Global Assets Rushing into China's Lithium Battery Industry

Global Assets Rushing into China's Lithium Battery Industry

As the stock market rallies, the lithium battery sector is experiencing a sharp rebound. From the downstream power battery companies such as CATL and BYD, to upstream raw material companies such as Tianqi Lithium and Jiangxi Ganfeng Lithium, relevant concepts are experiencing collective explosions. At the same time, capital is quickly entering the lithium battery track, and relevant funds have also performed well recently. Data shows that in the past week, funds tracking the lithium battery index have gained an average of nearly 6%, significantly outperforming the market. From the long-term perspective, driven by downstream demand, the industry's prospects are bright. The analyst believes that with the rise in downstream demand, the primary LiSOCL2 battery industry chain will maintain high growth in the next three to five years. Among them, lithium iron phosphate, as a key raw material for lithium iron phosphate batteries, will benefit from the substitution of ternary lithium batteries in the power battery field, and its demand will continue to grow rapidly.

China's Lithium Battery Production Capacity Has Leapfrogged to the World's First Level

Since 2015, the output of lithium batteries in China has ranked first in the world, and its market share has continued to increase. From 2015 to 2021, China's lithium battery output increased from 56.06 gigawatt hours to 232 gigawatt hours, with a compound annual growth rate of 23.42%. In 2021, China's lithium battery output will account for 59.7% of the global total, and its market share will further increase. The global trend of lithium battery capacity expansion is shifting to China. Since 2020, there has been a trend of large-scale capacity expansion in the global lithium battery industry. However, in the second half of 2021, European and American battery plants began to experience difficulties in capacity expansion due to rising costs and rising labor unionization rates. Many projects have been suspended or delayed. European and American battery factories face more obstacles in capacity expansion than expected, including rising costs, the shortage of skilled workers, and strong resistance from environmentalists. Chinese enterprises are rapidly expanding production capacity. The installed capacity of China's lithium battery enterprises is increasing rapidly. By the end of 2021, the lithium battery production capacity of Chinese enterprises will reach 324 GWh, which is more than five times the installed capacity in 2017. The output value will exceed 320 billion yuan, and the market share of power batteries will reach about 70%. China has become the world's largest lithium battery producer.

From the perspective of battery technology, lithium iron phosphate batteries have returned to the stage of history due to their low cost and high safety. Lithium iron phosphate batteries first entered the market in 1996. In the early stage, due to its low energy density, it was gradually replaced by ternary lithium batteries in the passenger vehicle market. However, due to its high safety, low cost, long cycle life, and high environmental friendliness, lithium iron phosphate batteries are widely used in passenger cars, buses, special vehicles, energy storage, ships, and other fields. Since 2020, lithium iron phosphate batteries have started to "revive" in the field of power batteries due to technological breakthroughs in battery materials such as lithium iron phosphate cathode materials and battery cells. With the popularization of lithium iron phosphate blade batteries, the energy density of lithium iron phosphate batteries has been significantly improved, approaching the level of ternary lithium batteries. The cost advantage of lithium iron phosphate batteries is obvious. Taking into account the subsidy policy and cost trends of lithium iron phosphate and ternary lithium batteries, lithium iron phosphate batteries have begun to have cost advantages in passenger vehicles, and the cost advantage is gradually expanding. From the perspective of cycle life, lithium iron phosphate batteries have better charging and discharging performance than ternary lithium batteries, which can achieve 2000 or even 6000 charge and discharge cycles. From the perspective of raw material supply, lithium iron phosphate battery materials are easier to obtain. In addition, compared with ternary lithium batteries, lithium iron phosphate batteries have better thermal stability and safety performance. With the rapid increase in demand for electric vehicles, lithium iron phosphate batteries with excellent safety performance, high cost performance, and stable raw material supply will gradually increase their market share.

