Author/Mo Ke (Founder of True Lithium Research)
Editor/ Regulus Little Wave
Editor's Note:
Under the epidemic situation and the situation in Russia and Ukraine, the value of battery raw materials has doubled and transmitted to the consumer side, when will this wave of price increases end? What is the root cause of the "magnificent" of this battery raw material? What is the long-term impact on global new energy vehicles? How do enterprises in the industrial chain view and respond?
On April 24, 2022, Xuanyuanzhixue held an online open class with the theme of "Crazy 'Raw Materials' - Logic and Response to the Rise of Battery Raw Materials", and invited relevant professionals from the supply side, demand side, trend analysis side and investment side to comprehensively analyze the core reasons, coping methods and trend judgments of raw material rise.
Today, we broadcast for you the sharing record (with deletions) from The founder of True Lithium Research, Mo Ke, on the day of the open class:
Today I mainly report on the development of our new energy automobile industry chain, and at the same time echo our theme - crazy raw materials, at the same time, I also do some superficial analysis at my personal level.
As we all know, the demand for the downstream application market represented by electric vehicles and energy storage has indeed begun to explode last year, and for this year, everyone's basic views have also increased significantly. But there is also controversy, the controversy is the judgment of the speed of development, how much it will be. I personally may be relatively pessimistic, I think this year may be 4.2 million to 4.5 million vehicles, the growth rate is not 50%, of course, many people think more than 5 million, some people even think 6 million, 7 million.
The Ministry of Industry and Information Technology, the National Development and Reform Commission and other competent authorities tend to think that this year will be more than 5 million vehicles, because new energy vehicles must have good results to the party's 20 major congresses.
The development status of new energy vehicles
This page PPT is about the statistics of new energy vehicles - monthly output in the Chinese market (2016-2021). In 2021, every month is much higher than before, doesn't it feel a little abnormal? If it is a normal development and normal high growth, in fact, at the beginning of January and February, at least there will be institutions or experts who can predict it. But the truth is that at the beginning of last year, basically no one could have predicted that the total size of 3.5 million vehicles would be reached that year.
So I think last year's rapid growth, in general, there are still some unexpected factors at play:
1. Manufacturers will produce in advance when they are convinced that its cost will continue to rise, and consumers will also consume in advance under the stimulus of price increase expectations. I think part of last year's growth was that this year's consumption was advanced.
2. In the 2020 epidemic, some consumers moved the consumption of the year to 2021, so in general, 2021 may be the consumption of the previous and subsequent years to this year, resulting in a particularly good number of results in this year.
3. National policies strongly direct to the dual carbon target of 3060. What you may not have thought at the beginning is that the 3060 dual carbon target will be greatly implemented and promoted at the administrative level of the relevant government agencies in charge, in fact, this is also a major reason for the great prosperity of new energy vehicles last year.
The above is my personal analysis, not necessarily true.
2022 electric vehicles, as I have just said, there are so many kinds of predictions, by the end of the year we will see what the specific situation will look like.
I am not as optimistic about the development of this year as most experts, there are some factors, first of all, I want to emphasize that the development structure of our new energy vehicles is not very healthy. We know that more than 80% of the production and sales of new energy vehicles are pure electric passenger cars, about 10% are plug-in hybrids, and passenger cars account for more than 90%. Based on this, from the health status of the pure electric passenger car market structure, it can be roughly judged whether the market structure of the entire new energy vehicle is healthy.
Last year, the structure of the pure car passenger car market showed a more significant dumbbell-shaped structure of "two large and small in the middle", and I personally believe that this structure needs to be optimized and adjusted. A healthy market structure should be imitation vertical, with a large middle and a small end.
Judging from this film, the dumbbell structure of the pure electric passenger car market last year is obvious, and my watch counts all the cars that produced 30,000 units last year. The sum of these vehicles accounts for about two-thirds of all pure electric passenger cars, and these cars are 34% of mini cars and 20.4% of high-end cars; mid-range cars are about 12.4%, accounting for the smallest proportion.
