Global lithium power ebb tide Under the continuous impact of crazy expansion and price wars, there are inevitable signs of a major decline in global lithium batteries.

Global lithium power ebb tide Under the continuous impact of crazy expansion and price wars, there are inevitable signs of a major decline in global lithium batteries.

Let's first look at the domestic market. According to previous statistics, in the first quarter of 2024, the total operating revenue of 107 lithium battery listed companies (note: Hong Kong listed companies have not disclosed their 2024 first quarter reports) was 292.907 billion yuan, a year-on-year decrease of 18%, and the total net profit attributable to shareholders was 16.907 billion yuan, a year-on-year decrease of 50.16%.

At present (July 14th), 32 listed companies in the lithium battery industry chain have released their performance forecasts for the first half of 2024. The total net profit range of these 32 lithium battery listed companies in the first half of the year is "loss of 580 million yuan - profit of 2.822 billion yuan", a decrease of 101.88% -90.87% compared to the same period last year.

According to the previous analysis and calculation by Dongwu Securities, based on the price of 80000 yuan for lithium carbonate, the cost of leading iron lithium battery cells is estimated to be around 0.32 yuan/Wh (excluding tax), while the cost of iron lithium battery cells for second tier manufacturers is about 0.37 yuan/Wh respectively. If we consider that the current capacity utilization rate of third tier battery factories in the industry is expected to be only 30-40%, and the yield rate is low, with many B-grade products, the cost of iron lithium battery cells is expected to exceed 0.4 yuan/Wh.

Assuming a price of 80000 lithium carbonate, according to Dongwu Securities' calculations, the breakeven point price of the second tier leading battery factory for iron lithium battery cells is expected to be 0.45-0.5 yuan/Wh (including tax, corresponding to a Pack selling price of 0.6-0.7 yuan/Wh).

According to Everbright Futures, as of July 5th, the price of square lithium iron phosphate batteries was 0.35 yuan/Wh. Based on the above analysis, most second - and third tier manufacturers are currently in a loss making state, and many companies may not be able to withstand this round of reshuffling cycle.

The severity of the industrial situation is rare in recent years.

History has repeatedly proven that everything cannot escape the laws and influences of cycles. Looking at the development history of the lithium battery industry over the past decade, it has gone through multiple cycles of industry baptism. Each cycle adjustment is almost always caused by drastic changes in supply and demand, that is, once the market supply and demand relationship changes, prices will definitely react quickly in reality. This is the power of cycles.

According to statistics, in the past two and a half years (from early 2022 to June 2024), there have been over 700 major manufacturing projects worth more than 100 million yuan announced in the Chinese lithium battery industry chain, with a total investment budget exceeding 3.5 trillion yuan; According to market statistics, since the passage of the US Inflation Reduction Act, car manufacturers and suppliers have announced investments of over $50 billion in North America for electric vehicles and batteries. Previously, according to the 24 Trend Industry Research Institute (TTIR), Tesla, Northvolt, LG Chem QuantumScape、Italvolt、SKI、 Thirteen companies, including Samsung SDI, are expected to have a battery production capacity layout of 387.3GW and 971.3GW in Europe by 2025 and 2030, respectively. According to comprehensive statistics, the global investment plan for the lithium battery industry has exceeded 4 trillion yuan since 2022.

According to previous statistics from the 24 Tide Industry Research Institute (TTIR), as of now, in the six core tracks of power batteries, energy storage batteries, positive electrode materials, negative electrode materials, electrolytes, and lithium battery separators, known enterprise capacity planning far exceeds the upper limit of market demand forecasts by third-party research institutions in 2025. A major industrial reshuffle is inevitable in the next three years.

In the severe industrial situation, the 24 Tide Industry Research Institute (TTIR) has found that there has been a wave of large-scale termination or postponement under the crazy trillion dollar investment map.

As shown in the table below, from 2023 to present, there have been over 30 incidents of termination of lithium battery business in the field of lithium battery manufacturing, involving multiple sub sectors such as lithium batteries, nickel lithium raw materials, and lithium battery raw materials, with a total investment scale of over 60 billion yuan.

Analysis has found that with the severe changes in the industrial situation, the signs of lithium power's decline are still further extending and expanding.

For example, many star companies are currently deeply involved in shutdowns, suspensions, or being listed as dishonest and executed persons. It is questionable whether their true strength can support a billion dollar investment strategy.

For example, in February 2022, Jiewei Power signed a strategic cooperation agreement with the People's Government of Tianchang City, Chuzhou, Anhui Province. The two sides reached a cooperation agreement on the settlement of Jiewei Power's 20GWh lithium battery production base project in Chuzhou.

