In the upstream and downstream companies of the lithium battery industry chain that flew in the Ningde era, nord shares that made copper foil may be the most inconspicuous one. It was not until Chen Yubi, executive deputy general manager of the company, a circle of friends who "blew tickets with life" that a round of discussion about NORD and copper foil was stimulated.
In late October, he sent a circle of friends saying: "Next year's market value is not 50 billion, I apologize for it", accompanied by a struggle meme and a speech poster. Although it was deleted in seconds, it was still widely reported by the media, and the Shanghai Stock Exchange sent a regulatory letter with its backhand.
Words like "cutting the abdomen" come with their own traffic, but the scale of 50 billion yuan cannot be played in the industrial chain. Selling battery equipment is the leading intelligence, with a market value of about 120 billion.
However, as a copper foil leader, NORD has become a member of the new energy army this year and is highly sought after in the capital market. At the end of October, the company also handed over a good report card, with revenue of 3.24 billion yuan and net profit of 320 million yuan in the first three quarters, up 20 times year-on-year.
Around this topic company, this article attempts to answer three questions:
1. What kind of business is copper foil?
2. What's special about NORD?
3. What is the competitive landscape of the copper foil industry?
According to the downstream scene, copper foil is divided into electronic circuit copper foil and lithium battery copper foil.
Before 2016, NORD mainly attacked the former, but since then, with the slowdown in the growth rate of 3C products, the subsidies for new energy vehicles, the installed capacity of power batteries has risen, and the copper foil as a negative collector has ushered in a new round of dividends, nord has begun to exert higher gross profit margins and greater demand for the latter.
Lithium battery copper foil accounts for about 8%-15% of the cost of lithium batteries (lithium iron phosphate and ternary lithium batteries are different), and the average gross profit margin is about 28%.
The cost ratio of copper foil in lithium batteries varies depending on the battery cell
The industrial chain of copper foil is very short, the upstream is copper mines and equipment, and the downstream is battery factories. In the cost structure of copper foil itself, raw materials are the absolute majority, accounting for 75%-80% (of which copper accounts for more than 95%), labor accounts for less than 5%, and electricity and fixed asset depreciation account for about 15%.
In order to reduce the adverse effects caused by frequent fluctuations in raw material prices, the common pricing method used by copper foil manufacturers is "copper price + processing fee".
Copper price fluctuations are borne by downstream customers, and the processing fee directly determines the profit margin, and the amount of processing fee depends on the thickness of the product on the one hand, and the supply and demand relationship on the other hand.
According to the thickness, copper foil can be divided into extremely thin copper foil (≤6μm), ultra-thin copper foil (6-12μm), thin copper foil (12-18μm), conventional copper foil (18-90μm) and thick copper foil (>70μm). The thinner the product, the higher the energy density of the battery, but the more difficult the process and the more unstable the yield, so the higher the price.
This set of processes and pricing logic is quite similar to condoms. Okamoto 001 is about 35 yuan each, which is more than 2 times that of 003, because the former uses polyurethane and the latter uses natural latex, which is far from the material cost and production process. The difference in copper foil is that no matter how thin it is, copper is used.
Before NORD entered the lithium battery industry in a big way, the global copper price continued to decline, the domestic copper foil production capacity was oversupplied, and many companies withdrew, but from Q3 of 2016, driven by new energy vehicle subsidies, copper foil demand picked up. However, due to the insufficient supply of upstream key equipment, the expansion of copper foil production is limited, and the yield of ultra-thin copper foil is not high, and the price of products continues to rise.
In the first half of 2017, the processing fee of mainstream products 8μm copper foil was 45,000 yuan / ton, compared with 36,000 yuan in the same period of the previous year[1].
In the three years from 2015 to 2017, NORD's revenue increased from 1.73 billion to 2.54 billion, and the copper foil production capacity reached 27,000 tons, becoming the industry leader with a market share of 30%, and penetrated the supply chain of major factories such as Watmar, BYD, ATL, Lishen, and Guoxuan Hi-Tech, with the top five customers accounting for 49.4% of the total revenue.
But it also buried a major hidden danger: in 2017, NORD receivables reached 610 million.
At this time, the thing that Nord feared the most appeared: the thunderstorm of the big customer. In the previous three years, Waterma's shipments were second only to NINGDE Times and BYD, known as the industry dark horse, but because of changes in subsidy policies, Waterma was unsustainable through the establishment of industrial alliances and then through huge related party transactions to raise revenues, and in 2018 shipments fell out of the top 20, and finally filed for bankruptcy liquidation in November 2019.
