【SMM Analysis】The growth rate of demand for dynamic storage terminals is slowing down, leading to a decrease in the month-on-month growth rate of battery terminal production.

In April 2024, the production of Chinese battery cells reached 94.88GWh, an increase of 11% compared to the previous month and a 44% year-on-year increase. By material, the production of ternary batteries in China reached 28.55GWh, a 4% month-on-month increase and a 31% year-on-year growth, while lithium iron phosphate battery production reached 62.13GWh, an 84% increase compared to the previous month and a 19% year-on-year increase. SMM predicts that the production of battery cells in China will reach 98.73GWh in May 2024, a 4% month-on-month increase and a 23% year-on-year increase. It is expected that in 2024, the battery segment will continue to be driven by sales, with current industry inventories reaching a safe and reasonable level, and production fluctuating cyclically in line with demand.

Power market: In March, the new energy vehicle market saw a significant end-of-quarter push, with noticeable destocking efforts at the dealership level. In April, new energy vehicle sales saw a decline after the end-of-quarter push, consistent with previous years, leading to lower-than-expected demand for battery backup. Sales of new energy vehicles are expected to increase month-on-month in May, but due to high vehicle inventories from previous periods, there is reduced demand for battery backup, resulting in a slight decrease in power battery production.

Energy storage market: In April, the energy storage industry maintained high levels of activity, with energy storage battery cell enterprises maintaining high operating rates. In terms of domestic projects, China's new installed capacity in the first quarter was 391 million kilowatts/1081 million kilowatt-hours, more than 12% higher than at the end of 2023. Looking at the volume of bids for projects, the first quarter of 2024 saw a high level of energy storage bidding, ensuring a significant volume of projects for the year. The total new installed capacity for the year is expected to exceed 60GWh. In the overseas market, particularly in the United States, although the new installed capacity in energy storage in February fell far short of expectations, data from March indicates that congestion issues in the United States' grid may be easing, with some backlog projects coming online in March. With the improvement in the industry chain's prosperity, it is expected that energy storage battery enterprises will continue to maintain high production and sales volumes in May. However, as the backup process for the 630 nodes gradually completes, the growth rate of energy storage battery cells may slow down by mid-year.

Power battery inventory: As of the end of April 2024, China's power battery cell inventory reached 127.05GWh, with a month's worth of inventory turnover ratio of 1.97, a 1% increase compared to March 2024. In April, as the demand weakened due to the oversupply of car sales in the first quarter, sales of new energy vehicles in China declined. With weaker car sales, overall demand for power batteries decreased, leading to an increase in inventory. In the ternary power battery segment, after hitting historical lows in March, battery companies saw a slight increase in inventory in April. In the lithium iron phosphate power battery segment, stable inventory turnover ratios were maintained in April due to good corresponding vehicle sales. It is expected that in the second quarter of 2024, with the influence of pre-positioned demand at the power end, the inventory of power battery cells will reach a low point in the cycle, meeting the backup demand. The capacity of the power end reservoir is enhanced, driving demand for upstream raw materials, with backup demand expected to continue until May.

Energy storage battery inventory: As of April 2024, energy storage battery inventory reached 38.72GWh, with a month's worth of inventory turnover ratio of 2.03, an 18% decrease compared to March. Currently, demand in the energy storage end is reaching high levels in the second quarter, preparing for grid connections in the mid-year. Looking at the supply side, after experiencing a low demand in the first quarter, energy storage battery shipments decreased year-on-year, leading to reduced production and destocking by battery cell factories. By the second quarter, the inventory turnover ratio for battery cells has returned to a reasonable level. At the same time, 300+Ah battery cells, as new products, are being produced intensively by various battery cell factories in the second quarter, to improve product qualification rates. This preparation is both for future mass deliveries and to maintain some reasonable inventory of new products. With these combined factors, energy storage battery factories are maintaining high operating rates in the second quarter, indicating a high level of industry prosperity.

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