Lithium prices have reached an inflection point, but the decline in car costs will not come anytime soon.
Wen 丨 Li Zi Nan Cheng Man Qi
Edited by Cheng Manqi
Over the past 100 years, the true price of cars has continued to fall. It's hard to imagine that cars will one day become "wealth management products", and since last November, buying Tesla cars will make more money than buying Tesla stock. During this period, Tesla's rear-wheel-drive model 3, which was originally priced at 235,000, rose three times in a row to 279,000 yuan, an increase of 18.7%. Over the same period, Tesla shares fell 17.7%.
Other electric vehicle brands quickly followed, since the beginning of this year, BYD, Xiaopeng, Ideal, Weilai, Nezha, Weima have increased prices, mainly between 10,000 and 20,000.
The most important factor driving the price increase of electric vehicles is the price increase of lithium, which has lasted for 16 months. Compared with chips that have been hotly discussed for more than a year, lithium can affect the purchase cost of an ordinary consumer.
Chips only account for about 10% of the cost of an electric car, and the car needs a huge number of chips, and the lack of a few categories does not shake the pricing logic of the whole vehicle.
Power batteries are the bulk of the cost, accounting for nearly 40%. In the battery, the cathode, electrolyte and other materials have eaten 50% of the cost, and the manufacture of a variety of cathodes and electrolytes is inseparable from lithium.
Since January 2021, the price of lithium carbonate, the compound that makes a variety of raw materials for lithium batteries, has risen from 50,000 / ton to 500,000 / ton.
Before the end of last year, when lithium carbonate has not yet touched 300,000 / ton, the entire electric vehicle industry chain can still barely digest the cost, and the price of the car does not rise. Tesla, which produced more than 900,000 yuan last year, can even reduce prices many times by relying on the scale advantage.
Since the beginning of this year, as the price of lithium carbonate has not returned to break through 400,000 and reached 500,000, the price increase has finally been transmitted to the final consumer.
An electric vehicle with a range of about 500 km at 60 kWh requires about 30 kg of lithium carbonate, which means that the cost of 15,000 yuan is more than ten times that of the beginning of last year. For a large number of price-sensitive car buyers, this amount is enough to buy or not to buy.
This is a situation that no one wants to see. Automobiles are non-essential products with high unit prices and low frequencies, and a sharp price increase means that the demand is reduced, and the entire industrial chain will share the bitter fruit.
Whether it is the upstream lithium mining company that has profited from the rise in lithium prices, lithium salt producers (lithium salt refers to lithium carbonate, lithium hydroxide and other lithium compounds); or the manufacturers of battery materials such as midstream cathode and electrolyte that have resisted for more than a year and have suffered from price increases; the next link of power battery manufacturers and the end of the car company, no one is spared.
Figure: Lithium battery structure. Source: Samsung SDI.
This is also not good news for governments that support replacing fuel vehicles with electric vehicles. The automotive market, which accounts for one-tenth of China's total retail merchandise, has stagnated in recent years, and electric vehicles are seen as a new pulling force that can change the situation.
But this is an unavoidable result of any single role in the industrial chain.
The root cause of price increases is that supply exceeds demand, electric vehicles are an emerging industry, and when downstream demand breaks out rapidly, the development speed of upstream resources is often left behind.
Lithium resources are relatively scarce, it is not as rich as the steel that makes the car body, and the sand that makes the chip. If battery recycling is not calculated, the proven lithium resources can still be used for 40-60 years, and are concentrated in South America, Australia and other places, China as the largest consumer of lithium, lithium resources are not abundant.
The rise in lithium prices is also a cut in the period when the world has entered a period of material shortage under the disruption of the epidemic.
The outbreak of the epidemic in early 2020 once made the industry pessimistic about automobile consumption, and the accumulated demand broke out in 2021, increasing the intensity of price increases.
