April is approaching, and the latest production schedule for lithium-ion batteries has been released. Some of the changes are worth paying attention to and analyzing.

Market research shows that on the basis of a significant recovery in battery and positive electrode production in March compared to the previous month and exceeding the level in January, the overall lithium battery production in April increased slightly by about 10% compared to the previous month.

Among them, the upstream lithium carbonate production rate is leading the way, with the total production of major enterprises in April increasing by over 25% compared to the previous month. The monthly production rate of top enterprises is close to 70%, and there is a significant gap in the industry's internal production rate.

The production growth of batteries and negative electrode links is also relatively strong, with the total production of major enterprises increasing by nearly 15% month on month in April; The monthly production of top battery companies is expected to exceed 40GWh. However, the negative electrode is also the only link where major enterprises are expected to experience a year-on-year decline in production scheduling.

In the positive electrode sector, the total output of major enterprises in Sanyuan increased by more than 10% month on month in April, while the total output of major enterprises in lithium iron phosphate increased by less than 5% month on month. The total production increase of major electrolyte companies in April was also around 10%.

Finally, there is the diaphragm segment, with the total output of major enterprises increasing by less than 10% month on month in April.

The performance of the 6-series ternary exceeded expectations, with negative electrode inventory approaching safety

From the production schedule data in April, it can be seen that there are new changes in various links of the lithium battery industry chain.

Firstly, in the positive electrode sector, the production growth rate of iron lithium enterprises is lower than that of ternary batteries, which is due to the recovery of the ternary battery market since the beginning of this year.

Before the expected increase in ternary production exceeded that of iron lithium, there had already been a reversal in the share of iron lithium and ternary within the power battery. In February this year, the actual monthly production of ternary batteries exceeded that of iron lithium batteries, and the sales ratio of ternary power warehouses was lower than that of iron lithium power warehouses and iron lithium energy storage warehouses, which is closer to the safety zone of 1.5-2 months. In March, the production of iron and lithium has slightly recovered, while Sanyuan still maintains growth.

The reason for this is, on the one hand, due to the emergence of popular ternary models such as the Wenjie M7 in the first quarter (with sales exceeding 20000 units for three consecutive months), and most of them choosing the 6 series ternary battery cells, the terminal has received positive feedback and positive transmission.

On the other hand, the fluctuation of energy storage demand, coupled with the price war of mid to low-end vehicle models in the early stage, mainly triggers consumer wait-and-see sentiment, which has a certain impact on short-term demand for iron and lithium.

Within the ternary material industry, the market share of the 6-series ternary material, which simultaneously dominates the 5-series and the 8-series, has reached a historical high in February this year, accounting for over 30%, with a difference of less than 5 percentage points compared to the 8-series ternary material market share. In 2023, the proportion of 8-series ternary production reached as high as 50%.

In addition to popular models, battery companies are constantly focusing their production capacity resources on two terminal scenarios, 800V high-voltage fast charging and plug-in hybrid range extension, based on market rhythm control.

According to Gaogong Lithium Battery, more than one battery company has stated that it will increase the capacity utilization rate of its already established ternary production line and overall increase the proportion of ternary battery shipments by 2024. This means a high demand for certainty for ternary materials.

Secondly, the expected increase in negative electrode production in March is over 30% compared to the previous month, and the expected negative electrode production in April is higher than other midstream materials, mainly due to the significant impact of destocking since the first quarter.

Taking the introduction of the Graphite Act in October 2023 as a milestone, enterprises will exceed their inventory in advance; However, the subsequent actual demand recovery did not meet expectations, leading to negative electrode companies reducing production significantly to reduce inventory.

The data shows that the current inventory of negative electrode materials is about 45 days, entering a safe range. Enterprises have resumed the model of production based on sales, and production scheduling expectations are closely following the pace of terminal production scheduling.

