The current market rebound is primarily driven by stronger-than-expected demand, with additives poised to benefit from both volume growth and structural advantages. Coupled with limited supply, the industry is expected to bottom out and recover, with the upside momentum largely dependent on price elasticity. All related companies stand to gain, though leading players may enjoy greater upside potential due to their technological, scale, and cost advantages. Key insights from CGS are as follows:
**Price Rally Opens Up Significant Upside Potential** VC (Vinylene Carbonate) prices surged rapidly in mid-November following lithium hexafluorophosphate, reaching an average of RMB 235,000/ton by November 28, 2025—a 408% increase from the bottom, with peaks hitting RMB 270,000/ton. Meanwhile, FEC (Fluoroethylene Carbonate) prices rose to RMB 54,000/ton, up 30% from the trough. The price surge is attributed to unexpectedly strong downstream production, inventory depletion, and supply shortages. Additives account for less than 1% of total battery cell costs, making them highly price-insensitive. Historical trends (VC once peaked at RMB 475,000/ton) and lithium carbonate-driven volatility in raw materials like lithium hexafluorophosphate suggest VC and similar additives have substantial room for further price increases.
**Demand Side: Structural Differences Drive "Double Growth"** To assess future supply-demand dynamics, CGS conducted a bottom-up analysis of global VC demand, concluding: 1) Steady growth in power batteries, with global shipments expected to reach 1,447GWh by 2026, maintaining a ~20% growth rate. 2) Synergistic domestic and international demand, with energy storage likely to continue exceeding expectations. Global energy storage battery shipments are projected to grow 62% YoY to 822GWh in 2026. 3) Overall, the lithium battery market (power + energy storage + consumer) will expand by 31% in 2026, directly boosting electrolyte additive demand—the "first growth driver." 4) Structurally, faster energy storage growth, rising overseas LFP adoption, and higher additive ratios from tech upgrades could push VC demand growth beyond 64%—the "second growth driver." FEC, meanwhile, will benefit from fast-charging and silicon anode adoption, with demand growth forecast at 29.5% in 2026, further supported by trends in semi-solid/solid-state batteries.
**Supply Side: Limited Expansion, Capacity Constraints** Since early 2022, the additives industry has faced over three years of downturn, with irrational capacity expansions triggering cutthroat competition and price collapses. By 2024, listed companies in the sector were operating at cash losses, with leading firms’ reserves at historic lows. Current profitability and capital constraints deter further expansions, leading to more rational industry behavior and accelerated exit of outdated capacity. Supply disruptions could intensify price volatility, with downstream electrolyte firms’ inventory restocking potentially fueling stronger buying demand. CGS estimates a VC supply gap of -16,000 tons in 2026, representing ~15.1% of total supply, indicating sustained tightness. FEC may remain in tight balance unless fast-charging, silicon anodes, or semi-solid batteries outperform, triggering rapid price increases.
Under certain conditions (VC at RMB 150,000/ton, FEC at RMB 60,000/ton), industry leaders trade below 12x P/E, offering a margin of safety.
**Risks**: Weaker demand, disruptive technologies rendering products obsolete, and rising raw material costs.
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