Analysis of April's ESS Cell Market Dynamics

In April 2024, China's battery cell production reached 94.88GWh, up by 11% month-on-month and 44% year-on-year. Breaking down by material, production of ternary batteries reached 28.55GWh, up by 4% month-on-month and 31% year-on-year, while lithium iron phosphate battery production reached 62.13GWh, up by 84% month-on-month and 19% year-on-year. SMM forecasts that in May 2024, China's battery cell production will reach 98.73GWh, up by 4% month-on-month and 23% year-on-year. It is expected that in 2024, the battery sector will still prioritize production based on sales, with current industry inventory reaching a safe and reasonable level, and production following cyclical fluctuations in demand.

In the automotive market: the end-of-quarter surge in new energy vehicle sales in March was significant, coupled with notable destocking efforts by dealers. In April, there was a decline in new energy vehicle sales following the end-of-quarter surge, consistent with previous years, which led to lower-than-expected demand for battery stockpiling. New energy vehicle sales are expected to increase month-on-month starting in May, but due to high vehicle inventories from previous periods, the demand for battery stockpiling is expected to decrease, resulting in a slight decrease in battery production.

In the energy storage market: In April, the energy storage industry maintained high prosperity, with energy storage battery companies continuing to operate at high capacity. Looking at domestic projects, China's newly installed capacity in the first quarter was 3.91 million kW/10.81 million kWh, an increase of over 12% from the end of 2023. In terms of project bidding volume, the first quarter of 2024 saw high levels of energy storage bidding, ensuring a significant project volume for the entire year. The annual newly installed capacity is expected to exceed 60GWh. In overseas markets, the main market is the United States. Although the newly installed energy storage capacity in February was far below expectations, March data showed some alleviation of the previous grid congestion issues in the United States, with some squeezed projects being grid-connected in March. With the improvement in the industry chain's prosperity, it is expected that energy storage battery companies will continue to maintain high production and sales volumes in May. However, as the backup process for the June 30th node gradually completes, the growth rate of energy storage battery cells may slow down by mid-year.

Regarding power battery inventory: As of the end of April 2024, the inventory of power battery cells in China was 127.05GWh, with a stock-to-sales ratio of 1.97 months, up by 1% compared to March 2024. In April, due to the impact of the decline in demand caused by the overdrawn demand in the later period of the first quarter by vehicle manufacturers, sales of new energy vehicles in China declined. With weakened vehicle sales, overall demand for power batteries decreased, leading to an increase in inventory. Among them, the inventory of ternary power battery cells had already reached a historical low point in March and saw a slight increase in April by battery companies. In the lithium iron phosphate power battery segment, due to its corresponding vehicle model sales performance, the stock-to-sales ratio remained stable in April. It is expected that in the second quarter of 2024, with the influence of pre-positioning demand in the power sector, the inventory of power battery cells will reach a low point after the cyclical period, meeting the demand for backup stockpiling. The capacity of the power battery reservoir is enhanced, driving demand for upstream raw materials, and the demand for backup stockpiling is expected to continue until May.

Regarding energy storage battery inventory: As of April 2024, the inventory of energy storage batteries reached 38.72GWh, with a stock-to-sales ratio of 2.03 months, down by 18% compared to March. Currently, demand for energy storage at the end of the second quarter is at a high level, with each link preparing for mid-year grid connection. From the supply side, after experiencing low demand in the first quarter and a year-on-year decline in shipments of energy storage battery cells, battery factories reduced production and destocked. The inventory-to-sales ratio of energy storage batteries has returned to a reasonable level in the second quarter. Meanwhile, as the 300+Ah battery cells are introduced as new products, various battery factories are accelerating production and improving product qualification rates in the second quarter. On the one hand, this prepares for later batch deliveries, and on the other hand, it also requires a reasonable inventory of new products. As a result of these combined factors, energy storage battery factories are maintaining high operating rates in the second quarter, with high industry prosperity.