Yu Qingjiao, secretary-general of the Zhongguancun New Battery Technology Innovation Alliance and president of the Battery 100 Association, told China Newsweek that the long-term strategy of new energy has been set, and the battle for mineral resources has been continuing. "If you have mine heart at home, don't panic, global mining will become normal."
Beehive energy
"Lithium prices are crazy right now." That gives Li Nanping, chairman of Jiangsu Ronghui Lithium, a hint of worry. This year's lithium prices have gone through the roof. On October 26th Pilbara Mining, one of Australia's biggest producers of lithium concentrate, opened its third auction of the mineral, setting a record high at $2,350 a tonne. Lithium concentrate is the main raw material for the production of lithium carbonate and lithium hydroxide, also known as "lithium salts", both of which are important raw materials for the manufacture of lithium batteries. The soaring mine price brings high cost of the whole industry chain. At present, the mainstream price of domestic battery grade lithium carbonate market is between 194,000 yuan to 197,000 yuan per ton, which is only 41,000 yuan in the same period last year.
As one of the core elements of power batteries, global lithium resources have been gobbled up by Chinese enterprises in the past two years. In the past month or so, Chinese companies have been involved in eight lithium investment deals worth nearly 20 billion yuan, five of which are overseas, involving Argentina, Canada and Brazil. Yu Qingjiao, secretary-general of the Zhongguancun New Battery Technology Innovation Alliance and president of the Battery 100 Association, told China Newsweek that the long-term strategy of new energy has been set, and the battle for mineral resources has been continuing. "If you have mine heart at home, don't panic, global mining will become normal."
"Lack of lithium" into the bottleneck of battery shortage
The battery crunch was not unanticipated. Back in March, NiO Chairman Bin Li predicted that battery supply would be the biggest bottleneck in the second quarter of this year compared to chips. In a recent economic performance analysis, Changan highlighted the need to cope with tight battery supply and ensure that orders are not lost.
According to SNE Research, by 2023, the global demand for power batteries for electric vehicles is 406GWh, while power battery supply is projected to be 335GWh, a shortfall of about 18%; By 2025, the gap will have widened to about 40 percent. According to a new report from Bank of America global Research, power battery supplies could be "sold out" by 2025-2026. Mr. He, Mr. Li and even Mr. Musk have publicly said this year that a lack of battery supplies has hurt production schedules.
Cao Guangping, an independent researcher of the new energy and intelligent connected automobile industry, told China Newsweek that the double credit policy in the auto industry has forced companies to shift to the production and sales of new energy vehicles, exacerbating the "battery shortage." Data show that in September, China's retail volume of new energy passenger vehicles was 334,000 units, up 202.1% year-on-year, with a market penetration rate of 20.4%. From January to September, China's power battery output totaled 134.7GWh, up 195.0% year on year; The loading volume was 92.0GWh, up 169.1% year-on-year. But a report by Saidi think tank pointed out that battery production enterprises due to misestimate the situation, failed to achieve the expansion plan in accordance with expectations, when facing the explosive growth of new energy vehicles, unable to keep pace with the development of enterprises, encountered production bottlenecks.
"Battery supply is tight, but the gap is another story." Cui Dongshu, secretary-general of the China Passenger Car Market Information Association, told China Newsweek that the supply gap is mainly concentrated in ningde Times, BYD and a few other battery manufacturers. Ningde's current production rate of one battery pack every 2.5 minutes is still not enough to meet demand. Based on the latest information, ningde times recently raised its shipment guidance again and expects battery shipments could reach 350GWh next year. This is the third time this year ningde times raised the forecast, compared with the second quarter fully increased by 100GWh.
At present, there are more than 1000 battery factories in China, but only about 10 enterprises can produce power batteries on a large scale. According to the China Automotive Power Battery Industry Innovation Alliance, from January to June this year, China's power battery production totaled 74.7GWh and the loading volume totaled 52.5GWh, which means 22.2GWh of capacity has not been utilized. The focus of "battery shortage" lies in structural shortage. Take the data of the first half of this year as an example, the top ten enterprises in the automotive power battery industry occupy 92.5% of the market share, the market is highly concentrated, and the total production capacity of the top ten enterprises in the whole industry accounts for less than 50%. The capacity utilization rate of several top enterprises has been as high as 80% or more, while the majority of enterprises outside the top ten, capacity utilization rate as low as 10% or less, is being phased out. Yu Qingjiao believes that the structural imbalance between supply and demand of power batteries exists for a long time, and high-end production capacity has been in shortage.
