Lithium Battery Cathode Materials to See Massive Capacity Expansion
Click:0    DateTime:Nov.11,2020

By Han Minhua, Sublime China Information (SCI)

Output of cathode materials is increasing year by year

Lithium battery consists of cathode, anode, diaphragm, electrolyte and shell, among which, the cathode material is an important component, accounting for more than 30% of the production cost of lithium battery. Therefore, its cost directly determines the battery cost, and its performance directly affects the battery functionality.
   Capacity of China's cathode materials has been continuously expanding in recent years. The total capacity reached 900 kt/a in 2019. Figure 1 shows the supply of cathode materials in China from 2016 to 2019. It could be found that the output of cathode materials in China is increasing year by year.

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Figure 1 Supply of cathode materials in China from 2016 to 2019

Four main types and their separate application fields

   The main cathode materials available in the market are divided into four types - ternary materials, lithium iron phosphate, lithium cobalt oxide and lithium manganese oxide. Table 1 shows their properties.

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   The total shipment of lithium batteries in China has increased significantly since 2015, and the shipment in segment markets has increased year by year, as shown in Figure 2. It can be found that the proportion of small battery shipment decreased from 60% to 35% during the period; the proportion of power battery and energy storage battery increased, with that of power battery up sharply from 36% to 60% and that of energy storage battery up slightly from 3.67% to 6.53%.

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Figure 2 China's lithium battery shipment from 2015 to 2019

   Lithium cobalt oxide: low cost performance, limited application fields

   Lithium cobalt oxide is a mature cathode material, which is featured with high energy density and simple production process. However, the high cost and the toxicity of cobalt are two matters worthy noting. The raw material cobalt in China is highly dependent on importing, and due to the scarcity of global mineral resources, the price of lithium cobaltite is relatively high. It was at about hundreds of thousands of yuan per ton in the past few years, but fell below RMB200 000/t to hit above RMB190 000/t this year due to subdued demand. Lithium cobalt oxide is mainly used in the field of 3C for cost performance. The upward room of lithium cobalt oxide is expected to be relatively limited.

   Lithium manganese oxide: balanced comprehensive performance, relatively wide application fields

   Compared with the other three types of lithium batteries, lithium manganese oxide battery has no overwhelming advantages and its comprehensive performance is relatively balanced. Under certain conditions, however, lithium manganese oxide can partly replace other cathode materials or be mixed with others, so it has wide application fields. In addition, the price of lithium manganese oxide is relatively low among the four major cathode materials because of the abundant resources of raw material manganese. Year-to-date, the price of lithium manganese oxide has only been pegged at RMB20 000-35 000/t due to the continuous falling of raw material prices and the sluggish demand. At present, lithium manganese oxide is widely used in small power, hybrid power, and low-end digital fields.

   Ternary materials: becoming the key cathode material for power battery due to superior performance

   The ternary materials can be divided into lithium nickel cobalt manganate (NCM) and lithium nickel cobalt aluminate (NCA). NCM is more widely used in China nowadays, as nickel, cobalt and manganese are mixed in different proportions to form ternary cathode materials with different properties. NCMs can be divided into NCM 111, NCM 523, NCM 622 and NCM 811 according to different proportion of nickel in NCM materials. Compared with other cathode materials, ternary materials have the advantages of large capacity, high energy density and good low-temperature performance, and the materials are mainly used in the passenger car market.
   At present, ternary battery and lithium iron phosphate battery take up more than 95% of the power battery market. New energy vehicle manufacturers are developing high-endurance batteries as the subsidy for new energy vehicles has continuously increased in recent years. Especially since 2017, ternary battery has been the first choice of power battery for major vehicle manufacturers. Therefore, the proportion of installed capacity of ternary power batteries has been increasing and reached 65% in 2019.
   However, ternary battery has two defects - poor high-temperature performance and high price. The price of ternary materials is only second to that of lithium cobalt oxide, as the materials are made by cobalt mixed with nickel and manganese at a certain proportion. The prices of ternary materials increase gradually as the content of nickel is higher. At present, the ternary materials are largely priced at a historically low level. The price of NCM power 523 is at RMB110 000-116 000/t, that of NCM power 622 at RMB130 000-138 000/t, and that of high nickel 811 at about RMB150 000-155 000/t.

