Starting from 2023, the lithium battery industry will enter a new downward cycle, which will continue until 2024. The lithium battery industry still faces challenges such as overcapacity, low prices, extreme competition, weak demand, and poor performance.

The above difficulties directly led to the "collapse" of the lithium battery industry, for example, in the material side, lithium battery leaders represented by Xinzhoubang, Wanrun New Energy, Nord Group, etc. have successively terminated or postponed the construction progress of projects, and even some companies have shut down some production lines; On the device side, there is a phenomenon of more than ten device companies "breaking prices" competing for the same project; The competition on the battery side is even more intense. In the first half of the year, mainstream enterprises almost stopped their previous expansion actions and instead engaged in fierce competition on the technology and cost sides. The product of this competition is the repeated record low prices of energy storage and power battery cells, performance losses after extreme compression of profit and cost, and the reality of how to "survive".

The industry believes that cyclical development is inevitable in the lithium battery industry at this point. How to cross the cycle and face the next round is a "mandatory course" for every enterprise involved.

According to the observation of Qidian Lithium Battery, various lithium battery companies have submitted their answers, such as seeking new markets overseas, taking the initiative to explore emerging tracks, or focusing on the increment brought by new battery technologies. Currently, these problem-solving methods have achieved some results and stimulated the comprehensive recovery of the industry.

01 Four signs of recovery in the lithium battery industry

Firstly, the overseas layout has shown initial results, with a significant increase in lithium battery export data.

Public data shows that from January to June this year, China's exports of power and other batteries reached 73.7 GWh, a year-on-year increase of 18.6%. The export volume of lithium iron phosphate batteries continues to rise, with 23.9 GWh of power type lithium iron phosphate batteries exported in the first half of the year, a year-on-year increase of 46.7%; Other types of lithium iron phosphate batteries exported 13.6GWh in the first half of the year, a year-on-year increase of 417.8%.

It can be seen that the demand in overseas markets has further exploded, especially for enterprises in the energy storage field, which have entered the delivery stage. It is expected that the shipment volume of energy storage and other batteries will further increase in the second half of the year.

Secondly, with the emergence of new tracks, segmented markets both domestically and internationally continue to experience explosive sales.

In the foreign market, taking the energy storage field as an example, there have been frequent large orders recently, such as Sunac Power winning the world's largest 7.8GWh energy storage project in Saudi Arabia and delivering it within this year. In addition, several companies including EVE Energy, CATL, Ruipu Lanjun, Guoxuan High Tech, Penghui Energy, Haichen Energy Storage, and Far East Battery have signed energy storage system orders with overseas customers this year, with an expected order quantity of over 32GWh.

In the domestic market, the demand for commercial vehicles and low altitude flights is increasing, and giants are frequently signing contracts.

For example, in the field of commercial vehicles, in the first quarter of 2024, the cumulative sales of new energy commercial vehicles in China reached 96000 units, a year-on-year increase of 87%, surpassing the growth rate of new energy passenger vehicles. It is expected to continue to maintain high-speed growth in the second half of the year.

On the enterprise side, CATL has launched the commercial power battery brand "CATL Tianxing" and has reached a cooperation agreement with Fresh Life Cold Chain Logistics Co., Ltd., a subsidiary of New Hope Group; EVE Energy has released open-source batteries and established stable supporting relationships with leading commercial vehicle companies such as Sany, Dongfeng, and Geely; Chu Neng New Energy's lithium iron phosphate battery is about to be installed on Sany Automobile's battery swapping pure electric dump truck and Sanhuan Automobile's pure electric dump truck. In addition, it also maintains cooperation with Dongfeng Commercial Vehicle, Xiamen Jinlu, SAIC Hongyan, Shenhe Automobile, and others.

In the field of low altitude flight, China's low altitude economy will reach 505.95 billion yuan in 2023, with a growth rate of 33.8%; It is expected that by 2026, the scale of low altitude economy will exceed one trillion yuan. At present, battery companies such as CATL, EVE Energy, Funeng Technology, Guoxuan High Tech, and Juwan Technology Research have all made early layouts. Among them, CATL has successfully flown a 4-ton civilian electric aircraft and is actively investing in and accelerating the development of an 8-ton aircraft.

Thirdly, after the order is placed, the production line scheduling and operating rate increase.

