CMSC: Solvent supply and demand and profitability continue to improve. EC solvents have even greater potential.

CMSC released a research report stating that with the continuous growth in demand, the supply and demand situation in the lithium battery solvent sub-industry has been effectively repaired over the past few years, and currently the production rates of the top solvent companies are relatively high. In recent weeks, the prices of solvents have also begun to rise slightly. Due to the restraint in production expansion by mainstream companies, it is expected that the profit situation of lithium battery solvents will significantly improve next year. Among them, EC solvent is not only the mainstream solvent variety, but also the main raw material for VC and FEC additives. It is estimated that the demand for EC driven by additives next year may exceed 300,000 tons. It is expected that the price and profit elasticity of EC solvents may be more prominent next year. Recommended companies include Shandong Hi-Tech Spring Material Technology (301292.SZ) and Shida Shinghwa Advanced Material Group (603026.SH). CMSC's main points are as follows: Solvent Introduction The electrolyte is mainly composed of solvents, lithium salts, and additives, with solvents accounting for about 80%-85% of the total mass. Carbonate solvents dominate approximately 95% of the solvent market, with DMC and EC being the mainstream varieties, each serving different functions. EC, with its high dielectric constant, is the core component for dissolving lithium salts and constructing a solid electrolyte interface (SEI) membrane, while DMC enhances conductivity with its low viscosity. Although PC has excellent low-temperature performance, its application is limited. DEC balances viscosity and boiling point to expand the temperature range, and EMC, with its optimal stability, is an ideal medium for connecting ring and chain systems. Turning point in lithium battery solvent profitability, expected to continue improving After several rounds of iteration, the lithium battery solvent industry has a relatively concentrated shipping pattern, with the top three companies holding a combined market share of over 70%. However, as of the first three quarters of this year, they are still generally operating at a loss. With the continuous growth in demand for lithium batteries over the past few years, the supply and demand situation for lithium battery solvents has been gradually repaired. In recent weeks, solvent prices have begun to rise, marking a turning point in both prices and profits after three years of decline. Due to the relatively restrained capacity expansion by mainstream companies, it is expected that the supply and demand situation, as well as profitability, will continue to improve. EC solvent shows more potential EC is the mainstream solvent variety and also the raw material for preparing various carbonate solvents (DMC, DEC, EMC). In addition, it is the main raw material for preparing VC and FEC additives. It is estimated that by 2026, only lithium battery additives are expected to drive demand for over 300,000 tons of EC. The supply pattern of EC is relatively concentrated, with Shandong Hi-Tech Spring Material Technology and Shida Shinghwa Advanced Material Group having capacities of 300,000 tons and nearly 200,000 tons respectively, with a combined market share of over 70%. The report analyzes that the price and profit elasticity of EC solvents may be greater. Recently, it has been observed that the price of EC has begun to accelerate, with a 70% increase in the past week. Risk Warning: Industry policy fluctuations, product price fluctuations, raw material price risks.