Lithium-ion batteries are batteries that use lithium metal or lithium alloy as the positive electrode material and a non-aqueous electrolyte solution. The difference between lithium-ion batteries and rechargeable batteries is that the former is a primary battery, while the latter is a rechargeable battery. The working principle of a lithium-ion battery relies on the movement of lithium ions between the positive and negative electrodes. During charging, the potential applied to the battery electrodes forces the compound at the positive electrode to release lithium ions, which then cross the separator to reach the layered carbon structure at the negative electrode. During discharging, lithium ions are released from the layered carbon structure and recombine with the compound at the positive electrode; the movement of lithium ions generates an electric current. Driven by the rapid growth of electric vehicles, my country's lithium-ion battery industry continues its rapid growth, with industry innovation accelerating, new products and technologies constantly emerging, and various new battery technologies being introduced.
Xuancheng City in Anhui Province has prioritized new energy as its leading industry, focusing primarily on the photovoltaic and lithium battery sectors. However, its development started relatively late. Through recent years of investment attraction and cultivation, a lithium battery industry chain cluster is beginning to take shape. The city's Economic Development Zone has gathered 25 companies in the lithium battery industry chain, covering positive and negative electrode materials, electrolytes, separators, copper foil, and battery cells. However, overall, these companies are generally small in scale, lack strong driving force, have relatively backward technology, insufficient R&D investment, and lack leading companies. Currently, focusing on supplementing, strengthening, and extending the industry chain, and aiming to attract large and strong enterprises, is the key and crucial aspect of the new round of investment attraction in the lithium battery industry.
I. Current Status of Lithium Battery Development in my country
After decades of development and innovation, my country's lithium battery industry has made significant breakthroughs in both quantity and quality. Furthermore, driven by policies and subsidies, the industry has given rise to many globally competitive companies. In 2021, my country's lithium battery shipments reached 229GW, and are projected to reach 610GW by 2025, representing a compound annual growth rate of over 25%.
Based on market analysis in recent years, the following key characteristics have emerged:
(I) Market Size Continues to Rise. From 2015 to 2020, the size of my country's lithium battery market continued to rise, from 98.5 billion yuan to 198 billion yuan, reaching 312.6 billion yuan in 2021. However, affected by factors such as price, the growth rate slowed down, with the year-on-year increase rate decreasing from 37.76% to 13.14% in 2020. In terms of capacity, my country's lithium battery production was 148 GWh in 2020, a year-on-year increase of 19.2%, but by 2021, the production reached 324 GWh, a year-on-year increase of 118.9%, showing a rapid increase in production. Based on this figure, production has continued to rise in recent years. From 2016 to 2021, my country's lithium battery production increased from 8.47 billion units to 23.26 billion units, but the year-on-year increase rate decreased from 51.3% to 23.4%.
(II) Power lithium batteries account for a large proportion and are growing faster. The rapid rise of new energy vehicles has driven the continuous growth of power lithium batteries. In 2021, the output of consumer, power, and energy storage lithium batteries were 72GWh, 220GWh, and 32GWh, respectively, representing year-on-year increases of 18%, 165%, and 146%, accounting for 22.22%, 67.9%, and 9.88% of the total, respectively. Power lithium batteries accounted for the largest proportion and grew the fastest. Among power lithium batteries, lithium iron phosphate batteries accounted for the largest proportion. In 2021, the cumulative output of lithium iron phosphate batteries was 125.4GWh, accounting for 57.1% of the total output, a cumulative year-on-year increase of 262.9%.
(III) Square batteries are gradually gaining dominance. Square batteries offer the best cost-performance ratio and have already become the mainstream in the Chinese market, accounting for approximately 80.8% of the market share in 2021. Pouch lithium batteries have the highest cell energy density, but because the aluminum-plastic film is easily damaged, the battery pack requires more protective layers, resulting in a lower overall energy density. Furthermore, their low standardization leads to higher production costs, thus limiting their market share to approximately 9.5%. Cylindrical batteries have the lowest cost, but their energy density is relatively low, leading fewer companies to choose this type of battery, resulting in a smaller market share of approximately 9.7%.
(iv) Significant fluctuations in upstream raw material costs. Affected by multiple factors such as industry cycles, the pandemic, and tense international relations, the cost of upstream raw materials for power lithium batteries continued to rise in 2022. For example, the price of battery-grade lithium carbonate soared from RMB 41,600/ton in 2013 to RMB 474,900/ton in June 2022, with a particularly high price increase in 2022, reaching a staggering 425.3% in June. However, starting in July, the prices of materials such as positive and negative electrodes both experienced a certain degree of decline.
