2021 China lithium separator: driven by power battery, growth of over 100%

In 2021, China diaphragm enterprises plan to expand production capacity (including coating production capacity) by about 22 billion square meters, with a total investment of over 56 billion yuan.

From industry, capital to ecology, the diaphragm industry will undergo new changes in 2021.

The new energy vehicle market continues to be hot, and the growth in demand for power batteries drives the demand for diaphragms to rise. Data show that in 2021, China’s lithium battery diaphragm shipments will be 7.8 billion square meters, a year-on-year increase of more than 100%.

The perspective of market size

1. The power battery market is driven by the increase in the global demand for new energy vehicles. The shipment of China’s power battery market has reached 220GWh, with a synchronous growth rate of over 170%, driving the demand for lithium-ion power diaphragms in China.

2. China’s diaphragm products are globally competitive. Driven by the substantial growth in power battery shipments in other countries, China’s diaphragm exports have increased rapidly.

3. The growth rate of the downstream segment, such as the energy storage market, exceeds 100%, driving the growth of lithium battery diaphragm shipments.

The perspective of diaphragm product structure

In 2021, China’s lithium battery diaphragm market shipments will still be dominated by wet diaphragms, accounting for 74% of the market. The reasons for the increase in the market share of wet process diaphragms are:

1. The downstream performance requirements are gradually improved, and the thickness of the wet separator is thinner, which can improve the energy density of lithium batteries.

2. The downstream demand is strong, the industry supply and demand is tight, and the production capacity of wet diaphragm is larger than that of dry diaphragm, which promotes the shipment of wet diaphragm. Although the proportion of dry method will decrease in 2021, its shipments will maintain rapid growth, mainly driven by the growth of energy storage and small power batteries.

The price trend

1. The price of dry-process and wet-process diaphragms has risen, with a rise of 5-10% for dry-process diaphragms and 10-15% for wet-process diaphragms, mainly due to the large scale of wet-process diaphragm companies, strong industry voice, and strong bargaining power 

2. The price increase of diaphragm enterprises for small and medium-sized battery enterprises and product segments such as (16μ wet method, 20μ, 25μ dry method) is larger than that of head battery enterprises and mainstream products.

From the perspective of market competition

In 2021, China’s lithium battery separator TOP6 enterprises will account for 78% of the market, TOP6 will increase and TOP3 will decrease. The main reasons are:

1. Strong industry demand, limited production capacity of leading companies, full production and full sales, and increased capacity utilization rate of second-tier companies, resulting in a decline in the industry concentration of TOP3.

2. The production capacity of TOP6 enterprises has increased greatly, which has led to an increase in the share of TOP6 enterprises.

Expected characteristics of the diaphragm industry in 2022

1. In the first half of the year, it will take time for the downstream demand to be strong and the new production capacity to be put into production. The supply and demand relationship in the industry will be further intensified, and the prices of dry and wet diaphragms will rise.

2. The new production capacity in the industry is dominated by wet-process diaphragms, and the new production capacity of dry-process diaphragms is less than 500 million square meters. The status of wet-process diaphragms is still expected to be further improved.

3. The dry diaphragm is mainly three-layer co-extrusion dry film, and the subsequent new production capacity is mainly three-layer co-extrusion.

4. The thickness of the wet diaphragm will gradually change from 9μm to 7μm and 5μm.

5. The downstream requirements for diaphragm performance are improved, and the industrialization of new coating technologies is expected to accelerate.

From the supply side

The supply and demand of mainstream lithium battery diaphragm enterprises are in a tight balance, the head diaphragm enterprises are almost full of production and sales, and the capacity utilization rate of second-tier enterprises has increased.

Based on the research and judgment on the global market diaphragm demand and the customer’s joint venture expansion requirements, diaphragm companies such as Enjie, Xingyuan Materials, Cangzhou Pearl, and Sinoma Technology have launched large-scale production expansion models. Companies such as Lianxin Materials have also increased their efforts to follow up.