Let's look at the changes in the first quarter of this year, in the first quarter of this year, I listed all the more than 10,000 vehicles produced, and these 24 cars accounted for about two-thirds of the total. The production structure of these cars, in fact, is basically the same as last year, if there is a change, the proportion of mid-range cars has also dropped by one percentage point, mini cars have increased by one percentage point, high-end cars have basically maintained, the overall car market structure has not improved, I think in this situation, if this year's results are particularly good, the total number of 6 million or even more, next year, the year after may have problems. Why? Because of this market structure, I personally think it is difficult to have a sustainable development.
In this year's electric vehicles, I think the only bright spot may be electric heavy trucks, but the total number of electric heavy trucks is still relatively small. This year it grew rapidly, producing 6182 vehicles in the first quarter of this year, basically more than half of last year's full year, and the growth rate is also very fast. The first quarter of this year increased by more than 10 times year-on-year, and the first quarter of last year was probably less than 600 vehicles. In general, the structure of this year's electric heavy trucks is still dominated by transport vehicles, and such a development is relatively healthy. Because the structure of heavy trucks in reality is basically based on transport vehicles, mixer trucks and sanitation vehicles are niche markets. So electric heavy trucks, in general, I personally think that the development is relatively healthy.
At the same time, electric heavy trucks are very helpful for the growth of our batteries, because each electric heavy truck uses 300 kWh of electricity, which is very beneficial to the development of the battery market, which is the main reason why we focus on electric heavy trucks.
The reason for the price increase of electric vehicles
On this page we talk about price increases. If last year's new energy vehicles are still expected to increase prices, then this year it has become a price increase reality, and some vehicle products have increased prices more than once this year. Why should the price of new energy vehicles increase? The most important thing is that the power battery has a significant cost increase. The proportion of power batteries in the entire cost structure of electric vehicles is relatively large, generally accounting for more than 30%, and the high may even be half. Therefore, the price increase of electric vehicles is fundamentally driven by power batteries.
What is the price increase of power batteries? Throughout 2021, our tracking shows that its cost has generally increased by 30% to 40%, and if you look at the 50 kWh of electricity for a car, the cost of the corresponding electric vehicle will generally increase by 0.5 to 10,000 yuan. This year, the subsidy policy for new energy vehicles has been introduced, and the subsidy amount is lowered, and the downward adjustment is about 0.4 to 0.6 million yuan per vehicle in terms of pure electric vehicle passenger cars.
This year's points can not make money, because the number of new energy vehicles last year is too much, but this time last year, the points can make money, because the amount of the previous year was not too much. Adding these factors together, the maximum increase in the cost of each car this year is likely to reach 20,000 yuan a car. I saw that Xu Xiaoming xu of Anchi Technology also listed some specific car price increases in the PPT, and these price increases actually could not catch up with the increase in battery costs. At the end of this year, electric products may still have one or two or more times to raise the price.
Since the price increase of electric vehicle products is driven by the increase in battery costs, let's take a look at the cost of power batteries, in June 2020, when we investigated a cell for ternary and lithium iron. We put the battery manufacturing at that time what materials are used, including the amount of use, these assume that it is unchanged, and then the change depends on the price change of the material caused by the cost change of the battery cell.
So tracked down, to April 1, 2 this year, the price, basically whether it is ternary or iron lithium cost has basically doubled, the growth rate is still very amazing. It should be known that before June 2020, the cost of the battery cell is basically declining, from 09 to 2020, it lasted for 11 or 12 years, but by 2020, it will usher in an inflection point - the cost of the battery began to go up.
Why are battery costs rising?
Why is the cost of batteries going up? Let's take a look at the four main materials for manufacturing power batteries: positive electrode, negative electrode, electrolyte, and diaphragm. The price changes here, I have listed above. As you can see, the most important element affecting the cost of the battery should be the cathode material, because the proportion of the cathode material in the battery is about 30%, or even half. Therefore, the cost of batteries has risen, mainly because the positive pole has risen more severely.
The negative electrode is also rising, the electrolyte has been rising faster for a while, probably from July to October last year, when it was rubbing up, the most important thing is lithium hexafluorophosphate, VC and other materials that specifically constitute the electrolyte, and the price of these materials soared at that time.