II. Market Situation of the Lithium Battery Materials Industry
Lithium batteries generally use lithium alloy metal oxides as the positive electrode material, graphite as the negative electrode material, and a non-aqueous electrolyte. Specifically, they can be categorized into positive electrode materials, negative electrode materials, electrolytes, separators, and aluminum-plastic films.
(I) Cathode Materials
The cathode material of a lithium-ion battery is the decisive factor in its electrochemical performance, playing a dominant role in the battery's energy density and safety performance. It also accounts for a significant portion of the cost, representing 30%-40% of the total cost of lithium-ion battery materials, making it the most critical material in lithium-ion batteries. Lithium-ion batteries are mainly classified according to their cathode material system, including lithium cobalt oxide, lithium manganese oxide, lithium iron phosphate, and ternary materials. Lithium cobalt oxide has a higher cost and shorter lifespan, and is mainly used in 3C products; lithium manganese oxide has lower energy density and shorter lifespan but lower cost, and is mainly used in special-purpose vehicles; lithium iron phosphate has a long lifespan, good safety, and low cost, and is mainly used in commercial vehicles; ternary materials, especially NCM, have high energy density, good cycle performance, and long lifespan, and are mainly used in passenger vehicles. Currently, ternary lithium-ion batteries and lithium iron phosphate batteries are the mainstream technologies in the industry. Lithium iron phosphate, benefiting from the rise of the electric vehicle and energy storage markets, is expected to become the fastest-growing cathode material in the next five years.
From a competitive landscape perspective, the market concentration of lithium cobalt oxide has been continuously increasing in recent years, with a gradual trend of consolidation among leading companies. In 2021, Xiamen Tungsten New Energy, Shanshan Energy, Mengguli New Materials, Bamo Technology, and GEM Co., Ltd. occupied the top five positions in the lithium cobalt oxide market, with market shares of 42%, 14%, 10%, 9%, and 6% respectively, totaling a high 82%. The high concentration of lithium cobalt oxide is closely related to the significant stratification of high-end and low-end products, the increasing barriers to entry for high-end products, and the overall market maturation. In the future, products such as high-voltage lithium cobalt oxide may further increase product barriers. The market concentration of ternary materials is relatively low. Rongbai Technology ranks first with an 11% market share, followed by Bamo Technology, DangSheng Technology, and Changyuan Lithium Technology, each with a 10% market share. The gap between manufacturers is relatively small, and the industry structure is relatively fragmented. The concentration of lithium iron phosphate cathode materials is high, with Hunan Yuneng and Defang Nano dominating the market. Hunan Yuneng holds a 22% market share, making it the leader. Defang Nano is second with a 20% share.
Data shows that the market size of lithium battery cathode materials in my country increased from 21.38 billion yuan in 2016 to 75.19 billion yuan in 2020, with an average annual compound growth rate of 36.9%. The market size reached 87.71 billion yuan in 2021, and it is predicted that the market size of cathode materials in my country will reach 100.23 billion yuan in 2022.
(II) Anode Materials
Anode materials are a crucial component of lithium-ion batteries, significantly impacting their capacity, initial efficiency, and cycle performance. Anode materials are formed by uniformly coating a paste of negative electrode active material, binder, and additives onto both sides of copper foil, followed by drying and rolling. Anode materials account for approximately 5% to 15% of the cost of power lithium-ion batteries.
Currently, lithium-ion battery anode materials are mainly composed of artificial graphite and natural graphite. The development trend is to dope graphite anodes with silicon to form silicon-based anodes with higher energy density. At present, artificial graphite is the mainstream anode material. Silicon-based materials have greater application potential and a broad market space in the future.
In 2021, my country's lithium-ion battery anode material market shipped 720,000 tons, a year-on-year increase of 97%. Due to the superior consistency and cycle performance of artificial graphite compared to natural graphite, it better meets the needs of power and energy storage batteries. The market share of artificial graphite continued to rise to 84%, while the market share of natural graphite declined to 14%. my country's anode material market has a high concentration and a relatively favorable competitive landscape, with the top three companies (CR3) accounting for 56% of the market. Among them, BTR, Putailai (Jiangxi Zichen), and Shanshan have consistently held leading positions, with market shares of 26%, 15%, and 15%, respectively. Dongguan Kaijin's market share has increased in recent years, reaching 13%.
Data shows that the market size of lithium battery anode materials in my country increased from 6.46 billion yuan in 2016 to 14.02 billion yuan in 2020, with an average annual compound growth rate of 21.4%, reaching 15.91 billion yuan in 2021. According to the China Business Research Institute, the market size of anode materials in my country is expected to reach 17.8 billion yuan in 2022.
