According to industry feedback, leading electrolyte and battery manufacturers have depleted their VC (Vinylene Carbonate) inventories, with some resorting to on-site procurement from VC suppliers. The highest quoted prices have exceeded 70,000 yuan per ton. Given VC's minimal cost share in battery production, manufacturers exhibit higher price tolerance.

Over the past two years, the downstream energy storage market has consistently outperformed expectations, while the market share of lithium iron phosphate (LFP) batteries in the power sector continues to rise. VC significantly enhances battery cycle performance, driving increased usage per unit. CMSC expects VC prices to maintain their upward trajectory. Key insights include:

1. **VC Prices Surge** Recent VC quotations accelerated to 60,000 yuan/ton, marking a 30% increase from the bottom. Actual transaction prices may be higher due to reporting lags. Some electrolyte and battery producers, facing shortages, have seen offers surpass 70,000 yuan/ton.

2. **Industry-Wide Losses Turn to Full Capacity** At the cycle’s low, VC prices hit 46,000 yuan/ton, leaving the entire industry unprofitable. However, stronger-than-expected demand has pushed operating rates to near-full capacity, solidifying the price uptrend.

New capacity expansions remain cautious, with a 12-month lead time for fresh projects and 3–4 months required to restart idle lines. Short-term supply gaps are unlikely to close quickly, sustaining the rally.

3. **LFP Battery Demand Boosts VC Usage** VC notably improves battery efficiency and cycle life, with LFP batteries incorporating 4–5% VC (higher for secondary electrolyte injection). The surge in lithium battery demand stems largely from energy storage, which relies on LFP batteries. In the power segment, LFP batteries dominate over 80% of China’s market, with global adoption accelerating. VC’s usage share is projected to grow further.

4. **Low Cost Share Enhances Price Acceptance** As a critical yet minor-cost additive (under 1% of battery expenses, ~2.5 million yuan per GWh), VC’s indispensability supports pricing power. While lithium hexafluorophosphate—another key electrolyte material—has spiked 140%, VC retains significant upside potential.

**Recommended Stocks**: Tianci Materials (002709.SZ), with watchlist candidates including Huasheng Lithium (688353.SH), Haike New Source (301292.SZ), Furim Group (002083.SZ), and Fuxiang Pharma (300497.SZ).

**Risks**: Weaker-than-expected demand or rapid new capacity ramp-up.