Lithium-ion Battery Supply Chain Alert! Hot Electric Vehicle Market in China Drives Demand (and Price) High on Raw Materials

New energy vehicle production has seen an increase of 500% in China in November as compared with the same period of last year, according to the recent data published by Ministry of Industry and Information Technology of China (MIIT). In this month, China manufactured a number of 72.3 thousand of such vehicles, which brings to a total of 279.2 thousand between January and November this year, or a 4-time jump from a year earlier. Lead electric carmakers there include BYD, Geely, Jiangnan and BAIC.

Nearly 100% of new energy vehicles sold in China in the past two years are pure electric and hybrid electric vehicles (EVs) (MIIT defines new energy vehicles as vehicles powered by pure electric, hybrid electric, fuel cell, solar cell, hydrogen fuel and other new energy storage systems). EV’s rapid growth has posed high demand on lithium-ion battery (LIB) supply. The domestic EV market size can reach 12.5GWh, but the current battery supply capacity in China is only 5GWh, less than half of the demand.

As a result, the prices for several LIB raw materials have been ramping up significantly over the past months.

Lithium hexafluorophosphate (LiPF6), the salt in the liquid electrolyte, can be quoted at as high as $40 thousand/ton (or 260 thousand yuan/ton) in December, rising from $14 thousand/ton (or 90 thousand yuan/ton) at the beginning of the year. The increase is almost 2 times.  The high price has pushed up the price of the electrolyte by 20-30% and electrolyte manufacturers plan to further adjust the price in January 2016.

Lithium carbonate (Li2CO3), the precursor for synthesizing cathode materials and LiPF6, sells now for $18.6 thousand/ton (or 120 thousand yuan/ton) in China, as compared with an average $8.5 thousand/ton (or 55 thousand yuan/ton) in September. The price is skyrocketing in just 3 months. US company FMC also announced that it would increase the price for lithium carbonate by 15%, effective in October this year.

The demand on separator increases to 620 million square meters in China this year, up by 36% from last year. In early 2015, the average price was $0.6/m2 (or 4 yuan/m2). However, the supply has become tight in recent months and battery OEMs can be paying as high as $1.2/m2 (or 8 yuan/m2) nowadays.

In response, suppliers are expanding their capacities. For LiPF6, 3 major Chinese companies Tinci, Do-Fluoride and Jiujiujiu each will double their annual production, to 14,000 tons in total by 2016. Despite this increase, there still can be a gap of 3000 tons globally to meet next year. In the case of Li2CO3, Tianqi and Ganfeng in China is ramping up to 27,500 and 11,000 tons/year respectively. Albermarle’s new 20,000-ton plant in Chile also expects to start offering the salt in 2016.  Regarding the separator, Mingzhu is on its way to 140 million square meters by 2017 and HongTu’s 45 million-square meter plant is under construction. On the flip side, there could be excess capacity in the coming years.

The impact of this round of price increase on battery and EV segments is yet to be figured out. For one thing, assuming that the electrolyte in a cell costs 15% of the total, if the cost of electrolyte increases by 50%, we may see the cost of the cell go up by 7.5%.

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