Thirdly, the expected increase in production scheduling for the diaphragm process is lower than downstream, mainly due to significant internal differentiation, stronger resumption efforts from top manufacturers, and difficulties in survival at the tail end. The inventory level is around 35 days, and manufacturers have provided feedback that inventory still needs to be removed.

In addition to production scheduling, the performance of lithium battery companies in capacity utilization is also worth paying attention to.

It is understood that the overall capacity utilization rate of the lithium battery industry chain in April will continue the trend of March, with the top achieving 60%, while other enterprises will achieve 30% -40%.

Some viewpoints point out that the current speed of capacity expansion in the lithium battery industry is slowing down, but the recovery of capacity utilization is relatively slow, and it has not yet reached a "higher level of momentum"; But as the number of new enterprises decreases, the competitive landscape is expected to ease.

Who will come first when demand exceeds and lithium prices fall?

Since the beginning of this year, the information on the new energy vehicle market and the lithium battery industry chain has become increasingly complex and diverse. For the judgment of future trends, it may be necessary to return to the judgment of variables or increments in the supply and demand fundamentals.

Both the demand and supply sides have their own core issues to face.

Among them, with the recovery of production in March, the main contract price of lithium carbonate futures has returned to a relatively high level of 110000 to 120000 yuan in the past period of time, indicating that the market has high expectations for the recovery of lithium batteries. Can the high growth expectations on the demand side be implemented?

In the short term, it can be confirmed that the high-intensity terminal price war is beginning to pass the stage of consumer wait-and-see, and then shifting towards promoting sales growth. Although Tesla announced a price increase against the trend, industry insiders believe that its main purpose is also to stimulate consumption before the price increase. Under the stimulation of this strategy, the monthly sales of Tesla related models are expected to return to 10000.

The price war of 50000 to 100000 yuan PHEV models led by BYD will mainly have a repairing effect on the upward trend of iron lithium production and sales, while the sustained upward trend of ternary materials may be under pressure.

The above positive factors will further promote the completion of destocking in the terminal process, and the subsequent replenishment behavior will drive the recovery of production scheduling in the middle and upper reaches.

Data shows that the inventory of new energy passenger garages in China is showing a "slow decline" trend. In November 2023, the inventory of pure new energy vehicle companies reached a recent peak level of 400000 units, but by February 2024 it had dropped to 340000 units, with a significant decrease in dealer channel inventory and industry inventory returning to health.

The market believes that BYD may rebound after establishing a bottom in bicycle profits in the first quarter of this year, and after that, the profits of the lithium battery industry chain are expected to be boosted.

Another industry insider has stated that in the short term, the selling price and sales volume of Xiaomi cars will become the biggest uncertainty factor in the lithium battery industry chain.

In the medium to long term, new energy vehicles will move from pure electric to plug-in hybrid, extended range and other diversified routes, as well as the release of growth expectations for mid to high end new energy vehicle models, which will bring broader opportunities.

In terms of policy, the disclosure and implementation of the "trade in" policy details, coupled with the possibility of replacing new and additional purchases, are expected to become the main driving force for the growth of new energy vehicle consumption, and are expected to become a positive factor with high certainty.

On the supply side, lithium carbonate futures fell back to around 100000 yuan this week, driving spot prices to fall for the first time since the end of February. Behind this was the influx of futures warehouse receipts and imported raw materials into the market, and the supply of lithium carbonate raw materials resumed to be loose. However, the demand side lacks upward support, and the overall market is returning to rationality.

At the beginning of this week, the market once again fermented information about lithium related enterprises in Yichun reducing production and shutting down. However, in reality, since the Spring Festival holiday, a small number of small and medium-sized smelters that have been broken through the cost line have not resumed work, and the oversupply pattern has not reversed.

Looking at the long timeline, apart from oversupply, there are currently no other strong trends or signals on the fundamentals, and the overall trend has entered a "weak reality, strong expectations" fluctuation cycle. It is necessary to be vigilant whether market fluctuations are based on financial sentiment or actual signals of production and sales changes.