Recently, SMM took stock of the 10 major status quo of the lithium iron phosphate industry in 2023, including industry investment heat, market trends, buying and selling transactions, etc. Both iron phosphate and lithium iron phosphate will experience overcapacity and downturn in 2023, which is very different compared to 2022. In seizing the market, enterprises work hard to practice basic skills, reduce costs, and expand customers with great confidence to seek the future. However, as more and more enterprises join, the advantages of traditional enterprises have gradually become smaller, and each joiner has a strong strength.
Status quo 1: Heat and decline (investment turns cold).
Due to the declining input-output ratio, the investment enthusiasm has gradually entered a cooling-off period from the enthusiasm of capital. In 2024, the investment in iron phosphate and lithium iron phosphate will be greatly cooled, and capital will only favor those high-quality and competitive resources, and other enterprises may appear temporarily barren after prosperity.
Status quo 2: The track is congested (there are many enterprises).
The iron phosphate and lithium iron phosphate tracks are crowded, and many companies are pouring into the track. Enterprises that have entered the track include the expansion of enterprises in multiple places and factories, the layout of other new energy enterprises in iron phosphate and lithium iron phosphate, and the joint ventures or sole proprietorships of enterprises in non-new energy industries seeking new growth points, and state-owned enterprises and private enterprises are on the battlefield, including many industries: automobiles, real estate, chemicals, machinery, etc.
Status quo 3: Overdraft future (overcapacity).
Too much new capacity has been put in, resulting in serious overcapacity, and the completed capacity is enough to meet the demand for the next 3-5 years. Excessive overdraft will inevitably lead to idle capacity and asset impairment. Among the top 10 companies, some companies will have a production capacity growth rate of 329% in 2023.
Status quo 4: Difficulty in making profits (meager profits).
After the completion of iron phosphate and lithium iron phosphate enterprises, they are currently facing a difficult situation, and they are in a dilemma in the choice of production: not putting into production is a loss, and putting into production is a loss. Regardless of iron phosphate or lithium iron phosphate enterprises, most enterprises have meager profits and cannot make ends meet in the actual operation process, and it is difficult to make profits in a short time. Even some enterprises have become difficult to turn, accelerate and change direction in a crowded track, so that it affects survival, let alone development.
Status quo 5: Stomping on each other (low-cost occupancy).
Source: SMM
Whether it is a newly put into production enterprise or an enterprise in production, in order to maintain or occupy market share, it grabs orders at low prices and occupies the market. When the demand is not greatly driven, the first below the cost price is frequently displayed, and in the market, the first business stomles on each other. In the end, it depends on who can occupy the place for a long time, withstand the stampede, and successfully break through from it. Many enterprises seek to survive and seize the opportunity by binding the downstream and locking the upstream. But this relationship is also relatively weak.
Status quo 6: Rapid change (rapid iteration).
The upgrade and iteration of iron phosphate and lithium iron phosphate products are fast, and the production line that has just been commissioned and stabilized may soon receive new instructions from downstream battery cell enterprises: new requirements for metal particles, new requirements for product compaction, new requirements for energy density, etc. In order to adapt to the downstream requirements, the company frequently debugs the production line. The technical level, process flow and detailed formula of downstream enterprises are different, which makes it difficult for the same product to be used by multiple customers. There are even enterprises whose production lines are operating normally, but the results of the products made downstream are different, A can make an ideal product, but B can't;Yesterday I was able to make a qualified product, but today I can't. Taking iron phosphate as an example, iron phosphate enterprises often dedicate a certain production line to a certain downstream, and once there are any requirements from the downstream, they can be unconditionally debugged at any time: repeated communication, continuous sample verification. When there is a problem with the downstream production product, the production is immediately stopped to find the cause, which can be as fast as a few days or as slow as a few weeks. This is also the reason why integrated enterprises (iron phosphate and lithium iron phosphate integration) have prevailed in the past one or two years, in addition to controllable costs and lower possibilities, the advantage is that the product iteration is faster: internal communication is more convenient, and the review is more silky. At the same time, enterprises with complete integration of iron phosphate and lithium iron phosphate may close a window for new products of iron phosphate, forming a technical occlusion.
Status 7: Slow collection (extended account period).
In order to seize market share, iron phosphate and lithium iron phosphate companies give "preferential" to the downstream in terms of payment methods, and give away part of the profits to leave financial pressure. Enterprises need a large cash flow to maintain their operations, and many enterprises seek funds from the new energy chain, or ensure the safety of funds by advancing funds and buying insurance. This has invisibly increased the operating costs of enterprises and increased financial expenditures. When the capital market is loose, hot money can be used for a while, and when there is no consistent return on investment, hot money will also shrink. When the capital market is expected to shrink in 2024, the enterprise may not be able to continue to operate to supply a downstream enterprise, and some accounts receivable may form a bad debt and be permanently swept away by the market. Enterprises need to be wary of potential risks: capital chain crisis!
Status quo 8: oligopoly effect (28 principle).
80% of the profits are in the 20% of the companies, and even more exaggerated. 95% of the profits are in the hands of 5% of the enterprises, and most of the enterprises in the iron phosphate and lithium iron phosphate industries have become nameless blood transfusions in this vigorous market movement. In 2024, such blood transfusions may not be able to continue to complete the blood transfusion task and will be forgotten by the market.
Status Nine: Bleak contract (lack of integrity).
In the iron phosphate and lithium iron phosphate markets, the phenomenon of order destruction is serious, and there are always those who break the normal rules in the original normal business: the contract becomes more lenient and more ineffective. The downstream destroys the upstream order, and the given order volume is shifted to other companies with lower **, and the upstream is the same. In addition, the contract is like a piece of waste paper, which gradually becomes non-binding: there is no money or deposit, which leads to no risk of breaking the contract, and there are few people in the market who know that they are losing money and want to perform the contract. In fact, the market should not be ruthless, and in economic events, the invisible hand of the principle of good faith in the spirit of contract is still at work.
Status quo 10: Collective wintering (the future can be expected).
In 2023, especially in the second half of the year, iron phosphate and lithium iron phosphate enterprises will collectively survive the winter, production capacity expansion will be suspended, production reduction of large enterprises will be reduced, and small enterprises will temporarily suspend production. The market downturn is not the worst outcome, and the power and energy storage market is still promising. Lithium iron phosphate enterprises avoid the so-called "investment name" type of vertical and horizontal alliance, speed up the return of funds, reduce operating costs, and survive the winter smoothly, in order to seek a more long-term and broader market.
To sum up: the objective problems existing in the industry, such as overcapacity, stampede, and narrowing demand growth are not the core problems. The core problem is the problem of people's hearts, the spirit of the contract has become bleak, and the lack of integrity has made the lithium iron phosphate industry, which was originally loosening the bargaining chips in the payment method, become in danger. When an industry forms an avalanche, every snowflake is not innocent. In difficult periods, maintain low-speed, low-cost operation, maintain a good reputation, wait for the opportunity, and take off at any time.