Plummet! Lithium battery materials “Three Assassins” have fallen drastically


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(The following article comes from Qidian Lithium Battery.)

In the past two years, the “Three Assassins” of lithium battery materials that Ningde era has been snatching up have continued to decline and have lost their former glory.

In 2021, driven by the strong logic of increasing demand for new energy vehicles, the prosperity of the power battery industry continued to rise, leading to a sharp increase in prices of upstream raw materials.

Under the combination of supply shortage and market speculation, lithium carbonate, lithium hexafluorophosphate, and lithium battery PVDF became the hottest commodities in the lithium battery industry chain over the past two years. Prices skyrocketed several times and reached a peak of 500,000 to 600,000 RMB/ton, making them truly deserving of the title “Three Assassins” in the lithium battery materials sector.

“Queuing for orders and staying at the forefront for procurement” has become a common practice for companies in the industry chain. Leading companies like CATL and BYD have been actively engaging in signing contracts, establishing joint ventures, and investing in order to secure the supply of these three major lithium battery materials and stabilize prices.

However, nothing lasts forever. Since the second half of last year, the “Three Assassins” of lithium battery materials have been on a continuous decline, and the related companies have experienced a roller coaster ride in terms of their performance.

Lithium carbonate gradually returns to rationality

Compared to lithium hexafluorophosphate and lithium battery PVDF, which have been declining without looking back, lithium carbonate has shown periodic fluctuations.

Starting from the beginning of 2023, the price of lithium carbonate has been continuously declining. In mid to late April, it reached a low point of 165,000 RMB/ton, and then experienced a rebound. In June, it even surpassed 300,000 RMB/ton at one point.

Currently, after maintaining a price above 200,000 RMB/ton for four months, lithium carbonate has fallen below this threshold for the second time this year. The latest data indicates that on September 8th, the average price of battery-grade lithium carbonate in China dropped to 198,500 RMB/ton.

During the period of fluctuating lithium carbonate prices, the upstream and downstream sectors of the industry entered a phase of intense competition. Currently, there is sufficient supply of lithium carbonate in the upstream, but the demand in the downstream market is insufficient. Battery and cell manufacturers have high inventory levels, and cathode material manufacturers tend to produce based on sales orders, remaining cautious in purchasing lithium carbonate and maintaining a continuous pressure on prices.

In the short term, there is significant pressure on upstream inventory, which may lead to further declines in lithium carbonate prices. However, as demand recovers, prices may rebound.

While lithium carbonate prices have been declining, the profitability of A-share lithium mining companies has also been on a downward trend. Compared to the significant growth in net profits during the same period last year, leading lithium resource companies such as Ganfeng Lithium and Tianqi Lithium have generally experienced poor performance in the first half of this year.

However, in the long term, the stability of lithium carbonate prices is crucial for the healthy and orderly development of the industry chain. In this regard, Penghui Energy stated, “In the long run, the decline in prices of major raw materials is beneficial to the expansion of downstream product demand and market size, which is favorable for the midstream battery industry.”

The further decline in spot prices of lithium carbonate is driving the continued reduction in the prices of battery cells, with many companies already reaching 0.5 RMB/Wh, and there is still room for further decline. Particularly in the field of energy storage batteries, the decrease in lithium carbonate prices will help lower the investment and construction costs of electrochemical energy storage projects, enhancing the competitiveness of energy storage facilities in participating in the power market in the future.

Most of the lithium hexafluorophosphate manufacturers are expected to incur losses

The continuous decline in lithium carbonate prices has also led to a baptism for lithium hexafluorophosphate, transitioning from a scarce commodity with high prices to a situation where prices have fallen below the industry’s cost line.

Looking back, in the second half of 2020, the price of lithium hexafluorophosphate began to steadily rise. Within a year, the price surged from a low point of 70,000 RMB/ton to a peak of 590,000 RMB/ton at the beginning of 2022, increasing by a factor of seven. Subsequently, the price of lithium hexafluorophosphate reached its peak and started to decline. In the second half of 2022, it fluctuated in the range of 250,000 to 300,000 RMB/ton.

In the first quarter of this year, due to the decline in lithium salt prices, the price of lithium hexafluorophosphate also experienced a significant decline. It dropped from 242,000 RMB/ton at the beginning of the year to a low point of 85,000 RMB/ton, representing a decrease of over 80% from the peak.

