CMSC: The increase in per-unit consumption combined with tight supply has the potential to drive up VC prices.

CMSC has released a research report stating that the average price of VC in the domestic market has significantly increased recently, returning to over 200,000 yuan/ton after a temporary adjustment in the first half of the year. On the demand side, the expansion of lithium battery shipments, combined with the new national standard for the safety of power batteries leading to increased VC consumption, is expected to maintain strong global demand growth. On the supply side, nominal VC production capacity is rapidly expanding, but the challenges of second-generation technology are substantial, and effective supply release is expected to be limited. The bank anticipates that the current pattern of VC shortages is likely to continue, with subsequent prices showing significant elasticity, and recommends ongoing attention. CMSC's main points are as follows: VC prices have returned to an upward trend, and the industry's prosperity has notably recovered. As of August 14, 2026, the domestic average price of VC has reached 225,000 yuan/ton, with an increase of over 70% since June, significantly accelerated due to factors such as the shutdown of a 10,000-ton capacity at Suzhou Huayi Dalian. In the long term, VC prices have undergone a complete cycle consisting of a peak in 2021, a continued decline from 2022 to 2025, and a turnaround at the end of 2025. The average price in July-August 2025 dropped to about 46,000 yuan/ton; subsequently, the explosion of energy storage demand, along with maintenance shutdowns of leading manufacturers, resulted in a rapid price rebound. After experiencing a phase adjustment in the first half of 2026, the price has surged again since June, currently up approximately four times from the 2025 low, and prices remain in an upward channel. The expansion of lithium battery shipments, combined with an increase in VC consumption, is expected to sustain strong global demand growth. It is projected that global shipments of lithium batteries will reach approximately 3,600 GWh by 2027, with a CAGR of about 26% from 2025 to 2027, among which the proportion of energy storage batteries will increase from 27% to 31%. In addition to total demand growth, the new national standard for the safety of power batteries promotes an increase in the VC addition ratio, with expected VC addition ratios for power LFP/ternary systems increasing by approximately 33%/67%. Energy storage batteries require higher cycle life and long-term stability, so the VC addition ratio for the LFP system is expected to rise by approximately 10%. With the increase in LFP penetration and the higher proportion of energy storage batteries with high VC consumption, the average VC consumption in the industry is expected to rise from 30 tons/GWh to 38 tons/GWh, with a global VC demand CAGR of about 42% from 2025 to 2027, far exceeding the industry growth rate. The difficulty of expanding new technology is high, and effective supply release is expected to be limited. In recent times, leading companies have rapidly expanded nominal capacity by binding key customers, with companies such as Genyuan, Huasheng, and Yongtai having expansion plans ranging from 20,000 to 100,000 tons. Additionally, second-tier manufacturers often use technological upgrades to reduce costs and increase efficiency, resulting in a 20-30% increase in capacity. This round of expansion largely shifts from first-generation long-process technology to second-generation short-process technology, reducing costs by about 15,000 to 20,000 yuan/ton compared to the first generation; however, industry feedback indicates that the second-generation process is relatively difficult, leading to a slow capacity release pace. The bank estimates that by 2027, global nominal VC capacity could reach 400,000 tons, but actual release is expected to be around 110,000 tons, indicating overall limited supply release. The pattern of VC shortages is likely to continue, and prices and profitability show significant elasticity. Industry feedback indicates that downstream demand is strong, and there is currently a supply-demand gap for VC, which may continue to tighten. The bank predicts that if supply is not released as expected, the supply-demand balance will shift from tight equilibrium to exacerbated shortages starting in the second half of 2026. VC accounts for a relatively low proportion of the value of the battery cell, and even when calculated at current prices, the proportion is still only about 1.9%, indicating that downstream has a strong ability to endure price increases; under the backdrop of high demand growth and slow effective supply release, VC prices are expected to remain well-supported, with further strengthening expected in price and profitability elasticity. Continuous attention is recommended. Recommendations for attention: Jiangsu HSC New Energy Materials, Shandong Hi-Tech Spring Material Technology, Shandong Rike Chemical, Guangzhou Tinci Materials Technology, Zhejiang Yongtai Technology Co., Sunvim Group, Jiangxi Fushine Pharmaceutical, among others. Risk reminder: Risks related to downstream demand not meeting expectations, and new capacity being released or ramping up too quickly.