According to the data, at that time, Watmar was in debt of 19.7 billion yuan, of which 559 suppliers were owed 5.4 billion yuan, and Nord, as the main supplier of copper foil, was not spared.
Nord in 2018 revenue decreased by 8.5%, net profit plummeted by 50%, by 2019, NORD in order to save performance, the introduction of copper trading business, the first three quarters of revenue soared 61%, but because of the limited profits of new business, coupled with a large number of bad debts, resulting in a net loss of 130 million yuan in 2019.
From becoming the leader to the collapse of revenue, it has ushered in a harvest this year. What are the reasons behind the volatility that can be explored?
Nord's trajectory can be understood from both industry and individual perspectives.
After the epidemic stabilized, global sales of new energy vehicles soared. Although the downstream battery factory is full of horsepower, a large number of copper foil factories have also announced the expansion of production, but the water can not quench the near thirst. Generally speaking, it takes about a year for a power battery production line to start production, but it takes two years for copper foil.
On the one hand, because only a very small number of companies in the world can produce the cathode roller that directly determines the quality of copper foil, and 70% is concentrated in Japan, but the expansion willingness of these companies is insufficient, which restricts the downstream expansion rhythm, and the current production of overseas cathode rollers has been scheduled to 2024. On the other hand, due to the sulfuric acid mist exhaust gas generated in the process of dissolving copper and raw foil, the EIA approval is relatively strict.
It is temporarily impossible to produce high-quality cathode rollers in China
The production process is complex, the debugging time is long, the production capacity climb is relatively slow, and the shelf life of the copper foil is only 3 months, and there is no way to adjust the supply and demand relationship by changing the inventory, which leads to the fact that when the downstream demand soars, the copper foil is easy to become a neck link.
Under the strong demand, the industry as a whole has entered a fast lane. Against this background, NORD's previous advantages – especially in products up to 6 μm and below – can be exploited.
In the past five years, under the pressure of increasing energy density, the thickness of copper foil has gradually developed from 8 μm to 6 μm, and 4.5 μm products have also begun to penetrate. It is estimated that compared with 8μm, 6μm, and 4.5μm copper foil, the energy density of lithium batteries can be increased by 5% and 9%, respectively, and on average, the battery energy density can be increased by 2.56Wh/kg for every 1μm reduction in copper foil thickness[4].
For copper foil factories, thinner means less material, more active materials can be coated to increase energy density; for battery factories, although the processing fee has increased, it is generally more cost-effective. For example, using 4.5μm, the cost of a single GWh can be reduced by about 5 million yuan compared with 6μm, and the higher the energy density means that the longer the endurance, the easier it is to be favored by downstream OEMs, and the more installed capacity means that the cost can be further diluted.
In the first ten months of this year, the domestic power battery production reached 159.8GWh, of which the output of lithium iron phosphate batteries reached 87.5GWh, which exceeded ternary lithium, and lithium iron phosphate because the energy density is lower than that of ternary lithium, the demand for extremely thin copper foil is more urgent, including 6μm and 4.5μm products, of which the demand for 4.5μm copper foil in the ningde era in the second half of this year will increase from 600 tons per month to about 2000 tons.
However, the extremely thin copper foil has a difficulty: it has more stringent requirements for process stability, equipment accuracy, and additive quality, greater production difficulty, increased folds and fractures, and low yield.
In order to continue production, copper foil factories mostly choose to reduce the production current, resulting in reduced production efficiency, increased frequency of maintenance, and ultimately led to insufficient operating rate, such as the current capacity utilization rate of 6μm and below is only 70%, 10 points lower than the industry average.
The good news for NORD is that the technical transformation of the copper foil production line with an annual output of 25,000 tons in Qinghai has been completed, and Chen Yubi has also opened his mouth that the industry will enter a "tight balance" state in 2021, especially products with an annual output of 6 μm and below [1].
On the one hand, the downstream demand for extremely thin copper foil is strong, on the other hand, the limited operating rate and the production cycle of about two years, the direct result of the mismatch between supply and demand is the rise in processing fees.
The processing fee of 8μm copper foil has risen from 25,000 yuan at the beginning of the year to 35,000 yuan / ton in November, and the processing fee of 6μm copper foil has increased from 41,000 / ton at the beginning of the year to about 52,000 yuan (including tax), but there is still a certain gap from the historical high of 70,000 / ton in 2017.