After hitting the bottom, there was a rebound, and on September 6th, the price of lithium hexafluorophosphate was quoted at 106,000 RMB/ton. However, it is difficult to guarantee that this price will not further decline. Compared to the glorious moment of nearly 600,000 RMB/ton during the same period last year, it has undoubtedly fallen below the manufacturers’ cost line.

The influx of capital and the continued expansion of production capacity are also important factors contributing to the sharp decline in the price of lithium hexafluorophosphate. According to incomplete statistics from Qidian Lithium, China’s lithium hexafluorophosphate production reached 105,000 tons in 2022, an increase of 95% compared to the previous year.

By 2025, domestic production capacity of lithium hexafluorophosphate in China is expected to reach nearly 500,000 tons. Moreover, only one company, Duofuduo, has planned production capacity of 80,000 to 100,000 tons by 2024. However, in terms of demand, global demand for lithium hexafluorophosphate is projected to be around 270,000 tons in 2025. This indicates an oversupply situation in the lithium hexafluorophosphate market.

Indeed, in recent years, weakened downstream demand coupled with significant production growth has caused a supply-demand imbalance in the lithium hexafluorophosphate market. In 2023, major manufacturers began a “price war” to compete, leading to squeezed profit margins. This has resulted in some manufacturers choosing to halt production.

According to Li Yunfeng, the General Manager of Duofuduo, there are currently 48 lithium hexafluorophosphate production companies in China, with approximately 15 electrolyte companies having production capacity. He estimates that out of these 48 companies, about 40 of them will incur losses in the coming years, and only one or two companies in the industry will truly make profits.

Currently, Duofuduo and Tianci Materials dominate a significant portion of the market share as the two leading companies. In addition to these two companies, other relevant enterprises such as Tianji Co., Ltd., Yongtai Technology, Yan’an Bikang, Shenghua New Materials, and Shenzhen Xinxing are also planning and constructing their production capacities in the lithium hexafluorophosphate industry.

The frenzy of lithium battery PVDF is over

Due to restrictions on environmental impact assessments for raw materials and the longer production expansion cycle, PVDF was once referred to as the “most scarce lithium battery material,” and its rapid price surge was astonishing.

Within a year, the price of lithium battery PVDF skyrocketed from 100,000 RMB/ton to 500,000 RMB/ton, representing a surge of 400%. There were even rumors of downstream companies quoting as high as 800,000 RMB/ton for PVDF used in power batteries, making it extremely difficult to procure.

Meanwhile, the price of R142b, the main raw material used in the production of PVDF, once exceeded 200,000 RMB/ton, with a cumulative increase of 1200% within a year.

The lucrative profits have driven capital to enter the market at an accelerated pace, and major production companies have been speeding up the establishment of new production capacities.

In the second half of 2022, many PVDF manufacturers gradually realized their newly expanded production capacities, with the majority of them securing the necessary R142b raw material supply. According to statistics from Qidian Lithium, the total production capacity of the PVDF industry increased by more than half in 2022. Furthermore, major production companies are still planning to add 203,000 tons of production capacity, mainly focusing on starting production in 2023-2024.

By 2025, it is expected that the production capacity of lithium battery-grade PVDF will exceed 300,000 tons, with over a dozen production companies in the market. Currently, there are several domestic companies involved in PVDF production, including Lianchuang Share, Juhua Share, BlueStar Chemical, Sanai Fu, and Fulin Materials, among others. However, with the projected increase in production capacity, there is a risk of severe oversupply in the lithium battery-grade PVDF market.

As production capacity continues to increase, the growth rate of downstream demand has not been able to match the expansion of production. The situation of lithium battery PVDF transitioning from supply shortage to oversupply has led to intensified market competition. The market is now characterized by an excess supply of PVDF, which puts pressure on manufacturers to compete for customers and may lead to further price reductions.

In May 2023, the low price in the lithium battery PVDF market essentially broke through the lowest point in nearly five years, reaching 70,000 to 80,000 RMB/ton, which represents a price drop of over 80%. Although it experienced a slight recovery to 160,000 RMB/ton in July, it has been difficult to return to its previous high prices.

In the medium to long term, lithium battery PVDF still maintains significant growth potential in terms of demand, especially with the scale application of 4680 batteries in the coming years.

According to the disclosure by Lianchuang Share, the total usage of PVDF in 4680 batteries is expected to increase to 8%, significantly higher than the 1.5% usage in traditional ternary batteries and 3.5% usage in lithium iron phosphate batteries. Therefore, with the rapid scaling of 4680 batteries, the demand for PVDF is expected to increase as well.

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