Cycles exist in every industry.
Some time ago, non-ferrous metals rose, Zijin Mining, Western Mining, Northern Copper, and Tin shares attracted people's attention. Recently, the real estate industry has also gradually recovered, and Tiandiyuan, Nandu Property, Binjiang Group, and China Merchants Shekou are quite popular.
Where there is an upside, there is a downside. Lithium battery, semiconductor, chemical and other industries have not yet seen a significant recovery, especially the lithium battery industry, which is still at the bottom of the cycle, and the situation is still very grim.
So, what are the factors that affect the cycle of the lithium battery industry in the mainland?
In 2022, the demand for new energy will grow explosively, and the production capacity will be actively expanded, and the entire lithium battery industry can be said to be a huge money printing machine, with a performance growth rate of dozens or hundreds of times.
However, since 2023, the popularity of new energy vehicles has decreased, the lack of market demand and the intensification of competition have gradually entered the industry.
The price of lithium carbonate and lithium hydroxide, the upstream raw materials of lithium batteries, also continued to decline, at the beginning of May 2024, it was only 110,000 yuan/ton.
Due to the wide range of product coverage, the performance of mainland battery leaders such as CATL, BYD, EVE Lithium Energy, and Sichuan Energy Power has not had much problem, but the growth rate has slowed down. For example, CATL's revenue growth rate in 2022 will exceed 150%, and it will only be 22.01% in 2023.
But for upstream lithium resource companies, the situation is not so optimistic.
The demand for downstream lithium battery market has declined, the price of its own products has also decreased by 80%, and the performance of enterprises such as Ganfeng Lithium and Tianqi Lithium, which are the leading lithium resources in mainland China, has continued to shrink in the past two years.
Among them, Ganfeng Lithium is the world's third largest producer of lithium compounds and the world's largest producer of lithium metal, with production capacity more than three times that of Tianqi Lithium, which can be said to be the first leader in the industry.
From 2019 to 2022, the net profit of Ganfeng Lithium has increased by 5727.37% in 3 years, which can be said to have made enough money.
However, in 2023, due to weakening demand, the company will only achieve revenue of 32.972 billion yuan and net profit of 4.947 billion yuan, a significant decrease of 75.87% year-on-year. Tianqi Lithium's net profit in 2023 also decreased by 69.75% year-on-year when the self-supply rate of lithium mines was 100%.
In the first quarter of 2024, Ganfeng Lithium had a net profit loss of 439 million. However, compared with Tianqi Lithium's loss of more than 3.6 billion, the certainty is still much higher.
On the one hand, Ganfeng Lithium's loss is due to the decline in lithium prices, and more importantly, the company continues to spend money on acquisitions.
A few days ago, Ganfeng Lithium acquired the remaining 40% stake in Mali Lithium from Leo Lithium with its own funds of $342.7 million to continue to increase the production capacity of lithium resources.
So, what is the reason why the company continues to increase production capacity during the downward phase of the cycle?
1. Improve the self-supply rate and seize the lithium concentrate market
Lithium concentrate is the upstream raw material for lithium carbonate and lithium hydroxide.
From the perspective of price changes in 2023, the average price of lithium carbonate is 257,000 yuan/ton, a year-on-year decrease of 46.98%, and the average price of lithium hydroxide is 274,000 yuan/ton, a year-on-year decrease of 41.74%. However, lithium concentrate fell by only 22.65%, which was slower than that of lithium compounds.
On January 15, 2024, Australian lithium giant Pilbara revised its contract with Ganfeng Lithium to significantly increase the supply of lithium concentrate in the next three years, planning to supply 310,000 tons in 2024 and 260,000 tons to 310,000 tons in 2025 and 2026, an increase of 62.5%-93.8%.
In the future, Ganfeng Lithium will increase the production of lithium concentrate in the most upstream, on the one hand, to slow down the downward trend of the price of the main product, and on the other hand, to improve the self-supply rate of lithium compound raw materials and control costs.
