China Securities Co., Ltd.: It is expected that the supply and demand situation of lithium batteries will be effectively reversed next year, entering the price recovery range.

China Securities Co., Ltd. released a research report stating that the lithium battery industry is expected to see a reversal in supply and demand situation for the first time in three years in the second quarter of 2025. In terms of electric vehicles, domestic demand is better than expected, with an estimated 13 million vehicles to be sold domestically in 2024, a year-on-year increase of 36%. With the subsidy for replacing old vehicles driving sales, China Securities Co., Ltd. predicts that domestic electric vehicle sales in 2025 will reach 15.6 million units, a year-on-year increase of 20%. In the United States, sales are expected to reach 1.6 million units in 2024, an increase of 8% from the previous year, and the market is expected to remain flat in 2025 due to unclear policies. In Europe, China Securities Co., Ltd. projects sales of 2.95 million units in 2024, which will remain stable in comparison to the previous year. In 2025, considering that the entire industry will not be subject to fines, sales are expected to reach 3.52 million units, with a conservative estimate of 3.4 million units, representing a year-on-year increase of 15-20%. With nearly 50% growth in energy storage driving demand, China Securities Co., Ltd. forecasts a demand for lithium battery installations of 1,814 GWh in 2025, an increase of 22% from the previous year. The supply side, having experienced two years of declining prices, has now reached its lowest point. According to China Securities Co., Ltd.'s calculations, the industry is expected to effectively reverse the supply and demand situation by the end of the year and into the second quarter of 2025, entering a period of price recovery. China Securities Co., Ltd.'s main points are as follows: - Outlook for new energy vehicles in 2025: Sales are expected to reach 21.34 million units, an increase of 19% from the previous year. - Outlook for energy storage in 2025: It is estimated that there will be an additional installation of 220-250 GWh, with battery demand expected to exceed 400 GWh. This includes around 120 GWh in China and 55-70 GWh in the United States. Large projects in the Middle East are entering the implementation and delivery phase, with an expected demand for lithium batteries of over 400 GWh considering inventory turnover, household storage demand, etc. The end of the three-year surplus cycle opens up the reversal of industry supply and demand: In terms of demand, it is predicted that the demand for lithium battery installations will reach 1,814 GWh in 2025, an increase of 22% from the previous year. Based on supply and demand ratios, it is expected that some tight material processes in the peak season of the fourth quarter of 2024 will see price increases first, and the almost unprofitable material companies (such as copper foil, lithium hexafluorophosphate, lithium iron phosphate, dry diaphragm, etc.) will enter a phase of price increases after the second quarter of 2025. Opportunities ahead include: 1) Expectation of supply and demand reversal in the sector seeing bottoming out: Some tight processes in the fourth quarter of 2024, including special categories of LFP cathode and anode, high-voltage reality and fast charging starting to see price increases, and the whole line of unprofitable copper foil processes will also see price increases, mainly due to the crucial negotiations for 2025 demand between Ningde and BYD at the end of November and December. Starting from the second quarter of 2025, nearly unprofitable material companies can enter a phase of all-line price increases, recommending leading companies in lithium iron phosphate cathode, anode, and copper foils. 2) Undervalued targets with confirmed demand for 2025. 3) In the heat of the sector, further attention can be paid to new technological advancements, including solid-state batteries, composite foils, and fast charging technologies.