A Glance of China Lithium-ion Battery Materials Week 4, Feb 2023

▼ Lithium Compounds: Downstream demand has not significantly improved, and cathode materials manufacturers are not actively purchasing, with inventory depletion and on-demand purchasing of lithium compounds being the primary activities. It is expected that there will still be a decline in lithium compounds prices by the end of the month.

-- Nickel Sulfate: On the supply side, the nickel sulfate companies increased their production capacity last week. On the demand side, due to a slight increase in the price of nickel sulfate crystals, many companies in the market have slowed down their procurement of nickel sulfate to make nickel plates. The demand from the downstream ternary industry chain for nickel sulfate remains weak. It is expected that the price of nickel sulfate will stay stable next week.

▼ Cobalt Sulfate: Global cobalt supply is abundant, but cobalt sulfate production has declined and operating rates remain low. Demand-side hoarding of cobalt sulfate by some market participants has led to a short-term price increase, but the impact on end-users is expected to be minimal due to the overall oversupply in the market. On the cost side, cobalt mining companies are reluctant to lower their prices, which supports the current cobalt sulfate prices. However, a slight decrease in the price of cobalt sulfate is anticipated in the near future.

-- Manganese Sulfate: The supply of manganese sulfate in the market is abundant, as companies have resumed production with an increased operating rate and gradual rise in production capacity since February. However, weak demand for downstream ternary precursors from cell producers has resulted in a sustained low demand. Hence, it is anticipated that the price of manganese sulfate will remain stable in the short term.

▼ Ternary Cathode Materials: The supply of ternary materials is decreasing with a low operating rate and reduced production compared to the previous week. Weak demand for ternary cathodes persists due to downstream cell producers reducing inventory cycles to suppress raw material prices. Cell companies are cautious on procurement while the demand is weak. The prices of lithium carbonate and cobalt sulfate have decreased, leading to an expected decline in the price of ternary cathode materials.

LFP Cathode: The downstream market currently has a bearish sentiment, resulting in a buildup of inventory among downstream cell producers. This has led to cautious purchasing behavior and a strong desire to negotiate prices, causing intense negotiations with suppliers. The operating rate has slightly increased but remains at a mid-range level, with long-term orders dominating the market. Top LFP cathode manufacturers aim to secure stable raw material supplies by signing supply guarantee agreements.

Anode Materials: The main reason for the price decline is due to the significant increase in supply caused by the gradual release of new production capacity, while demand remains weak, leading to relative oversupply in the market for mid-to-low-end synthetic graphite anode materials. However, for high-end synthetic graphite anodes, supply remains limited, and prices have not been affected. Manufacturers are relatively optimistic about the market, and it is anticipated that downstream demand will recover in March.

▼ Graphitization cost:  The actual deal is lower than the list price from graphitization plants. The operating rate of outsourced processing manufacturers remains low. The graphite processing market is currently experiencing an oversupply of processing capacity, and the market price of processing fees is expected to continue declining in the short term, despite a potential slight recovery in downstream demand in March.

-- Electrolyte: Demand in the electrolyte market is weak, with limited trading activities and a slight improvement in RFQs. Industry participants are optimistic about future downstream demand, and leading electrolyte manufacturers are ramping up production schedules for March. The price of electrolytes is anticipated to remain stable in the short term, and a boost in downstream demand is expected post-March.

In 2022, the global average penetration rate of new energy vehicles is approximately 12%, according to MarkLines. Both China and Europe have experienced significant increases in their NEV penetration rates, with both exceeding 20%. The United States has a relatively stable new energy vehicle penetration rate of approximately 7%. When the penetration rate of EVs is less than 10%, policies have the most significant impact on its sales. Therefore, implementing the IRA Act will significantly boost the US EV market.

In 2022, the sales of NEVs in the US reached nearly 1 million units, a YoY increase of about 57.6%, showing another high-growth trend after the breakthrough of 630,000 units in 2021. Tesla dominates the US electric vehicle market, occupying two-thirds of the EV market share. The top ten best-selling EV models in the US are Tesla Model Y, Tesla Model 3, Ford Mustang Mach-E, Tesla Model S, Tesla Model X, Hyundai Loniq 5, Kia EV6, Nissan Leaf, Kia Niro EV, and Polestar 2. Moreover, the top ten new energy vehicle companies in the US are Tesla, Ford, Chevrolet, Jeep, BMW, Kia, Hyundai, Volkswagen, Rivian, and Volvo. Unlike China and Europe, where subsidies are gradually phased out, the US has just begun its NEV subsidies which will be officially implemented in 2023. The enthusiasm of local manufacturers and consumers has just about to take off and boost its NEV sales to catch up with Europe.

Although the IRA Act has localization requirements for key minerals and battery components, the subsidy scope and scale have increased compared to the previous EV  tax credit policy, while the 200,000-vehicle sales limit for NEV companies has been lifted. This will encourage global new energy vehicle and components manufacturers to enter the US market for auto assembly and obtain raw materials and batteries in the US, thereby will greatly bolster US domestic NEV industry and accelerate the NEV sales growth. However, the IRA Act has significant restrictions on China. The use of auto batteries from "sensitive entities" will not be eligible for any subsidies, and according to the IRA's provisions, any new energy vehicles using Chinese batteries will not be eligible for subsidies. CATL (Contemporary Amperex Technology Co. Limited, a Chinese battery manufacturer and technology company) has accepted Ford's cooperation invitation and will provide construction and operation services for its battery factory in Michigan, as well as license its battery technology. This cooperation model avoids the restrictions of the US IRA Act and demonstrates CATL's own technological strength with a long-term growth prospect.

Stay tuned for how Chinese battery companies navigate the bumpy road of globalization amidst new regulations from the US and Europe regarding power batteries: https://www.mysteel.net/search?type=Insights&keyword=A%20glance%20of%20China%20Lithium-ion%20Battery%20Materials

Contact us at <inquiries@mysteel.com> if you'd like to start a trial to get the latest news and know more about the rationale behind the views.

Find out how Mysteel Research & Consulting can help grow your outreach and visibility - https://www.mysteel.net/products-services/consulting/