Lithium battery electrolyte is an important part of the lithium battery industry chain. The electrolyte is generally composed of a mixture of lithium salt, solvent, and additives. By weight, the proportion of lithium salt is generally about 12%, the additive is about 5%, and the solvent is about 80%. According to the cost calculation, the electrolyte solvent accounts for more than 30% of the total electrolyte. The electrolyte is used as a medium for lithium-ion transmission in the battery, connected to the positive and negative electrodes of the battery, and has high ionic conductivity and excellent electronic insulation. The choice of electrolyte is very important to the performance of the lithium-ion battery, and it also has a great impact on the safety performance of the battery.
Compared with other materials, the average price of solvent products has been increasing year by year, and the gross profit margin is gradually expanding. The recent increase in solvent prices has been obvious. After July, the demand for lithium battery raw materials increased greatly, and the effective supply of solvents was seriously insufficient, which pushed up the price of DMC. Battery-grade DMC needs to be rectified from industrial-grade DMC. The process technology is difficult, the customer verification cycle is long, and the barriers to competition are high. At present, the global DMC production capacity exceeds 1 million tons per year, mainly distributed in five countries: China, the United States, South Korea, Italy, and Japan. China is a major producer of DMC, accounting for approximately 74% of the world's DMC production.
Electrolyte is a direct application field of solvent, so the development of electrolytes naturally drives the growth of the solvent market. The main application areas of electrolytes include power batteries, 3C batteries, and energy storage batteries. The application of power batteries accounts for up to 59%, which is the most important application field of electrolytes. From 2015 to 2017, driven by the support policy of new energy vehicles, the demand for lithium power batteries has risen sharply; driven by the light-weight trend of electronic products, the demand for 3C lithium batteries has also continued to rise, driving a substantial increase in the market for lithium battery electrolytes in China. Power batteries are also the main application market for electrolytes. Therefore, while the development of power batteries drives the growth of the electrolyte market, it also boosts the development of the solvent market.
Downstream Demand Drives Industry Growth
The direct application market for solvents is the electrolyte, and the development of electrolytes naturally drives the growth of the solvent market. The main application areas downstream of the electrolyte include power batteries, 3C batteries, and energy storage batteries. The application of power batteries accounts for up to 59%, which is the most important application field of electrolytes. From 2015 to 2017, driven by the support policy of new energy vehicles, the demand for lithium power batteries has risen sharply; driven by the light-weight trend of electronic products, the demand for 3C lithium batteries has also continued to rise, driving a substantial increase in the market for lithium battery electrolytes in China.
Power battery is the main application field of electrolytes. Based on the good market prospects of China's new energy vehicles, the demand for power battery electrolyte will continue to rise in the future. According to the requirements of the Mid- and Long-term Development Plan for the Automobile Industry, China's new energy vehicle output will reach 2 million by 2020, and the cumulative production and sales will exceed 5 million. The government strongly supports the development of new energy vehicles. In addition, a series of government documents force traditional auto companies to reduce fuel consumption and improve the layout of new energy vehicles. Driven by the strong support of national policies and the acceleration of the promotion and application of new energy vehicles, the domestic sales of new energy vehicles increased from 75,000 in 2014 to 1.206 million in 2019. In the future, China's new energy vehicle production and sales are expected to continue to rise, and the demand for vehicle power batteries will increase significantly, which will greatly drive the demand for power battery electrolyte.
3C battery is the second-largest application field of electrolytes. Benefiting from the growth in demand for smartphones and tablets, China's 3C lithium battery shipments have achieved rapid growth. On the whole, 3C lithium batteries have a large demand for electrolytes and will maintain a steady growth rate in the future.
The huge demand for lithium energy storage batteries in the energy storage field will drive the demand for related electrolyte products. Lithium energy storage batteries have been widely used in recent years due to their low environmental pollution, high energy density, wide operating temperature range, fast charge and discharge, and long service life. As of 2019, in China's electrochemical energy storage project, the cumulative installed capacity reached 1709.6MW, a year-on-year increase of 59.4%. Among them, the cumulative installed capacity of lithium batteries was the largest, reaching 1378.3MV, accounting for 80.6% of the total. In September 2017, the National Development and Reform Commission issued guidance to encourage the active development of energy storage batteries, including lithium batteries, and realize the transformation of energy storage batteries to large-scale development. With the support of policies, energy storage batteries will maintain a high growth rate in the future, continuously driving up the demand for related electrolytes.
The Tight Supply Pattern Is Difficult to Break in the Short Term
Looking forward to the future commissioning of the solvent industry, the production of solvents requires manufacturers to have the ability to produce propylene oxide and a long industrial chain extension. Downstream manufacturers are not willing to extend the industrial chain and there are few new entrants. The two new entrants currently put into production fell short of expectations.
It is difficult for new entrants to solve the process and certification problems in a short time, and the effective capacity of the stock is seriously insufficient. It will be difficult to break the tight supply pattern of the solvent industry in the next three years. With the launch of the new production capacity of leading companies, the market share will increase to 90%, and the competitive landscape of the industry will be clear. Leading companies will further strengthen their bargaining power.
Lithium battery solvent technology is difficult, new entrants lack research and development capabilities, downstream electrolyte customers have long verification cycles and repeated tests. These two constraints make it difficult for new entrants to solve process and certification problems in a short time. The industry supply gap will be continued. The expansion rate of the supply side of the solvent industry is still not as fast as the growth rate of downstream lithium batteries and electrolytes. It is expected that solvents will continue to remain tight before 2025.
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