China has overtaken Japan as the world’s leading producer of battery separators amid strong demand from lithium-ion batteries used in cars.
The country’s incredible surge in production of low emissions vehicles in 2015 has seen it overtake in the US as the leading producer with annual growth of 290% compared to 2014.
China is expected to top 250,000 vehicles by the time the numbers are published in January 2016, with the US market due to reach 180,000 this year.
As a result, it is unsurprising that demand for key components that make an automotive lithium-ion battery have also surged.
With the majority of focus on cathode or anode materials, separators tend to fall under the radar. However, the polymer membrane which divides a battery’s active cathode material from the carbon anode are perhaps the most accurate indicator of demand, as they are used in every lithium-ion battery regardless of chemistry.
New data from Japan’s Yano Research shows that China now accounts for 37.6% of the battery separator market while Japan now stands in second place with a 34.9% market share. The third largest producer is the U.S. with 11.1% of the sector.
EV batteries are an order of magnitude bigger in size than those used in cell phones, laptops and tablets and therefore require more volume of anode and cathode material and square meters of separators. China has capitalised on this over the last five years by investing in low cost capacity compared with its main competitors, Japan and South Korea.
Japan was the market leader in the separator space until 2013 when production increases and an aggressive pricing strategy from Chinese manufacturers saw it begin to take significant portions of demand.
Automotive separators: 16.5% CAGR since 2011
Between 2011-2015, demand for separators used in lithium-ion batteries for small, mobile applications has nearly doubled from 486,000m2 to 760,000m2.
Meanwhile, separators for automotive batteries have increased from 592,000m2 to 1.27m2 in the same period, a CAGR growth of 16.5%, with the majority of new low cost supply coming from Chinese manufacturers.
“The average separator price per m2 is dropping year by year because Chinese manufacturers are trying to expand market share with an aggressive low pricing strategy,” explained Sachiya Inagaki, General Manager at Yano Research to Benchmark Mineral Intelligence.
Electric vehicle (EV) initiatives launched by the Chinese government have encouraged new entrants into the separator market, but Inagaki believes that China’s sharp increase in production could lead to a medium term over supply in the market.
“Since the central government has been promoting EVs, there has been an increasing number of Chinese producers entering the market in anticipation of [new demand].”
“However shipments by local Chinese separator makers may far exceed the actual demand due to the low production yield of Chinese automotive lithium-ion battery makers,” Inagaki added.
With actual separator demand still up 26.1% in 2014 on 2013 levels and stronger expected growth to come, the short and medium term demand for this critical component is strong.
The impact of the potential over supply from China is yet to be felt in a significant way.
Domestic price competition may lead to consolidation in the medium term, but for now this relatively young industry is more focused on taking market share away from its neighbours of Japan and South Korea than utilising its production capacity.
Something it is, at present, successfully doing.