The state began to control the expansion of lithium battery production capacity, and low-end duplicate and backward production capacity is expected to accelerate clearance!

On May 8, the Ministry of Industry and Information Technology publicly solicited opinions on the lithium battery industry standard conditions and announcement management measures (draft for comments). Among them, it is proposed to guide enterprises to reduce manufacturing projects that simply expand production capacity, strengthen technological innovation, improve product quality, and reduce production costs. In addition, it also mentioned that the annual expenses of lithium battery companies for R&D and process improvement are not less than 3% of the main business income.

As soon as the "draft for comments" came out, it caused a huge earthquake in the industry, and the battery sector also rose by more than 5% on May 9, and many stocks, including Tianli Lithium Energy, closed the price limit together. The relevant suggestions on "guiding enterprises to reduce manufacturing projects that simply expand production capacity" mentioned in the draft have caused the industry to think deeply. In this regard, some people in the lithium battery industry chain commented in an interview with the media that the lithium battery industry should focus on quality and not pay too much attention to quantity, and should limit the expansion of production capacity.

In fact, looking back at the previous "lithium battery industry standard conditions", the first version released as early as 2015 has already made it clear that "strictly control the new lithium battery industry projects that simply expand production capacity and have a low technical level", which is the same as today's "guiding enterprises to reduce manufacturing projects that simply expand production capacity". Now, this opinion is also based on the current situation of the lithium battery industry.

According to statistics from SNE Research, a South Korean research agency, the global installed capacity of electric vehicle batteries will reach 705.5GWh in 2023. According to the statistics of the China Automotive Power Battery Industry Innovation Alliance, the domestic battery production capacity alone will reach 1,860GWh in 2023, and the overcapacity of the industry is obvious. Zheshang Securities and other market institutions have also predicted that by 2025, the power battery production capacity required for new energy vehicles will reach 1200GWh, but the current capacity planning of power batteries has exceeded 4000GWh, and the planned production capacity far exceeds the required capacity.

And judging from the current development period of the lithium battery market, in recent years, the domestic lithium battery industry has expanded rapidly, and the production capacity has been growing, but the utilization rate has been declining year by year. In terms of production capacity, according to the investment and expansion projects of domestic lithium battery enterprises, the China Automotive Power Battery Industry Innovation Alliance has predicted that by 2025, the mainland lithium battery production capacity is likely to exceed 3000GWh.

According to SMM data, according to the actual production capacity that has been implemented in April, the annualized production capacity of domestic lithium batteries in 2024 will be about 1976GWh, and considering the situation of China's lithium battery output of 94.88GWh in April, SMM expects that the annualized output of domestic lithium batteries in 2024 will be 1138.56GWh, and the annualized capacity utilization rate will be about 57.62%.

Some media even predict that by 2025, the capacity utilization rate of lithium batteries in mainland China is likely to drop to about 35%. The comparison between the two boxes is enough to see the need to "reduce the simple expansion of production capacity".

For example, taking the anode market in 2023 as an example, according to SMM research, the output of anode materials in 2023 will be about 1.6 million tons, and the production capacity of anode materials in the same year has been as high as 3.4 million tons, which confirms the fact that the anode material industry will have overcapacity and low capacity utilization rate in 2023, and therefore, the price of anode materials will also decline in 2023. In 2024, the overcapacity of the anode material industry still exists, but the opportunity for development is actually hidden in the sluggish market and in the problems that need to be solved urgently: the application of lower-priced raw materials, the improvement of graphitization technology, the standardization of production processes, and the construction of integrated production lines; regulation and control of production scheduling and inventory, and control of capital flow; Construction of product structure, upstream and downstream structure; The improvement of product performance, the research and development of new anodes such as silicon-based anodes and hard carbon anodes; The development of overseas customers, the deployment and implementation of overseas plans...... 2024 will be a year of fierce competition between new and old players, and it will also be a year for the overall level of the anode industry to further climb.

The lithium battery separator industry is also facing the problem of price war, for this reason, enterprises have to seize market share by making profits, coupled with the increase in market share brought about by the improvement of the production competitiveness of domestic separator enterprises, the price of high-priced separator products has been pulled downward, driving the domestic lithium battery separator price to show a downward trend. And since the Spring Festival in 2024, the price war between the head separator companies due to overcapacity has continued, and the companies have made profits and lowered prices in order to grab large orders from the head battery cell companies, and the head battery cell companies have benefited from the low-price rush orders. Manufacturers of lithium battery separators increase production and yield rates with high operating rates to reduce costs, and ship at low prices to alleviate higher inventory pressure. In terms of production, the current starting differentiation between the top lithium battery separator manufacturers and the second- and third-tier enterprises is more serious, and some of the lower-ranking manufacturers still lack orders, and the production schedule is slow to recover.

Looking forward to the whole year of 2024, SMM expects that the price of lithium battery separator will still maintain a downward trend during the involution period, and the profits of separator companies will narrow. With the intensification of competition, there may be enterprises to deal with the state of loss, and the industry reshuffle is inevitable.

The state began to control the expansion of production capacity Industry insiders believe that it will promote technological innovation in the industry and accelerate the clearance of backward production capacity

Looking at the current lithium battery market, there are still many industry insiders who believe that domestic high-quality production capacity is still in short supply. The structural problem of concentrated expansion of low-end production capacity and insufficient high-end production capacity is particularly prominent in the lithium battery industry.

