In recent years, with the increase in demand for downstream power batteries, the upstream electrolyte industry has experienced a reshuffle of the leader. Although the electrolyte entered the quagmire of the price war, and the price also fell, it was actually subject to the fact that there were fewer customers of downstream power batteries before, and the electrolyte had once encountered a dilemma of effective capacity difference. Similar to diaphragm manufacturing, the electrolyte seems to have a low technical threshold, but product purity must be guaranteed by strict process control. The technological barriers and scale effects of leading companies have more advantages in the competition.
Downstream power battery “stuck”, electrolyte industry shuffle
GGII data show that the top five electrolyte companies in 2018 have accounted for more than 65% of the market, with GZTC, SZXZ, and JSGT at the forefront.
In terms of shipments, GGII data shows that from January to September 2019, the total domestic electrolyte shipments were 134.79 million tons, including 41,020 tons of digital electrolytes, 81,050 tons of power electrolytes, and 12,720 tons of energy storage. Compared with China's 140,000 tons of electrolyte shipments in 2018, it can be predicted that this year's electrolyte shipments will achieve year-on-year growth.
Although the electrolyte industry has entered a price war in 2018, the prices of electrolytes and lithium hexafluorophosphate have also fallen to the bottom. After this round of industry competition and reshuffle, the Matthew effect of the industry has become prominent, and the industry structure of the strongest Hengqiang has gradually become clear. At present, the two leading companies in the industry, GZTC Materials and SZXZ, continue to expand market share. According to the statistics of Sichuan Finance Securities, the electrolyte CR6 has reached 77.3% in 2019, an increase of 4 percentage points compared with 2018.
Both price and shipment growth have already been reflected in the financial reports of electrolyte head companies. In the third quarter of 2019, GZTC Materials' revenue was 746 million yuan, an increase of 34.44% year-on-year; the net profit attributable to shareholders of listed companies was 39.49 million yuan, an increase of 48.81% year-on-year.
In recent years, the feature of large volume of power batteries has been very prominent. This is also the main reason why SZXZ, DZTC materials and JSGT have accelerated the layout of the power market since 2016. SZXZ chooses to maintain good cooperation and interaction with existing suppliers of raw materials such as lithium hexafluorophosphate and solvents, and through mergers and acquisitions of high-quality targets, stabilize and even expand lithium battery business with electrolyte as its core.
Before the “battered” upstream electrolyte of the power battery, as a holding subsidiary of the listed company JSGT, it had been in the leading position of electrolyte materials for the domestic lithium battery industry for the past 4-5 years. Increasingly fierce, strong competitors such as GZTC materials and SZXZ have emerged, breaking its dominant market structure.
Structured differences in effective capacity
The core competitiveness of electrolyte companies lies in the formulation with additives as the core. Through strong technical development capabilities and customer service capabilities, they can enter the supply chain system of top battery manufacturers. The electrolyte industry is characterized by heavy R & D and light assets, and its core competitiveness lies in the formulation of electrolytes with additives as its core.
In terms of application, the important performance parameters of the electrolyte are high safety, high specific energy, long life and wide temperature range, all of which need to be worked on in the additive formulation. In response to the different needs of downstream customers, electrolyte companies cooperate with customers to jointly develop products and gain customer recognition through strong technical development capabilities and customer service capabilities, so they have the opportunity to enter the supply chain system of top battery manufacturers.
Similar to diaphragm manufacturing, the electrolyte seems to have a low technical threshold, but product purity must be guaranteed by strict process control. Additive formulations need to be developed and accumulated with customers for a long time. In recent years, the domestic nominal production capacity of electrolyte has been severely excessive, and the effective production capacity is much smaller than the actual production capacity.
Currently, GZTC, SZXZ, JSGT and other head electrolyte companies have penetrated into the global mainstream battery company supply system.
Specifically, CATL's electrolyte suppliers include GZTC, SZXZ, JSG; Panasonic, LG's Chinese suppliers include SZXZ, JSGT, and Samsung's Chinese suppliers include GZTC, SZXZ, JSGT.
Sales gross profit margin drops, electrolyte track "leftover is king"
In terms of sales gross profit margin, since 2016, the gross profit margins of major leading companies have shown a downward trend. The researchers analyzed two main reasons. One is the increasingly fierce competition in the power battery industry, the industry reshuffles, and its price competition is gradually transmitted to the upstream, which makes the electrolyte market competition more intense. Second, it is affected by the price fluctuations of upstream materials such as lithium hexafluorophosphate.
As of the first three quarters of 2019, the gross profit margins of the four companies, GZTC, SZXZ, JSGT, and HNSS, were 35.87%, 27.61%, 21.81%, and 11.9%, respectively.
The decline in gross profit margin, in addition to the impact of excess downstream capacity, strengthened environmental protection supervision is also an important factor. The tightening of domestic environmental protection regulations has tightened the supply of raw materials, which has led to higher raw material prices. The cost of the company's lithium-ion battery chemicals has increased more than the revenue growth rate, which has ultimately led to a decline in its gross profit.
In addition, changes in the gross profit margin of the lithium battery electrolyte, in addition to changes in the industry's competitive landscape, are also greatly affected by upstream materials such as lithium hexafluorophosphate. For companies that purchase purely solutes and additive synthetic electrolytes, the profitability fluctuations are even more pronounced. . The key to reducing the decline in gross profit margin and maintaining a high level of profitability still depends on the strength of the company's technological research and development and innovation, especially for the competitive electrolyte market.
Electrolyte products need to adapt to the user's positive and negative materials, and optimize and improve some performance requirements. Therefore, for different users, the electrolyte often involves different formulations and additives for customization. In addition, it is considered that the difference in the performance of the electrolyte is mostly reflected in the additives. Technological innovations in formulations and additives have become a killer in competition among enterprises.