The power battery industry chain is mired in a crisis of overcapacity
With the decline in the price of raw materials for power batteries, the problem of overcapacity in related industries has also surfaced. Recently, the leading graphitization enterprise Shangtai Technology issued an announcement that its Lichengdao base, which has been operating for nearly 15 years, officially announced the suspension of production. After experiencing round after round of large-scale expansion, the drawbacks of overcapacity and homogenization competition in the field of power battery raw materials have been undoubtedly revealed. The surplus crisis is continuing to spread, and the entire power battery industry seems to be about to enter the adjustment period of capacity reduction and structural optimization after the expansion spree.
Raw materials took the lead in opening the curtain on production capacity
It is understood that the Licheng Road Base of Shangtai Technology began to be built in 2008, which is the earliest production base of Shangtai Technology, and is also the starting and birthplace of the company's entrepreneurship, and the main facilities are graphitization furnace and other supporting facilities, office buildings and dormitory buildings. At present, the integrated production capacity of graphitization process is about 20,000 tons/month, of which the highest production capacity of anode materials in Lichengdao base is about 1152 tons/month. For the reason for the suspension of the Licheng Road base, Shangtai Technology attributed it to the slowdown in demand for anode materials and the company's own need to reduce costs and increase efficiency.
Shangtai Technology said that from the demand side, since 2023, the growth rate of electric vehicles has slowed down, the power battery market has been affected by destocking, and lithium battery customers have not been actively scheduled, resulting in a slowdown or even weakness in the demand growth of the entire anode material market. From the supply side, after the substantial expansion of the industry in previous years, negative electrode material manufacturers, including the industry's leading enterprises, have entered the capacity release period, the effective production capacity of the industry with graphitization process as the core has increased significantly, and the supply and demand of the entire negative electrode material industry has reversed, facing the situation of overcapacity. The active shutdown is also a positive measure for Shangtai Technology to adjust its backward production capacity.
It is understood that due to the early completion time of Shangtai Science and Technology Lichengdao Base, the equipment and facilities are old and aging, compared with the company's new production line, the production capacity is small, the unit energy consumption is higher, the production process and workshop equipment layout are unreasonable, the production organization and management efficiency is low, the comprehensive cost is high, and the competitiveness is not strong. At the same time, the base of Licheng Road is located in Wuji County, Shijiazhuang, Hebei Province, with a remote location and very inconvenient transportation; The market electricity price used in production is high, and the main production facility of the Licheng Road base is a graphitization furnace, which consumes a large amount of electricity. For Shangtai Technology, the shutdown of the Licheng Road base can reduce its management operating costs, improve management efficiency, and help further reduce graphitization costs. In addition, the current integrated production capacity of graphitization process is about 20,000 tons/month, and the new production line located in Beisu headquarters and Shanxi Phase III has been put into operation in the second half of 2022. While there is more advanced production capacity to meet production demand, enterprises take the initiative to stop production and backward production capacity is more in line with development needs.
Faced with overcapacity and falling prices, related raw material companies are starting a tough battle to reduce costs and increase efficiency. Shangtai Technology said that the new production line will make up for the capacity gap of the Licheng Road base, and after the Licheng Road base stops production, the company's current production capacity and inventory can meet the needs of customers, which will not affect the company's normal sales and continuous operation, but will help the company relieve inventory pressure, reduce expenditure, reduce production costs, and improve efficiency.
It is reported that the global lithium battery anode material industry concentration is very high, mainly concentrated in China and Japan. Among them, China is the main producer of anode materials, accounting for 75% of the world's shipments. According to the "White Paper on the Development of China's Anode Material Industry (2023)", global anode material shipments reached 1.556 million tons in 2022, a year-on-year increase of 71.9%. Among them, China's anode material shipments increased by 84% year-on-year to 1.433 million tons, a record high. In 2022, a large number of new graphitization and anode material production capacity will be built across the country, especially in Guizhou, Yunnan, Sichuan and Inner Mongolia, and with the gradual release of production capacity under construction, the industry will generally show a situation of oversupply. In order to control overcapacity, as early as last year, some provinces and cities have suspended the approval of relevant projects through measures such as dual control of energy consumption. Today, companies are also joining the team that actively stops backward production capacity. It is understood that the current anode materials of Shangtai Technology are not full production and full sales, and the backward production capacity is stopped, more in order to play the role of high-quality production capacity, which is more in line with the development needs of the industry.
