanol oxidative carbonylation DMC plant is expected to be officially put into production by the end of 2021.

According to the analysis of the industry, with the crazy expansion of the production capacity of the DMC industry, cost will become the most important factor in the future competition, while the low-cost advantage of the coal chemical industry route may completely break the existing pattern of the DMC industry in the future.