The automotive industry's thirst for lithium has affected some fields and people who use less lithium but also can't find alternatives. This includes consumer electronics lithium battery companies, at the end of October last year, lithium carbonate was close to 200,000, some companies that made batteries for electronic cigarettes and headphones have taken holidays and stopped production, and by the end of the year, when the lithium price reached 250,000, some mobile phone battery companies also began to stop production. It also includes patients with bipolar affective disorder , lithium carbonate is also an anti-manic drug , and also has an adjunctive therapeutic effect on depression.
The rise of lithium and its ripple effect show how a seemingly well-organized system can be out of balance; how the envisioned process of popularizing new energy sources has hit a wall; and what companies and people are making to keep their chances of survival and development.
The increase exceeded everyone's expectations
As a result, the rush to each link has been doubled
On a Thursday, January 7, 2021, Li Jigang, general manager of cathode supplier Tianjin Skorland, negotiated with upstream traders to buy lithium carbonate for 55,000 tons, and he was not in a hurry to settle the contract that week. Just over the weekend, the business turned yellow — someone bought what he had negotiated for 60,000 tons.
Li Jigang realized that lithium is about to start to rise in price: "I have been in the industry for nearly 20 years, and I have never seen such a situation of one price a day. Two days up 5,000, 100 tons of cargo is 500,000. He set himself a trading principle: the contract for buying lithium carbonate should be completed in one day, and the traders should not be given time to slip.
But for most of 2021, traders will delay transactions with Mr. Li: sometimes delaying deliveries, sometimes delaying contracts.
The weekend rest day has become Li Jigang's most difficult moment: at this time, the trader does not return the information, does not answer the phone, does not sign the contract, but the price increase of lithium carbonate will not stop, he can only watch the price rise, can not do anything.
In the eyes of small and medium-sized players such as Li Jigang, the rise in lithium prices is unexpected, and it is a result that he must accept and is powerless to influence. The leading enterprises in the industrial chain have judged the trend in advance and reacted.
Wang Xiaoshen, vice chairman of Ganfeng Lithium, China's largest lithium producer, entered the lithium industry in the early 1990s as deputy general manager of China Nonferrous Metals Import and Export Xinjiang Corporation. Wang Xiaoshen told LatePost that at the beginning of 2020, they judged that in the second half of that year, the supply of lithium resources would turn tight.
This is determined by supply and demand: the rapid rise in sales of electric vehicles requires more lithium to make more batteries. However, the pace of expansion of automobiles and batteries is very different from that of upstream lithium mines. A new battery production line can be built as soon as 9 months, while a mature lithium mine project generally takes 12 to 24 months to expand production, and it takes several years to mature the construction of new exploration projects. The upstream expansion cannot keep up with the downstream, and the entire market will be in short supply.
But the COVID-19 outbreak in January 2020 disrupted the rhythm. Throughout the first half of the year, due to the suspension of work in many countries, poor logistics and pessimism about consumption expectations, some overseas electric vehicle companies began to reduce production.
There are two choices in front of Ganfeng: one is to follow the downstream production reduction, and the other is to go all out to increase production, and Ganfeng chose the latter. They believe that the shortage of supply and demand will still come, but it is postponed. Full capacity reduces the cost of lithium mining per unit, in case this judgment is not correct, the worst result is to increase lithium ore inventory at a lower cost, ganfeng can bear.
The Mt Marion Mine in Australia, in which Ganfeng holds a 50% stake, has been in full production since August of that year, and the output is higher than before the epidemic. This is ganfeng's most important source of lithium resources, with an annual output of 450,000 tons of lithium concentrate.
Photo: Mt Marion Mine, Australia.
Ganfeng also accelerated its investment in other projects, such as the completion of the exercise of the Sonora lithium mine project in Mexico in September of that year, avoiding the increase in the cost of exercise after the rise in lithium prices.
At the other end of the lithium resource supply chain, power battery giant Ningde Times has also made a similar judgment.
More than half of China's new energy vehicles use the batteries of the Ningde era, which can feel the temperature of the downstream market at the earliest and most complete.