According to the public information, the China diaphragm enterprises plan to expand the production capacity (including coating production capacity) of about 22 billion square meters in 2021, with a total investment of over 56 billion yuan.

The change and development trend of diaphragm industry

By reviewing the lithium battery diaphragm production expansion project in 2021, we can also gain insight into the changes and development trends of the diaphragm industry.

First, the expansion of diaphragm production is heating up, and leading companies have entered the level of tens of billions of production expansion.

Before the second half of 2020, due to the overcapacity of the diaphragm, most of the diaphragm enterprises were in a state of low profit or loss, which made the overall production expansion of the industry slow, and the characteristics of horizontal mergers and acquisitions were more prominent. Entering 2021, the new energy market is in strong demand, and leading companies are the first to announce production expansion.

Then, second-tier and third-tier and cross-border enterprises also participated in the expansion of diaphragm production. It is worth noting that the total planned amount of diaphragm and coating capacity expansion of Xingyuan Materials and Enjie in 2021 will exceed 10 billion yuan. will increase further.

Second, wet-process diaphragms are still the mainstream of production expansion, and the advantages of base film and coating integration projects are prominent.

Among the 17 diaphragm expansion projects in 2021, 15 are wet-process base film and coating projects, and 2 are dry-process diaphragm projects. The downstream demand is strong, the supply and demand in the industry is tight, and the production capacity of wet diaphragms is larger than that of dry diaphragms. Therefore, wet diaphragms are still the mainstream of capacity expansion. Although the proportion of dry method will decrease in 2021, its shipments will maintain rapid growth, mainly driven by the growth of energy storage and small power batteries.

Therefore, some companies have also made moves in production capacity layout. It is worth noting that the cost advantage of the base film with coating vertical integration project has begun to become prominent, the profit margin improvement has been reflected in the performance of listed companies, and the integration project has become the trend of leading companies to expand production.

From the perspective of the expansion project of diaphragm in 2021, the expansion projects of Xingyuan Materials, Pureland and Enjie are mainly based on the base film + coating integration project. Among them, Putailai has also formed an industrial closed loop from diaphragm base film, coating materials, coating equipment to coating processing.

Third, the power battery will be deployed in the diaphragm industry chain to maintain stable supply.
According to the current expansion rhythm (diaphragm expansion construction cycle takes about 2-3 years), superimposed diaphragm equipment manufacturers are constrained by the release of production capacity, and it is expected that the global diaphragm will maintain a tight balance for at least 2-3 years. Locking the supply of diaphragms in advance has become a consensus among leading power battery companies.

In November 2021, CATL signed a cooperation agreement with Enjie, and plans to invest in the construction of 1.6 billion square meters/year wet separation membrane and 2 billion square meters/year dry separation membrane projects.

At the same time, CATL locked the supply of Wet Separator for Enjie in the next five years. In August 2021, Yiwei Lithium Energy and Enjie Co., Ltd. plan to cooperate to set up a joint venture company in Jingmen to build a wet-processed base film with an annual production capacity of 1.6 billion square meters and a coating film that fully matches the production capacity, and give priority to the company and its subsidiaries. The company supplies, the total investment of the project is 5.2 billion yuan.

Fourth, the shortage of imported equipment has become a bottleneck for production expansion, and the price of diaphragms may rise.
The capacity expansion is ambitious, but it is difficult to quickly fill the gap in the supply of diaphragms in the future.

The equipment of head diaphragm enterprises is basically imported. At present, there are only 4 major diaphragm equipment manufacturers in the world: Japan Steel Works, Japan Toshiba, Germany Bruckner, and France Isopp. The expansion speed of the diaphragm production line largely depends on the supply of diaphragm equipment: on the one hand, the global mainstream equipment suppliers have limited overall production capacity, and the pace of equipment expansion is relatively conservative.

More than a year and a half, it usually takes several months for equipment debugging after the equipment enters the factory. The strong downstream demand and the new production capacity will take time, and the industry supply and demand relationship will be further intensified, and the prices of dry process and wet process diaphragms will rise.