Battery Industry Faces Cooling Demand, Price Declines, and Capacity Reductions

Panasonic EV battery

TrendForce’s recent analysis sheds light on the battery industry’s current challenges, revealing a notable decline in operating rates throughout November. This downturn stems from a substantial dip in end-user demand, accompanied by a consistent decrease in the prices of essential raw materials like lithium, cobalt, and nickel, consequently driving battery cell prices downwards across various segments.

In November, Chinese electric vehicle (EV) battery cell prices experienced a 3–4 percent month-on-month drop, while consumer Lithium Cobalt Oxide (LCO) cells decreased by 2.5 percent. However, the most significant decline was observed in storage-type cells, plummeting by 6.8 percent.

The slowdown in demand for EV and storage markets prompted battery cell suppliers to decrease their capacity utilization rates, resulting in an industry-wide operating rate falling below 50 percent. Some companies, grappling with heightened market competition and reduced orders, are responding with production cuts or shutdowns. Additionally, in a bid to relieve inventory pressure, certain cell suppliers are adopting low-price strategies, triggering a price war. Notably, the lowest quoted price for storage cells in China reached approximately CNY 0.4/Wh in November.

Following the Double Eleven shopping festival, demand for consumer cells flattened out as the consumer electronics market entered a period of decreased procurement. With manufacturers having previously stocked up, the focus has shifted to inventory management and reduction. Meanwhile, prices of upstream materials like lithium and cobalt continued their decline in November, with lithium salt prices dropping by over 10 percent, contributing to a 2.5 percent month-on-month decrease in the Average Selling Price (ASP) of LCO cells.

TrendForce’s projections for the fourth quarter of 2023 anticipate sustained weakness in demand for EV and storage markets. This could lead to further reductions in capacity utilization rates, potentially resulting in production halts for some companies. The downward trend in upstream core lithium material prices is expected to persist, fueled by a supply growth rate unable to match the deceleration in downstream demand.

Looking ahead to 2024, TrendForce anticipates a persistently low demand in the first quarter, with a potential rebound delayed until the second quarter. To address market challenges, there’s an opportunity to streamline less efficient capacities within the EV industry chain. This includes early-built capacities with lower energy consumption and production efficiency, smaller-scale operations, and those lacking comprehensive layouts in core raw materials. By reducing these capacities, there’s a strategic move to control costs and normalize supply and demand within the EV battery market.