The overcapacity crisis is in full swing
The shutdown of backward production capacity of Shangtai Technology is only a microcosm of the overcapacity of China's power battery industry chain. After experiencing rounds of crazy investment and expansion in the upstream and downstream of the industrial chain in the past few years, the problem of overcapacity in the power battery industry has become prominent. Statistics from the China Automotive Power Battery Industry Innovation Alliance show that in March this year, the production and installed capacity of China's power batteries were 51.2GWh and 27.8GWh, respectively, and the two were 130.0GWh and 65.9GWh in the first quarter. The current output of the power battery industry is much higher than demand, continuing the state of oversupply since last year. Data show that because of the previous expansion of the power battery industry, power battery manufacturers have taken the lead in entering the situation of oversupply. Statistics show that the production satisfaction of power batteries in 2022~2025 is 97%, 114%, 119% and 123% respectively.
In fact, the problem of high inventories has been evident since last year. EVTank data shows that the inventory of power batteries in the whole industry chain in 2022 will reach 164.8GWh, a record high, and the pressure on the industry to deinventory has increased sharply this year. Moke, founder of the True Lithium Research Institute, said that the oversupply of the power battery industry last year continued in the first quarter of this year. After the crazy investment and expansion of the upstream and downstream of the industrial chain in the previous two years, as well as the hoarding behavior under high prices, it is now time to pay for the previous blind expansion, that is, the price decline and overcapacity.
The high inventory of the power battery industry will inevitably be transmitted to the upstream raw material field, and the overcapacity crisis of related material companies is more serious.
At present, power battery companies destocking, reducing production capacity, declining capacity utilization, production line shutdown, personnel flow, etc. reflect the real operating status of enterprises. It is reported that not only Shangtai Technology, but also China Innovation Airlines has left some employees due to insufficient orders; The CATL era also saw a decline in capacity utilization. "If there is no accident, the power battery industry will face the dilemma of overcapacity this year, and now is just the beginning, overcapacity will spread from the low-end market to the high-end market, and small and medium-sized battery manufacturers without scale strength will face greater risks." Moko said.
Ouyang Minggao, academician of the Chinese Academy of Sciences and vice chairman of the China Electric Vehicle 100 Association, said that the production capacity of power batteries may be 3 times the demand for new energy vehicles in China, and the demand for downstream new energy vehicles continues to increase, making the entire lithium-ion battery industry develop rapidly, and related enterprises in the industrial chain are actively expanding production capacity, while capital is also accelerating into this market. Wang Zidong, deputy secretary-general of the China Automotive Power Battery Industry Innovation Alliance, made a judgment as early as the end of last year: in 2023, the growth rate of new energy vehicles in China's local market is likely to decline, coupled with the release of new production capacity of power battery companies, and then the battery supply will be excessive. Zhang Xiaofei, chairman of Gaogong Lithium Battery, also pointed out that the lithium battery industry chain has expanded significantly in the past two years, and new production capacity will be released centrally from 2023, and overcapacity has become a high probability event.
In fact, in the past few years, although the continuous investment fever has alerted the lithium battery industry, the optimism about the future expectations has diluted the concerns of related companies about overcapacity. Wang Dongwei, chairman of Zhongtai Capital Investment Management Co., Ltd., said that in 2022, the entire lithium-ion battery industry ushered in a year of rising volume and price. But the good times are not long, after last year's crazy investment and rapid development, the current power battery industry chain upstream and downstream are caught in the crisis of overcapacity.
Eliminate backward production capacity and adjust the structure at a good time
"The tight supply of power batteries and overcapacity coexist." As Wang Dongwei said, in general, the problem of overcapacity in the power battery industry chain is more serious, and there is a need to eliminate backward production capacity in the upstream and downstream, and Shangtai Technology's initiative to stop backward production capacity is the best example. However, he also pointed out that the current development state of oversupply on the whole is a good opportunity for the whole industry to eliminate backward production capacity and carry out structural adjustment. Ouyang Minggao said that from the supply and demand side, the amplification of demand brought by panic inventory reserves is temporary, and with the improvement of lithium carbonate supply capacity, it will gradually return to the basic demand side, and it is expected that it is possible to restore a complete supply and demand balance in two or three years.
The management department has also paid attention to the problem of overcapacity in the power battery industry, and the Ministry of Industry and Information Technology has repeatedly issued clear documents, requiring the lithium battery industry chain and supply chain to "avoid low-level homogeneous development and vicious competition". Wang Dongwei stressed that industry enterprises need to pay attention to changes in key indicators such as technology and cost, as well as the landing of effective production capacity and capacity utilization. Eliminate backward production capacity, accelerate the pace of industry structural adjustment, enhance competitiveness, and accumulate strength for stricter low-carbon green development, the power battery industry will usher in a round of structural adjustment throughout the upstream and downstream of the industrial chain.
Originally published on China Automotive News on May 5, 2023