2. Grasp the cycle and increase production capacity
In 2023, there will be a global surplus of 21,000 tons of lithium carbonate, and it is expected that from 2024 to 2025, related companies will still be in the stage of de-capacity and de-inventory, and lithium prices will continue to decline.
However, most of the lithium mines have shifted from above-ground mining to underground, and the difficulty of mining has increased, coupled with the strong desire of enterprises to raise prices and the reduction of expansion speed, lithium prices have been in the bottom run-in period, and there is little room for downside. Supply and demand are expected to return to equilibrium again after 2025.
Ganfeng Lithium's project continues to be constructed, benefiting from the original orders on the one hand, and on the other hand, the completion and commissioning date is just at the time node of supply and demand balance. At that time, the price of lithium will rise, the company's production capacity will just be released, and the product is expected to usher in both volume and price.
So, what are the future development points of Ganfeng Lithium?
In addition to the production layout of upstream lithium resources and midstream lithium compounds, Ganfeng Lithium has also gradually developed downstream business to collect the latest market information for upstream production.
1. Solid-state battery
The domestic new energy commercial vehicle industry has great potential.
In 2023, the number of new energy commercial vehicles in China will reach 490,000 units, a year-on-year increase of 36.1%, and the growth rate will exceed 37% of passenger vehicles in the same period, and it is expected to exceed 20 million units by 2035.
In addition, the penetration rate of new energy commercial vehicles is only 7.3%, which is far lower than that of ordinary passenger vehicles, and is still in the stage of rapid development.
Celis is Huawei's core car company in the field of new energy vehicles.
In 2022, Ganfeng Lithium's solid-state battery has been installed in the actual car of Cialis. In September 2023, Ganfeng Lithium spent another 1 billion yuan to subscribe for the new registered capital of 100 million yuan of Ruichi Electric, a subsidiary of Seris.
Ruichi Electric accounted for 12.11% of the new energy battery market, ranking second in sales of new energy commercial logistics vehicles.
Roughly speaking, if Ganfeng Lithium can win all the solid-state battery shares of Ruichi, this alone can make Ganfeng Lithium the 13th in terms of installed battery capacity, and it is only one step away from entering the top ten.
Solid-state batteries are very high-tech, and the R&D expenses of any manufacturer entering the country are indispensable.
Since 2022, Ganfeng Lithium's total R&D investment has exceeded 2.4 billion yuan, and in the first quarter of 2024, R&D investment accounted for 4.29% of revenue, even higher than that of professional power battery manufacturer Funeng Technology. Tianqi Lithium's R&D expenses do not exceed 50 million.
In the downward stage of the cycle, the ultra-high R&D investment also reflects Ganfeng's ambitions in the field of solid-state batteries.
In addition, on May 9, Anda Technology announced that it would transfer 60% of the equity of its subsidiary Inner Mongolia Anda to Ganfeng Lithium at a price of only 1 yuan.
Anda Technology is located in the middle of the lithium battery industry, with lithium iron phosphate cathode materials as its main business, which contributed eighty percent of the company's revenue last year.
2. Lithium-ion recovery
In order to meet the demand for lithium-ion batteries and respond to the call for carbon neutrality and low carbon, the recycling and reuse of lithium-ion is particularly important.
In 2022, the scale of China's waste lithium-ion battery market will grow to 48.29 billion yuan, and it is expected that by 2026, the market size of the entire industry will be nearly 100 billion yuan.
Ganfeng's subsidiary, Recycling Technology, is currently the largest lithium iron phosphate battery and waste recycling capacity in China, and the top three leading enterprises in the battery comprehensive processing capacity industry, and the lithium-ion recycling business is expected to become the company's second growth line in the future.
As an industry leader, Ganfeng has attracted much attention, and in 2023, Ganfeng has obtained positions from 421 institutions, including E Fund.
In general, although Ganfeng is currently at the bottom of the industry cycle, the company continues to explore the downstream market, and its market share in the field of power batteries is gradually expanding.
The above analysis does not constitute specific investment advice. The stock market is risky, and investors need to be cautious.
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