By Song Jing, OilChem China
Development pattern and trends of China’s cathode materials industry
It has been a global consensus to develop new energy in the context of "dual carbon". The rapid development of new energy vehicles has driven the rapid expansion of the lithium battery industry, providing a broad market for the development of lithium battery cathode material industry.
From 2018 to 2023, China's cathode materials industry was transitioning from the development stage to the maturity stage. During this period, enterprises’ production capacity was in a trend of active expansion, leading to an accelerated growth rate in cathode material output. (see Figure 1)
Figure 1 Comparison of the production capacity of China’s cathode material from 2018 to 2023
In 2021, the Chinese National Development and Reform Commission and the National Energy Administration issued the Guiding Opinions on Accelerating the Development of New Energy Storage, pointing out that new energy storage is an important technology and basic equipment to support new power systems, and is of great significance for promoting green energy transformation, responding to extreme events, ensuring energy security, promoting high-quality development of energy, and supporting the achievement of climate change goals. In 2022, the National Energy Administration and the National Development and Reform Commission released the Implementation Plan for New Energy Storage in the 14th Five-Year Plan, further clarifying the development requirements of the energy storage industry. Driven by these national industrial policies, China will usher in a golden period for the development of the energy storage industry.
In 2022, the Ministry of Industry and Information Technology and the State Administration for Market Regulation jointly issued the Notice on the Coordinated and Stable Development of the Lithium-ion Battery Industry Chain and Supply Chain. The notice pointed out that local departments shall guide lithium battery enterprises to reasonably formulate development goals based on actual conditions and industry trends. It is recommended that, under the premise of stable supply of key materials, sufficient investment in R&D and innovation, and adequate supporting funds, companies should appropriately expand production scale, optimize industrial layout according to time and needs, and avoid low-level homogeneous development and vicious competition.
Furthermore, the Ministry of Industry and Information Technology proposed that we shall insist on promoting a better combination of effective markets and positive governments, strive to eliminate local protection and regional fragmentation, and jointly build a unified national lithium battery market that is efficient, standardized, fair, and open.
In 2023, in order to support the development of the new energy vehicle industry and promote automobile consumption, the Ministry of Finance, the State Administration of Taxation, and the Ministry of Industry and Information Technology issued the Announcement on Tax Reduction and Exemption Policy for the Purchase of New Energy Vehicles. The announcement clarified that new energy vehicles purchased between January 1, 2024 and December 31, 2025 will be exempt from vehicle purchase tax, but the exemption for each new energy passenger vehicle shall not exceed RMB30 000. Furthermore, new energy vehicles purchased between January 1, 2026 and December 31, 2027 will be halved, but the exemption for each new energy passenger vehicle shall not exceed RMB15 000. The announcement also stated that new energy vehicles that enjoy the purchase tax exemption policy include pure electric vehicles, plug-in hybrid (including extended-range) vehicles, and fuel cell vehicles.
In the future, the new energy automobile industry is expected to continue its rapid development over the next 3 to 5 years. Additionally, the demand for the energy storage industry is continuously rising. Therefore, the global new energy industry is expected to remain highly prosperous. At present, most of the world's new lithium battery upstream and downstream production capacity is concentrated in China.
Current development characteristics of China’s cathode materials industry
1. The production capacity of new cathode material is expected to slow down in 2023, with the total capacity expected to exceed 5 million tons by the end of the year
China's ternary materials production capacity will maintain steady growth in 2023. The total production capacity of the ternary materials industry has increased to 1.3147 million t/a, with a production capacity growth rate of 35.38%. It is expected that there will be a newly-added capacity of 440 000 t/a in 2023. Judging from the actual production situation, all new production capacity has been put into operation in 2023, and the capacity utilization rate has gradually increased. Regarding the newly-added units during the year, more than 60% were listed companies, and private companies accounted only a few. It is expected that the total production capacity will increase to nearly 2 million t/a by 2025.
In 2023, the newly built production capacity of domestic leading lithium iron phosphate units will continue to be released, such as Hunan Yuneng New Energy Battery Material Co., Ltd., Gotion High-tech Co., Ltd., Hubei Wanrun New Energy Technology Co., Ltd., Guizhou Anda Energy Technology Co., Ltd., etc. Other companies are titanium dioxide companies, with advantages in iron sources, such as Henan Longbai New Materials Technology Co., Ltd.
