Anode material, a key component in lithium-ion batteries, is seeing its price cycle bottom out, with profitability expected to stabilize and recover. The anode industry is projected to enter a state of tight supply-demand balance in the second half of 2026 through 2027. This could allow anode material prices to rise, passing on cost pressures and leading to an improvement in industry profits. Cost control emerges as the decisive factor, with increasing the self-sufficiency rate in graphitization and advancing integrated production capacity becoming the primary trends for cost reduction. Companies with high graphitization self-sufficiency hold a significant cost advantage.

Anode Material as a Key Battery Component, Trends Toward Fast Charging and Cost-Effectiveness

Anode material is one of the four key components in lithium-ion batteries, accounting for approximately 10% to 15% of the total battery cost. Currently, artificial graphite holds an overwhelmingly dominant position, representing 92.7% of total anode material shipments in 2025. Within the production process for artificial graphite anode material, graphitization is the crucial step. The development of anode materials exhibits the following trends: 1) Widespread adoption of fast-charging technology, making it a standard feature for power battery artificial graphite; 2) A focus on high cost-performance, leading to a more segmented industry landscape; 3) Accelerated breakthroughs in silicon-based anode technology, which is expected to see scaled commercial application.

Anode Material Price Cycle Hits Bottom, Profitability Poised for Recovery

1) 2020 to First Half 2022: Industry upcycle. Driven by strong demand from both the power and energy storage sectors, demand for anode materials surged amid tight supply, leading to sustained price increases and rapid revenue and profit growth for leading companies. Optimistic market outlooks spurred accelerated capacity expansion.

2) Second Half 2022 to 2024: Industry downcycle. Structural overcapacity from previous disorderly capital inflows led to significant price declines. While leading firms maintained high utilization rates, smaller companies faced prolonged shutdowns or operated as contract manufacturers with low utilization. Industry profits declined, turning to losses.

3) 2025 to First Half 2026: Industry utilization recovers, prices stabilize. High growth in energy storage demand coupled with steady growth in power demand led to a recovery in lithium-ion battery shipment growth, boosting demand for anode materials. Anode capacity expansion slowed, and capacity utilization rates improved. Graphitization processing fees stabilized and began to recover, with anode material prices reaching a bottom.

4) Outlook for Second Half 2026 to 2027: Industry expected to reach tight supply-demand balance. On the demand side, steady power demand growth combines with high energy storage demand growth. On the supply side, capacity growth is slowing, with limited actual new additions. The anode industry is anticipated to enter a period of tight balance between supply and demand, potentially allowing for price increases to pass on costs and leading to stabilized and recovering industry profits.

Cost as the Decisive Factor, High Graphitization Self-Sufficiency is Key to Competitiveness

Graphitization can constitute up to 47.9% of the cost for high-end artificial graphite. Companies typically produce via in-house supply or outsourced processing. Outsourced graphitization significantly increases costs and reduces gross margins. Furthermore, as an energy-intensive process, rising electricity prices increase graphitization costs. Insufficient effective capacity due to regulatory policies can also drive up graphitization processing prices. Therefore, increasing the self-supply rate of graphitization, advancing integrated capacity construction, and mitigating the impact of processing fee volatility have become primary trends for anode companies to reduce costs. Firms with high graphitization self-sufficiency possess a distinct cost advantage.

Investment Recommendations

With the anode industry approaching a potential upward inflection point, suggested companies for attention include: 1) Shangtai Technology: Leader in integration with significant cost advantages; 2) Zhongke Electric: Pioneer of the box furnace with strong capabilities in continuous graphitization; 3) Putailai: Its integrated base in Sichuan provides cost benefits.

Risks include policy implementation falling short of expectations, intensifying industry competition, volatility in raw material prices, new technologies underperforming expectations, overseas operational risks, and calculation inaccuracies.