(III) Electrolyte
Electrolyte is the carrier of ions in a battery, specifically acting as a conductor between the positive and negative electrodes of a lithium battery. It is essential for lithium batteries to achieve advantages such as high voltage and high specific energy. Lithium battery electrolytes are generally formulated under specific conditions and in specific proportions using high-purity organic solvents, lithium salts, and necessary additives. Based on their structure, the organic solvents can be categorized into key components such as lithium hexafluorophosphate, ethylene carbonate, and phosphorus pentafluoride.
Currently, my country's lithium battery electrolyte industry has a high degree of concentration, with the top three companies accounting for over 60% of the market share. Meanwhile, in recent years, leading Chinese lithium battery electrolyte companies have continuously invested in building new factories and expanding production capacity, resulting in a stable competitive landscape and further increasing industry concentration. Relevant data shows that the top three domestic lithium battery electrolyte companies are Tinci Materials, Shenzhen Capchem Technology, and Guotai Huarong, whose combined market share in 2021 was 67.1%. Among them, Tinci Materials has the highest market share, making it the absolute leader in the industry with a 33.1% share.
Data shows that my country's lithium battery electrolyte production increased from 110,000 tons in 2017 to 507,000 tons in 2021. It is projected that my country's lithium battery electrolyte shipments will reach 626,000 tons in 2022.
(iv) Diaphragm
Lithium-ion battery separators are one of the raw materials for lithium-ion batteries. Located between the positive and negative electrodes inside the battery, they allow lithium ions to pass through while hindering electron transport. They are thin films with a microporous structure and are a key internal component with the highest technological barriers in the lithium-ion battery industry chain. The performance of the separator determines the battery's interface structure, internal resistance, and other characteristics, directly affecting the battery's capacity, cycle life, and safety performance. High-performance separators are crucial for improving the overall performance of the battery.
Lithium-ion battery membrane manufacturing processes are divided into dry and wet processes. In terms of membrane product structure, wet-process membranes still dominate the Chinese market. Wet-process membranes offer higher performance and are thinner, thus improving the energy density of lithium-ion batteries. The core advantages of dry-process membranes lie in their lower cost, lower production line investment, and lower unit energy consumption, making them more suitable for applications that are highly cost-sensitive but have lower energy density requirements, such as the energy storage market.
In the wet-process separator market, a dominant player and several strong competitors have emerged. Enjie Materials, with its large-scale production release in 2021, exceeded 3 billion square meters of separator output, further solidifying its leading position in the wet-process separator market with a market share exceeding 50%. Xingyuan Material and Sinoma Science & Technology are in the second tier.
In the dry-process separator market, a three-way competition has emerged. Zhongxing New Materials has become the leading company in the dry-process separator market due to increased production and strong demand from major downstream customers. Xingyuan Material has slipped to second place with a 21% market share. Other players include Huiqiang New Materials and Sinoma Science & Technology.
The production process of lithium battery separators is complex, requires significant capital investment, and necessitates a long period of research and development and accumulation of relevant production experience. It was the last of the four major lithium battery materials to achieve domestic substitution. In recent years, driven by rising demand for lithium batteries, the shipment volume of lithium battery separators has also increased rapidly. Data shows that in 2021, my country's lithium battery separator shipments reached 7.8 billion square meters, an increase of over 100% year-on-year. It is estimated that in 2022, my country's lithium battery separator shipments will exceed 15 billion square meters, with a market size reaching 3.67 billion yuan.
(V) Copper Foil
Copper foil, used as the negative electrode current collector in lithium-ion batteries, acts as a carrier for the negative electrode active material. While it accounts for a relatively small percentage of the cost of lithium-ion batteries, approximately 5-10%, it has a significant impact on the overall battery performance. Therefore, copper foil is a crucial component that cannot be ignored in lithium-ion batteries. Based on thickness, lithium-ion battery copper foil can be divided into thin copper foil (12-18 micrometers), ultra-thin copper foil (6-12 micrometers), and extremely thin copper foil (6 micrometers and below). Due to the high energy density requirements of new energy vehicles, power lithium-ion batteries tend to use thinner ultra-thin and extremely thin copper foil.
Benefiting from the rapid development of my country's new energy vehicle and lithium battery industries, my country's lithium battery copper foil industry is in a leading position globally, with products covering thin copper foil, ultra-thin copper foil, and extra-thin copper foil. Currently, my country's 6nm lithium battery copper foil market is relatively broad, but the traditional 7-8nm copper foil market is highly competitive.
