For years, Gree chairwoman Dong Mingzhu made headlines as China’s most prominent female business boss, backed by her much-heralded career in manufacturing. Another candidate for the title of most influential businesswomen is Liu Jingyu, who forged a formidable reputation behind the scenes at the aerospace and defence conglomerate AVIC.
Since 2019, Liu has been running AVIC spin-off China Lithium Battery Technology (CALB), helping to grow its revenues from Rmb1.7 billion ($270 million) that year to Rmb6.8 billion in 2021. The company has swung from a net loss of Rmb156 million to a profit of Rmb112 million in the same period. The Chinese media is impressed, dubbing her a “Goddess of Finance”.
Before CALB, Liu performed a similar feat at another AVIC unit, Tianma Microelectronics. But CALB has much trickier ambitions to challenge Contemporary Amperex Technology (CATL) as the world’s leading battery producer.
The next step on that roadmap is a listing on the Hong Kong Stock Exchange. Analysts are predicting a share offering that could raise around $1.5 billion, making it the bourse’s largest flotation of the year so far.
During its most recent Rmb12 billion funding round last September, CALB was valued at Rmb60 billion. There was participation from a series of state investment firms backed by local governments.
By comparison, CATL currently boasts a market capitalisation of $188 billion, or nearly 20 times more than CALB’s value last September. CATL forecasts 2021 net profits around the Rmb15 billion mark. However, as we reported in WiC574, investors have been hitting the sell button since December, with fears that CATL won’t be able to pass on all of the impact of soaring raw material prices to the car manufacturers.
They also worry that CATL’s imposing market share will come under pressure from newer players like CALB, SVOLT (which is also preparing for a STAR Market listing), Sunwoda and Shenzhen-listed EVE Energy.
These concerns weren’t so apparent last year when CATL grew its global market share from 25% to 33%. In doing so, it outshone both of its nearest rivals – South Korea’s LG Energy Solution and Japan’s Panasonic – which reported declines in their own share of the market.
CALB currently ranks third domestically in China, with 5.9% market share at the end of 2021. This was based on 9.05 GWh of battery plant capacity from China’s 154.4 GWh total. CATL ended the year on 80.51 GWh.
Both companies have announced aggressive expansion plans. In January CALB signed agreements with the Guangdong provincial government to build two 50 GWh plants in the province. One of the facilities is rumoured to be intended to serve EV start-up XPENG, which is an existing client of CATL.
Few doubt the sector’s long-term potential as the world transitions towards net carbon zero. But geopolitics and raw material shortages are wreaking havoc for the short-term fortunes of the main players.
CALB’s battery technology is based on NCM (nickel, manganese, cobalt) and nickel prices have been having a turbulent run since Russia (the world’s third biggest producer) invaded Ukraine. The London Metal Exchange had to suspend trading on March 8 after a 250% increase in nickel prices to more than $100,000 per metric tonne (see WiC577). On March 31, nickel prices were back to about $32,740. Lithium carbonate prices are also soaring. After closing 2021 just below Rmb300,000 per metric tonne, prices passed Rmb500,000 in early March.
Miners are struggling to get it out of the ground quickly enough to meet new demand and battery producers are getting squeezed by the shortages. Analysts estimate that every 1% rise in lithium carbonate prices will cut CATL’s 2022 net profit by 0.3%. A 1% rise in nickel prices will lower profits by 0.4% too.
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