China Company to Speed up Investments in High-Nickel Ternary Capacity in Europe

SHANGHAI, Nov 10 (SMM) - Dang Sheng Technology announced that it had signed a letter of intent with Finnish Minerals Group ("FMG") and its wholly-owned subsidiary Finnish Battery Chemicals Oy ("FBC") on 8 November to establish a joint venture in Finland, in which Dongsheng Technology intends to hold a 70% equity interest in the joint venture and FMG to hold a 30% through FBC. The joint venture will be responsible for the construction and operation of the first phase of the 100,000 mt/year high nickel lithium cathode material for power battery, of which the first part totals 50,000 mt/year capacity and is expected to be completed and put into operation in 2024, with a total investment of approximately EUR500 million (equivalent to approximately RMB3.9 billion, the final investment amount is subject to the conclusion of the feasibility study).

FBC is a wholly owned subsidiary of FMG and is responsible for investments in lithium batteries. The cooperation with FMG and FBC will further expand Dang Sheng's production capacity and better meet the growing demand for high nickel products from overseas customers.

About the transition to high-nickel products

By increasing the proportion of nickel content, high nickel batteries can optimise its performance in terms of energy density and are able to support longer range. While by reducing the proportion of the scarce and expensive cobalt content, the cost will be more controllable, especially when the prices of cobalt are quite high. And with the progress of technology, the safety of high nickel batteries has also reached a controllable range. In addition, high nickel has a higher technical barrier. In the face of the impact from the better priced lithium iron phosphate, 5 and 6 series of ternary cathode materials are easier to be replaced by LFP when considering their performance. While high nickel ternary cathode will be more irreplaceable due to its differentiation.

At current stage, the demand for high nickel products mainly came from overseas market, and the growth rate of domestic high nickel demand is relatively slow. Many overseas car companies prefer high nickel ternary batteries with high energy density. Among them, overseas versions of Tesla Model Y, Model 3, Volkswagen ID.3 are the best-selling overseas high nickel models. According to statistics, Model Y sales reached 66,074 units in September, with a market share of 29%, an increase of 89% from the previous month and 476% on the year. The combined market share of Model Y and Model 3 reached as high as 54%.

In addition, Volkswagen, Daimler, BMW and many other car companies also plan to launch a variety of new high nickel models in 2021-2022, which will become the core driver of high nickel demand. At the same time, due to the higher profit margins of overseas car companies, the price increase will be better accepted.

In China, on the contrary, with the impact of the gradual reduction of the new energy subsidy support, cost-effective and battery safety has become the new development trend in China, instead of energy density. At the same time, as lithium salt prices remain high, the cost pressure of ternary materials is increasingly significant, but the downstream battery and terminal users are less willing to accept the high prices of cathode materials. At this point, lithium iron phosphate, which has achieved a technological breakthrough with a higher cost effectiveness, gains a lot of favour. It is expected that in the short term, the domestic will still be dominated by the more cost-effective lithium iron phosphate batteries.