In 2020, the top five companies in my country in terms of lithium battery copper foil shipments were Longdian Huaxin, Nord Copper, Jiayuan Technology, Tongguan Copper Foil, and Jiujiang Defu, with Longdian Huaxin temporarily ranking first with a market share of 18.4%.
Currently, my country has become the world's largest producer of lithium-ion battery copper foil, with an average annual growth rate of 80% from 2015 to 2021. In 2020, my country's total lithium-ion battery copper foil shipments reached 125,000 tons, a year-on-year increase of 13.9%, including 105,000 tons shipped by domestic companies and 20,000 tons by foreign companies. In the coming years, driven by national policies and industry adjustments, the new energy vehicle industry is expected to enter another phase of rapid development, with power lithium batteries driving the Chinese lithium-ion battery copper foil market to maintain a high-speed upward trend. Lithium-ion battery copper foil shipments reached 154,000 tons in 2021 and are projected to rise to 180,000 tons in 2022.
(vi) Aluminum-plastic film
Aluminum-plastic film is a core material for soft-pack lithium batteries, playing a crucial role in battery lightweighting. Compared to packaging materials such as steel, aluminum, or plastic shells, aluminum-plastic film has advantages such as light weight, thinness, and flexible design, and is gradually becoming the mainstream in the market. Overall, the market size of my country's aluminum-plastic film industry is on the rise. It increased from 3 billion yuan in 2016 to 4.1 billion yuan in 2020, with an average annual compound growth rate of 8.1%, reaching 4.8 billion yuan in 2021. According to the China Business Industry Research Institute, the market size of my country's aluminum-plastic film industry is expected to reach 5.7 billion yuan in 2022.
(vii) Equipment
The battery manufacturing process involves separately and uniformly mixing the positive and negative electrode materials into a slurry. The mixed positive electrode material is then coated onto aluminum foil, and the negative electrode material is coated onto copper foil. A separator separates the positive and negative electrode materials. The coated electrode sheets are then further compacted to increase energy density. Depending on the type, the process includes slicing, baking, winding, casing, electrolyte injection, and finally, encapsulation and testing.
The lithium battery equipment required includes vacuum mixers, coating machines, rolling mills, winding machines, liquid injection machines, and testing machines. Lithium battery equipment is mainly divided into front-end, mid-end, and back-end processes. Front-end equipment has the highest value and is largely controlled by Japanese and South Korean companies. my country leads in back-end manufacturing technology for lithium battery equipment, reaching international advanced levels and possessing a significant price advantage. In terms of revenue, Lead Intelligent Equipment is the absolute leader in the equipment field, with related business revenue of 6.956 billion yuan in 2021. Win-Win Technology follows with related revenue of 4.907 billion yuan. Other companies include Keheng Shares, Putailai, Hangke Technology, and Huazi Technology.
III. Forecast of the Lithium Battery Industry Development in 2022
Currently, the impact of the pandemic on the production side has gradually eased. Based on downstream sales and upstream production utilization, lithium batteries remain in short supply, prompting companies to expand production. Regarding raw materials, domestic new energy vehicles are more cost-sensitive, with demand for lithium iron phosphate batteries being stronger than that for ternary precursors, keeping prices high. Battery cell prices have risen somewhat, leading to improved gross margins for battery manufacturers. Considering the lithium battery sector's valuation is at a low point in recent years, the increasing demand for energy storage, and subsidies for automobile consumption in some regions, the lithium battery industry chain is expected to continue its rapid development.
(I) The application of energy storage is booming, forming a trend of simultaneous growth with EVs. In 2021, global energy storage battery shipments reached 203.5GW, with my country's shipments at 43.44GW, accounting for 21.3%. With the advancement of dual-carbon development and the rapid development of green electricity, the demand for energy storage is becoming increasingly urgent. According to third-party forecasts, global lithium battery shipments will reach 1218GW by 2025, with energy storage accounting for 36%.
(II) The proportion of square batteries continued to rise. The proportion of square batteries for power applications further increased, while square lithium iron phosphate batteries dominated energy storage batteries, and the production progress of cylindrical 4680 batteries accelerated.
(III) The concentration of the EV battery market continues to increase. CATL and BYD, as the first tier, have a market share of over 70%, while Guoxuan High-Tech and CALB have a market share of nearly 5%. The market share of the third tier is less than 3%, and the gap is still widening. (V) Energy storage applications continue to rise, and EV demand remains strong.