While Ganfeng accelerated the expansion of production, in the second half of 2020, CATL made a less conspicuous move: locking in the upstream VC material (vinylene carbonate) production capacity.
VC is an additive in the electrolyte, although it is indispensable, but the dosage is small, the cost is low, and the general enterprise will not deliberately lock in the supply of VC.
An electrolyte manufacturer told LatePost that CATL locked in the VC supply for the next year in the second half of 2020 by its electrolyte supplier Tianci Materials upstream. In order to maintain the quantity, Tianci used a price higher than the market price at that time and signed a long-term agreement with the upstream.
Early the next year, as demand for electric vehicles exploded, other manufacturers found themselves one step slower. A medium-sized electrolyte manufacturer, Ye Cheng (pseudonym), told LatePost that by Q2 2021, it was difficult for them to buy VCs upstream. A battery company source said that by the second half of 2021, even BYD, China's second-largest installed power battery company, is extremely short of VCs, and its inventory was once only enough for one week.
A lithium salt company source said that after locking in VC, CATL began to lock in the production capacity of cathode materials around the end of 2020.
This is a layout that requires more funding and is also more critical. 30% of the cost of a power battery is cathode material. The Cataline era especially attaches great importance to the lithium iron phosphate cathode, not only wrapping up all the lithium iron phosphate cathode production capacity of some companies, but also requiring them to expand production.
Car batteries mainly have two categories: lithium iron phosphate and lithium ternary. From 2018 to 2020, the proportion of ternary lithium has been higher than that of lithium iron phosphate, and the rapid development of the Cataline era in the past few years has benefited from its bet on the ternary lithium route. But in 2021, lithium iron phosphate will catch up with lithium ternary, accounting for 53%. The Ningde era was prepared in advance.
After receiving orders from large companies such as Catalcote Times, the cathode company will lock in the supply of lithium carbonate and lithium hydroxide required for the production of cathode to lithium salt companies such as Ganfeng and Tianqi in the upstream. At this point, the tight supply of the whole industry has been very clear.
There are more monks and fewer porridges, and battery companies that act one step later have to compete at a higher price. Lithium carbonate and lithium hydroxide immediately launched a large price increase cycle that has lasted so far in January 2021.
The price increase did not surprise these industry giants in the Ganfeng and Ningde eras. From the end of 2017 to the middle of 2020, the price of lithium carbonate plummeted by more than 80%. It was only late last summer that prices returned to their 2017 peak levels.
But the length, speed and magnitude of this round of price increases exceeded everyone's expectations.
There is one factor that cannot be calculated: anticipation and panic.
From car companies to power battery companies to positive pole companies, every link will be worried about insufficient supply, find ways to increase additional inventory, the industry's thirst for lithium beyond the actual production consumption - which further exacerbates the price increase, and gives companies in all links a greater incentive to stock up.
"We expected it to go up, but we didn't expect it to go up so fast, so much." Ganfeng Wang Xiaoshen said that when the price of lithium carbonate reaches 500,000, "the upstream and downstream are a bit bottomless, and it will not affect terminal demand and need to be observed."
The scramble spreads to the top
Battery companies began to invest directly in lithium mines
The turning point in price increases from reasonable to unexpected came in July last year.
In the first three months of last year, lithium carbonate rose from 50,000 / ton to 90,000 / ton, and from April to July, it was sideways around 100,000 / ton.
At this time, although the lithium price has risen 1 times, it is still within expectations. Lithium is the upstream resource of the long industrial chain, lithium mining companies receive downstream demand signals and take time to expand production, which will produce a mismatch between supply and demand, so lithium prices will fluctuate cyclically.
The last round of price increases in lithium prices (lithium carbonate) began in the second half of 2015, when the price was 50,000 / ton, and by the end of 2017, it had risen to nearly 180,000 / ton. Lithium prices last July are still far from that peak.
