According to the upcoming Development Program for Energy Conservation and New-Energy Automobile Industries, the central government will spend RMB100 billion on new electric vehicles between 2011 and 2020. As a key industry crossing the new energy, new material and new-energy automobile industries, the lithium ion battery is the heart of new-energy automobile, and will benefit the most from the development of new-energy automobile industry.
China’s lithium ion battery industry will experience rapid development and important adjustment in the future. In the first year of the Twelfth Five-Year Plan, CCID Consulting summarized the distributing characteristics of world lithium ion battery industry and its successful development mode; and analyzed the features of domestic distributing and resources. CCID Consulting examines the trends for future development of China’s lithium ion battery industry and the assorted investment values of lithium ion battery in every links of the chain. This provided important guidance for the layout design of the national and local lithium ion battery industry as well as decision making of enterprises.
With increasing regional competition, local governments take advantage of its resources and actively foster high-end industries.
In 2010, China’s lithium ion battery market has reached RMB 27.61 billion, an increase of 37.9% compared with 2009. In term of production capacity, China produced 3.67 billion lithium ion batteries in 2010, an increase of 33.9% compared with 2009. The figure of Production Capacity 2010 for Lithium Ion Battery in China shows the industry concentrated on the Pearl River Delta represented by Guangdong Province, Yangtze River Delta represented by Jiangsu and Zhejiang Provinces, and Beijing-Tianjin-Tangshan regions represented by Beijing and Tianjin, which is same as other key industries. However, since the industrial chain of lithium ion battery has extended to lithium ore upstream, the regions with rich lithium ore reserves represented by Yichun Jiangxi, Ngawa Sichuan, Qinghai and Tibet all put forward their own approaches by virtue of their unrivaled conditions for developing lithium ion battery industry.
The Pearl River Delta is an important production base for raw materials and assembly of lithium ion battery in China. In 2010, its output value exceeded RMB 9.67 billion, accounting for about 35% of the nation. Since this region has numerous cheap labors, the labor-intensive battery core assembling link has gained rapid development and formed the production base of lithium ion battery represented by BYD and BAK. As the central and western regions are increasingly showing their advantages, the lithium ion battery industry is more disposed to gradient transfer. Now, the Pearl River Delta is accelerating the transformation and upgrading of the industry, and most enterprises are transferring their factories to the inland, paying more attention to the research and development of technology and production of batteries driven by lithium ion to improve the technological contents of the industry.
The Yangtze River Delta including Shanghai, Jiangsu and Zhejiang is China’s most important industry cluster for lithium ion batteries and plays an essential role in China’s lithium ion battery industry. In 2010, the output value of lithium ion battery in this region is RMB 7.48 billion, accounting for about 27% of the nation. Jiangsu and Zhejiang are important production bases of lithium ion battery materials, and particularly Jiangsu has attracted a large number of foreign-funded enterprises. The lithium ion battery industry in Shanghai gains rapid growth due to its solid automobile industry. Benefited from superior R&D and technology, Shanghai gives priority to the development of lithium ion power battery industry.
The Bohai Bay surround by Beijing, Tianjin, Hebei, Liaoning, and Shandong is the material and production base of lithium ion battery in China. In 2010, the output values of lithium ion battery for these areas reached RMB 4.56 billion. Depending on its advantages in technology and talents, Beijing has achieved remarkable growth in the field of anode material for lithium ion battery. It has successfully provided clean lithium ion power batteries for Beijing Olympic Games commuter buses. Tianjin has formed a sound industrial chain for lithium ion battery. With comparatively lower cost, many enterprises such as BTR and BAK have chosen to locate themselves in Tianjin. As a result, Tianjin will become an essential base for the lithium ion battery industry in the future.
