Car companies add lithium iron phosphate left "phosphorus" right "lithium" golden age has come

Recently, Tesla (TSLA.US) said at his third-quarter investor exchange meeting that lithium iron phosphate batteries will be used worldwide for the standard continued version of Model3 and ModelY,.

Since the beginning of this year, the prices of all kinds of phosphorus chemical products have risen rapidly because of the rising cost of raw materials and the tension between supply and demand. Yellow phosphorus and phosphoric acid are both important raw materials for making lithium iron phosphate batteries. The price of yellow phosphorus rose from about 20,000 yuan per ton in July this year to about 42000 yuan per ton on October 22, with a maximum of 66000 yuan. The price of phosphoric acid also rose from about 7000 yuan per ton in July to 16162 yuan on October 22, with a maximum of nearly 21000 yuan.

As yellow phosphorus is an energy-intensive industry, prices have soared since July due to power restrictions and production restrictions in Yunnan, but have declined recently, but Tesla's switch to lithium iron phosphate may further affect the prices of yellow phosphorus and phosphoric acid. As the demand and price of phosphorus chemical products continue to rise, the performance of phosphorus chemical enterprises this year also ushered in the outbreak.

Affected by the cost, the major car companies have added lithium iron phosphate batteries.

Nowadays, as the world's major automobile production and consumer countries continue to launch policies to promote the development of their new energy vehicle industry, the new energy vehicle industry is in a period of vigorous development. Global sales of new energy passenger vehicles were only 549000 in 2015, rising rapidly to 3.125 million in 2020, with a compound annual growth rate of 41.6%. With the policy support of global mainstream automobile powers to new energy vehicles, the increasing improvement of supply chain and supporting facilities, and the increasing acceptance of consumers to new energy vehicles, the sales of new energy vehicles will still maintain the trend of growth in the medium to long term.

In order to promote the high-quality and sustainable development of the new energy vehicle industry, the State Council of China issued the Development Plan of the New Energy vehicle Industry in October 2020. The Plan points out that by 2025, the sales volume of new energy vehicles will reach about 20% of the total sales of new cars. According to the forecast of the China Association of Automobile Manufacturers, the sales of new energy vehicles in 2021 are expected to reach 2.4 million, an increase of 76% compared with the same period last year. According to the forecast of (GGII) of the Institute of Lithium and electricity of High Industrial Research Institute, the output and sales of new energy vehicles in China will reach 6.251 million and 6.23 million respectively by 2025, with an average annual compound growth rate of about 35%.

The rapid development of new energy vehicles also brings great opportunities for the development of auto parts, especially new energy power batteries.

At present, the new energy power battery is mainly lithium battery. Cathode material is the core material of lithium battery, and its performance directly affects the energy density, safety, cycle life and application range of lithium battery, and the proportion of cathode material in the material cost of lithium battery is 30% 40%. It directly determines the overall cost of the battery.

According to the different material systems, cathode materials can be divided into lithium cobalt, lithium manganate, lithium iron phosphate and ternary materials, among which lithium iron phosphate and ternary materials are the two most widely used materials in new energy vehicle power batteries. Lithium iron phosphate is a kind of cathode material with lithium source, iron source, phosphorus source and carbon source as the main raw materials, and the ternary material is a kind of ternary composite cathode material made of nickel salt, cobalt salt, manganese salt or nickel salt, cobalt salt and aluminum salt as the main raw materials.

Lithium iron phosphate and ternary materials have their own advantages and disadvantages, which leads to their different applications: in the field of energy vehicles, lithium iron phosphate is mainly used in price-sensitive new energy commercial vehicles and medium-and low-end new energy passenger vehicles; ternary materials are mainly used in medium-and high-end new energy passenger vehicles with long mileage.

In terms of cost, compared with ternary, lithium iron phosphate has obvious advantages in price, especially when the prices of cobalt and nickel continue to rise this year, the cost of ternary batteries has risen all the way affected by fluctuations in raw materials. Coupled with the decline of subsidies in the new energy vehicle industry and the rise in chip prices, the cost pressure of car companies has increased sharply.

Today's electric cars are in the stage of expansion, and the strategy adopted by most car companies is to reduce prices to increase market share. Among them, Tesla's decline is the most obvious. The company's Model3 has been downgraded six times in two years, with a cumulative price reduction of more than 100000 yuan.

In this context, to find a way out in the price war, cost control has become the pursuit of most car companies, cheap lithium iron phosphate battery seems to be the best solution.

