Western: Lithium battery production in March increased compared to the previous month, and the industry supply and demand outlook is expected to improve over the next 25 years.

Western released a research report stating that according to the pre-production data of Xin Lu, the month-on-month forecast for battery/positive electrode/negative electrode/separator/electrolyte production in March 2025 is expected to increase by +14.76%, +17.33%, +1.84%, +13.47%, and +14.06% respectively. The demand for downstream orders is strong, with major manufacturers maintaining a high operating rate. According to calculations, the expansion of new capacity in most areas in 2025 is slowing down. From a supply and demand balance perspective, the supply-demand relationship for lithium iron phosphate, negative electrodes, hexafluoride, copper-aluminum foil, and other areas in 2025 is expected to significantly improve. At the same time, negotiations for price increases in some areas in January and February have been finalized, and unit profits may bottom out and rebound, with the outlook for the lithium battery industry chain expected to improve. Lithium carbonate may be at the bottom of the cycle, with marginal slowing in battery cost reduction According to SMM data, as of the end of 2024, the price of battery-grade lithium carbonate was 75,100 yuan/ton, a decrease of 22.55% from the beginning of 2024 and 85.28% from the beginning of 2023. Lithium carbonate may be in the bottom price range of the long cycle, with the marginal effect of cost reduction on reducing costs for car manufacturers slowing down. Car manufacturers looking to implement differentiation competitive strategies need to start from other aspects, such as improving battery energy density and fast-charging performance. By 2024, most pure electric vehicles in China priced above 200,000 yuan are commonly equipped with 800V high-voltage fast-charging batteries. Material price hikes are expected to continue throughout the year, with the industry chain expected to return to an inflationary cycle From a supply and demand perspective, high-end vehicle models in 2025 will move towards 5-6C direction; mid-to-low-end models towards 3-4C; and hybrid models will also exceed 2C. Contemporary Amperex Technology's Shenxin batteries and BYD Company Limited's second-generation blade batteries are expected to ramp up quickly, with corresponding high-pressure solid lithium, fast-charging negative electrodes, and other materials possibly facing capacity shortages. From a pricing perspective, the pace of capacity deployment for high-end products is slower than the demand growth rate, and structured supply shortages provide pricing power to material manufacturers, shifting the industry chain from a cost-driven model to a research and development-driven model. Additionally, upstream raw material prices such as lithium carbonate, petroleum coke, and copper-aluminum are expected to continue rising, with expectations of material price hikes in the battery materials sector continuing throughout the year, and the lithium battery industry chain expected to return to an inflationary cycle. With the faster iteration of new technologies in an inflationary cycle, "solid-state batteries + large cylindrical batteries + silicon negative electrodes" are expected to continue to receive industry catalysts The industry chain is transitioning from "rolling prices" to "rolling technology," with new opportunities emerging in downstream lithium battery applications. Progress in industrialization of humanoid robots, eVTOL, AI glasses, and other areas is accelerating, demanding an urgent increase in battery energy density and safety requirements, thus accelerating the industrialization of new technologies such as solid-state batteries, large cylindrical batteries, silicon negative electrodes, etc. Investment recommendations Recommend Shijiazhuang Shangtai Technology (001301.SZ), Contemporary Amperex Technology (300750.SZ), Shanghai Putailai New Energy Technology (603659.SH), and suggest paying attention to Hunan Yuneng New Energy Battery Material (301358.SZ), Shenzhen Dynanonic (300769.SZ), Fulin Precision (300432.SZ), and Hunan Zhongke Electric (300035.SZ). Risk warning Downstream demand below expectations; intensified industry competition; slower-than-expected progress in the industrialization of new technologies.