   Lithium iron phosphate battery: drawing more attention due to favorable policies

   Lithium iron phosphate has the advantages of strong high-temperature stability, high cycle life and low cost. However, its capacity and mass energy density, at 140mAh/g and 476wh/kg, are significantly lower than those of lithium cobalt oxide and ternary materials. At present, the application of lithium iron phosphate is mostly limited to public transport and transport vehicles, while the utilization rate in the field of passenger cars has declined.
   In addition to having the requirements for endurance and energy density, the new energy subsidy policy has set price limits in 2020, specifying that the price before subsidy should be less than RMB300 000 (including RMB300 000). Tesla took the lead in correcting its prices for standard endurance upgrade version to RMB291 800 and the selling prices after subsidy to RMB271 550. Tesla's price reduction is a signal that calls for domestic new energy vehicle manufacturers to take stricter control over their cost. In other words, they should shift attention to cost performance over energy problems. China's leading battery manufacturer BYD's "blade battery" and Contemporary Amperex Technology Co's CTP battery solution have effectively narrowed the technical gap of lithium iron phosphate battery. As a result, the cost of battery in each vehicle can be reduced by RMB10 000-15 000 by replacing ternary power battery with lithium iron phosphate battery.
   Lithium iron phosphate battery is better in cost performance and thus is drawing the attention of passenger car market again.
   Besides, the demand for energy storage has significantly increased on the heels of the fast-growing 5G sector. More energy storage capacities are required, as the energy consumption in 5G base stations has increased by about 3.5 times due to higher signal frequency, shorter transmission distance and weaker penetration effect. Lithium iron phosphate battery has become the first choice of 5G base station energy storage battery because of its cost performance, security, and cycle life. The construction projects of 5G base stations by China's four major operators will reach 600 000 in 2020. In the next few years, the demand for lithium iron phosphate in the field of energy storage will continue to grow.

Four competitive pressures faced by cathode material market

   With the rapid development of lithium battery, the cathode material market keeps growing to serve the downstream sectors. The market has been facing a variety of competitive pressures so far. The first is the competition of substitutes: the applications of the four cathode materials are sometimes overlapped. In various application fields of lithium battery, it is difficult for a single cathode material battery to completely monopoly the market due to the diversity of demand, so the four cathode materials are competing with each other for the market share. The second is the competition among market players. Some small and medium-sized cathode material manufacturers are gradually withdrawing from the lithium battery market as their products are largely homogeneous and low-end, but the number of market participants is still large. Meanwhile, leading manufacturers keep expanding capacities. Therefore, the total supply in the market will continue to rise and the competition of high-end products will be more intense. The third is the bargaining power of buyers. At present, given the proportion of sellers and buyers of cathode materials is many-to-one, downstream battery manufacturers make purchases based on various indicators, and buyers are playing a leading role in the determination of the prices. The fourth is the barriers to the formation of scale economy. It is well known that leading manufacturers have advantages in technology, capacity and binding of key accounts after years of development and the majority of the new projects in China are theirs. The margin room of cathode materials is constantly squeezed amidst slower-than-expected demand growth and continuously falling prices, so leading manufacturers are expanding key downstream customers by making up prices through quantity. However, small and medium-sized manufacturers are difficult to expand capacities due to capital constraints, resulting in a rapid decline in their profitability.

Rapid expansion period in coming few years

   The Ministry of Industry and Information Technology has regulated that new energy vehicles should account for about 25% of new vehicle sales in 2025. According to the data in 2019, the sales volume of new energy vehicles took up less than 5%. At present, the supply of China's cathode materials is far from meeting the demand growth in the power battery sector. Therefore, the capacity will increase rapidly in the coming few years and cathode material manufacturers should position their market direction, speed up technological innovation and strengthen industrial chain cooperation, so as to escort the healthy development of lithium battery industry.