THE SURVIVAL LOGIC OF LITHIUM BATTERY COMPANIES UNDER THE SOARING PRICE OF LITHIUM CARBONATE AND THE EXPANSION OF PRODUCTION IN THE LEFT HAND AND THE ACCUMULATION OF MINES IN THE RIGHT2022.04.01 09:32
THE SURVIVAL LOGIC OF LITHIUM BATTERY COMPANIES UNDER THE SOARING PRICE OF LITHIUM CARBONATE AND THE EXPANSION OF PRODUCTION IN THE LEFT HAND AND THE ACCUMULATION OF MINES IN THE RIGHT
Since the beginning of the year, the lithium battery industry has attracted much attention.
On the one hand, the overall trend of the new energy industry continues to improve. The production and sales of new energy vehicles will hit a new high in 2021. The agency predicts that the sales volume in 2022 is expected to exceed the 5 million mark, and the penetration rate will exceed 20%; on the other hand, upstream raw material prices have repeatedly A new high, battery-grade lithium carbonate as a battery cathode material has continued to rise since 2021, and its average price in March 2022 exceeded 500,000/ton, an increase of nearly 70% from the beginning of the year. Some industry practitioners ridiculed this increase: "I will see this once in my life."
The soaring price of lithium carbonate has also triggered a series of shocks in the industry. From the "battery shortage" that was intensively reported by the media last year; to this year, many car companies announced price increases or even suspended orders, intending to stop losses; to the recent rumors that Ningde and BYD will no longer purchase lithium carbonate and resist price increases. The supply of raw materials can be said to have affected the development pattern of the entire lithium battery industry. The tail companies with low bargaining power have to face the risk of being eliminated at the bottom, while the head companies are facing cost pressures and seek a balance between ensuring supply and capacity expansion.
The left hand expands production capacity and the right hand stores lithium mines
Since the beginning of 2021, facing the booming and promising lithium battery market, the capacity planning of power battery companies has accelerated significantly. As of the end of 2021, the (incomplete) statistics of each capacity plan are as follows: CATL 670GWh in 2025; BYD 600GWh in 2025; LG New Energy: 430GWh in 2025; Guoxuan Hi-Tech: 300GWh in 2025; China Innovation Aviation: 500GWh in 2025; Honeycomb Energy: 600GWh in 2025; Yiwei Lithium Energy: 200GWh in 2023; 100GWh.
In the coming era of TWh, 100GWh has become the basic unit of production capacity in the lithium battery industry. For reference, the total installed capacity of power batteries in China in 2021 is 154.5GWh. Based on the consumption of 500 tons of lithium carbonate for 1GWh, 50,000 tons of lithium carbonate are required for every 100GWh of production capacity. It is predicted that China's lithium carbonate production will be about 280,000 tons of LCE in 2022, and the capacity that can be supported is still less than 600GWh.
With the shortage of lithium carbonate supply, how can companies ensure the supply of raw materials and stabilize the impact of price increases on the return on investment cycle for expansion? At the moment when "the one who wins lithium wins the world" has become the consensus of the industry, power battery companies will directly deploy upstream, and investing in mines will inevitably become a long-term way out. At present, due to various conditions, there are not many companies with mines at home. Among the top-ranked companies in the industry, only a few companies such as CATL, Guoxuan Hi-Tech, Honeycomb Energy, and Yiwei Lithium have seized the opportunity.
For power battery companies, how important is it to grab mines? Taking Guoxuan Hi-Tech as an example, the company announced at the 2021 Supply Chain Conference that by the end of 2022, Guoxuan's production capacity is expected to reach 100GWh, and it plans to put into production over 50GWh. Based on this calculation, Guoxuan Hi-Tech will need 25,000 tons of lithium carbonate in 2022. If the supply cannot be guaranteed, the performance will be dragged down.
However, Guoxuan Hi-Tech seems to have devised a strategy. According to the information disclosed by various channels, the cumulative production capacity of the three lithium carbonate projects in Yichun Kefeng, Fengxin Guoxuan and Yifeng Guoxuan that Guoxuan has deployed in Yichun, Jiangxi has reached 120,000 tons per year. Among them, the first phase of the Yichun Kefeng battery-grade lithium carbonate project with an annual output of 20,000 tons is expected to be put into operation in April, with an estimated annual production capacity of 10,000 tons. In addition to self-production and self-supply, Guoxuan also finalized long-term supply agreements with Jiangte Electric and Salt Lake through strategic cooperation in the second half of last year. Coupled with the lithium carbonate resources obtained by Guoxuan through material recycling channels, it is known that the total supply of lithium carbonate has basically guaranteed the production plan in 2022.
Based on the industry cost price of 150,000 yuan and the market price of 500,000 yuan per ton, Guoxuan Hi-Tech's own lithium carbonate gross profit per ton is about 350,000 yuan. In other words, regardless of other costs, Kefeng's 10,000-ton production capacity can save Guoxuan Hi-Tech 3.5 billion yuan in raw material costs a year. Based on the current market estimates, the layout of Lithium Carbonate in Yichun, Jiangxi, including Kefeng, Yifeng, Fengxin, etc., has a total production capacity of 120,000 tons, which can save 42 billion yuan a year after full production
The advanced layout of the supply chain is not achieved overnight
Apple's strong control over the supply chain is one of the important reasons why the company has become the world's most valuable company. Although the lithium battery supply chain is not as complicated as the consumer electronics supply chain, the layout of the supply chain from mines to raw materials to cathode materials not only involves all aspects, but also has a long layout cycle. A battery company wants to have a stable material supply chain. It can be done overnight. In addition to the need for strong financial support, it also tests the forward-looking strategic vision and thinking of business leaders.