This page of PPT concludes that the increase in battery costs mainly depends on the positive electrode.
Looking at the situation of the cathode, why is the price of cathode materials rising so much? A central conclusion is that it depends on the rise in the price of resources. We know that the production of cathode materials basically uses lithium carbonate, and ternary materials also use nickel and cobalt, and we will also hear about nickel in the hot spring temperature later.
I only take the case of a lithium resource as an example here, and the price change of cathode material depends largely on the change in the price increase of lithium carbonate. From this film, it can probably be taken in September 2021 as an intermediate node, before which the price increase of lithium carbonate has generally maintained an upward momentum, but its price increase is still relatively slow.
From September 2021 to late March 2022, it rose rapidly, at that time it was about 100,000, 140,000 tons to 150,000 tons, etc., to late March to 500,000 tons, and at the end of March to now, it is generally fluctuating on the 500,000 line, and the price finally did not continue to go up.
In this analysis, we can see that the continuous increase in battery costs is rooted in the continuous rise in the price of related resources. Of course, this is only a personal opinion.
Why do resources increase in price? Let's take a look at this page of PPT, which is my analysis of the reasons for summarizing personally.
1. Inflation leads to the depreciation of the currency, which triggers a correction of the price of the product. According to the economic knowledge I learned, usually this correction starts from the resource side, and last year we actually saw such a price correction, so I think this may still be the core reason, that is, the money is not worth anything, resulting in the price of the product starting to go up.
2. China's electric vehicle market (the largest demand side) had an unexpected explosion last year, and all parties were underprepared, and all relevant parties were not prepared enough to expect it.
3. The combination of the above two reasons has led to the market misreading the price increase on the resource side because of the supply problem, which leads to the adjustment of the behavior of each link (demand side, middleman, supply side), which eventually leads to the demand side to increase the purchase volume, and the supply side will also find ways to guide the product price to continue to go up, the middle chamber of commerce hoards, and these behavior adjustments will slowly lead to the actual supply tension. Especially in individual time periods, there will even be a shortage of supply.
4. This in turn forms a targeted feedback, resulting in a continued rise in resource-side prices. From September last year to March and April this year, basically 3 and 4 have been circulating. The chart on the right is the data on the change of the index of the US CPI, why the US CPI? Because of our global resources, whether you are lithium resources or other resources, this denominated currency is basically the US dollar, so we have to look at the depreciation of the US dollar, the best reference is the CPI of the United States.
Through comparison, we can see that the lowest CPI in the United States is probably May 2020, when it was just above 0, and in January 2021, it was only in its early 1st, and it rose to 8 in March of this year, so the CPI index grew very fast. The rise in the price of resources may be slightly lagging behind, but the overall is corresponding, the price of lithium carbonate is also going up, even the rhythm is similar, the overall speed, the speed of change can also be correlated, so I think this may support my personal belief that inflation-induced currency depreciation may be the main reason.
Of course, everyone has a different opinion from each person, and I am only my personal opinion for your reference.
Coping methods
After so many problems, how to solve them? The entire industry, including governments and relevant actors, has been trying to figure out how to solve the problem. These solutions to the problem, I probably made some summaries divided into two aspects: internal force, external force. The internal force is the work done by the industrial chain itself, and the external force is mainly the government department, of course, there are other institutions doing related work.
internal force. What is being done so far? There are mainly the following aspects:
1. All links are increasing supply and expanding production, especially on the resource side. In general, it belongs to the active behavior of the supply side, who expands production who must do it downstream, it is an active thing to do.
2. The demand side unites to resist the continued rise in the price of resources, which is the initiative of the demand side. The most significant is that in March, the market came out of the wind, with several major battery manufacturers and other demanders to say "no" to the price increase of lithium carbonate, saying that as long as you exceed 500,000 yuan a ton, I will not buy, at that time such rumors in the market still caused a lot of repercussions.
3. The demand side reduces costs through technological progress, of course, including process improvement. This should be said to be a very positive factor, which is also the active behavior of the demand side.
Such a move, we may also hear some teachers and bosses mention the reduction of costs through technological progress.