From the perspective of industrial distribution, China's lithium battery industry chain has formed an industrial cluster effect centered on the Yangtze River Delta, the Pearl River Delta, and the central and western regions. At present, China's lithium battery industry chain has formed three industrial clusters centered on the Yangtze River Delta, the Pearl River Delta, and the central and western regions. The Yangtze River Delta cluster mainly focuses on cathode materials, anode materials, separators, and battery assembly. Among them, Zhejiang, Jiangsu, and Shanghai are the most concentrated regions for battery materials enterprises, with cathode material enterprises as the core, and anode material and separator enterprises as the support. The Pearl River Delta cluster mainly focuses on cathode materials, anode materials, separators, lithium salts, battery assemblies, and consumption terminals. Guangdong Province has the largest number of lithium battery enterprises in China, especially Shenzhen, which has the most concentrated areas of lithium battery enterprises in China. Guangdong is not only an important base for lithium battery consumption terminals such as consumer electronics and electric vehicles, but also a production base for lithium battery materials such as lithium cobalt oxide, lithium manganate, lithium nickel cobalt manganate, lithium iron phosphate, natural graphite, and lithium carbonate. The central and western industrial cluster mainly focuses on lithium ore, basic lithium compounds, cathode materials, and battery assemblies. Among them, Sichuan, Hunan, and Jiangxi provinces have abundant lithium ore resources and a complete lithium battery material industrial chain.

Driven by Downstream Demand, the Lithium Battery Material Industry Chain Will Maintain High Growth in the Next Three to Five Years

In recent years, the downstream demand for lithium batteries has grown rapidly, driving the rapid growth of lithium battery material production and capacity. Lithium iron phosphate, as a key raw material for lithium iron phosphate batteries, will benefit from the substitution of ternary lithium batteries in the power battery field, and its demand will continue to grow rapidly. Lithium iron phosphate material enterprises such as CATL, Deshan New Materials, and Longneng Technology have accelerated their capacity expansion plans. Driven by downstream demand, the lithium battery material industry chain will maintain high growth in the next three to five years. With the popularization of electric vehicles and the growth of downstream demand, the demand for lithium batteries is growing rapidly. The downstream demand for lithium batteries mainly comes from electric vehicles, energy storage, and consumer electronics. Among them, the market share of electric vehicles in lithium battery demand is increasing year by year. The energy storage market has huge development potential, and its market share in lithium battery demand will gradually increase. From the perspective of demand structure, in 2021, the downstream demand for lithium batteries is mainly in the fields of electric vehicles, consumer electronics, and energy storage. Among them, the demand for lithium batteries in the field of electric vehicles accounts for the largest proportion, reaching 58%; followed by the demand for lithium batteries in the field of consumer electronics, accounting for 28%; the demand for lithium batteries in the field of energy storage accounts for 11%. It is expected that with the rapid development of electric vehicles and energy storage, the proportion of demand for lithium batteries in these two fields will gradually increase. The growth rate of lithium iron phosphate demand will exceed that of ternary lithium batteries. The rapid growth of lithium iron phosphate demand is mainly driven by the following three factors: 1) Policy push: With the promotion of new energy vehicle subsidy policies, the cost of battery systems accounts for a high proportion of the total cost of new energy vehicles. Lithium iron phosphate batteries have the advantages of high safety, long life, and low cost, and are more competitive in cost. 2) Technological breakthroughs: The popularization of lithium iron phosphate blade batteries has greatly improved the energy density of lithium iron phosphate batteries, making them closer to ternary lithium batteries in terms of energy density. 3) The rapid development of the energy storage market: Lithium iron phosphate batteries have excellent safety performance and cycle performance, and are more suitable for large-scale energy storage systems. The continuous increase in lithium iron phosphate material production capacity. The increasing demand for lithium iron phosphate has promoted the rapid expansion of lithium iron phosphate material production capacity. CATL, Deshan New Materials, and Longneng Technology have successively announced plans to expand their lithium iron phosphate material production capacity. Among them, the production capacity of lithium iron phosphate materials announced by CATL is the largest, reaching 120 GWh. In general, driven by downstream demand, the lithium battery material industry chain will maintain high growth in the next three to five years. The output of lithium iron phosphate materials will continue to grow rapidly, benefiting from the substitution of ternary lithium batteries in the power battery field.

Lithium Battery Concept Continues to Surge, and Relevant Funds Perform Well

Driven by multiple positive factors, the lithium battery sector rose sharply. Relevant funds have also performed well in the past week. Data shows that funds tracking the lithium battery index have gained an average of nearly 6% in the past week, significantly outperforming the market. Driven by multiple positive factors, the lithium battery sector continued to surge.