Battery Price Hike Is Consequent after Battery Cell Costs Soared 60% in 2021

SHANGHAI, Dec 2 (SMM) - Recently, some lithium insiders put forward that the domestic mainstream battery companies have notified their potential customers to re-negotiate prices, and the offer may be revised up by about 20%. According to SMM, the China battery industry is likely to see unified price hikes, while the execution of long-term contracts next year are currently under negotiation with the downstream, from which it has been clear that the enterprises are firm in inflating prices.

This round of price hike among battery companies have been in line with market expectations. Lithium materials prices have increased significantly this year, such as battery-grade lithium carbonate prices, which have rose to 200,000 yuan/mt from 63,000 yuan/mt from the beginning of January, an increase of 228%! Lithium hexafluorophosphate prices have also climbed from 110,000 yuan/mt from the beginning of the year to 560,000 yuan/mt, an increase of more than 400%! The prices of the four major materials for lithium batteries have also gone up. Among them, the prices of ternary materials, lithium iron phosphate and electrolyte have jumped 73%, 133%, and 172% respectively!

In the case of broadly rising prices of raw materials for lithium batteries, lithium battery costs also continued to rise. The costs of conventional 523 prismatic ternary battery cells rose from an average of 0.50 yuan/Wh in January to 0.84 yuan/Wh in November, an increase of 63%. The costs of prismatic lithium iron phosphate battery cells also rose from an average of 0.42 yuan/Wh in January to 0.69 yuan/Wh in November, up 62%.

In the past years, the costs of battery cells have been declining year by year, but the costs increased by more than 50% in 2021. However, battery companies have not significantly raised their prices in the power battery market this year, and most of the orders still adhere to the pricing at the beginning of the year. The overall demand-supply imbalance of battery materials will remain unresolved next year. Under the influence of the production reduction in Qinghai Salt Lake in winter and the slow expansion of mine production, the overall supply and demand are imbalanced; and the prices are expected to remain high next year.

Also, due to the high concentration of enterprises and the chemical characteristics of the products, the expansion of lithium hexafluorophosphate capacity has been slow, hence the prices are unlikely to decline. The shortage of other solvents is expected to alleviate in the second half of next year, and the prices of electrolyte will be more difficult to see any declines. It is also a question of whether the production capacity of negative electrode graphitization will be released smoothly next year. The shortage of supply remains as a problem, thus the prices of negative electrode still carry upward potentials. The short supply of equipment for battery separator may intensify next year, affecting the release of new separator production capacity, and the prices may also rise.

Overall, the prices of raw materials for lithium batteries are expected to remain at a high level, and the costs will still be difficult to control. However, in order to ensure the normal operation of raw material supply enterprises, it will be necessary for battery companies to raise their offers. And car makers, for the purpose of guaranteeing next year's production schedule, will be more likely to accept the price hikes.

At present, the costs of battery cells have little chance of dropping. For finished automobile makers, it is critical right now for them to seize market shares. So besides raising the quotes of finished automobile, it is also important to form close cooperation with midstream material companies and upstream raw material companies to comprehend cost development one step quicker than the peers to control the costs of battery cells.