SMM Semi-Year Review of Lithium-Battery Copper Foil

SHANGHAI, Jul 1 (SMM) - According to SMM research, the lithium battery copper foil capacity planned to be put into operation in China in 2022 is estimated at 269,000 mt, a year-on-year increase of 162%. Among them, a total of 122,000 mt of capacity is expected to commission in the first half of 2022, and the remaining 147,000 mt in the second half. Has the lithium battery copper foil equipment barriers been broken in such great leap in capacity expansion? How much capacity has really been released in the first half of 2022? How will the market evolve in the second half of the year? SMM lithium battery copper foil semi-annual briefing will give a detailed look into the market dynamics.

According to SMM, more than 900 domestic cathode rollers are expected to be installed in 2022, a year-on-year increase of 245%. If calculated at 25 tonne per equipment per month, the theoretical increase in production capacity of domestic cathode rolls is about 274,000 mt, and coupled with the existing daily production excluding the capacity expansion of PCB copper foil, the bottleneck of core equipment that restricts the development of copper foil will ease significantly. 

▲The barriers to core equipment become "thin", and the expansion of lithium battery copper foil has accelerated

The rapid expansion of lithium battery copper foil production benefits from the active development of domestic equipment. At present, the market share of domestic equipment has reached 75% in China, and that Japanese brands is only 25%. The cathode roller for copper foil is highly localized. In terms of products, domestic cathode rollers are applicable to production at 4.5-micron, and gradually meet the development trend of light and thin lithium foil. In addition, the yield rate of domestic cathode rollers has also increased, and the delivery cycle is shorter than that of Japanese manufacturers. 

▲In 2022, China plans to put 269,000 mt of lithium-battery copper foil capacity at or under 6-micron into production

In 2022, the planned production capacity of lithium battery copper foil in the first half of 2022 is 122,000 mt, among which 107,000 mt actually commissioned. As the energy density requirements of new energy vehicle batteries continue to increase, the demand for ultra-thin copper foils has been growing. The newly expanded foil factories are mainly for specifications of 6μm and below as 6μm and 4.5μm could increase the energy density of lithium batteries by 5% and 9% respectively compared with 8μm. At present, the penetration rate of 6μm has reached 65%, which is the absolute mainstream of the market.

▲The yield rate has improved, and it is still the core of competition among enterprises.

From the perspective of matching and cutting: Previously, the mainstream cathode roll had a width of 1380 mm (above 75%), while most of the batteries in the market were 150AH or above with the demand for width of 700-900 mm, resulting in greater waste. At present, the new copper foil enterprises now realise the importance of communication between the upstream and downstream. Some enterprises will customize cathode rolls according to downstream needs. For example, the width of copper foil for BYD blade batteries is 948mm, and the enterprise customizes 1100mm cathode rolls for them. In addition, some newly established enterprises have begun to customize 1580mm and 1650mm width cathode rolls in order to further improve the matching rate.

From the perspective of products, thinner foil accompanies higher probability of wrinkling and the break the belt. In order to achieve continuous production, the manufacturers have to reduce the current, which will result in lower production efficiency, and the product qualification rate and efficiency in the ultra-thin production process are both weakened. At present, the average yield rate of domestic leading enterprises is more than 85%, and the average yield rate of the industry is 75%. Although it is higher than in previous years, it is still the core of competition among enterprises which can be further improved.

▲Processing fess of lithium-battery copper foil dropped amid sky-rocketing battery materials prices, imminent oversupply and temporarily weakening demand amid spreading COVID. 

In 2022, about 16,700 mt of new capacity was released in the first half of the year. And under the influence of the pandemic, the automobile industry chain was severely suppressed, which led to oversupply amid contracting demand. In addition, the cost of raw materials for lithium batteries has been high in 2022, and lithium battery companies are urgent to reduce costs, including copper foil. For the combination of multiple factors, the processing fee of lithium battery copper foil "slumped". At present, the processing fee of SMM6μm lithium battery copper foil is reported at 41,000-45,000 yuan/mt, 8μm 30,000-33,000 yuan/mt, and 4.5μm 65,000-70,000 yuan/mt, with some recording a fall of 7,500-10,000 yuan/mt compared with the peak last year.

Prospects of the lithium battery copper foil industry in the second half of the year

Supply: A total of 147,000 mt of capacity will be put into production in the second half of the year, and the annual production capacity will reach 632,000 mt. Most of the factories under construction have been completed, and the equipment is in the stage of commissioning. According to the current yield rate and capacity ramp-up speed, SMM expects that the output will reach 327,000 mt in 2022.

Demand: For power battery, the impact of the pandemic will subside in the second half of the year, and the supply of raw materials for batteries is expected to be smooth. And battery orders will also rise after the supply chain of car companies is restored. Some leading lithium battery companies have raised their shipment targets in the third quarter, but the existing inventory cannot be ignored though the power battery sector has been its pivot. SMM believes that the installed capacity of power batteries will reach 294 Gwh, up 76% YoY. 

Energy storage battery: At present, the newly new energy storage demand in China is mainly found in the power supply side and the user side, and the increase is due to the distribution and storage requirements of the power supply side and the electricity cost of the user side. With the constant innovation of energy storage system on the user side, the power generation side, as well as the grid side, it will create more value for end users and generate more demand. And the energy storage sector is of great significance to the achievement of the carbon peaking and carbon neutrality. It is expected that domestic energy storage batteries will maintain rapid growth in 2022, and the annual demand is expected to exceed 41GWh in the year, a year-on-year increase of 64%.

Consumer batteries: Although the demand for new digital products such as high-end electronics and wearable devices is still strong, and the demand for high-end digital batteries and high-rate batteries continues to grow, the traditional consumer electronics, which accounts for a large proportion in this field, remains sluggish in terms of demand. In the future, the growth engines are expected to be scarce except for the estimated demand growth thanks to the introduction of relevant stimulus policies by local governments and the increase in demand for some consumer electronics due to the September school season. SMM believes that the demand for consumer batteries will be 73Gwh in 2022, up 2% YoY.

On the whole, considering the current supply and demand relationship in the lithium battery market, SMM believes that the total supply in 2022 is expected to reach 468Gwh. According to the current yield rate of lithium battery copper foil industry and the unit consumption and penetration rate of various specifications, it is estimated that the demand for lithium-battery copper foil will reach 290,000 mt. By the end of 2022, there may be a surplus of 27,000 mt of foil. SMM predicts that the prices of 6μm and 8μm foil for power battery will fall below 40,000 yuan/mt and 30,000 yuan/mt respectively in 2022, a level seen in 2020.