Stimulated by the signing of various orders, the production line capacity of domestic lithium battery enterprises has rapidly increased, driving the overall market recovery of the lithium battery industry chain. Although the market for positive electrode materials has been slightly sluggish due to the impact of lithium carbonate prices, the production of electrolytes, negative electrodes, and separators has all increased month on month.

Taking lithium battery separators as an example, according to data from the Starting Point Research Institute (SPIR), although the market price of lithium battery separators has slightly decreased in Q2 2024 compared to Q1, and the gross profit margin of separator enterprises has narrowed, at present, the operating rate of separator manufacturers is at a high level, especially the production volume in Q2 has grown rapidly compared to the same period last year, mainly due to the increasing volume of energy storage markets at home and abroad.

According to SPIR, the second half of the year is expected to be a critical period for the implementation of energy storage projects. Coupled with the peak season for new energy vehicles, the shipment volume of battery companies will significantly increase, which will drive up the demand for separators and further increase the shipment volume.

In addition, companies such as CATL in the battery sector have publicly announced that their overall production schedule is good, with recent and third quarter production schedules showing a month on month growth trend; Guoxuan High tech stated that production scheduling is normal and orders are increasing instead of decreasing.

Fourthly, with the acceleration of production, lithium companies are facing a recruitment wave.

This can support the improvement of lithium battery production line output rate. According to statistics from Qidian Lithium, as we enter the third quarter, various lithium battery companies have begun to "recruit talents". After aggressively recruiting 19 energy storage positions, Ningde Times has not only started recruiting for 5 major positions in the battery cell process engineering department, but also recruited production technicians for the production of the Luoyang base. After training at the Ningde base in Fujian, they will be gradually transferred to the Zhongzhou base in Henan in 2025 according to the production plan.

In addition, Hunan Yuneng has also started recruitment work in Hunan, including positions such as production reserve backbone, workshop general worker, fitter, quality engineer, etc. The demand for workshop general worker recruitment has reached 30 people.

02 After the performance is under pressure, we will face a turning point

According to statistics, over 20 lithium battery related companies have disclosed their performance for the first half of 2024, with an expected increase of less than 30%. Most of the reports are negative, while a small portion is expected to incur losses.

Among them, lithium salt enterprises are greatly affected by the decline in lithium carbonate prices, and most of them are in a downward trend. Taking Tianqi Lithium and Ganfeng Lithium as examples, the two giants have expected losses of 4.88 billion yuan to 55.3 billion yuan and 760 million yuan to 1.25 billion yuan respectively. In addition, the downward trend in performance has been transmitted to lithium battery companies, such as Nord Group, Duflo, and Vico Technology, which have also raised performance red lights.

However, it should be noted that some lithium salt companies, represented by Tianqi Lithium, have slightly narrowed their Q2 losses compared to the previous quarter. In addition, some companies are expected to increase their performance in the first half of the year. On the battery side, Xinwangda expects a year-on-year increase of 75% -105% in net profit for the first half of the year.

The industry believes that the fundamentals of the lithium battery industry may have been bearish. With the improvement of downstream demand for electric vehicles and energy storage, the lithium battery industry chain is expected to rebound in terms of quantity and price in the second half of the year. Production on the quantity side is expected to increase, and prices may see a partial rebound.

It is reported that the current average price of lithium carbonate is 87000 yuan/ton. Several companies have stated that lithium prices have already been surveyed and will not continue to decline. The peak season for the market is coming in the second half of the year. With the clearance of inventory in the first half of the year, the profitability of the industrial chain will rebound, and the performance may usher in a turning point.

It should be noted that the "Matthew Effect" is currently evident in the lithium-ion battery segmentation field. For second - and third tier lithium-ion battery companies, they can pay attention to the demand for new markets and technologies in terms of market growth in the second half of the year.

Taking lithium battery equipment companies as an example, solid-state battery technology is accelerating its implementation. Some companies have already laid out intelligent manufacturing equipment for solid-state batteries, such as Chengtai Technology, which has launched dry electrode equipment suitable for solid-state batteries and won cooperation with leading enterprises; Yugong High tech is developing all solid state electrolyte membrane preparation and composite equipment, and has reached cooperation with top domestic authoritative institutions. It is expected to generate nearly 10 million orders in the short term.