An interesting example shows the intensity of the "mine grabbing" war in the lithium battery industry. In 2021, the Ningde era and Ganfeng Lithium will have a four-month "mine war". In July of that year, Ganfeng Lithium planned to acquire Canadian Millennium Lithium for no more than 353 million Canadian dollars (approximately RMB 1.837 billion), but Ningde era rushed out midway, intending to increase the price by 7% to take the latter into the bag. Unexpectedly, after several reversals, the American Lithium Industry finally realized the acquisition of Millennium Lithium Industry by "cutting the Hu", and the Ningde era was sadly defeated.
Even if the mine is successfully purchased, it still has to face uncontrollable market risks. If the luck is bad, it will still be difficult to achieve the expected results. For example, in 2018, Tianqi Lithium increased its M&A loan by US$3.5 billion due to the purchase of a 23.77% stake in SQM. As a result, the company's asset-liability ratio rose sharply, causing the company's operations to fall into a difficult stage for a long time.
All of these have led to the fact that before the market is hot in 2020, there are few leaders in the industry who have embarked on the layout of the entire industry chain. There is even a battery company that once ranked in the top ten because of the lack of strategic vision in the upstream layout, and the action is a step slower, resulting in only regrets. Looking at China's power battery companies, there are still very few companies that can achieve a closed-loop supply chain industry. Taking Guoxuan Hi-Tech as an example, the company's supply chain layout since 2016 can be described as a step-by-step approach.
Six years of sharpening a sword, one step at a time, it is not easy, and it is not easy to explain in a few words. But it is worth mentioning that the layout of Guoxuan Hi-Tech's lithium mine in Jiangxi, from the contact between the two parties to the signing of the contract, took only three months to maximize the "robbing" time, and even during the Spring Festival negotiation and promotion. Judging from the popularity of today's lithium carbonate market, these efforts have not been in vain, and Guoxuan's layout has just caught up with the best time.
Build a supply chain system to fully implement carbon neutrality
"On the morning of February 24th, the commencement ceremony of key projects in Wuhai City, Inner Mongolia Autonomous Region in 2022 was held in the Low-Carbon Industrial Park of Wuhai High-tech Industrial Development Zone, including 400,000 tons of lithium-ion batteries from Inner Mongolia Guoxuan Zero Carbon Technology Co., Ltd. Anode material project.” Recently, a news about the centralized construction of Wuhai City project has gradually surfaced the Guoxuan Wuhai project, and Shi Taifeng, Secretary of the Party Committee of Inner Mongolia Autonomous Region, and his party inspected the Wuhai Guoxuan project site on March 16, and from the media The reported video shows that the construction of the Wuhai Guoxuan project is in full swing. The content of the on-site exhibition board shows: Guoxuan Hi-Tech's material layout in Wuhai is an integrated production line project of lithium-ion battery anode materials with an annual output of 400,000 tons. , The project is located in Wuhai Low-Carbon Industrial Park, Inner Mongolia, with a planned area of more than 2,000 mu. The first phase of 100,000 tons has been constructed. It is expected to be completed and put into operation in the second half of this year. Calculated on the basis of 1GWh=1300 tons of anode graphitized materials, 400,000 tons of anode materials just meet Guoxuan Hi-Tech's 300GWh target in 2025.
This also confirms what Li Zhen, chairman of Guoxuan Hi-Tech, said at the World Manufacturing Conference in November 2021: the company "plans to deploy new energy power generation in Wuhai, Inner Mongolia, and build a zero-carbon base for new energy vehicle materials to meet the needs of the company. All negative polarization electricity requirements for graphitized materials.”
It seems that Guoxuan Hi-Tech has not only begun to lay out the supply of anode materials in the next five years, but also proposed a feasible way to achieve low carbonization in view of the high energy consumption of anode graphitization, combined with local natural conditions. This layout with both industrial development prospects and carbon neutral strategic thinking reflects an enterprise leader's accurate judgment on the general trend of the industry, a high-level plan for the industry's prospects, and a majestic layout for enterprise development.
It solved the difficult problem of external material supply, and also solved the system problem of internal supply. According to Caijing-Delay, in early 2019, CATL integrated dozens of first-level business departments and sorted them into three major systems: market, R&D and engineering manufacturing, operation and supply chain according to the process operation relationship. Feng Chunyan and Zeng Rong, the co-presidents of the supply chain system, report directly to the chairman Zeng Yuqun. This also lays the foundation for the accelerated layout of the supply chain system in the Ningde era.
Coincidentally, Guoxuan Hi-Tech has also independent of the global supply chain center in the organizational structure adjustment in 2021, and the person in charge, Sun Aiming, reports directly to the chairman. The Global Supply Chain Center split the original package of procurement into two major parts: procurement and delivery, and set up a separate material procurement center. It also detailed the key materials in the original business such as lithium carbonate, iron phosphate, ternary, and lithium iron phosphate. Purchasing division of labor makes the process more professional and efficient.
Judging from the production capacity planning of Guoxuan Hi-Tech, 300GWh in 2025 is not high compared to other companies. However, as can be seen from the announcement that the company signed a five-year 200GWh announcement with an American company, Guoxuan has explored a business model of accepting prepayments from car companies to build factories and jointly investing in the upstream and downstream links of the industry chain, effectively sharing costs and controlling risks. , At the moment when the industry is constantly being questioned about the future overcapacity, it has achieved premeditated expansion and orderly expansion.
If the contradiction between supply and demand continues, coupled with the existence of global unrest such as epidemics and wars, there are still variables in how many battery companies can implement their capacity expansion strategies. According to statistics, from January to December 2021, a total of 58 power battery companies in my country's new energy vehicle market achieved vehicle installation, a decrease of 13 from the same period last year. What is certain is that only a firm and steady, step-by-step company can win a place in the increasingly competitive industry landscape.