Another reality is that demand for power batteries is rising, but there is a shortage of raw materials for lithium batteries. At present, the raw material market of lithium battery can be roughly divided into two sub-markets: lithium carbonate market represented by lithium iron phosphate battery and lithium hydroxide market represented by high nickel ternary battery. Since May this year, lithium iron phosphate battery first in the output of the three lithium battery, and then in July in the loading volume beyond the three lithium battery. By September, the output of lithium iron phosphate battery was 1.4 times that of terpolymer lithium battery and 1.6 times that of installed capacity. At present, the power battery capacity bottleneck lies in lithium carbonate, lithium carbonate capacity has been fully loaded, the price is all the way up.
"Lithium carbonate is more scarce now and we are producing at full capacity." Sun Hongbo, director and general manager of Qinghai Citic Guoan Lithium Development Co, told China Newsweek that the explosive growth of mid - and low-end new energy vehicles using lithium iron phosphate batteries is driving demand for lithium carbonate. At present, the company's production of lithium carbonate trading price has exceeded 185,000 yuan/ton, and this year's 6000 tons of lithium carbonate production capacity has been all divided up by customers. Sun Hongbo told reporters that at present, the head of lithium enterprises capacity is to serve big customers, do not accept retail investors. This means that small and medium customers can only get high prices in the market.
In Yichun, which is known as the "Asian lithium capital", the actual transaction price of battery grade lithium carbonate per ton has already exceeded 190, 000 yuan. Local lithium carbonate production enterprises told the media that battery grade lithium carbonate and industrial grade lithium carbonate, there is no spot, need to schedule production. Insiders believe that, from the supply side, the construction cycle of lithium salt new projects is generally more than 18 months, new projects may be put into production in 2023, lithium carbonate is still in a tight balance this year and next year.
Upstream lithium prices crazy
When supply is in short supply, lithium concentrate is usually the most important source of new supply for the industrial chain, especially the high-efficiency industry combination of "Western Australia lithium mine + China lithium salt plant".
But Mr Li has seen the cif price of lithium concentrate imported from Australia, where it costs just $400 a tonne to extract, soar to $2,500 a tonne. Lithium is found in two main places: salt lakes and lithium mines. At present, there are two main routes to export global lithium resources. One is to mine lithium from Australia and then ship it to China for processing into lithium compounds. Another is to extract brine from South American salt lakes and process it locally into lithium compounds such as lithium carbonate for sale in other countries.
Lithium concentrates play a key role in the global supply chain of lithium resources, accounting for 56% of the global supply of lithium resources in 2020. According to the statistics of West China Securities, most of the new lithium concentrate projects around the world are expected to put into production in 2024, the next 1~2 years in the world lithium concentrate will be in a strong seller's market, quarterly prices are likely to continue to rise. The agency forecast that the spot price of lithium salt in the fourth quarter of this year is likely to exceed 200,000 yuan per ton, a record high.
"It's certainly inflated now, and the price is very unreasonable." In Li Nanping's view, the capital drive and expected demand, jointly boosted the high operation of lithium prices. Last time, the historical peak of lithium price appeared in 2017. The high price of lithium salt was 180,000 yuan per ton for only two weeks. With the production of Yinhe Resources and Marion Mine and the substantial increase of smelting capacity, the lithium price began to fall and fell to about 120,000 yuan per ton in two months.
But with pilbara Mining, Australia's leading lithium miner, launching an electronic trading platform, li nanping thinks the price of lithium has become completely out of control. The last two bids for lithium concentrate ended up at record FOB prices. An industry source told China Newsweek that there is a large amount of lithium that has not entered the market, but is held by some trading companies, waiting for the price to rise.
"It all comes down to upstream, just not enough mines." Liu Tao, an official with Ganfeng Lithium, told China Newsweek that, unlike "salt lake lithium", domestic spodumene lithium companies basically rely on imported spodumene, procurement cost is the most critical indicator, "the price increase is actually equivalent to a change in our cost."
Li nanping revealed that due to the soaring price of ore, the cost of lithium carbonate has increased by more than 10,000 yuan per ton. A number of institutions said in the research report, although lithium carbonate rose, but because this year since the metal lithium doubled, seriously compressed the profit space. Therefore, ganfeng Lithium, Tianqi Lithium and other companies with upstream lithium mineral resources have more obvious cost advantages in lithium salt production.