As early as February this year, Musk hinted that Tesla would replace the ternary lithium batteries of some electric vehicles with lithium iron phosphate batteries and confirmed the supply agreement with the Ningde era. At present, Tesla has produced cars equipped with lithium iron phosphate batteries in the Shanghai factory.

In addition to Tesla, BYD also said that the new car will fully switch to lithium iron phosphate battery, the new power Xiaopeng car also launched a lithium iron phosphate version of the model. Among the top 10 new energy models sold in the Chinese market in 2020, six models have launched a new version of lithium iron phosphate.

Not only that, the ternary lithium battery, which has always been the leader in production and installed capacity, was also quickly caught up by lithium iron phosphate batteries in the first half of this year. The data show that in terms of domestic power battery installation, in September, the ternary battery was loaded with 6.14GWh.Lithium iron phosphate batteries were loaded with a total of 9.54Wh.Lithium iron phosphate battery was ahead of the ternary battery in terms of loading capacity for three months in a row. In terms of production, in September, the output of ternary batteries was 9.63 GWH, accounting for 41.56% of the total output; the output of lithium iron phosphate batteries was 13.51 GWH, accounting for 58.31% of the total output. This is the fifth consecutive month that the output of lithium iron phosphate batteries has exceeded that of ternary batteries.

As the major automobile manufacturers have added lithium iron phosphate batteries, resulting in a further expansion of the gap between supply and demand of lithium iron phosphate materials, lithium iron phosphate enterprises have benefited obviously. The share prices of related companies, such as German Nano (300769.SZ) and Fulin Seiko (300432.SZ), have all risen more than twice this year.

In addition to the direct benefits of lithium iron phosphate producers, it can be found that upstream phosphorus chemical enterprises will also benefit from digging into the industrial chain of iron lithium phosphate production.

Monoamine phosphate will face a serious shortage of supply.

From the industrial chain of lithium iron phosphate battery, it can be found that the increase in demand for lithium iron phosphate will lead to an increase in the demand for monoammonium phosphate. According to the analysis of founder Securities, 1GWh lithium iron phosphate needs 1780 tons of monoammonium phosphate, and it is expected that the installed capacity of lithium iron phosphate battery in various fields will reach 824GWH in 2025, and the adjusted demand will be about 900GWh.

The upstream of monoamine phosphate is phosphate rock.

Data show that in 2020, the world's total phosphate ore reserves is 71 billion tons, and the total output is 223 million tons. Worldwide, Morocco and Western Sahara hold 71% of the phosphate rock, making it the largest phosphate ore reserve country in the world. Although China accounts for a small proportion of phosphate ore reserves, it is the largest producer, accounting for 40% of the world's phosphate ore production. In 2020, China's phosphate rock reserves / output is 32 / 89 million tons.

Since 2016, with the "three phosphorus regulation" and restrictions on the total production of phosphate rock, domestic production has declined. In 2020, Morocco and Western Sahara accounted for 17 per cent of global production, the United States accounted for 11 per cent of global production, and Russia accounted for 6 per cent of global production. The world phosphate rock output in 2020 is basically the same as that in the previous two years.

Although the production of phosphate rock did not decline in 2020, as the downstream of phosphate rock, monoamine phosphate and diamine phosphate are mainly used in phosphate fertilizer producers.

In recent years, due to the continued release of Moroccan and Saudi production capacity superimposed by the downturn in food prices, phosphate fertilizer prices at home and abroad have continued to fall. However, since 2020, under the background of global food supply, the increase of planting area and the rise of staple grain prices, the global agrochemical demand has increased greatly, the phosphate fertilizer boom has continued to rise, and domestic and foreign prices have begun to rise slowly.

Brazil's imports of phosphate fertilizer in 2020 increased by 14.7% compared with 2019. Due to the continuous rise in agricultural prices, Brazilian farmers' income from growing grain increased. According to Mosaic, Brazilian phosphate fertilizer imports increased by 19% year on year in 1Q21. Brazil's phosphate fertilizer imports are expected to be 850-8.8 million tons in 2021.

According to the Indian Ministry of Agriculture, India's actual consumption of DAP1176 in the 20-21 fiscal year was 10,000 tons, an increase of 11.07% over the 19-20 fiscal year, and inventories continued to decline. In May 2021, the Indian government significantly increased the subsidy for diammonium phosphate from 10231 rupees / ton to 24231 rupees / tonne, and the increase in import subsidies will drive import demand.

