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The market data shows that the average market price of electrolyte additives VC has dropped from a high-level of ￥500/KG in Q4 of 2021 to ￥300/KG in Q1 of 2022, with a drop of 66%. Since March, the market price of VC has accelerate decline, falling below￥200/KG in April. And further dropped to below￥150/KG in May, drop of more than 50% in Q1. As reported, the current domestic average price of VC is around ￥120-140/KG, which has back to the low-level price before this round of price increase. Moreover, some small enterprises quoted even lower to ￥100/KG. In addition, the price of additives including FEC and PS has also declined to a certain extent, with a drop of nearly 20%.
Several senior executives of additive companies said that VC price has entered a downward channel since Q4, 2021. And accelerating decline after the Spring Festival this year. The monthly decline can be up to ￥100/KG. At present, the average market price of VC has fallen broken the average market price before 2020, and the overall market demand is bleak. Industry insiders pointed out that the VC market price collapse has the following main reasons:
1. The rapid release of new VC capacity at the upstream supply side has led to a substantial increase in the overall supply, and the market supply and demand relationship has changed from short supply to oversupply, which in turn drives VC price to decline.
In 2021, additive companies, electrolyte companies and chemical companies, including Shandong Genyuan, Jiangsu HSC, Suzhou Huayi, Yongtai Technology, Tinci Materials, Capchem, Wansheng Co., Ltd., China Soft Technology, have invested in VC projects. The scale of new capacity is generally around 10k tons, and the release of new capacity is generally concentrated in 2022-2023. The new capacity of the above-mentioned enterprises will gradually be put into operation this year, which will lead to a substantial increase in VC supply in 2022. It is expected that the new VC production capacity will reach 20,000 tons during the year. For example, Shandong Genyuan's VC project with an annual output of 10k tons was put into operation at the beginning of the year. Yongtai Technology's annual capacity of 5,000 tons of VC in Inner Mongolia gradually climbed during the year. Fushine Pharmaceutical estimates to achieve 3,000-5,000 tons of VC capacity throughout the year. Tinci VC production line with an annual capacity of 20k tons will be put into operation in Q4, etc.
2. The downstream market demand is lower than expected, and the production reduction of electrolyte companies and battery companies reduces the demand for VC procurement.
The epidemic has repeatedly affected the supply chain, superimposed on the weakness of the new energy vehicle market, resulting in low capacity utilization rate of downstream electrolyte companies and battery companies, which in turn has greatly reduced the demand for VC procurement. Compared with last year's hard to find VC market, electrolyte companies had no pressure on VC procurement in 2022. At present, they are all on-demand procurement, and the market has a strong wait-and-see sentiment, which has led to a cold overall market demand for VC. Apart from that, VC raw materials, EC, CEC and other solvent products, are in sufficient supply, and the decline in price also has a certain impact on the decline in the price of VC. Affected by the sluggish market demand, the current capacity utilization rate of additive companies is generally below 50%. In terms of product prices, we will provide customers with quotations based on the cost of raw materials and the normal profit level of the industry. The professional believes that with the recovery of downstream market demand in the second half of the year, the overall VC shipments are expected to grow further in 2022. However, with the further release of new production capacity, the competitive situation of oversupply of VC products will further intensify, resulting in continued pressure on VC market prices.
Despite the increasingly fierce market competition, this may be a new development opportunity for additive companies with strong competitive advantages in terms of products, technology, production capacity and supply chain. At present, leading additive companies including Shandong Genyuan, HSC, Yongtai Technology, and Suzhou Huayi have signed long supply orders with their major customers to lock in their customers' annual purchase share and provide guarantees for their VC shipment growth. New entrants who do not have competitive advantages in quality, technology, production process and EIA construction will face great pressure and challenges, or will be eliminated in this round of market reshuffle.
Source: GGII