Lithium battery copper foil historical processing fee changes, source: copper foil association, Zhongtai Securities Research Institute
The highest price is 4.5μm copper foil, in July this year, the processing fee has risen to more than 75,000 / ton, 50% higher than 6μm, the technology premium is very obvious, the market generally predicts that the penetration rate of 4.5μm in the domestic market this year will increase from 3% last year to 15%-20%, and will further increase to 30%-40% in 2022.
However, when put into the industry, NORD is not a existence that can sit back and relax.
The competitive landscape of the copper foil industry is relatively scattered, and there is no absolute boss.
In 2020, there are 9 domestic enterprises with an annual output of lithium battery copper foil reaching more than 5,000 tons, accounting for 80.5% of the domestic total, and the total output of lithium battery copper foil of Huaxin, Nord, Jiayuan, Zhongyi and Tongguan has reached 94,000 tons, with a market share of 61.4%. In contrast, the market share of CR5 for negative electrodes, diaphragms, and electrolytes is between 78% and 85%.
This is because lithium battery copper foil is an investment-intensive industry. 10,000 tons of production capacity needs to invest about 700 million yuan, the production cycle is more than two years, the asset turnover rate is low, and the process barriers are high. Considering that the copper foil has a relatively large impact on the comprehensive performance of lithium batteries, the certification is more stringent, the cycle reaches 6-9 months, and foreign customers can last up to one year.
However, this more balanced situation will change with product upgrades and large-scale expansions by head manufacturers.
There are two main factors that affect the pattern: capacity and customers. From the current layout, NORD's leading position is not stable.
NORD currently has a copper foil production capacity of 43,000 tons, of which 25,000 tons are used to support lithium batteries. In December last year, NORD completed a round of fundraising, planning to invest 1.4 billion yuan in Qinghai to invest 15,000 tons of lithium battery copper foil project, in June this year, NORD launched a new round of fundraising, planning to raise 2.288 billion yuan for the expansion of 27,000 tons of copper foil.
In contrast, Jiayuan has a production capacity of 21,000 tons this year, all located in Meizhou, Guangdong, but in early November this year, Jiayuan announced that it would raise no more than 4.9 billion yuan to expand the production of multiple copper foil projects, including a 15,000-ton project in Ningde.
If calculated according to full production and full sales, in 2022, NORD's lithium battery copper foil production capacity will reach 45,000 tons, while Jiayuan will reach 61,000 tons, when Jiayuan is expected to surpass NORD to become the first in the industry. By 2023, the lithium battery copper foil production capacity of NORD and Jiayuan will reach 62,000 and 92,000 tons respectively, and the advantages of Jiayuan are expected to be further expanded.
When the supply of the entire industry is in short supply, the speed of expansion determines the market share. But there is another factor that cannot be ignored: the customer. Because the speed of high-end products will directly affect the company's gross profit margin.
From the current point of view, NORD and Jiayuan have been bound to some large customers, including NINGDE times, BYD, ATL, Ewell Lithium Energy, AVIC Lithium Battery, Fu Neng Technology, LG Chemical, Panasonic and other leading companies at home and abroad, the two sides are not divided, the difference is in the product structure.
At present, the gross profit margin of 4.5μm lithium battery copper foil is about 50%, 6μm is about 30%, and 8μm is about 20%. The confrontation between NORD and Jiayuan will largely focus on the technical level.
In the entire industrial chain, the copper foil factory has always been a small role in waiting for the big brother to drink soup after eating meat.
On the one hand, because the performance will fluctuate with the cycle, on the other hand, because the industrial chain itself is relatively short, and the core equipment is in the hands of foreigners, it is impossible to establish sufficient competitive barriers through vertical integration.
The good news is that the tight balance of lithium battery copper foil will continue in the next two years, and high value-added products of 4.5-6 μm will become mainstream; the bad news is that a large number of manufacturers are expanding production in a big way – and the competition on this track will become more and more intense.
[1] 2017 China's lithium battery copper foil industry price trend forecast, industry information network
[2] Lithium battery copper foil 2021 is expected to be "in short supply", high-tech lithium battery
[3] High-performance lithium battery copper foil is in short supply, high-quality faucet rides dongfeng, Guosheng Technology
[4] The golden age of lithium-electric copper foil, open source securities
[5] Lithium battery copper foil thinning: when the cycle meets innovation, Guosen Securities
[6] The king of copper foil leaders returned, accelerated the expansion and focused on the main business, and pioneered securities