In this period before July, Ganfeng continued to accelerate its investment in upstream lithium ore resources. This includes an increase in its stake in the Cauchari-Olaroz lithium-salt lake project in Argentina, which rose from 50 percent to 51 percent, and an offer to buy Bacanora, a British company that holds the Sonora project in Mexico, which Ganfeng had previously held nearly 30 percent of.
Ganfeng thought he was in a favorable position upstream of the layout. China consumes more than half of the world's power batteries. Overseas lithium salt companies, such as Chilean SQM, the United States Yapal, etc. are far from the consumer market, and their reactions and actions are not as fast as those of Chinese companies.
Ganfeng's main competitor in China, Tianqi Lithium, is still in a debt crisis in early 2021 and is temporarily unable to invest in new upstream projects. In 2018, Tianqi borrowed $3.5 billion to acquire a 23.7% stake in SQM for $4 billion.
But in late July last year, the price of lithium, which had been sideways for nearly four months, rose rapidly again, which exceeded Ganfeng's expectations.
Wang Xiaoshen said they would have thought lithium prices would not continue to rise until September last year. At the beginning of the year, it was decided to expand the production capacity of batteries and cathode materials until October and November. Companies generally start stocking 1-2 months before production, that is, in September, and market demand will suddenly increase. But the actual situation is that the entire industry believes that lithium will increase in price, so companies have advanced the stocking time and increased the stocking volume.
A fiercer competition for lithium mineral resources is taking place at the same time.
Wang Xiaoshen told LatePost that after June last year, he clearly felt that more people came to grab the project, and downstream companies became more radical; even some real estate companies that had nothing to do with new energy began to invest in lithium mines.
This has affected some of Ganfeng's investments. A widely publicized case is the bid for Millennium Lithium, a competition between the upstream and downstream giants of China's new energy industry, ganfeng lithium and Ningde era.
AS early as 2017, CATL began to test the waters to invest in upstream mining companies and projects. By June 2021, it has successively invested in the North American lithium industry, the Australian lithium mining company Pilbara, newstride, which develops lithium mines in Indonesia, and Neo Lithum, which owns a lithium salt lake project in Argentina.
The total investment in the above projects shall not exceed RMB 1.4 billion. In addition to accounting for more than 40% of the shares in the North American lithium industry, NINGDE's share in the remaining projects is less than 20%. Tianqi Lithium spent more than 5 billion yuan as early as 2012 when it acquired Talison, an Australian lithium mining company. In contrast, the Ningde era did not show a strong willingness to control the upstream before.
But in the millennium lithium industry, the investment style of the Ningde era has changed greatly.
Millennium has two lithium salt lake projects in Argentina, one with proven reserves capable of producing 4.12 million tonnes of lithium carbonate, and one in the early stages of exploration.
If the bidding is successful, CATL can obtain the underwriting rights of these projects: guarantee the annual supply, but do not promise the price, generally every quarter or semi-annual price adjustment.
The first to look at the millennium was Ganfeng. Last July, Ganfeng offered $353 million (about 1.8 billion yuan).
Wang Xiaoshen told LatePost that Ganfeng's investment in upstream minerals needs to do due diligence and field investigation, and there are more provisions and requirements, such as the team sent to Ganfeng for project management, which generally has a long cycle. On the Millennium project, Ganfeng spent nearly ten months from understanding the project to bidding.
After Ganfeng bid for 2 months, the transaction changed, and the Ningde era entered the game. According to the announcement released by Millennium Lithium at the end of September, catheter era's bid was 377 million Canadian dollars (about 1.9 billion yuan), more than the total investment in lithium mines in catheter era before 2021. CATL also agreed to pay $10 million in liquidated damages to Ganfeng for Millennium. The day after the announcement, catalist's stock price rose 5%.
Reviewing the upstream investment since the rise in lithium prices, Wang Xiaoshen believes that the pace should be accelerated while relaxing some non-core terms.