Xiao Chengwei, a researcher at the 18th Research Institute of China Electronics Technology Group, once mentioned in an interview with the media that at present, the mainland's power batteries are more of a lack of high-end and high-quality production capacity, low-end and inferior overcapacity. It is expected that some power battery companies that have done well in globalization and low-carbon will gain more market share.

Zhang Jianhong, executive director of the Environmental Technology and Economics Branch of the China Society of Technology and Economics, also expects that in the future, the head battery companies will occupy the vast majority of the market share, and the power battery companies below the second tier will accelerate the clearance.

As two well-known power battery giants in China, CATL and BYD, Liu Jincheng, chairman of EVE Lithium Energy, previously said that for the current lithium battery companies, compared with CATL and BYD, other companies are "not qualified" to roll up prices, and the rest of the companies can only live and die together.

The gap between the first, second and third-tier battery companies can also be glimpsed from their respective performance reports. As the world's undoubted leading power battery company, CATL's revenue in 2023 will be as high as 400.917 billion yuan, and the net profit attributable to shareholders of listed companies will be as high as 44.121 billion yuan, while Funeng Technology will have a net loss of 1.774 billion yuan in 2023, and Ruipu Lanjun's loss will also be as high as 1.943 billion yuan.

In an interview with the media, Zhang Xiang, director of the Vodaf Digital Vehicle International Cooperation Research Center, predicted that the price war will continue in 2024, and it is expected that by 2030, the power battery industry will be basically rectified, and the number of battery suppliers will be streamlined from the current 50 to about 10.

Referring to the Consultation Paper, according to SMM's preliminary understanding, although it stipulates that the actual output of the previous year should not be less than 50% of the actual production capacity of the current year, which is consistent with the provisions of 2021, due to the different stages of industry development, this standard has become more stringent in essence.

In addition, the Ministry of Industry and Information Technology also reiterated the provisions of the R & D expense rate of not less than 3% in the draft, and the superimposed capacity utilization rate of not less than 50%, many industry insiders believe that this will promote the industry's technological innovation and accelerate the clearance of backward production capacity.

The Science and Technology Innovation Board Daily also mentioned its views on the draft when interviewing a number of battery company executives, and many executives also said frankly that this will help the healthy development of the battery industry and enhance its competitiveness in combination with its own situation. Shen Jinliang, chairman of Huasheng Lithium Battery, commented that the relevant policies issued by the Ministry of Industry and Information Technology are conducive to guiding the high-quality and healthy development of the lithium battery industry, no longer simply expanding production capacity, but improving product quality through technological innovation such as improving energy density and cycle life, so as to achieve the effect of reducing costs and increasing efficiency, and will speed up the clearance of backward production capacity and prevent low-price disorderly competition.

Liu Yanlong, former secretary general of the China Chemical and Physical Power Supply Association, also said in an interview with Jiemian News that the new standard conditions guide enterprises to reduce manufacturing projects that simply expand production capacity, require strengthening technological innovation, improving product quality, and reducing production costs, and make minimum requirements for the annual cost of R&D and process improvement, reflecting the direction of government departments to guide the high-quality development of the industry. He said that the new normative conditions will help prevent enterprises from blindly pursuing the expansion of production capacity and promote the high-quality development of the industry.

A person familiar with the standard department of the domestic head lithium battery manufacturer also said that the new standard conditions will promote lithium battery companies to further improve product quality. In the long run, the leading enterprises are expected to usher in benefits, while the enterprises with shallow technical reserves may face elimination.

Li Weifeng, head of the advanced energy storage industry chain in Wangcheng District, Changsha, Hunan Province, also said in an interview with the "Securities Daily" reporter that the "Draft for Comments" optimizes the technical standards of lithium batteries and main materials, guides industry enterprises to reduce manufacturing projects that simply expand production capacity, and avoids disorderly competition, which will boost the healthy development of the industry. It believes that on the one hand, the draft will help the lithium battery industry solve the problem of overcapacity, and at the same time, it will also help to improve international competitiveness. In order to meet the new technical standards, enterprises will increase R&D investment and promote the innovation of lithium battery technology, and downstream enterprises will also choose higher quality raw material suppliers, so as to enhance the competitiveness of Chinese lithium battery enterprises in the international market. In addition, it is also conducive to the realization of green development of the industry, reasonable control of production capacity and technological innovation, and helps to promote the lithium battery industry to reduce resource waste and environmental pollution and achieve green development.

Huang Xiuyu, an analyst at Dongguan Securities, also recently commented that in the context of the current overcapacity of the lithium battery industry, the Ministry of Industry and Information Technology has revised the industry standard conditions to guide technological innovation, transformation and upgrading, promote the high-quality and healthy development of the industry, and benefit the head enterprises. Huang Xiuyu said that speeding up the clearance of backward production capacity and preventing low-price disorderly competition is conducive to improving the capacity utilization rate and profit repair of leading enterprises with technical advantages and high-quality production capacity. The draft focuses on product quality and low-carbon environmental protection, and actively paves the way for enterprises to "go overseas", which is conducive to improving the international competitiveness of enterprises.