The price of lithium raw materials is rising and the reshuffle of the power battery industry is intensified.

A few days ago, some media quoted industry sources as saying that the price of lithium iron phosphate (LFP) battery in Ningde era will be increased by 10% to reflect the increase in the cost of raw materials. In response to the news, the Ningde era immediately responded: the news is not true.

In the face of the above response, many onlookers on the Internet left messages one after another: "where there is no wind, there are waves"; "it is bound to rise, so it is no wonder that supply exceeds demand"; some even say that "the 10% increase is not true, but it is actually more than 10% higher."

The price of lithium material remains high and may hit a new high in the second half of the year.

As we all know, the price of raw materials upstream of lithium battery has been rising all the time behind the rumors of price increase in Ningde era.

Since 2020, the price of upstream raw materials for lithium batteries has remained high. Data show that as of May 18, the price of battery-grade lithium carbonate has risen from last year's "trough" of 38000 yuan / ton to the current 89000 yuan / ton (average price), an increase of 134%; lithium hydroxide has risen from 60, 000 yuan / ton to 87500 yuan / ton (average price).

Industry insiders said that the continued rise in the price of lithium-related battery materials is driven on the one hand by the strong demand for power batteries of downstream new energy vehicles; on the other hand, it is also subject to the current tight supply and demand of lithium materials.

According to the latest statistics of the China Automobile Association, from January to April this year, domestic sales of new energy vehicles totaled 732000, a year-on-year increase of 249.2%, which led to a year-on-year increase of about 241% in power battery installations. According to statistics from SNE Research, the installed capacity of power batteries in overseas markets increased by 96% in the first quarter compared with the same period last year.

In the next five years, with the sustained and rapid growth of the number of new energy vehicles, relevant agencies estimate that the global penetration rate of new energy vehicles is expected to reach 20% in 2025, and its sales will exceed 18 million. Taking into account other lithium carbonate application scenarios such as energy storage, 3C consumer electronics and traditional industries, the global demand for lithium carbonate is expected to reach 1.24 million tons in 2025, 3.6 times that of 2020.

On the one hand, the demand for raw materials continues to rise, on the other hand, it is insufficient supply from the supply side. It is reported that Australia, Chile, Argentina and other countries are currently the world's major lithium exporters, but in the past year, due to the impact of COVID-19 's epidemic, including SQM, Livent and other lithium mining giants' production expansion plans have slowed down. In the past week, affected by the aggravation of the epidemic, Chile, one of the world's major lithium exporters, announced that it would take stricter epidemic prevention measures from the second quarter. This has also led to further concerns in the industry about the tight supply of raw materials for power batteries.

In the view of the industry, due to the imbalance between supply and demand, the price of lithium materials may continue to rise in the future, or even hit a new high. At the recent "New Energy Battery Materials Frontier Technology and Intelligent Manufacturing Summit Forum", Xu Aidong, secretary-general of the Cobalt Branch of China Nonferrous Metals Industry Association, pointed out that the demand cycle of the lithium industry is strong this time. However, due to the global supply-side lithium resources and lithium smelting do not match each other, lithium prices are expected to remain high for longer than expected. In the second half of this year, the price of battery-grade lithium carbonate is expected to rise to 10-120000 / ton, and the lithium price center is expected to be 9-100000 / ton within 3 years.

Power battery enterprises are under pressure to move forward, and the industry reshuffle is intensified.

In the face of the sharp rise in raw material prices under tight supply and demand, power battery companies are obviously under a lot of pressure, so that when the Ningde era responded to the false news of the price increase, netizens made the above jokes one after another.

Indeed, as raw material prices have been rising, some battery manufacturers have been caught in a dilemma: on the one hand, if battery prices are raised, they may lose long-term orders; on the other hand, if prices do not rise, enterprises are under obvious pressure and their survival may be threatened.

The reality is that, in the face of the pressure from the rising prices of upstream raw materials, the first echelon of power battery suppliers (such as Ningde era) have not yet raised battery loading prices, while the second and third echelons and other enterprises have no choice but to raise prices.

It is understood that since the beginning of this year, far East Battery, Zhuoneng New Energy, Penghui Energy, Hengdian East Magnetic and Delaneng and other enterprises have issued battery price increase letters. The person in charge of a battery enterprise said frankly, "this kind of situation is very rare. Unless we have to, the enterprise is unwilling to raise the price. If it does not rise as much as possible, it may lose customers."

As a leading domestic power battery company, Zeng Yuqun, chairman of Ningde Times, also made a statement on the rise in raw materials at a recent shareholders' meeting: "if raw materials rise very high, it will certainly have a greater impact on our costs." But to what extent it should be passed on downstream, we are also considering this question. " At the same time, he put down the "cruel words", "if they desperately raise prices at random, they will also be a little guilty, because we can exclude it."

Zeng Yuqun added, "Lithium carbonate or nickel and cobalt is the only thing in the world, and now we are also doing some layout in lithium nickel and cobalt to let them really understand that it is only at a reasonable price (business) that they can do business in the long run."

At present, although battery companies have not followed the trend of price increases, but the impact of raw material price increases on all enterprises can not be ignored, especially the decline in gross profit margin. Therefore, in the face of rising raw material prices and declining gross margins, cost reduction has become an important part of improving the market competitiveness of battery enterprises.

In view of the certain pressure on the cost side caused by the rising prices of major materials this year, Ningde Times said that mainly from improving product performance and energy density, optimizing product design, improving product yield, reaching deep cooperation with the industrial chain and other ways to reduce production costs and raw material costs. In addition, the Ningde era is also constantly improving the level of manufacturing and management, implementing intelligent manufacturing internally, improving production processes, improving product yield and reducing costs.

Penghui Energy said that affected by the increase in the price of raw materials, it will be resolved from two aspects in order to maintain a reasonable gross profit margin: the first is to reduce costs, rely on research and development and technological progress, increase battery capacity, energy density, optimize formula structure, etc., reduce unit ampere-hour or watt-hour costs, and reduce labor costs by improving the level of equipment automation. Rely on fine management, lean manufacturing, tapping internal potential, optimizing process flow, reducing defective rate, reducing manufacturing cost, and so on. The second is the transmission of battery prices, through the increase in battery prices to let downstream customers share the pressure of price increases, in fact, some battery products have already increased prices.

However, it should be pointed out that, unlike head battery companies, for small battery companies, the rise in raw material prices and the decline in gross profit margin will further reduce their living space, and it can be expected that the reshuffle in the power battery industry will be further intensified. Relevant data show that the number of domestic power battery suppliers has been declining year by year in recent years, from about 130 in 2016 to about 70 in 2020. At the same time, the market concentration of the industry has also increased significantly, ranking TOP5 in terms of installed capacity, and its market share has further increased from 85 per cent in 2016 to 94 per cent in 2020.