Just when the market thought that the NINGD era would make a breakthrough in the upstream, a third competitor appeared. On November 1, Millennium Lithium announced that it had received a $400 million (about 2.5 billion yuan) offer from Lithium of the Americas, and CATL could decide whether to increase the price within 10 working days. The CATL era eventually gave up the price increase, and the millennium lithium industry was pocketed by the American lithium industry.
The bidding around the millennium lithium industry shows the complexity of lithium investment faced by new entrants such as CATL.
The winning American lithium industry has a deep relationship with Ganfeng. In early 2017, Ganfeng invested $50 million in Lithium Americas and currently holds a 12.5% stake in it. Ganfeng also developed a joint venture with Lithium Of americas to develop one of its major mineral resources, the Cauchari Lithium Salt Lake Project in Argentina, in which Ganfeng holds a 46.66% stake.
Some people believe that Ganfeng has promoted the price increase of the American lithium industry behind the scenes and become the ultimate winner. Ganfeng publicly responded that they only have one board seat in the American lithium industry, and the transaction involves competition in the same industry, and Ganfeng did not participate in the decision-making throughout the process.
Wang Xiaoshen told LatePost that the American lithium industry shot not because the Ningde era entered the game, but because Ganfeng gave up the project. If only Ganfeng offers, The American Lithium industry will take into account the shareholders and the multi-year cooperative relationship and not participate in the competition. After Ganfeng gave up, the American lithium industry no longer has concerns. At that time, Ganfeng was more focused on the simultaneous acquisition of Bacanora and did not continue to participate in the bidding.
In addition to trading logic and skills, it is more difficult for new entrants to make up for the experience required for mineral processing and mining in a short period of time.
Lithium ore is mainly divided into rock mines that produce spodumene, lithium mica and lithium salt lakes/lithium brines that can extract lithium carbonate. Rock ore to see the core, particle crystal size, distinguish the ore level, especially difficult is to find the ore vein in a large area of mining area; the key to brine processing is to judge the fluidity, the better the fluidity, the easier it is to extract brine.
In addition, mineral processing should also examine and understand the political system of the country where the project is located, the mining system, and whether foreign companies are encouraged to invest.
The mining and lithium extraction links after mineral processing are equally complex. A lithium salt company source told "LatePost" that the prospecting and mining of rock mines requires geological exploration experience, if it is a salt lake extraction, it is necessary to master the lithium chemical technology, due to the natural conditions of different salt lakes, mineral endowments, liquidity, etc., for different projects to do different research and development and customization, this is a completely different set of battery production technology system.
In the face of mining relatively mature lithium mines, experienced companies can complete the whole process from beneficiation to lithium production line production within 18 months at the earliest, while companies with less experience in mining need longer.
Pictured: A small salt pan in the experimental phase.
In the price increase cycle, the development of mature mineral projects to sell minerals has sufficient returns, and the willingness to introduce external investment is not strong. The projects that can be bought are more projects that have not yet been mined or even proven reserves. This does not alleviate the tight supply immediately.
But buyers can't wait. Wang Xiaoshen said that he observed that some companies did not go to the field before investing in projects and signing agreements.
However, for powerful downstream companies, expensive and long cycles are not fundamental obstacles. Investing in lithium mines is not just a temporary necessity, and the long-term division of labor across the industry is being rewritten. At the same time, CATL is also cooperating with external companies to obtain the technical ability to develop lithium ore. In March this year, CATL and Yongxing Materials, a joint venture company with Mica lithium extraction leader Yongxing Materials, will carry out lithium extraction project cooperation.
In addition to bidding for Millennial Lithium, CATL acquired a US$240 million (1.55 billion yuan) stake in Manono, a lithium mining project in the Democratic Republic of the Congo in Africa, which is building a 700,000-ton annual capacity last September.
According to statistics from the analyst firm Landiz, as of March 2022, CATL and its affiliates or subsidiaries own 77% of the underwriting rights of the Mibra lithium mine in Brazil, 29% of the underwriting right of the Pilgangoora lithium mine in Australia and 51% of the underwriting right in the Manono lithium mine.
