According to a research report by CMSC, the lithium battery solvent segment has seen effective supply-demand recovery in recent years amid sustained demand growth. Leading solvent producers are now operating at relatively high utilization rates. Over recent weeks, solvent prices have broadly risen modestly. With major players showing restraint in capacity expansion, lithium battery solvent profitability is expected to improve significantly next year.
Among solvents, EC (ethylene carbonate) serves not only as a mainstream solvent but also as the primary raw material for VC and FEC additives. CMSC estimates additive-driven EC demand could exceed 300,000 tons next year. The firm expects EC solvent to demonstrate more pronounced price and profit elasticity in 2024.
CMSC recommends Haike Chemical (301292.SZ) and suggests monitoring Shida Shenghua (603026.SH). Key insights include:
1. **Solvent Overview** Electrolytes consist mainly of solvents (80%-85% by weight), lithium salts and additives. Carbonate solvents dominate (95%), with DMC and EC being primary varieties. EC's high dielectric constant makes it crucial for lithium salt dissolution and SEI film formation, while DMC enhances conductivity through low viscosity.
2. **Profitability Turning Point** After industry consolidation, the top three solvent producers now hold over 70% combined market share. Despite losses in the first three quarters this year, recent weeks have seen broad-based price increases, marking an inflection point after three years of declines. Conservative capacity expansion suggests continued supply-demand and profitability improvements.
3. **EC's Growth Potential** As both a key solvent and raw material for multiple carbonate solvents (DMC/DEC/EMC) and additives (VC/FEC), EC demand could surpass 300,000 tons annually by 2026 just from battery additives. With concentrated supply (Haike and Shida Shenghua control 70% capacity), EC may show greater price volatility. Recent third-party data indicates EC prices surged 70% week-over-week.
**Risks**: Policy changes, product/raw material price fluctuations.