Summary of Key Points
Recently, the lithium battery industry has experienced a stark contrast of "fire and ice": The price of lithium carbonate at the upstream has dropped by more than 30% in three months, while prices for midstream materials (such as lithium iron phosphate, VC additives, and copper foil) have skyrocketed (VC prices have even increased by more than three times). Downstream battery manufacturers are struggling to survive amidst rising costs and pressure from end-users. This disconnect is not just a simple fluctuation in prices but the result of a combination of supply-demand imbalances, production capacity cycles, policy changes, and technological advancements, marking a transition for the lithium battery industry from "wild expansion" to "high-quality competition."
1. Upstream Lithium Carbonate: Why Is It Selling Less But Getting Cheaper?
Lithium carbonate is the primary raw material for lithium batteries. Prices peaked at 600,000 yuan per ton between 2021 and 2022, prompting a frenzy of expansion in lithium mining and smelting facilities. Now that new production capacity is being released (for example, the resumption of operations by CATL's mines and Australian lithium mines), there are concerns about a slowdown in future demand growth. Although inventory levels of lithium carbonate are decreasing (for 12 consecutive weeks) and downstream orders are increasing, fears of oversupply have led to a price drop to around 140,000 yuan per ton. In short, current demand is decent, but future prospects are uncertain, and the abundance of supply has pushed prices down.
2. Midstream Materials: Why Are Prices Rising So Rapidly?
The midstream segment processes raw materials into battery components, and several materials have seen particularly sharp price increases:
- Lithium Iron Phosphate: Its cost is influenced by both lithium carbonate and phosphoric acid; although lithium carbonate prices have fallen, the cost of phosphoric acid (a key component) has risen by 9% in June, leading to higher overall costs. Additionally, there is a shortage of high-end "fourth-generation high-pressure solid" products while there is excess capacity for lower-end ones, forcing manufacturers to raise prices to cover their expenses.
- VC Additives: New national standards require safer batteries, and VC additives are essential for enhancing safety. Demand has surged, but supply has not kept up, resulting in a 40% increase in prices over the past month and more than a threefold increase in just one year.
- Copper Foil: Copper foil is used as the conductive framework in batteries. Both the demand for new energy vehicles and AI computing power has increased, and copper prices have risen by 40% (due to US demand and reduced production in Chile). Processing costs have also increased, leading to higher overall prices for copper foil.
3. Downstream Battery Manufacturers: How Are They Surviving?
Battery manufacturers are facing both rising costs from midstream materials and pressure from end-users (such as automakers and energy storage companies):
- Although demand for batteries has increased (with sales of power batteries up 36% and energy storage batteries up 83% between January and June), battery prices have also risen by about 20%, squeezing their profit margins.
- Tax policies have further exacerbated the situation: Export rebates have been reduced from 9% to 6% (to be eliminated next year), and a 2% consumption tax will be levied (rising to 4% next year), further narrowing profit margins.
- Smaller manufacturers are likely to be eliminated due to financial constraints, while larger ones with greater scale and technological capabilities will survive. The industry is undergoing a process of "survival of the fittest."
4. Behind the Contradictions: Is a Major Change on the Horizon?
This price divergence is not incidental but part of a transformational period for the lithium battery industry:
- The "ice" at the upstream reflects the consequences of reckless expansion, leading to overcapacity.
- The "fire" in the midstream indicates a shift towards higher-quality products (such as high-end lithium iron phosphate and VC additives).
- The challenges for downstream manufacturers force them to focus on improving efficiency and technology.
Conclusion
The current price fluctuations are a necessary part of the industry's transition from extensive growth to more refined management and technological innovation. This change presents both challenges and opportunities for companies, with the potential for safer and higher-quality battery products for consumers. The era of rapid growth is coming to an end, and cyclical fluctuations and competition will become the new norm in the lithium battery industry.