At the same time, BYD, which has battery and vehicle businesses, has also joined the upstream competition.
In January 2022, BYD Chile SPA, an affiliate, spent $61 million to obtain a Chile-based mining authorization to use a mineral project over a 20-year period that could mine a total of 80,000 tonnes of lithium carbonate. More than 70 companies competed for the tender, and BYD bid twice as much for lithium carbonate per unit as its competitors.
The spoilers may also have Tesla. On Friday, Tesla founder Musk tweeted on social media: "The price of lithium has reached crazy levels! Tesla may have to enter the lithium mining and refining business on a large scale. ”
Tesla is one of Ganfeng's major customers, it has previously signed a long-term agreement directly with Ganfeng, purchased lithium hydroxide (Tesla's high-nickel battery route requires the use of lithium hydroxide), and then gave them to upstream power battery manufacturers, which itself is stronger than the general car companies to control the upstream supply. In November last year, Tesla just renewed a three-year long-term agreement with Ganfeng.
In this round of price increases, it has become the norm for customers to become competitors. Earlier than the competition for lithium mines, NINGDE times established Tianyi Lithium in 2018 as a joint venture with lithium salt company Tianhua Chaojing, and Ningde times held 25% of the shares, entering the main battlefield of Ganfeng and Tianqi - lithium salt production. In January this year, the two sides once again established a lithium salt joint venture company Fengxin Times, with CATL holding 90% of the shares.
Ganfeng Lithium established the Ganfeng Battery Division in 2015, involving consumer electronics batteries and solid-state batteries. At the beginning of this year, Ganfeng announced that semi-solid-state batteries have been installed.
The big guys who were originally distributed in different links invariably expanded the boundaries upwards and downwards. This is different from the mature period of the fuel vehicle industry, the automakers are only responsible for the manufacture of core components such as engines, and the parts manufacturers perform their duties and the division of labor at all levels of supply.
The yet-to-be-finalized electric vehicle industry has more plasticity, and companies are trying to find the most favorable positioning and form, and this round of resource surge has accelerated the process.
The first to bear the impact of the price increase are the suppliers of battery companies
At the moment when lithium salt and battery giants are scrambling for resources, battery material companies such as positive and negative electrodes and electrolytes sandwiched in the middle are in a difficult situation.
The new energy automobile industry chain is a pattern of small and two large ends in the middle: upstream lithium salt giants Ganfeng and Tianqi are companies with a market value of more than 100 billion, and the downstream battery giant Ningde era has a market value of more than one trillion. In the middle of the field of battery materials, leading companies such as Tianci Materials and Zhongwei Shares have a market value of 60 billion to 80 billion, and a large number of small and medium-sized manufacturers are also distributed in this link.
Since the second half of last year, companies such as phosphorus chemical giant Yuntianhua and cement giant Conch Cement have crossed into this field. A lithium iron phosphate cathode material supplier commented that there are too many players and "the cathode material is used as pig feed."
Due to the relatively low concentration, battery materials companies are at a disadvantage when trading with upstream.
Ganfeng Lithium has begun to sign a long-term agreement with downstream materials major customers since 2017, and the long-term agreement is not insured, and the price will be adjusted once every six months or quarterly.
After the second half of last year, the price adjustment cycle of the mine to the lithium salt company changed from quarterly to monthly, and Ganfeng also changed the price adjustment cycle of some supply agreements to monthly. The rising costs of lithium carbonate and lithium hydroxide are passed on from the mine to the middle and lower reaches of the mine faster.
Because of the lack of demand and funds, small material companies are difficult to sign in for a long time, and can only go to the market to sweep goods, and the supply is extremely unstable.
Even if they can find a source, material companies face tough trading conditions. Electrolyte supplier Ye Cheng told LatePost that in the past, they looked for upstream lithium hexafluorophosphate (the raw material of the electrolyte, which needs to be made of lithium carbonate) generally did not use cash and used acceptance drafts, and there was an account period of 3 months to half a year, which could reduce the cash occupation of the buyer, which was a common operation in the manufacturing industry.