Taking advantage of the local lithium ore, the central and western regions represented by Yichun Jiangxi, Ngawa Sichuan, Qinghai and Tibet vigorously develop the lithium ion battery industry. The tantalum-niobium ore field in Yichun Jiangxi is China’s largest base to produce tantalum-niobium-lithium raw materials, with the reserves of Lithia up to 1.1 million tons, accounting for 31% of the nation and 12% of the world, ranking the first in lithium ore. Depending on the rich resources of lithium ore, Yichun has put forward the strategic goal of drawing all efforts and resources to build a 100-billion project and create the lithium center of Asia. The lithium ore of Ngawa Sichuan accounts for one fourth of the total reserves of the nation, with lithium glance mainly distributed in the counties of Barkam (Ma’erkang) and Quqên (Jinchuan). The rare lithium ores within the territory have laid a solid foundation for Ngawa to build into China’s Lithium Valley. The brine in salt lakes of Qinghai and Tibet has also provided a basis for the lithium ion battery industry in the two provinces.
Industrial transfer and convergence are increasingly prominent, and competition for industrial space gets tougher
There is strict entrance barrier in high-end lithium ion battery material industry, and the eastern regions will keep their industrial advantage. The bottleneck of lithium ion battery industry lies in its technological performance and security, while high-end battery material is the decisive factor for the performance of lithium ion battery. With high barrier in threshold of market access, technology and other intelligence factors are the major drivers for the rapid development of high-end material of lithium ion battery such as membrane and lithium hexafluorophosphate. Intelligence-intensive eastern regions represented by Beijing, Jiangsu, and Shanghai, therefore, will maintain their monopoly position in high-end battery material based on their leading technologies. As new-energy automobile requests for power batteries with better performance, the eastern regions will show even clearer advantages.
The trend for gradient transfer of battery core assembly and PACK link is intensified, and the resource advantages of the central and western regions in the link of upstream lithium ore is becoming more obvious. As seen from the geographical distribution of the global lithium ion battery industry, the output of lithium ion battery in Japan, China, and South Korea accounts for over 90% of the global output. Before 2000, more than 80% of lithium ion battery was produced in Japan. Attracted by China’s good investment environment and cheaper labor costs, the global lithium ion battery industry is transferring their factories to Chinese Mainland, and many Japanese, South Korean and Taiwanese enterprises go to China to build their lithium factories. In 2010, the output of China’s lithium ion battery holds over 30% of the global output, and with a trend of year-on-year increase. Obviously, the global lithium ion battery industry is transferring toward China.
As seen from the distribution of lithium ion battery in China, the Pearl River Delta represented by Shenzhen and Dongguan has gathered many lithium ion battery manufacturers. However, as the inland increasingly lowers the labor costs, the labor-intensive links such as battery core assembly and PACK will gradually move from coastal areas to inland areas. Lithium carbonate is an essential raw material of lithium ion battery. It is mainly derived from minerals and brine, 38% from minerals and 62% from brine. China’s lithium ores are mainly distributed in Sichuan, Jiangxi, Hu’nan and He’nan, and brine in Qinghai and Tibet. As China implements its new-energy automobile strategy step by step, the central and western regions with resource advantages represented by Yichun Jiangxi, Xinyu Jiangxi, Ngawa Sichuan, Qinghai, and Tibet begin to enlarge their investment in the lithium ion battery industry, and the Lithium Center of Asia and Lithium Valley of Asia have laid solid foundation for them to build 100-billion lithium battery industry. In general, China’s central and western regions enjoy unrivaled resource advantages in the link of upstream lithium ore.
Upgrading toward the lithium ion power battery, the industry gets its prosperity in those traditional automobile cities. The future development of lithium ion battery will be automobile power battery; therefore, each party in the industrial chain is driving to this direction by means of joint venture or cooperation. There are two typical modes: “automobile manufacturer + lithium ion battery manufacturer” and “automobile parts manufacturer + lithium ion battery manufacturer.” Such modes can not only lower the risks for each party but also make best use of resources from upstream and downstream, as well as reducing transaction costs. China’s lithium ion battery manufacturers all actively seek cooperation with downstream automobile manufacturers, which leads to the accumulation of the industry in traditional automobile cities. Cities like Beijing, Shanghai, Hefei, and Guangzhou will become major locations of lithium ion battery industry.
The investment value gets prominent, and every stage of the industrial chain has its own characteristics.
