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Wen, Li Hongli
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The publication of "Lithium Battery Industry Standard conditions (2024)" (draft for soliciting opinions) will effectively resolve the problem of phased overcapacity in many links of the lithium battery industry chain, which is conducive to the long-term and healthy development of the industry.
On May 8, the Ministry of Industry and Information Technology issued "Lithium Battery Industry Standard conditions (2024)" (draft for soliciting opinions) and "measures for the Administration of Lithium Battery Industry regulations (2024)" (draft for soliciting opinions). Among them, the expression of "guiding enterprises to reduce manufacturing projects that simply expand production capacity, strengthen technological innovation, improve product quality and reduce production costs" has attracted the attention of the industry.
Stimulated by the Lido policy, on May 9, the new energy sector set off a rising limit, Tianli Lithium Energy, Jinyang shares, Hezong Technology (rights protection) 20CM rose by the limit, Tianhong Lithium Power, Xiang Fenghua and Dangsheng Technology rose by more than 11%. The Wind Lithium Battery Index also rose by more than 4% in a single day. From the point of view of the extended time line, the lithium power industry is in a period of economic repair. as of May 15, the Oriental Fortune Lithium Battery Index has risen 2% in the past 20 days.Arcade1.07%, up more than 20% in the past 60 days.
Accelerate the clearance of backward production capacity
In recent years, with the explosive growth of new energy vehicles, China's lithium power industry has also expanded rapidly. with the influx of capital, the lithium power industry has changed from "supply in short supply" to "oversupply". Are plagued by the problem of periodic overcapacity.
The draft for soliciting opinions is given from the aspects of industrial layout and project establishment, production and operation and process level, product performance and so on.Arcade1Guidance and specific suggestions are given to promote the transformation of lithium battery industry production capacity to high-end and high-quality. The part of "Industrial layout and Project Establishment" in the draft for soliciting opinions mentions: guide enterprises to reduce manufacturing projects that simply expand production capacity, strengthen technological innovation, improve product quality, and reduce production costs. The "production, operation and process level" section mentions that lithium battery enterprises should have independent production, sales and service capabilities for products related to the lithium battery industry; the annual cost for R & D and process improvement is not less than 3% of the main business income.
At the same time, the draft for soliciting opinions also proposes to encourage enterprises to obtain the qualifications of independent research and development institutions, engineering laboratories, technology centers or high-tech enterprises at or above the provincial level; encourage enterprises to establish green factories; encourage enterprises to build or participate in the joint construction of pilot platforms; major products have patents for technological inventions; and the actual output in the previous year at the time of declaration is not less than 50% of the actual production capacity in the same year.
"the high-end capacity of the lithium industry is not excessive, and the low-end repetitive capacity needs to be cleared faster." Mo Ke, director of the True Lithium Research Institute, said that the actual output in the previous year was not less than 50% of the actual production capacity in the same year, which means that the entry threshold is rising. At the same time, enterprises need to increase investment in research and development to promote the innovation of lithium battery technology. This means that some backward production capacity will be phased out at an accelerated pace.
Economist Yu Fenghui said that the impact of this policy on the lithium power industry is mainly reflected in the following aspects: first, it will prompt enterprises to pay more attention to technological innovation and product upgrading, especially to improve the energy density and safety of batteries, which will contribute to the technological progress of the industry as a whole. Secondly, by restricting the blind expansion of production and encouraging high-quality development, it will help to avoid excessive competition and overcapacity in the industry and enhance the concentration of the industry. For lithium power enterprises, this is both a challenge and an opportunity, and those with core technology, efficient production and cost control capabilities will be more favored by the market.
Huang Xiuyu, an analyst at Dongguan Securities, also said that in the context of the current overcapacity in the lithium battery industry, the Ministry of Industry and Information Technology has revised the industry norms and conditions to guide technological innovation, transformation and upgrading, and promote high-quality and healthy development. It will speed up the clearance of backward production capacity, prevent disorderly competition at low prices, and help enterprises with technological advantages and high-quality production capacity to improve capacity utilization and profit repair. The revised draft pays attention to product quality and low-carbon environmental protection, which actively lays the groundwork for enterprises to go to sea, which is conducive to improving the international competitiveness of enterprises and benefiting the head enterprises as a whole.
Press the pause button for multiple "cross-border" projects
When the lithium price remains high, the entire lithium industry chain has become a hot place for capital investment, and it has also attracted many enterprises to dig gold across the border. However, with the intensification of the contradiction between supply and demand in the lithium power market, the enthusiasm for capital investment has gradually receded. Since the beginning of this year, many enterprises have suspended or terminated lithium power projects and have become more cautious in their attitude towards production expansion.
Baoming Technology, which is mainly engaged in the display business, announced on April 29th that the company plans to terminate the production base project of composite copper foil (lithium anode current collector material), which was originally planned to invest up to 6.2 billion yuan. Baoming Technology said that due to the change in investment planning, in order to avoid the waste of project resources, decided to terminate the investment project.
Huarou Technology announced on April 26th that it had terminated two electrolyte additive projects with a total investment of 450 million yuan. Huarou Technology said that due to the market situation, investment environment and administrative examination and approval policy changes and other factors, the company decided to terminate the annual production of 12000 tons of lithium battery electrolyte additives and 6000 tons of fluorinated vinyl carbonate (FEC) lithium battery electrolyte additives.
In addition, the food company Black Sesame also suspended related lithium power projects. On April 19, some investors asked questions about the energy storage lithium battery project of Black Sesame Company, which had far exceeded the expected completion time. Black Sesame replied: "in view of the major changes in the market situation of new energy batteries since the second half of 2023, there is a significant difference with the company's hypothetical conditions for conducting a project feasibility study, based on which the company closely observes the changes in external conditions and calmly faces major market changes and does not advance rashly. Suspend the construction of the project.