For tianqi Lithium, a giant of lithium industry burdened by huge debts, the upsurge of lithium price brings a good opportunity to overturn the market. In 2018, Tianqi Lithium launched a "snake swallowed elephant" merger that shocked the industry. Tianqi Lithium's purchase of Sociedad Qumiicay Minerade Chile S.A. (hereinafter referred to as "SQM") 23.77% equity of new M&A loans of 3.5 billion US dollars, the company's asset-liability ratio increased significantly. In 2020, the liability ratio of Tianqi lithium was as high as 82.32%. But on October 29 this year, Tianqi lithium announced that the operating revenue of the first three quarters was 3.873 billion yuan, up 59.58% year-on-year, and the net profit was 530 million yuan. Compared with a net loss of 1.03 billion yuan in the same period last year, it has turned into a profit.
As another domestic lithium giant, under the lithium price increase, Ganfeng Lithium's net profit attributable to shareholders of listed companies in the first three quarters of this year was 2.473 billion yuan, a year-on-year increase of 648.24%. The pace of ganfeng lithium's global "ring mine" is also accelerating, this year has carried out four acquisitions. Liu tao told China Newsweek that in order to reach the capacity target of 600,000 tons of lithium carbonate equivalent, more raw materials need to be mastered.
Splint in the battery enterprise
Lithium prices have skyrocketed, and battery companies are producing at full capacity, but, contrary to the growth in battery installations, battery companies are not generating corresponding profit growth. Ev Lithium energy, Guoxuan High-tech, Xinwanda and Penghui Energy recently released financial results showed that the gross margin of the three quarters of the four battery companies all fell from the previous quarter. Among them, Ev lithium energy's gross margin of 21.53% in the third quarter, has declined for four consecutive quarters, nearly 10 percentage points lower than the same period last year. Guoxuan And Penghui saw their gross margins fall for two consecutive quarters, by 9% and 3% respectively.
The squeeze on lithium supplies has set off a cascade of butterfly effects, putting pressure on the entire supply chain. On October 10, Ganfeng Lithium announced that all its lithium metal products will increase prices, and the unit price of the company's lithium metal products will increase by 100,000 yuan/ton. Companies such as Hongli Power Supply and Shengli High-tech Energy have also raised the prices of cell products.
But the cost pressure brought by the rise of raw materials, unable to transmit to the downstream, congestion in the battery production end, by the battery enterprise hard shoulder. Yu Qingjiao said that the cost pressure is difficult to transmit to the terminal, although the high-end capacity of power battery is short, but the voice of auto companies is still strong, for most battery companies, can only absorb the cost pressure.
This directly leads to many battery manufacturers gross margin decline, profit space is squeezed. Cao Guangping told China newsweek, the new energy automotive industry development bottleneck mainly depends on the battery, the battery pack costs accounted for 30% of the vehicle to 50%, which remove the battery shell, battery management system, thermal management system and cable accessories, mainly is the batteries and its internal lithium, nickel, cobalt and other metallic cost, thus the battery itself is not expensive, But the materials used to store the electricity are too expensive.
According to the tracking statistics of true lithium research, the current power battery cost increase is generally between 30% and 40%, which has exceeded the gross margin level of the vast majority of power battery enterprises. Without price increases, most battery companies have struggled to make money. September 16 in Haikou city, Hainan province held the "third world New energy vehicles conference", Xin Guobin, vice minister of industry and information technology, proposed that the current cost of New energy vehicles in China is still high. In addition, the power battery, a key component of electric vehicles, faces the pressure of securing mineral resources such as lithium, cobalt and nickel and rising prices. The Ministry of Industry and Information Technology will speed up coordination with relevant departments to improve the guarantee capacity.
'The pure electric vehicle business is unprofitable at the moment because the cost of the battery pack is basically the same as that of a normal gas car,' Mr. Cao said. But the subsidies given by national policies and points for selling new energy vehicles can "make money". "Although the proportion of profits from industry subsidies, industry positive points and brand premium is not quite the same for the trolley business of various car companies, the money earned must balance the battery procurement and the rising cost of raw materials."
After suffering for half a year, the head of the power battery enterprises are collectively brewing price rises. Recently, a BYD "battery price increase contact letter" on the Internet widely spread. Penghui Energy, Guoxuan High-tech issued a price adjustment letter is more straightforward, the reason for the price rise directly refers to raw material prices and shortages, resulting in high production costs. Yet the long-cherished dream of rising prices is not so easy to achieve. Industry insiders explain: the order of automobile power battery is generally signed one year, and the interim price adjustment needs to be communicated with the oEMS, but it is generally difficult to get their consent.
