China to guide lithium battery makers to strengthen innovation, cut back on projects for pure capacity expansion

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China will guide lithium-ion battery and material companies to cut back on projects for “purely expanding production capacity”, and encourage them to step up technological innovation, improve product quality and reduce production costs, according to draft guidelines released by the country’s Ministry of Industry and Information Technology (MIIT) on Thursday.

When apply for new projects to expand capacity, companies should make sure their actual capacity utilization in the previous year was higher than 50%, said the ministry.

Battery companies will be prompted to manufacture electric vehicle and hybrid power batteries with an energy density of no less than 180Wh/kg, and energy storage batteries with an energy density above 145Wh/kg, showed the guidelines.

Battery cathode material manufacturers will be encouraged to produce lithium iron phosphate with specific capacities of no less than 150Ah/kg, and ternary material above 175Ah/kg. They will also be provided support to manufacture lithium manganate with specific capacities of no less than 115Ah/kg.

Anode material manufacturers will be encouraged to produce graphite material with specific capacities above 335Ah/kg, while electrolyte producers will be provided support to produce electrolytes with water content of no more than 20ppm, hydrogen fluoride content lower than 50ppm, and metal impurity content below 1ppm.

The draft plan has been published for public comment and is subject to change.

While the draft guideline prompted market concerns that the government may intent to control lithium battery capacity, Yang Hongxin, chief executive of SVOLT Energy Technology, said “this should not be over-interpreted.”

These are guidelines, not regulatory requirements, and meanwhile there is still a short supply in lithium battery market and major companies can easily passed the threshold of capacity utilisation, Yang said, adding that she believe “the guidelines are aimed to guide the industry to have high-quality development.

Chinese battery manufacturers have boosted production capacities in recent years to meet rapid growths in demand from the new energy vehicle sector, with 700GWh of new production projects planned in the first half of this year, according to market participants.

The country’s largest power battery producer CATL in August unveiled plans to build 137 GWh/yr of lithium-ion battery capacity in five projects in the regions of Fujian, Guangdong and Jiangsu.

China’s total output of power batteries rose to 159.8GWh in the first ten months of the year, up by 250% compared with the same period of last year, while installed volumes increased by 168.1% to 107.5GWh over the same period, according to data from the China Automotive Manufacturers Association (CAAM).

CATL, BYD and China Aviation LB were the top three battery manufacturers for installed volumes during the period of January-October at 54.5GWh, 17.9GWh and 6.4GWh respectively, accounting for 50.7%, 16.6% and 6% of the total.

Global NEV sales are forecast to reach 17 million units and 42.5 million units in 2025 and 2030, up from 3.24 million in 2020. This will boost the installed volume of power batteries to 719GWh in 2025 and 1,797GWh in 2030, up from 137GWh in 2020, according to China’s key battery material manufacturer Beijing Easpring Material Technology.

Prices for 99.5% grade carbonate were assessed stable at 195,000-203,000 yuan/t ex-works today, after hitting record highs in early November driven by robust NEV and power battery growth.