(iv) The price of power lithium batteries continues to rise. Affected by factors such as rising raw material prices, reduced production due to power rationing, increased energy consumption control and labor costs, the price of power lithium battery cells is unlikely to fall in the short term.
(v) There is still a supply and demand gap in upstream raw materials. Lithium iron phosphate, which accounts for the largest share, is in short supply due to insufficient production and limited new production, resulting in tight demand; the electrolyte shortage is widening further, with the price range expected to be 10.15 million yuan/ton, the largest increase.
(vi) Breakthroughs are still needed in core technologies such as sodium-ion batteries and solid-state batteries. Due to the influence of raw material resources and costs, these types of batteries have attracted a lot of attention, but it is difficult to achieve mass production in the short term and thus cannot compete with lithium batteries.
IV. Future Trends in the Lithium Battery Industry
(I) New technologies in the battery industry are gradually maturing. Innovative system structures such as module-less lithium battery designs, blade batteries, and clip-on batteries have achieved large-scale application, while breakthroughs have been made in cutting-edge technologies such as high-nickel cobalt-free batteries and solid-state/semi-solid-state batteries. Simultaneously, with technological advancements, the energy levels of power lithium batteries continue to rise. The energy density of ternary square batteries is approaching 300Wh/kg, while pouch lithium batteries have reached 330Wh/kg; the energy density of semi-solid-state batteries has also exceeded 360Wh/kg, and is expected to reach 400Wh/kg by 2025; in the future, the energy density of lithium-sulfur batteries is expected to reach 600Wh/kg.
In particular, liquid electrolyte lithium batteries pose a risk of thermal runaway, making oxide electrolytes a promising option for high-performance batteries. Future batteries will evolve towards higher specific energy, with the entire cell transitioning from liquid to safer hybrid solid-liquid and all-solid-state batteries. Simultaneously, high-nickel and lithium-rich manganese-based cathodes with higher specific energy will become a major development direction to meet the requirements of passenger vehicles achieving a range of 1000km and electric aircraft. Furthermore, cathode materials based on modified lithium manganese oxide, lithium iron phosphate, and nickel-manganese spinel, combined with high-capacity anode materials, will form a solution for achieving a 600km range for pure electric vehicles.
(II) Accelerating Battery Recycling to Achieve Dual Carbon Goals. Batteries have high recycling value, and retired batteries can still be recycled, upgraded, and reused. Even when batteries are scrapped, lithium, cobalt, and nickel resources can be recycled. The recycling of metals in cathode materials and the recycling of aluminum and copper in batteries are not only crucial for supply chain security but also of great significance for achieving carbon emission targets. Currently, there are three main battery recycling methods: physical recycling, pyrometallurgical recycling, and wet recycling. (1) Physical recycling can reduce carbon emissions throughout the battery production chain; (2) Pyrometallurgical recycling has a small carbon reduction and high energy consumption; (3) Wet recycling has lower energy consumption but has issues such as liquid solvent pollutant emissions. According to relevant institutions, battery material recycling will reach a certain scale by 2030; around 2050, the supply of original mineral resources and recycled resources will reach a considerable level. In the longer term, recycled resources will gradually completely replace the demand for original resources.
(III) Lightweight and thinner designs, high energy density, high safety, and fast charging are important future development directions for the industry. In recent years, consumer electronics products have been developing towards fashionable and lightweight designs, ergonomic shapes, and enhanced mobile connectivity. Furthermore, with the expansion of radio frequency bands, increased pixel density, and improved processor performance in consumer electronics, energy consumption and heat generation issues have become increasingly prominent. This has led to a growing demand for lithium batteries that are lightweight, small in size, large in capacity, high in energy density, customizable in size, have good safety performance, and can be fast-charged. Simultaneously, with the rapid development of the electric vehicle and energy storage markets, consumers are paying close attention to the performance of power lithium batteries in terms of high safety, high specific energy, long lifespan, and fast charging.
(IV) Technological advancements will further drive industry development. Electric bicycles and low-speed electric vehicles will increasingly use lithium batteries to replace traditional lead-acid batteries; in the consumer battery application field, the maturity and large-scale commercial application of 5G technology will spur demand for the replacement of smart mobile devices. Furthermore, the rise of emerging electronic products such as wearable devices, drones, and wireless Bluetooth speakers will also bring new markets to consumer batteries; in the energy storage battery application field, grid energy storage, base station backup power, home photovoltaic-energy storage systems, and electric vehicle photovoltaic-energy storage charging stations all have significant growth potential. It is foreseeable that the lithium battery industry has broad development prospects.