But since the first half of last year, lithium hexafluorophosphate company has no longer collected bills of exchange from small banks, only recognizing the four major banks; in the second half of the year, the four major banks are no longer ok, as long as cash. "Pay first, then ship." Ye Cheng said. Buying a single item is tens of millions of cash expenditures, and if the transaction cannot be closed quickly, the price increase caused by the time delay will also be borne by the downstream.
Another practitioner said he encountered an extreme situation in which the upstream supplier did not deliver on schedule, and later preferred to default rather than ship, but instead had the downstream company re-place the order at the latest price – the profit of the price increase has exceeded the default loss.
When selling goods downstream, material companies also have difficulty transferring cost pressure to battery companies.
A supply chain engineer for a power battery company told LatePost that last year's lithium price increase has been accumulated in the battery material link, until BYD and Guoxuan Hi-Tech took the lead in starting the price increase in November.
Before the end of last year, when the price of lithium carbonate had not risen below 300,000, some small factories were producing at a loss. "Workers' wages are money, equipment depreciation is also money, suspension of production is also a loss, production is also a loss, production can at least keep customers." Li Jigang, a cathode supplier, said this is the general mentality of peers.
When the price of lithium carbonate exceeded 400,000 at the beginning of this year, some factories chose to stop production on holiday. Li Jigang said that most of the positive pole companies that are still running will sign a "back-to-back" agreement with the battery company: after the battery company accepts the price increase, the material company will go upstream to buy raw materials.
Under this model, material companies can only earn a "processing fee".
Mo Ke, the founder of True Lithium Research, calculated that the production of a ton of 523 ternary lithium battery cathode material requires about 1 ton of precursors and nearly 0.4 tons of lithium carbonate. At the end of February this year, lithium carbonate was quoted at 440,000 / ton, precursors 140,000 / ton, and the direct raw material cost of one ton of cathode material was 308,000, compared with the market price of 310,000 at that time.
"The production of the 523 cathode also needs to be sintered, sintered once is 6,000 kWh of electricity, the electricity bill is 6,000 yuan, which does not include labor costs, equipment depreciation, and material loss." Mo Ke believes that if the ternary cathode manufacturers trade at the market price, there is no possibility of profit.
Inside the battery link, there is a clear two-stage differentiation.
CATL stabilized its leading position last year, with its domestic market share slightly rising to 52% from 50.2% in 2020.
Other top-ranked battery companies received the most growth dividends. The downstream demand that the CATL era could not meet spilled over to other battery manufacturers. China Innovation Aviation, which poached Xiaopeng Automobile from the Ningde era, increased its installed capacity by 266.7% year-on-year in February this year, becoming the third in China. Sunwoda attracted investment from Wei Xiaoli with a 4C battery that can achieve fast charging, and the Xiaopeng G9 will use the Sunwoda battery.
Battery companies with huge volumes or downstream support from automakers have obtained a more stable supply at lower prices. A lithium salt company source said that the overall price of the Ningde era is about 30% lower than the market.
Smaller companies at the back of the industry are dying at an accelerated pace. They can't match large companies in terms of cost, and they dare not easily raise prices for customers. A second-line battery factory person said that the Ningde era does not rise, and they do not dare to rise. According to CBN, CATL did not start the first price increase in this cycle until December last year.
The crisis gradually evolved from rising prices to having no materials to buy. A salesman of electrolyte and cathode material manufacturer Tianci Material told "LatePost" that 95% of their electrolyte production capacity this year has been booked, in addition to the domestic installed capacity of the top ten power battery companies, Tianci will not sign a long contract with customers, other new customers, small customers, can only have a margin to give a little: "Now the power battery customer priority is the highest, and some energy storage customers have reduced their weight here." ”
Some battery companies have withdrawn from the market. China's new energy vehicle market had a total of 58 power battery companies installed capacity last year, 13 fewer than the previous year. At the same time, the total installed capacity of power batteries in China reached 133 GWh last year, more than double that of the previous year. Bigger cake, left to fewer players.
