China Galaxy: The price increase path has opened up for the additive industry, and the industry is expected to hit bottom and rebound.

China Galaxy Securities released a research report stating that the core reason for the marginal changes in this round of the market is the demand side exceeding expectations. Additives can fully benefit from the growth dividend in terms of quantity and structure, coupled with limited supply, the industry is expected to bottom out and rebound. The upward momentum core depends on price elasticity, and related companies will all benefit. It is recommended to focus on companies that have certain advantages in technology, scale, and cost, with larger companies having more elastic space. Key points from China Galaxy Securities: Price increase channel is open, with ample elasticity In mid-November, VC (vinyl cyanide) took over from lithium hexafluorophosphate and experienced a rapid increase. As of November 28, 2025, the average price was 235,000 yuan/ton, an increase of 408% from the bottom and a peak of 270,000 yuan/ton. At the same time, the average price of FEC reached 54,000 yuan/ton, an increase of 30% from the bottom. The main reason for the rise of additives this time is that the short-term downstream production exceeds expectations, passive inventory consumption, and supply shortage. The bank calculated that the proportion of additives converted to the total cost of the battery cell is less than 1%, with very low price sensitivity. Considering the historical price trends (VC highest at 475,000 yuan/ton), and the volatility of raw materials such as lithium hexafluorophosphate affected by lithium carbonate, additives represented by VC have even greater elasticity space. Demand side: Structural differences bring "double growth" To analyze the future supply and demand trends, the bank calculated the global demand for VC additives from the bottom up, and under certain backgrounds and assumptions, the bank made the following judgments: 1) Stable growth in power, with the total shipments of global power batteries expected to reach 1447GWh in 2026, with a stable growth rate of around 20%. 2) Resonant demand domestically and abroad, with the prospect of sustained exceeding expectations in energy storage demand. The bank expects the global energy storage battery shipments in 2026 to grow by 62% to 822GWh. 3) Overall, by 2026, the size of the lithium battery market (power + energy storage + consumption) will expand by 31%, and the expansion of the overall market will directly drive the expansion of the electrolyte additive market, which is the "demand growth hit." 4) Structurally, with the faster growth of energy storage and the increasing market share of overseas power lithium iron phosphate, combined with technological upgrades leading to an increase in the proportion of additives, the demand for VC in 2026 is expected to achieve a growth rate of over 64%, which is the "double growth of demand brought by structure". FEC will mainly benefit from the further promotion of fast charging technology and silicon-based negative electrode technology in the future. In addition to the growth brought by 3C lithium batteries, the trend of semi-solid-state batteries/solid-state batteries also favors the growth of FEC demand. The bank predicts that the demand growth for FEC in 2026 will reach 29.5%. Supply side: Limited expansion, high load production constraints Since the beginning of 2022, the additives industry has experienced over three years of downturn. Irrational expansion has led to "cannibalistic" competition, rapid decline in prices, and by 2024, listed companies related businesses have entered a cash deficit state. Currently, leading companies' cash reserves have declined to historic lows. In the current profit status and capital base, companies are unlikely to have the intention to expand production further, the industry is becoming more rational, and low prices accelerate the clearance of backward production capacity in the industry. In addition, disruptions in events may intensify price fluctuations. The bank believes that downstream electrolyte companies may have a stronger demand for stocking up supplies or inventory replenishment, therefore, there is expected to be a greater price elasticity space. Based on industry supply and demand statistics, the bank believes that the industry's VC capacity gap in 2026 will reach -16,000 tons, and the gap/supply ratio is about 15.1%. This means that the tight supply situation of VC is expected to persist throughout the year. In contrast, FEC is relatively balanced, and if downstream fast charging, silicon-based negative electrode, semi-solid-state batteries exceed expectations, FEC is also expected to experience a rapid increase. The bank calculated that under certain conditions, if the central VC price is 150,000 yuan/ton and the central FEC price is 60,000 yuan/ton, the latest valuation of industry representative companies is below 12 times, indicating a strong safety margin. Risk factors Risks include lower-than-expected demand, rapid development of new technologies leading to products losing market share, and rising raw material prices.