It is reported that the total investment of the Jiewei Power Chuzhou Lithium Battery Production Base project is about 10 billion yuan, with a planned production capacity of 20GWh. The product types include lithium iron phosphate and ternary material systems, which will be mainly used for the production of advanced power lithium-ion batteries. The project is planned to be completed and put into operation before the end of 2023.

But at the end of November 2023, a Jiewei Power "Notice of Company Shutdown, Employee Vacation, and Training" shook the industry. The document shows that due to objective factors such as the market and the upstream and downstream industrial chain, in order to ensure the sustainable development of the company's business, after research and decision by the management, Tianjin Jiewei will start to suspend production from December 1, 2023.

According to a report by Phoenix Network's "Storm Eye" on December 9th, in fact, the problems with the Jetta Power are far more severe than what was announced. Its battery production base in Tianjin has been shut down for three months. Wu Sujun, a grassroots employee who has been working at Jiewei Power for more than ten years, told Phoenix Net's "Storm Eye" that the battery factory has completely shut down. Before the shutdown, there were only about 400 employees left at the headquarters. After the shutdown, half of them left; The remaining personnel will stay in the company, either on vacation or receive training and receive the minimum wage.

According to Qichacha, Jiewei Power has been included in the list of dishonest persons subject to enforcement, and there are also two consumption restriction orders issued on April 28 and May 20, 2024, respectively.

In addition, some companies that plan to expand beyond billions have even been listed as dishonest executors. For example, on the afternoon of May 23, 2022, the signing ceremony of the Tianjin New Energy 20GWh power battery and supporting industry project cooperation framework agreement and the strategic cooperation agreement between Yingke Capital and Qianshan City was held in Anhui Qianshan. This marks the official settlement of Tianjin New Energy's 20GWh power battery project in Qianshan, Anhui.

It is reported that the total planned investment for the Tianjin New Energy 20GWh power battery and supporting industry project is 10 billion yuan, of which the first phase investment is 5 billion yuan, and a 10GWh power battery manufacturing project is planned to be constructed.

According to Qichacha, Tianjin New Energy has been included in the list of dishonest executors, with 7 pieces of information showing "all unfulfilled" status. The latest release was on March 26, 2024, with an executed amount of 28.71 million yuan.

In order to withstand the cold wave of the industry, many companies are accelerating their internationalization layout. However, the reality is that some major overseas projects of these companies seem to be delayed or even almost stagnant.

For example, Enjie Corporation announced as early as May 2022 that it planned to build a lithium battery isolation membrane project in the United States, with an investment budget of about 6.38 billion yuan. According to financial reports, as of the end of 2022, the project progress of the factory was about 10%, but by the end of 2023, its project progress had not changed and remained at 10%, almost stagnant.

In addition, in November 2020, Enjie Group also plans to build 4 fully automatic imported film production lines and more than 30 coating production lines in Hungary, with an annual production capacity of about 400 million square meters for base film. The project investment budget is approximately 340 million euros, and according to its strategic plan at the time, "the project is expected to start mass production before the end of the first quarter of 2023." However, the financial report shows that as of the end of 2023, the progress of the Enjie Hungary factory project is only 76.50%, which is lower than expected.

The wave of major project terminations continues. On June 6th, International Industries (000159. SZ) announced that the company held the second extraordinary meeting of the ninth board of directors on June 6th, 2024, and approved the proposal on terminating the investment and construction of the lithium iron phosphate energy storage battery PACK integrated production line project by its controlling subsidiary.

After research, multiple domestic companies have entered the lithium battery market during the same period, and it is predicted that there will be oversupply in the future market. At the same time, there is uncertainty in international market orders. After comprehensive analysis, Zhongda Tower plans to terminate the investment in this project, "said International Industry.

At the recent Global Partner Summit held by Honeycomb Energy, Chairman Yang Hongxin predicted that there may not be more than 40 power battery companies by the end of this year, and the next two years will still be an accelerated phase of elimination. In response to various changes in the lithium battery industry, Honeycomb Energy has implemented multiple measures such as reducing personnel control fees and streamlining business since the beginning of this year.

