China Securities Co., Ltd.: optimistic about the lithium battery new cycle, the electrolyte industry chain represented by 6F and VC welcomes profit reshaping.

China Securities Co., Ltd. released a research report stating that the nonlinear growth of energy storage demand is driving the lithium battery new cycle to become more evident. On the demand side, it is expected that global lithium battery demand will reach 3065GWh by 2026, a year-on-year increase of 33.7%, driving rapid growth in demand for lithium battery electrolytes. Taking supply and demand into account, it is expected that 6F and VC will be in a tight balance in 2026, while the supply relationship in other electrolyte segments is expected to improve. At the same time, solvent prices are expected to return to reasonable levels. Optimistic about the profit reshaping of the electrolyte industry chain represented by 6F and VC in the new lithium battery cycle, with a focus on the 6F and VC segments. The main points of China Securities Co., Ltd. are as follows: - The new cycle of lithium batteries is becoming more evident due to the nonlinear growth in energy storage demand. The fundamental logic of this cycle lies in the resonance of the increase in penetration rate of new energy generation and the decrease in storage system costs. The core drivers include Document 136 promoting the comprehensive entry of new energy into the market, widening peak-valley price differentials, and Document 114 clarifying the storage capacity electricity price, providing stable income expectations for energy storage. - On the demand side, it is expected that global lithium battery demand will reach 3065GWh by 2026, a year-on-year increase of 33.7%. This corresponds to a demand of 3.67 million tons for electrolytes, 404,000 tons for 6F, 917,000 tons for EC, 822,000 tons for EMC, 1.013 million tons for DMC, and 110,000 tons for VC, with a demand of 44,000 tons for FEC. - On the supply side, it is estimated that the effective capacity of 6F will be approximately 34.5/41.4 thousand tons from 2025 to 2026, with EC at approximately 93.6/110.6 thousand tons, DMC at approximately 90.3/129.0 thousand tons, EMC at approximately 108.5/113.5 thousand tons, VC at approximately 7.9/11.4 thousand tons, and FEC at approximately 4.0/5.7 thousand tons. - Taking supply and demand together, it is expected that 6F and VC will be in a tight balance in 2026, with other segments expected to see improved supply relationships. Looking at the quarters, 6F is expected to experience shortages in the second half of 2026, while VC will remain in a tight balance for the whole year, with other segments tightening supply and demand in the fourth quarter of 2026. The first quarter of 2026 may see relatively weak demand, but as demand increases in the second and third quarters, 6F and VC are expected to maintain high prices. The supply and demand relationship for solvents is expected to significantly improve, with solvent prices expected to recover to a reasonable profit level. - Optimistic about the profit reshaping of the electrolyte industry chain in the new lithium battery cycle, focusing on the 6F and VC segments. Risk Factors: 1) Weaker than expected downstream demand: Sales may be affected by weak end demand; Production may be affected by significant fluctuations in upstream raw material prices and power restrictions, which may in turn affect the company's related business shipments and profit capabilities. 2) Unexpected fluctuations in raw material prices: Since 2021, raw material prices have shown significant fluctuations, which can have an impact on end demand due to high and unstable prices, as well as disturb the company's short-term performance. 3) Slow progress in key projects recommended by the company: As a participant in the new energy track, the progress of key projects is crucial to supporting revenue and profits, and is also a reflection of the company's growth prospects. A delay in the progress of key projects may affect current and future performance. 4) Impact caused by policy fluctuations: Currently, lithium batteries and materials account for about 80% of global supply, and changes in policies such as tariffs, tax refunds, carbon emissions on the production side, and changes in demand-side subsidies may result in changes in supply and demand or changes in industry chain profits.