Therefore, due to the global attention to food security and the strong demand for phosphate fertilizer imports from major growing countries such as India, Brazil and Bangladesh, international phosphate fertilizer prices have taken the lead in rising to a new high.

According to the China Fertilizer Information Network, by the end of 2019, China's industrial-grade monoammonium phosphate production capacity was 1.95 million tons, accounting for 39% of the world's total production capacity, making it the largest producer in the world. The average annual compound growth rate from 2015 to 2019 was 8.6%. In terms of production, it was 1.03 million tons in 2019, accounting for 30 per cent of the world's total output. The average annual compound growth rate from 2015 to 2019 was 7.2 per cent.

In addition to chemical fertilizers, according to the above forecast of founder Securities, the demand for monoammonium phosphate in 2025 is about 1.602 million tons. The increasing demand of lithium iron phosphate battery will undoubtedly lead to a serious shortage of monoamine phosphate supply.

The volume and prices of major products rose, and the gross profit of CNOOC increased by 108% in the first half of the year.

It is understood that CNOOC Petrochemical (03983) is a modern large-scale enterprise mainly engaged in the development, production and sales of chemical fertilizers and chemical products. The products mainly include phosphate fertilizer, urea, compound fertilizer, methanol and polyformaldehyde and so on. At present, the total design capacity of the company is 2.36 million tons of urea, 1 million tons of phosphate and compound fertilizer, 1.6 million tons of methanol and 60, 000 tons of polyformaldehyde. Phosphate fertilizer is mainly produced by Hubei Dayukou Chemical, a subsidiary of the company, which is 79.98% owned by the company.

In the first half of the year, the company's total revenue was 6.109 billion yuan, an increase of 22.9% over the same period The gross profit of the company was 1.445 billion yuan, an increase of 110.8% over the same period last year. The reason for the sharp increase in gross profit of the company is mainly due to the sharp rise in the prices of urea, methanol and phosphate fertilizer. The income of phosphate fertilizer and compound fertilizer business was 1.475 billion yuan, an increase of 68.5% over the same period last year, and the gross profit increased by 226 million yuan.

According to the announcement, in the first half of 2021, the first phase of Dayukou Chemical Plant produced 27835 tons of DAP (diamine phosphate) and 124226 tons of compound fertilizer, totaling 152061 tons, and realized sales of 8035 tons of DAP and 163443 tons of compound fertilizer, totaling 171478 tons.

It is worth mentioning that while the price of chemical products continues to rise, the operation rate of the company's chemical fertilizer business and chemical business has also been significantly improved, with the operation rate of chemical fertilizer business reaching 102% in the first half of the year, much higher than the 82.4% in the same period last year. Chemical business has also increased from 83.2% in the same period last year to 86.9% this year.

And after June this year, whether methanol, urea or phosphate fertilizer, prices continue to rise, it can be seen that the company's performance in the second half of the year will be quite good.

With the addition of 50,000 tons of lithium iron phosphate, the new materials business enables the new growth of lottery chemistry.

Lottery Chemical (01986) is mainly engaged in dye and agrochemical intermediates, pigment intermediates, new materials and other four major business sectors, accounting for 76%, 3% and 1% of revenue in the first half of 2021, respectively. In terms of production capacity, Laureate Chemical is the world's largest supplier of DSD acid, DMSS and DMAS, and the third largest supplier of mononitrotoluene in the world. The global market share is 63%, 55%, 70% and 26%, respectively.

In addition to traditional chemicals, Lottery Chemical also began to lay out lithium iron phosphate business as early as 2017. After years of development, its products have been verified by a large number of customers and have reached a stable cooperative relationship. Including Beitri, Peking University first, Guoxuan Hi-Tech, Zhongtian Technology, Ossei Technology and so on. By the first half of 2021, the company has a production capacity of 20,000 tons of iron phosphate in Cangzhou, Hebei Province, and a total production capacity of 50,000 tons of iron phosphate in the Dongying production base of Shandong Province under construction. As the 50, 000 tons under construction is built and expanded on the existing plants and plants, this will greatly reduce the construction time, and through technical replication with the original 20, 000-ton iron phosphate production line, a lot of time will be saved for commissioning the production line. The first phase of the project is expected to reach production by 2022, when Lottery Chemical will achieve an annual output of 45000 tons of iron phosphate.

If the first phase of 25000 tons is successfully put into production in 2022, the business performance of iron phosphate in 2023 is estimated to be 510 million yuan according to the price of 11361 yuan / ton in the first half of the year. Lithium iron phosphate business will also bring new performance growth points for Lottery Chemistry.