Anode material industry profits have declined quarter-over-quarter since Q4 2025 due to rising graphitization and raw material costs. It is believed that resisting internal competition is the general trend. Facing sustained growth in power and energy storage demand since Q4 2025, and considering the relatively rigid supply in the anode material sector, the potential for profitability recovery among leading anode companies should be noted. It is suggested to focus on: 1) Anode enterprises with high self-supply ratios of graphitization and strong integration capabilities; 2) Leading anode firms with relatively high outsourcing ratios but fast cost pass-through and strong bargaining power. The main views are as follows:
Facing steady expansion in new energy vehicles and explosive growth in energy storage, the anode sector has underperformed the industry. At the beginning of 2026, the view "Bid Farewell to Excess Capacity Mindset, Embrace the Major Cycle of Lithium Battery Materials" was proposed, suggesting a focus on leading battery manufacturers that are "lithium-first" and have strong execution capabilities. According to GGII data, China's lithium battery shipments in Q1 2026 reached 525 GWh, a year-on-year increase of 67% but a quarter-on-quarter decrease of 8%. Within this, China's energy storage battery shipments were 215 GWh, surging 139% year-on-year and increasing over 7% quarter-on-quarter. The anode material segment maintained relatively better profitability during the downturn cycle of widespread industry overcapacity from 2023 to 2025, with a slower pace of capacity elimination. However, rising graphitization and raw material costs in Q4 2025 further compressed anode industry profits, making it one of the very few segments in lithium battery materials to experience a quarter-on-quarter profit decline since Q4 2025.
Graphitization prices are rising. Currently, leading anode companies, to reduce investment risks and financial pressure, have demand for outsourced graphitization. However, due to factors like energy consumption environmental assessments, obtaining approval for independent graphitization capacity is relatively difficult. It is believed that while third-party capacity statistics still show a large amount of nominal graphitization capacity, the actual operational release of this capacity depends not only on project completion but also on factors like electricity costs, energy consumption quotas, environmental compliance, furnace type compatibility, yield control, customer certification, and accounts receivable tolerance. According to Xinluo Lithium Battery data, in mid-November 2025, the price of graphitization (box type) increased by 750 yuan per ton. From a price increase perspective, the effective graphitization capacity that can operate stably, comply with regulations, control costs, and fulfill orders for leading anode companies may not be as ample as total data suggests.
Anode price adjustment cycles are slow but expected to catch up. There is a bargaining cycle between finished anode materials and downstream customers. Since Q4 2025, rising graphitization and raw material costs have squeezed industry profit margins, putting anode companies in a "squeeze from both ends" by upstream and downstream. According to Graphite Alliance data, from May 18 to 22, the price of artificial graphite increased slightly by 500 yuan per ton. For some anode producers operating at a loss, the willingness to push for price increases is strong. Based on Xinluo Lithium Battery's June lithium battery and production scheduling data, estimated production from sampled anode enterprises is 185,500 tons, a quarter-on-quarter increase of 1.92%. It is believed that under low-profit conditions, corporate expansion pressure is significant. As the peak season in the second half of the year gradually approaches, supply-demand tensions in the anode industry are expected to intensify, which may help drive profitability recovery for anode material enterprises.
Risk warnings: Power and energy storage demand may fall short of expectations; price increase progress may be slower than anticipated.
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