Xu Chenxi, CNCIC

The average annual growth rate of the downstream lithium industry has surpassed 20% in recent two years, along with China’s booming new energy industry. Lithium battery products have raised new requirements for raw materials, both in terms of quantity and quality. Polyvinylidene fluoride (PVDF) is an indispensable binder for lithium battery cathode materials. But due to the technological gap, PVDF used for lithium batteries in China’s domestic market has long been dominated by several overseas giants. 

Fluoride coatings used to be the largest application of PVDF before the accelerating development of the new energy industry, mainly applied in anti-corrosion of building steel structure. But from 2020, the consumption of PVDF in lithium battery, at around 14 kt overshadowed that in coatings and its consumption ratio stood at 36% (as shown in Figure 1).  

Figure 1 China’s PVDF downstream consumption distribution in 2020

Booming lithium battery industry boosts rapid growth in PVDF consumption

New energy vehicles are the major application field of lithium battery, while energy storage battery, a relatively small consumption area of lithium battery will see rapid growth in the coming five years. Of the newly added chemical energy storage batteries in the past five years, 99% were for lithium battery. New-type energy storage installed capacity is predicted to reach above 30GW by 2025, with the average annual growth rate over 50% in 2021-2025. CATL, BYD and other domestic lithium battery enterprises have been making the layout for energy storage batteries and increasing research and development input. 

From 2021 onwards, supportive policies will accelerate the development of new energy vehicles. According to the New Energy Vehicles Development Plan (2021-2035), China’s new energy vehicle sales will account for around 20% of domestic auto sales by 2025, and the average annual growth rate of new energy vehicle consumption shall reach 30% in the following five years, considering the current ratio at around 5%. 

Upstream PVDF producers rush for capacity expansion

Upstream PVDF producers are planning to expand their capacity on the back of robust demand from the lithium battery industry. There are around 10 PVDF producers in China and over half of them have expansion plans, all targeting the lithium battery market. 

China’s new PVDF capacity may reach 66.5 kt/a (see Table 1) in the five years ahead, including 17 kt/a planned additional capacity of overseas companies and the rest are from domestic producers. These planned new capacities are expected to come on stream in the coming five years, as driven by brisk downstream demand. However, the supply growth of upstream feedstock may lag behind in the near term, due to the relatively long approval period of new PVDF and downstream capacities as well as the quota restrictions of feedstock R142b. Hence, the supply shortage is likely to improve in two years’ time. 

Lithium battery grade PVDF and related products prices surge

Overseas enterprises’ prices for lithium battery grade PVDF surged in 2021 to around RMB200 000/ton, while those for other grades were at only RMB50 000-100 000/ton. The price increase was mainly because of the severely tight supply of lithium battery grade PVDF, which caused the shortfall in supply of other grades. Meanwhile, the prices of feedstock R142b spiked, by over 300% from the fourth quarter of 2020 to the second quarter of 2021, and are currently around RMB65 000/ton. 

The supply crunch may linger in the near term, thus keeping PVDF prices at high levels in the coming two years, due to the relatively long approval period of new PVDF capacities (about two years). 

Lithium battery producers begin to purchase domestically-made PVDF

There remains a big gap between lithium battery grade PVDF made by domestic fluorine chemical producers and their foreign counterparts. The main problems are the low molecular weight of domestically made products and their viscosity is not up to the overseas levels. However, CATL and BYD have begun to make volume purchases of domestic materials and cooperation with Sinochem Lantian, Shandong Dongyue and Shanghai 3F in view of the tight feedstock supply. Foreign lithium battery producers also fall short of PVDF supply and are competing for feedstock supply with Chinese lithium battery producers.  

A few downstream lithium battery producers are acquiring PVDF manufacturers for upstream integration to secure feedstock supply. For instance, Shanghai Putailai New Energy Technology Co., Ltd. and Guangdong Ruyuan Dongyangguangg Fluorine Resin Co., Ltd. achieved strategic cooperation intention and may obtain 60% equity of the investment target.  

Outlook

     The lithium battery industry will maintain strong growth momentum in the following five years and the average annual growth rate is expected to exceed 20%. By 2025, PVDF consumption in the lithium battery sector may top 30 kt, which will bring new challenges and opportunities for domestic PVDF producers.