4. The price increase of electric vehicle terminal products will affect sales, and the decline in sales will force the purchase of batteries by OEMs. The purchase volume of battery factories is reduced, it will also be transmitted upwards, and the amount of material procurement will also be reduced, which may eventually lead to a substantial decline in the expected and actual demand increases in demand for resources, which will lead to a downward adjustment in the price of resources.
If an inflection point is established here, it is easy to enter another cycle, which will lead to the price of resources entering a downward channel. It can be seen from the price of lithium carbonate that in September 2015, the price of lithium carbonate rose from more than 40,000 in August to more than 100,000, and has risen to 150,000 and 160,000, until the price of lithium carbonate in 2019 began to decline, almost to May and June 2020, the price of lithium carbonate reached a relatively low point. Overall, the cycle may be around five years, which is the first cycle of lithium carbonate. What will the second cycle look like? There will be experts to give us relevant analysis later, and I will not say more.
5. Leading enterprises strengthen their own resource strategies to ensure their supply. These measures themselves, to a certain extent, will also inhibit price fluctuations to a certain extent, which is also an active behavior of the demand side. There are active and passive, and there are more active behaviors in general.
external force. It is not easy to say, I feel that the direction and pace are not very uniform.
1. The competent authorities hope that new energy vehicles will present the party's 20th Party Congress with excellent results, or hope to promote the further high-speed development of new energy vehicles, which will lead to related battery demand, material demand and resource demand is expected to be more exuberant, in this case, the price will be on the basis of the already high may add firewood, stimulate resource prices to further increase.
2. The authorities are intervening in the rapid rise in resource prices, and we know that we are already doing so in the field of lithium resources.
3. And at the same time, it is also requiring an increase in the supply of resources, which I will not say more about.
4. Strict epidemic control policies have affected supply and demand and logistics, including logistics, and may eventually actually reduce demand.
I recently learned that there are some companies whose production is actually in part of the production reduction, the actual demand may not be as good as previously imagined. So this may also be one of the main reasons why the price of lithium carbonate is currently hovering between 400,000 and 500,000.
I'll just say that first, and then we'll listen to the experts and bosses behind me, because they probably know more about this market than I do.
Lithium battery in the domestic situation
On the last page of PPT, I would like to talk about the overall situation of lithium batteries in our Chinese market.
A total of 330 GWh lithium-ion batteries were produced in 2021, the total domestic market was 230 GWh, and the electric vehicle market was more than 150 GWh. This demand includes Tesla's car, because it is installed in the country to Europe, to sell it in other places overseas, and our statistics also count this in it.
Exports are about 30 GWh, and about 70 GWh more are produced, of which power batteries produce more than 60 GWh, and consumer batteries and small power produce less than 10 GWh more, which is generally the case. This year may be more than 500 GWh, and the specific composition is probably like this.
1. In addition to the total demand of other markets other than electric vehicles and energy storage markets is about 80 gigawatt hours, this is more reliable, even if there is growth, growth is also expected, unlike last year's electric vehicle market growth, not entirely the market role, the prediction is more difficult. In addition to the electric vehicle market and the energy storage market, other markets still follow its market laws, so we can see it overall.
The electric vehicle and energy storage markets have some additional forces in it, especially the judgment caused by the policy may be more difficult. The electric vehicle market is calculated by 5 million units, a car 50 kWh of electricity is about 250 GWh, the output of energy storage batteries is assumed to be 40 GWh, and the energy storage market I also seek truth from facts to tell you, I can't see clearly. Because there is a big gap between the relevant data of the company's annual report and the battery demand of the energy storage bidding project that can be checked, it is not on the number. This year's forecast, we are still optimistic, we assume that this year may have about 40 GWh of production.
In addition, exports corresponding to last year's statistical caliber may be about 40 gigawatt hours, which will increase slightly. The amount of batteries produced this year may be more than 100 GWh, and the total battery production this year may exceed 500 GWh, which is probably the case.
I'll probably talk about this, throw a brick first, and then I want to hear the views of the next guests. (True Lithium Research launched a lithium battery cost calculation tool that is easy for everyone to use)