2. Trends of China’s cathode material production capacity from 2019 to 2023
According to OilChem China, China's new ternary materials production capacity had a compound growth rate of 60.68% from 2019 to 2023 (see Figure 2). From 2021 to 2022, high-nickel projects increased rapidly, with the production capacity growth rate in 2021 reaching 201%. There was a number of units expected to be put into operation in 2022, but the production capacity of some enterprises will not be released until 2023. In 2023, the new production capacity of leading companies will be released quickly, and it has basically been put into operation in the first half of the year. New projects in the second half of the year will reach 240 000 t/a, and Ningbo Ronbay Lithium Battery Materials Co., Ltd.'s 200 000 t/a new production capacity is expected to be put into operation by the end of the year.
Figure 2 Change of China’s new ternary materials production capacity and output from 2019 to 2023
According to OilChem China, China's lithium iron phosphate production capacity had a compound growth rate of 69.97% from 2018 to 2022 (see Figure 3). 2021 to 2022 was an explosion of production capacity because after the reduction of state subsidies, lithium iron phosphate has caught up with ternary materials due to its cost advantage, safety and durability. What’s more, driven by the development of photovoltaics and new energy vehicles, the demand for lithium iron phosphate has rapidly risen. As of 2022, the production capacity has reached more than 2 million t/a, and there is still production capacity under construction and ready to be put into production. In 2023, the production capacity of lithium iron phosphate is expected to reach 3.63 million t/a, with newly-added capacity of 1.5 million t/a, and the new production capacity will be gradually released.
Figure 3 Change of China’s new lithium iron phosphate production capacity and output from 2019 to 2023
According to OilChem China, China's new lithium manganate production capacity had a compound growth rate of 9% from 2018 to 2023 (see Figure 4). In 2022, while market demand was saturated, the new production capacity of lithium manganate slowed down. Except for the leading enterprises, both small and medium-sized enterprises have no expansion plans. The data shows that the growth rate of production capacity peaked in 2021. However, in 2022, affected by the sluggish downstream demand, units were not put into production as expected. In 2023, downstream digital demand remains sluggish, resulting in less new production capacity in the market and a limited increase in output.
Figure 4 Change of China’s new lithium manganate production capacity and output from 2019 to 2023
According to OilChem China, China’s lithium cobalt oxide production capacity had a compound growth rate of 89.41% from 2018 to 2022 (see Figure 5). Over the past five years, the new production capacity of lithium cobalt oxide peaked in 2020, mainly due to the pandemic. Online education increased the product demand and further stimulated the launch of new units. The new production capacity of lithium cobalt oxide was released in 2021, driving the significant output growth, but downstream demand became basically saturated. As a result, there was less new production capacity in 2022, and the growth rate declined. In 2023, the newly expanded production capacity will mainly concentrate in leading companies. As of now, Tianjin B&M Science and Technology Co., Ltd.'s newly expanded capacity has been put into operation.
Figure 5 Change of China’s new lithium cobalt oxide production capacity and output from 2019 to 2023
3. The supply of cathode materials will continue to increase from 2024 to 2028, and lithium iron phosphate will remain the main force
According to OilChem China, it is lithium iron phosphate that will have the most newly-added capacity in the next five years, followed by ternary materials. The iron phosphate product industry plans to construct 12.53 million t/a in the next five years, with no plan to exit production capacity. The new production capacity will be mainly distributed in Southwest, Central and East China. Part of the new capacity is the expansion of the original companies, while others are companies with upstream raw material resources, such as titanium dioxide companies or phosphorus chemical companies which are developing their industrial chain towards scale production, and a small number of enterprises are across industries. Due to the large production capacity planned to be built, lithium iron phosphate is expected to be oversupplied in the future. As a result, corporate profits are expected to shrink, which may affect the launch of some new production capacity in the later period, and some companies may even cancel their projects. The ternary material products industry has a planned capacity of 1.2 million t/a, with no plan to exit production capacity. Among the planned production capacity, there are 4 companies with a capacity of more than 100 000 t/a (including 100 000 t/a). The new capacity will be mainly distributed in East China, Central China and South China. According to statistics, production capacity below 100 000 t/a (exclusive) will basically be put into operation in 2023, with a newly-added capacity of 280 000 t/a, while capacity above 100 000 t/a will basically take around 24 months.
