In the past two years, the electric vehicle industry is undoubtedly one of the most eye-catching industries in the global investment market, especially the soaring stock price of Tesla, a leader in electric vehicles. However, this year, due to the tight upstream supply, the production capacity of Tesla and other electric vehicle companies has been limited, and the stock prices of many upstream battery raw material suppliers have performed better, and even many have increased by nearly 200%, far outperforming Tesla's 31% increase in stock prices this year.
Horace Chan, a chemical analyst at Bloomberg think tank in Hong Kong, said: "Investors are paying more attention to parts and metal suppliers as they look for hidden gems in the battery supply chain. ”
Battery raw material suppliers' stock prices have soared this year
With the rapid development of the global electric vehicle industry, the growth rate of battery production capacity has exceeded the growth rate of the supply chain, which has led to a serious shortage of some components and ore raw materials. Driven by strong demand, miners and chemical producers are constantly raising prices and increasing profits.
As of Thursday, Australian lithium supplier Pilbara Mining had risen more than 210 per cent this year, while shares of South Korean producers ecopro BM and L&F were up more than 200 per cent. Australian-listed rare earth producer Lynas Rare Earths Ltd is up about 132 percent this year.
Ken Brinsden, CEO of Pilbara, said: "Raw materials have proven to be scarce and profits are quickly pushed upstream. ”
Pilbara supplies raw materials to several power battery giants. Due to the decline in lithium ore prices two years ago, the company was once forced to cut production sharply in 2019, but in the past two years, as lithium ore prices soared, the company also increased production capacity, acquisition expansion, and stock prices also rose.
Patrick Choi, general manager of L&F, which supplies cathode materials to battery companies such as LG Energy Solution, said in an interview: "Profits are expected to increase further by 2022 and it is planned to increase annual production capacity from 40,000 tons this year to 200,000 tons in 2025. ”
Analysts expect L&F's sales to triple this year's growth to 1 trillion won ($850 million). Patrick Choi said sales in 2022 are expected to double further, reaching at least 2 trillion won.
The upstream supply chain is not moving as fast
Brinsden, CEO of Pierbala, said that the preparation and construction of the battery factory only takes about 18 months, while the mine usually takes 7 years or more to be put into production, suggesting that the supply of raw materials may still be limited and prices will remain high.
"There's probably more pain and heartache in the future [in the battery supply chain]. Supply chains can't react as quickly as people think, and at the same time demand is expanding rapidly," he said. ”
High raw material prices have also stimulated the development of the battery recycling industry.
In October, L&F partnered with Redwood Materials Inc., a battery recycling company founded by Tesla co-founder J.B. Straubel, to launch operations in Europe and the United States.
L&F's Patrick Choi said, "Now everyone is talking about the shortage of metal for batteries. But if recycling is achieved, we assume that about 80 percent of the cathodes in used batteries can be extracted and reused in new electric vehicles in 10 years. This will reduce the supply burden and reduce costs to 60% of current levels. ”
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