After the off-season of the first quarter, the overall production schedule of the lithium battery industry continued to improve in mid second quarter.

From 2023 to present, it can be said that the lithium battery industry has undergone a large-scale adjustment, which has affected all aspects of the industry chain, including prices, inventory, capacity utilization, etc., and has profoundly affected the operating conditions of lithium battery enterprises.

With the passage of time, this round of adjustment reached its peak from the fourth quarter of 2023 to the first quarter of this year. This is not only because the prices of materials and batteries have fallen all the way to historical lows, but also because the price war between the car market and battery companies reached its highest point during this period. In addition, with the arrival of the off-season in the first quarter of 2024, the industrial chain is full of uncertainty.

However, in the second quarter of this year, positive news from the industrial chain such as production recovery, stable prices, demand expansion, and inventory replenishment came one after another.

In terms of the seasonal pattern of the lithium battery industry, after the off-season in the first quarter of this year, the second and third quarters have gradually entered a new round of stocking period. Several lithium battery companies have recently made it clear that the market demand has rebounded significantly in the second quarter, and the capacity utilization rate has remained at a high level.

This also indicates that after a whole round of major cyclical adjustments in the past, the most difficult moments of the industrial chain have gradually become a thing of the past. In 2024, whether from the growth data of the automotive market, the installed capacity of power batteries, or the market growth expectations of lithium battery companies, it will become an important watershed.

Industrial adjustment is gradually entering a favorable stage

Capacity, price, inventory and other indicators are important indicators for judging the health of the industrial chain.

In 2024, based on these indicator data, the lithium battery industry has undergone more than a year of adjustment and has made significant improvements. In terms of related news, the transmission of the real supply and demand relationship in the industry chain has also opened up the process of eliminating falsehood and retaining truth.

Firstly, in terms of production capacity. Previously, due to the popularity of the lithium battery industry, it attracted a group of cross-border players in the lithium battery industry, and together with the expansion boom of industry enterprises, formed a large number of nominal production capacity, of which a considerable number were contracted production capacity rather than actual operating capacity. This has also led to a severe overcapacity in the nominal capacity of the lithium battery industry in 2023. In contrast, the actual production capacity is much smaller and more concentrated in the leading enterprises in the industry.

With the adjustment of the lithium battery industry, cross-border enterprises in the early stage find it difficult to form effective competitiveness in the industry due to factors such as long product certification time, insufficient stable supply capacity, and product homogenization. Moreover, material prices are approaching the industry limit, and most enterprises in the industry have already suffered losses. Due to reduced profits and tightened financing, the speed of investment in new production capacity in the industry has significantly slowed down. Many cross-border entrants have postponed or even cancelled their original investment and expansion plans, resulting in a significant decline in nominal production capacity.

From the perspective of the supply and demand structure of production capacity, the nominal production capacity of the industry is approaching the actual production capacity, which is closer to the real demand situation of the industry.

Next is the price aspect. The large fluctuations in prices from materials to battery cells will constrain the development of the industry, lead to an imbalance in profit distribution in the industry chain, and ultimately result in a series of adverse market phenomena.

The period of 2022-2023 corresponds to a major cycle of severe fluctuations in the overall price chain of the lithium battery industry. The upward trend in 2022 caused a shortage of "lithium" and the car market suffered, while the downward trend in 2023 resulted in severe losses for material companies.

In contrast, after a major cycle adjustment, the supply and demand structure is clearer and procurement strategies are more cautious from upstream lithium mines to midstream and downstream materials, batteries, and new energy vehicle companies.

Nowadays, the price of lithium carbonate is stable in the price range of 100000 to 110000 yuan/ton, the price of lithium iron phosphate is stable at 40000 yuan/ton, and the price of lithium hexafluorophosphate is stable at 70000 yuan/ton.

Several lithium battery companies have also stated that material prices are currently at historically low levels and the possibility of a decline is unlikely. A stable price system is more conducive to the healthy development of the industry chain. Looking ahead to 2024, starting from the overall supply and demand structure, it is expected that material prices will continue to remain stable.

Then there is inventory. The inventory status of a company is also the key to judging the health of its operations and even the industry. In the past major adjustment cycles of the lithium battery industry, the inventory strategies of lithium battery companies have gone to two extremes. In the upward cycle, they started large-scale stockpiling strategies, and in the downward cycle, they started collective inventory clearance.

Extreme inventory strategies not only mislead the transmission of real supply and demand relationships, but also damage the financial and energy resources of enterprises.

After continuous industry adjustments, maintaining a cautious and stable inventory strategy has become a consensus in the industry. According to the first quarter report released by lithium battery companies in April, the inventory levels of most companies have decreased by more than 20% compared to 2023, and the industry's inventory has entered a healthy level.

The peak season for lithium battery stocking is approaching

The peak season for the downstream new energy vehicle market is concentrated in the third and fourth quarters, which is transmitted to the mid to upper reaches of the lithium battery market, while the peak season for stocking is concentrated in the second and third quarters.

With the passage of time, the stocking wave of lithium battery industry is coming.

From the perspective of capacity utilization rate, the first quarter of this year was a low period for capacity utilization rate. However, compared with the same period last year, the recovery trend of the lithium battery industry in 2024 is significantly higher than that in 2023, and the capacity utilization rate of CATL in the first quarter is also better than that of the same period last year.

According to the shipping pattern of the lithium battery industry in the past, it is generally based on the industry's shipments in the first quarter, with an amplification of about 5 times for the whole year. However, from the market situation, especially the production schedule of lithium battery companies in the second quarter, it is significantly better than that in the first quarter. This also means that with production exceeding expectations in the second quarter, the lithium battery industry's annual shipments are expected to exceed five times those of the first quarter.

It is understood that since March, the capacity utilization rate of top battery companies has increased significantly month on month. In the first half of the second quarter, which is April this year, the overall industry production schedule continued to rise, with the capacity utilization rate of leading battery manufacturers increasing to 80%, and the capacity utilization rate of some second - and third tier battery manufacturers also increasing to 60-70%.

Looking back at the materials aspect, Zhongke Electric recently stated that downstream customers have a high demand for negative electrode materials, and the company's capacity utilization rate is at a high level; De Fang Nano stated that the company currently has a high production capacity, and the downstream recovery trend in the second quarter is quite obvious. The capacity utilization rate is expected to remain at a high level; Xinzhoubang expects a relatively stable month on month growth in electrolyte shipments in the second quarter.

In the downstream automotive market, sustained and stable growth provides support for the decline in lithium battery production. According to data from the China Association of Automobile Manufacturers, sales of new energy vehicles reached 2.94 million units from January to April this year, a year-on-year increase of 32.3%. According to data from May 1st to 12th, the sales of new energy vehicles reached 241000 units, a year-on-year increase of 31% and a month on month increase of 10%. In addition, as we enter May, the release of new cars at the auto show combined with the release of trade in rules will further boost the sales of high-speed trains in the market.

Overall, due to the decline in upstream resources such as lithium carbonate, intensified competition, and destocking over the past year, the profitability of lithium battery material companies has bottomed out and stabilized. Processing fees in various links have also fallen to a temporary low, coinciding with the period of replenishment in the lithium battery industry. In the second half of 2024, the lithium battery industry may further stabilize or even grow beyond expectations.