In addition to the above cases, since last year, many enterprises have cancelled or terminated lithium power projects. For example, Zhongyuan shares have suspended the fixed increase plan for the integrated construction project of anode materials for high-performance lithium-ion batteries with an annual production capacity of 200000 tons; Xiexinengke's convertible bond scheme has been adjusted to delete the battery-grade lithium carbonate project with an annual production capacity of 30, 000 tons; the production of Shantai Technology Li Shing Road Base has been suspended. New Zeus terminated the construction of Zhuhai New Zebang Electronic Chemicals Project; and so on.
Yu Fenghui said that a number of listed companies have terminated or suspended the construction of new projects, reflecting that the lithium industry is undergoing a period of adjustment, market demand growth is slowing, and companies are beginning to rationally assess investment risks. This shows that the industry is shifting from rapid expansion in the past to fine management and optimization of existing capacity, and it also reflects the adjustment of market expectations for future demand growth for lithium batteries.
Qiu Boyuan, manager of Kangzhuang asset fund, said that market forces are forcing them to stop expanding production and promote capacity clearance. It is true that there is an oversupply of capacity in this market in the short term, especially in terms of low-end capacity, but in the long run, high-quality capacity is still far from enough.
The performance of material enterprises hit bottom in the first quarter
A reversal is imminent?
At the present stage of weakening investment and suspending or terminating lithium power projects, the material-end enterprises in the middle and upper reaches of the industrial chain can not escape the cyclical influence of the lithium industry, and the performance in the first quarter of this year has "changed face".
Take the "lithium industry duo" Tianqi Lithium Industry and Ganfeng Lithium Industry as an example, the net profit in the first quarter of 2024 changed from profit to loss. In the first quarter of 2024, Tianqi Lithium Industry achieved operating income of 2.585 billion yuan, down 77.42% from the same period last year, while net profit lost 3.897 billion yuan, down 179.93% from the same period last year. In the same period, Ganfeng Lithium achieved operating income of 5.058 billion yuan, down 46.41% from the same period last year, while net profit lost 439 million yuan, down 118.31% from the same period last year.
In addition, the performance of negative material enterprises Bertre and Putailai also declined to varying degrees. Of the 19 A-share lithium companies listed in the lithium sector, 15 experienced a decline in revenue growth in the first quarter of 2024 and 14 reported a decline in return to home net profit growth, accounting for 78 per cent and 73 per cent, respectively, according to Wind.
From the point of view of the reason, the first is the price factor. Ganfeng Lithium Industry said that the impact of fluctuations in the market for lithium products and lithium batteries led to a drop in sales prices in this period. Salt Lake shares said that on the whole, there is a phased mismatch between supply and demand in the market, and prices are showing a gradual downward trend. This leads to the downstream demand side showing caution in purchasing, mainly to digest inventory and control the risk of falling price loss.
It is not difficult to find that the enterprises in the upper and middle reaches of lithium power industry chain have basically moved towards the node of loss. In the face of the current industry situation, how should lithium mining enterprises and material enterprises alleviate the pressure of development?
"the real bull stock is not because of profiteering, but because of scale." Qiu Boyuan believes that at the present stage, lithium mining enterprises should vigorously lay out exploration, mining, and smelting, integrate themselves into the entire industrial chain, and ask for value from the industrial chain, from scientific and technological innovation, and from extreme efficiency. Lithium mining enterprises must be soberly aware that lithium is a recyclable material, which is the fundamental difference between lithium and crude oil, and the global demand for lithium will not expand indefinitely. Finally, lithium mining enterprises and aluminum mining enterprises will grow exactly the same, their return on net assets, gross profit margin on sales, and corporate net profit margin will all converge to the basic profit level of society. Lithium mining enterprises should pay attention to the emergence of revolutionary technologies in the energy field, such as hydrogen fuel cells, controllable nuclear fusion, solid-state batteries and so on may change the pattern of the industry.
Since December 2022, the price of lithium carbonate has continued to fall, compared with a peak of nearly 600000 yuan / ton, has fallen to about 100000 yuan / ton, a drop of about 80%. Many people think that there is an opportunity for the industry to reverse, so has the turning point of the lithium industry hit bottom really come?
Huaxia fund manager Li Yan said that after in-depth research, the lithium industry is currently in the bottom reversal stage, some leading companies capacity utilization as high as 80% to 100%, the fundamentals clearly improved.
Castrol global innovation leading stock QDII fund manager Xiong Yuzhou also said that based on the current node, from the inventory cycle, new demand scene, and supply-side marginal changes and other factors, the industry reversal opportunity has been available, the industrial chain began to gradually appear some varieties of price rise and recovery is also a side verification. "at present, lithium is undoubtedly in a state of cyclical lows and low valuations (mainly measured by PB, PS, etc.). As fundamentals improve and earnings upward signals gradually strengthen, we still look forward to the future performance of the sector."
In Yu Fenghui's view, the current sharp drop in lithium carbonate prices is more reflected in the price correction after the adjustment of supply and demand. Whether it is a reversal of the industry, we also need to observe the subsequent balance of supply and demand, the global economic recovery and the growth trend of market demand for new energy vehicles. "this may be seen as a rebound in the short term, but in the long run, if market demand continues to grow, the industry is expected to enter a healthier and stable growth cycle."
Qiu Boyuan said that at present, the price of lithium carbonate and the prices of products in all aspects of the industrial chain are at the bottom stage, considering that new energy vehicles, energy storage and other areas continue to grow rapidly, the reversal of the industry boom is certain.
(this article has been published in the Securities Market Weekly on May 18. It is mentioned in the article that individual stocks are only for example analysis and do not make trading recommendations. )
