Since 2023, a global economic downturn and decreasing inflation have dampened the enthusiasm of certain countries, renowned for their substantial installed capacity, for photovoltaic (PV) installations. Consequently, the actual installed capacity falls short of initial expectations. Concurrently, with the ramp-up of production for upstream raw materials like polysilicon and lithium carbonate, the production capacity of battery cells has outpaced demand, causing a persistent downward spiral in product prices, repeatedly reaching record lows.
In the past, customers vied for battery cells, but the current landscape sees manufacturers engaged in fierce competition for more orders, underscoring the oversupply in production capacity. It is widely recognized that, in the face of intense competition, especially for enterprises with limited resources and high risks, some may be compelled to halt production or exit the market.
The balance between raw material supply and demand is easing, signaling an excess supply of energy storage batteries.
By the end of 2023, lithium carbonate prices had plummeted to less than 100,000 yuan per ton, leading to a continuous reduction in raw material costs. This has resulted in a loose market scenario, indicating an oversupply of energy storage batteries and a decline in battery cell prices. Additionally, the rapid growth in the energy storage market has spurred industry enterprises to expand their production capacity.
According to CAEV data from January to November 2023, the combined output of power and energy storage batteries reached 698.7GWh, marking a 41.6% year-on-year increase. With new entrants entering the scene and raw material supplies remaining ample, the production capacity of energy storage batteries is anticipated to expand further. However, this relative oversupply in production capacity is expected to heighten industrial competition.
According to TrendForce, the energy storage battery industry is grappling with challenges like oversupply and accumulated inventory, driven by lower-than-expected market demand and a rapid expansion of production capacity in the sector. Since the third quarter of 2023, the energy storage industry has entered a de-stocking phase. In December, the average price of Chinese energy storage batteries dropped to 0.45 yuan/Wh, experiencing a monthly decline of around 4%.
Complicating matters is the intense price competition within the energy storage industry, particularly with the bidding mechanism in play. Even in centralized procurement projects, battery cell prices have been pressured to dip below 0.4 yuan/Wh, surpassing the cost for some battery cell manufacturers. Consequently, a fierce price war is underway, causing selling prices to plummet by 50%. Despite the escalating competition in the energy storage sector, enterprises along the industrial chain continue to expand their production capacities.
Presently, the energy storage industry finds itself trapped in a recurring cycle: the rapid expansion of production capacity results in an oversupply, leading to weakened demand, and ultimately, a buildup of inventory. As demand in the power and energy storage markets wanes, battery cell manufacturers, in an effort to deplete existing inventory, scale back the utilization rate of production capacity. This, in turn, contributes to an industry-wide reduction in operational rates.
Confronted with cutthroat market competition, some enterprises are compelled to slash or even halt production due to a dearth of orders. While leading manufacturers engage in competition through strategies like price reductions and production capacity expansion, second and third-tier enterprises find themselves with dwindling opportunities, left with little choice but to follow the prevailing trend.
Furthermore, although customers still have existing demand, their increasing needs fail to keep pace with the burgeoning supply. The surplus production lacks orders, but this doesn't imply an absence of customers in the market. This mismatch in supply and demand is a key reason why many enterprises struggle to secure orders. In this landscape, the industry is poised for a new round of reshuffling, where advanced production capacities will distinguish themselves from the rest.