Lithium prices have signaled to stop rising
But car costs are likely to continue to rise
In the past 1 month, lithium prices have shown signs to stop rising.
The price of battery-grade lithium carbonate in Shanghai Nonferrous Network has been fixed at 503,000 / ton for half a month after March 15. After entering April, the price of lithium carbonate continued to hover around 50-502,500 tons. On April 14, the latest offer of lithium carbonate was 496,000 / ton.
Downstream production cuts are a direct trigger. At the end of February, Euler Black /White Cat, a subsidiary of the Great Wall, which has a low unit price and is more sensitive to price, announced that it would temporarily stop taking orders due to the sharp rise in raw material prices and the loss of more than 10,000 yuan per unit.
According to a cathode material supplier, starting in February this year, some small cathode material factories have begun to shrink or stop production. He observed that lithium hexafluorophosphate, an intermediate material between lithium carbonate and electrolyte, had become relatively wealthy, and its price had fallen first in early March when lithium carbonate was still rising in price, possibly because some traders or producers who had previously hoarded lithium hexafluorophosphate stocks had become bearish and began selling.
Bearish also passed on to some lithium carbonate traders, a material manufacturer told LatePost that some small traders have been selling lithium carbonate at about 400,000 / ton.
But that doesn't mean a drop in car costs will come anytime soon.
As far as electric vehicles are concerned, they are still in an explosive period. 4.2 million electric vehicles were produced worldwide last year, and third-party agency TrendForce predicts more than 10 million this year. Compared with downstream car companies and battery companies that can put into production faster, upstream lithium mine development takes time. Analyst firm Rystad Energy believes that at least until 2030, the supply of lithium is relatively tight.
For the entire automotive industry, including fuel vehicles, the deeper change is a change in the way production and division of labor are done.
Invented by Toyota and widely adopted by the automotive industry, the Just-In-Time model pursues extreme efficiency, with parts on hand to minimize inventory. It is supported by a set of meticulous division of labor, layer by layer supply system, the automobile company only produces core components such as engines, and the upstream links perform their duties.
This makes cars cheaper and cheaper, and for 100,000 yuan, people can buy 30,000 parts and components, which is one of the miracles of modern industry.
With the shortage or price increase of various parts such as lithium, nickel, and chips, the uncertainty of the epidemic and regional conflicts is increasing day by day. The auto industry is beginning to consider higher costs in exchange for more security of supply.
This includes increasing inventories. In its January report, Supply Chain Disruption: Why It Continues into 2022, research firm IHS Markit mentioned that some automotive purchasing managers are considering changing long-term practices such as lean inventory and just-in-time production to increase inventory of certain parts.
In the field of electric vehicles with undecided industry pattern and division of labor, companies in each link still have the motivation and ability to seek greater control over the industrial chain. The competition for minerals brought about by the rise in lithium prices is a typical case: battery companies, automobile companies and other divisions of labor that were originally far from the upstream are also investing heavily in minerals in exchange for safety and stability.
But expanding inventory and investing upstream resources will increase costs and will eventually be passed on to the price of the car.
In 2000, The Economist reviewed the world of the 20th century in a series of stories, one of which was about prices: Throughout the 20th century, the real price of cars fell by 50 percent.
"Many older people experience much higher inflation than young people." This sentence in the text shows a better narrative of progress today than in the past.
And now, at a higher price, buying the same or even inferior things is a fact in front of most people. This will dampen consumer demand.
It is everyone's consumption that constitutes macro GDP growth, with one person spending less and the other reducing income. Automobiles support nearly four trillion yuan of consumption in China every year, and electric vehicles are considered to be a new driving force for the automobile market and economic growth. Now, it could be the victim of declining consumption, and it won't be the only one.
Caption: Tesla Berlin factory opened.