However, this round of price rises, industry giant Ning De times did not follow. Cao Guangping believes that Ningde Times, as the largest supplier of lithium battery industry, insists on not raising prices. The reason lies in that Ningde Times has carried out in-depth layout of raw material industry in the early stage, and has carried out in-depth capital cooperation with automobile companies, and interests have been tied together. Since 2018, Ningde Times has subscribed for the equity of North American lithium and Australian lithium mining enterprises respectively, and also established a joint venture with Defang Nano, a leading lithium iron phosphate cathode material company. Last year, Ningde participated in the capital increase of lithium iron phosphate materials enterprises such as Hunan Yuneng and Jiangxi Sublimation.
Scramble for lithium
For more home no ore battery enterprises, into the upstream resources, in order to stand tall.
Battery enterprises in the splint, forced to buy ore, has become a trend. In August this year, Ganfeng Lithium plans to invest 8.4 billion yuan with its own funds to build a new lithium battery project with an annual output of 15GWh. At present, Guoxuan High-tech has successively arranged the positive electrode, negative electrode, copper foil, diaphragm, electrolyte and other upstream raw materials and battery recycling, hoping to establish a vertical layout of the whole industry chain.
Mo Ke, a beijing-based think tank expert and founder of Zhenli Research Institute, told China Newsweek that battery companies' core strategy is to ensure the safety of their supply chain, "to ensure a stable production and the continuity and stability of lithium raw material supply."
"Mine sweep" the battlefield has hit the international. In late September, Canada's Millennium Lithium parted ways with ganfeng lithium after paying a $10 million penalty. The company had offered 3.60 Canadian dollars per share for up to 353 million Canadian dollars, or about $1.825 billion. Millennium has two world-class lithium salt lake projects in Argentina with approximately 4.12 million tons of measured and indicated lithium carbonate equivalent. The project "Interception" was initiated by Ning De Times. Ningde Times was reported to have won the bidding war with a bid of rmb1.92bn. Sources say non-ferrous metals giant Luoyang Molybdenum is also in the bidding.
But soon the plot changed again. On Nov. 1, American Lithium, a Vancouver-based company in which Ganfeng lithium owns a stake, plans to buy Millennium Lithium for $400 million in cash and stock. Sources close to ganfeng lithium denied the claim and said the company was not involved in board discussions to buy the company. Ganfeng Lithium has many overseas projects of its own, Liu Tao told China Newsweek. "This project could be good, but we might want to go for it at our pace, not in a way that raises costs." The interpretation of the outside world is that the Ningde era is not short of money, ganfeng lithium is not short of ore.
The takeover reflects the increasingly heated battle for lithium mines. For the head battery enterprises, the supply chain is both a weapon and a weakness. Based on the consideration of supply chain, Ningde era, without lithium mineral resources in hand, is eager to lay out the upstream lithium mineral and lithium salt resources. In recent years, Ningde Times has made continuous acquisitions involving Congo (DRC), Australia, North America and Jiangxi province in China. "They want a greater voice in the supply chain." Sun Hongbo revealed that Ningde times has had several contacts with Qinghai Citic Guoan Lithium, but failed to negotiate. "They are demanding, and they always want to make him the chief. But now, the companies that control the resources are also strong and have a strong voice."
A number of interviewed experts believe that with the rising price of lithium resources becoming an inevitable trend, Chinese enterprises can guarantee a relatively stable price in the future by buying a large number of lithium mines overseas, and can lock in these resources. Ningde times, yi Wei lithium and other industry giants, will be the main force to buy ore.
At present, the global lithium resources not only show the characteristics of centralized regional distribution, but also show the characteristics of highly centralized control. Talison Lithium and Galaxy Resources Ltd., based in Australia. The two companies control about 70 percent of the world's lithium supply, while SQM, Rockwood and FMC control about 92 percent of the world's salt lake lithium supply. SQM and Yabao have carved up the world's largest salt lake lithium mine, Atacama in Chile. Yabo and Tianqi Lithium share the world's largest in-production lithium mine -- Greenbush mine in Australia; Tianqi Lithium is also SQM's second-largest shareholder.
Since this year, lithium enterprises have accelerated the layout of upstream lithium resources, more and more capital is also willing to cross-border layout of lithium. Data show that since the second half of the year, there have been more than 20 enterprises cross-border distribution of lithium, including Golden Yuan, Anzhong and other listed companies. Luan Zhengming, director of the China Mining Association and executive director of the Legal Committee, believes that Chinese enterprises are competing too fiercely for mineral resources. Luan zhengming suggested that downstream enterprises should not blindly follow the trend and do what one can. "If you have a good partner upstream, it is better to help upstream enterprises to acquire some projects, rather than acquire them independently."
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