Industrial players compete for mineral resources to win their leading monopoly. Main upstream ores of lithium ion battery include lithium carbonate, iron, manganese, cobalt, and nickel. Among all cobalt and lithium are mostly consumed but have very limited nature reserves, which as a result is full of strategic investment value. China is rich in lithium, next only to Chile and Argentina. In 2008, the global output of lithium carbonate is 93,000 tons, while the demand is about 100,000 tons, with about 28% of lithium demand from battery products. With the industrialization of the motive power battery, the demand for lithium carbonate will grow rapidly, and upstream lithium carbonates will fall short of demand. CCID Consulting believes that with the rapid development of lithium ion battery industry and the expanding of downstream productivity, resource companies will face increasing pressure of supplying. As demand exceeds supply, upstream mineral resources will be of high investment value. However, due to the rareness of mineral resources, monopoly of the industry, and huge investment in the early stage, small and medium enterprises are usually hard to cut in. It is recommended that companies should benefit from the industry development by listing, M&A, introducing strategic investment to expand their production capability and strength themselves. In fact, Sichuan Ni&Co Guorun New Materials Co.,Ltd successfully introduced the strategic investment of Morgan Stanley and DT Capital Partners worth $40 million in 2007, and Tianqi Lithium Sichuan Tianqi Lithium Industries, Inc. and Xinyu Ganfeng Lithium Co. Ltd are listed on the stock market to seek financing. They have all accomplished great-leap development.
Battery material is the bottleneck of lithium ion batteries industrialization. The material of lithium ion battery mainly includes anode material, cathode material, membrane, and electrolyte, as well as aluminum platinum, copper foil, adhesive, etc. The cost for anode materials accounts for about 33% of the total, and that for cathode material, electrolyte, and membrane accounts for about 10%, 12% and 30% of the total respectively. In the entire industrial chain of lithium ion battery, anode material, membrane, and electrolyte are the sectors with the highest investment value. Anode materials are in the central position of the industrial chain owing to its importance in improving the performance of lithium ion battery, and huge market capacity makes it a hot destination for investment. Therefore, those who have possessed core technology patent will stand out in future anode material market. Membrane plays an important role in the security of lithium ion battery, the value of which cannot be ignored. With the few membrane manufacturers in China and heavy rely on high-quality membranes imported, membrane will become a hot investment destination in the future along with the development of motive automobile batteries. Lithium hexafluorophosphate, the decisive raw material in electrolyte, is mainly imported from abroad due to its high technological contents. Affected by its technological bottleneck and high profit ratio, the enterprises which first enter this field can enjoy high profit and added value in the early stage owing to the technological barriers.
The development of battery core assembly depends on capital and scale. With mature production technique and technology, most lithium ion battery manufacturers in China can produce cores of lithium ion batteries, on the condition that the raw material supply is guaranteed. However, the production of motive-power battery involves combination of cores, which requests core consistency, more advanced battery production equipment and more investment as a result. Compared with other upstream battery material industries, this industry is labor-intensive, and many domestic and foreign enterprises have stepped into this field. CCID Consulting believes that battery core assembly mainly depends on capital and scale, which makes small enterprises hard to survive after entering this field, and traditional battery manufacturers will have more advantages. Now, the large lithium ion battery manufacturers should catch the chance of developing new-energy automobile to expand their production capability of motive-power batteries, and actively cooperate with downstream automobile manufacturers to combine resources from both downstream and upstream, take the collaborative effect, and create a win-win situation with automobile manufacturers.
Recycling market will have its future. As the production and consumption of lithium ion battery go up, the scrapped lithium ion batteries lead to increasing environment pollution. Cobalt contained in lithium ion battery is a kind of rare metal. Cobalt, low in nature minerals, can bring huge economic value if recovered. With the development of battery recycling and recovery technology, especially the maturity of microorganism metallurgy in handling lithium ion batteries, cobalt, graphite, electrolyte and other metals contained in lithium ion battery will all show their recovery value. There are fewer lithium ion battery recovery enterprises now in the market. The main reason is that the recovery technique is complicated and it is difficult to extract lithium from the battery. Due to the entrance barriers, there are fewer enterprises in this field, most of which just sort the batteries simply. CCID Consulting believes that under China’s background of building environmental-friendly society and developing low-carbon economy, the battery recovery will present higher investment value. The small and medium enterprises with lithium ion battery recovery technologies should step into this field in an active attitude to share the economic profits brought by the rapid development of the industry.