For the energy storage industry that has become more popular in the past few years, industry leaders' predictions are even more pessimistic. Ruipu Lanjun Chairman Cao Hui once bluntly stated that the industry has now entered the deep autumn before the cold winter. The competition has reached a deep water zone, and many companies are on the brink of survival. I think 90% of battery integrators will collapse. The probability of two or three battery factories collapsing is also high. Many companies that rush in will eventually leave with a face full of dust, and they should have reverence for the complexity of batteries

Zheng Hanbo, the General Manager of the Energy Storage Division of Yuanjing Energy, also expressed a similar view. He believes that some enterprises that rely on capital support without core technologies, in order to survive and seek refinancing, may find it difficult to sustain by winning low-quality and low-priced bids, which also lays hidden dangers for the industry. The lifecycle of energy storage power plants is no less than 10 years now, and it is difficult to guarantee after-sales service... By 2024, 80% of energy storage system integrators may collapse

Nowadays, the phenomenon of the Great Recession has swept across the world, and overseas giants have even been more strongly impacted.

On July 7th, SK On, the world's fourth largest battery manufacturer, announced that it is facing a crisis as its downstream customers are struggling to cope with disappointing electric vehicle sales in Europe and the United States. Since its spin off from SK Group in 2021, SK On has incurred losses for ten consecutive quarters.

In the first quarter of this year, SK On incurred a loss of 331.5 billion Korean won (approximately 1.7 billion yuan), nearly 17 times the loss of 18.6 billion Korean won (approximately 97 million yuan) in the fourth quarter of last year. Due to a decrease in sales and prices, SK On's sales in the first quarter of this year were KRW 1.68 trillion (approximately RMB 8.8 billion), a year-on-year decrease of 49%.

As the losses widened, SK On CEO Lee Seok hee announced a series of cost saving and operational improvement measures, describing them as emergency management measures.

In a letter to employees, Li Shixi stated, "We are at a dead end and must work together." SK On announced last week that it will freeze all executive salaries to alleviate financial difficulties until the company turns losses into profits.

Prior to this, SK On had made a series of aggressive investments in the United States and Europe, one of the main reasons being that various parties had predicted a surge in demand for electric vehicles. However, since the second half of last year, the production of electric vehicles in the European and American markets has been weak, and sales have been even lower than expected. As a result, SK On had to scale back its investments in Europe and the United States. The company has now announced an extension of the shutdown time for workers at its Georgia factory and postponed plans to establish a second factory in Kentucky through a joint venture with its main American customer, Ford.

Just one day later, on July 8th, preliminary financial data released by LG New Energy showed that the company's revenue in the second quarter of this year decreased by 30% year-on-year to 616 trillion Korean won (approximately 32.34 billion yuan); Operating profit fell 58% year-on-year to KRW 195.3 billion (approximately RMB 1.03 billion), lower than industry expectations. Even without taking into account the tax credits provided by the US Inflation Reduction Act, LG New Energy actually incurred an operating loss of 252.5 billion Korean won (approximately 1.33 billion yuan) in the quarter.

LG New Energy recently announced that the company is efficiently and flexibly adjusting the pace of investment execution according to market conditions, and has suspended the construction of the Energy Storage System (ESS) battery production line at its Arizona factory in the United States. This battery factory is LG New Energy's second independent factory built in the United States, which began construction in April this year. It plans to produce 46 series cylindrical batteries for electric vehicles and lithium iron phosphate soft pack batteries for energy storage systems.

In fact, domestic battery companies in the United States are also struggling. On May 5th, American star battery company Ambri Inc. filed for bankruptcy in the Delaware court and will be auctioned off for $38 million.

Ambri was founded in 2010 and its core product is liquid metal batteries. The two founders of Ambri were a pair of mentors and apprentices at the Massachusetts Institute of Technology. Chemistry professor Donald Sadoway and doctoral student David Bradwell invented a liquid metal battery in the laboratory: this battery uses magnesium (later replaced with calcium) as the negative electrode, antimony as the positive electrode, and molten salt as the electrolyte. This type of battery has a cycle life of up to 20 years, and the calcium and antimony in the materials used are much cheaper than the lithium, nickel, cobalt, and manganese used in mainstream batteries, and are safer than traditional lithium batteries.

And Ambri's main customers are not electric vehicle manufacturers. Its products mainly focus on energy storage for wind and solar power generation, which can store electricity for a long time. Even after 20 years, it still has a retention rate of 93%.

In 2011, shortly after its establishment, Ambri received millions of dollars in investment from French oil giants Total, Bill Gates, and the US Department of Energy; In 2014, Ambri announced a $35 million investment, led by Khostra Ventures and followed by Bill Gates; In 2021, it was announced again that it had received a $144 million investment, led by the new energy fund under Indian giant Reliance Industries, and followed by Bill Gates once again.

For the bankruptcy reasons of Ambri, "Pencil Path" analysis believes that there are three main reasons:

Firstly, there is no commercialization or mass production. Ambri's products have been in small-scale production and provided to a small number of customers. These 'customers' include public institutions, trial factories, and shareholders. Ambri has received meager amounts of money and the cost cannot be reduced without mass production. Tesla's financing scale is so large that before mass production, Musk slept in the factory every day to urge progress. He knew that if he didn't cross that line, the funding chain could break at any time;

Secondly, lithium batteries are too powerful. The price reduction of lithium batteries in recent years has been astonishing, and their performance is constantly improving. These startups claiming to replace lithium batteries have found that their market estimates were wrong;

Thirdly, major clients require stability. For many large customers, new forms of batteries may have many advantages, but they have not been tested by the market, and mature lithium battery technology is not easy to make mistakes. The large-scale replacement of new batteries, if something goes wrong, is not as simple as economic losses. Environmental safety, personnel safety, and corporate reputation may all suffer significant losses, and it is really a desperate situation.

The situation in the European market is also not optimistic. European battery company Northvolt recently announced that it will adjust its capacity expansion plan after reporting a huge annual loss, "which may delay the construction of new factories in Germany, Canada, and Sweden." In the 2023 fiscal year, Northvolt's loss increased sharply from $285 million (about 2.07 billion yuan) the previous year to $1.2 billion (about 8.7 billion yuan).

On June 4th, ACC, a joint venture battery company between European car company Stellantis, Mercedes Benz Group, and Total Energy, announced the suspension of construction of two electric vehicle battery factories in Europe. Behind this decision, it reflects a slowdown in market demand for expensive electric vehicles, so they may consider shifting to batteries with lower production costs.

Originally, ACC's plan was to establish and operate three super battery factories in Europe, with a total investment of up to 7 billion euros (approximately 55.2 billion yuan), and an expected total production capacity of 120 GWh, with each factory having a capacity of 40 GWh. At present, factories located in northern France are in the stage of increasing production capacity, while factories in Italy and Germany are temporarily suspended from construction and preparation due to market changes.

In fact, as early as mid January 2023, the bankruptcy of British start-up battery company Britishvolt had already begun the brutal reshuffle and competition in the European market.

Britishvolt was founded in December 2019. In 2020, Britishvolt officially began operations, recruited employees, and signed a series of cooperation plans. The company has chosen to establish a super factory in Bryce, Northumberland, and has pledged to invest £ 2.6 billion in the project, making it one of the largest investments in the history of the northeast region of the UK.

But until bankruptcy, Britishvolt's investment strategy was only focused on direct confrontation, and not only did it not secure an order from a heavyweight customer, but it also did not promote a mature product to the market.

Anyway, in order to ensure their own energy security, countries such as China, the United States, and Europe have elevated energy storage to a national strategic level and issued relevant support policies. However, policies in Europe and America imply trade protection clauses, which further accelerate the industrialization process of lithium batteries and increase the difficulty of global development and competition for enterprises.

In the future, it can be foreseen that in order to compete for the dominance and pricing power of the global new energy industry, the scope and intensity of the encirclement and suppression of Chinese enterprises by European and American governments are likely to further escalate. Industrial competition is so cruel, we should not have any luck mentality.

Returning to the level of enterprise competition and development, considering that it takes three to four years for a battery factory to be built and put into operation, and 5-6 years for it to "recover", according to this timeline, the time left for Chinese enterprises to internationalize and develop is already very urgent.

Undoubtedly, a global competition sweeping across the new energy industry has already begun, and the success or failure of global competition may have a profound impact on the future development trends and directions of enterprises and even industries.

According to the analysis of 24 Tide Industry Institute (TTIR), there are five key factors that determine the success or failure of globalization: production capacity layout, market development ability, supply chain network, research and development system, and carbon neutrality capability.

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Based on the latest development trends and changes in the comprehensive industry, global new energy enterprises will engage in a new round of competition around multiple dimensions such as new technologies, new production capacity, and new capital in the future. The success or failure of the competition will inevitably have a profound impact on the future industrial landscape and development. The author believes that in the future, enterprises with capabilities such as "technological breakthroughs and continuous innovation, advanced production capacity layout and efficient execution, global layout and development, financial health and strong capital strength" will have the genes and strength to cross cycles and continue to develop and grow.

However, considering the significant volatility risks in the global economic, financial, and market environment, companies must also act within their capabilities when deploying advanced production capacity, integration, and globalization. Ren Zhengfei once said in his article "Don't Be a Flash in the pan Hero", "Without a solid foundation, expanding without authorization can only be suicide