Will China’s Price Woes In Lithium Battery, Module Sectors Mean Further Drops In India?

For two of the biggest energy bets made by China in the past decade, namely, battery storage and solar manufacturing, June continued to bring bad news in terms of price trends.

Lithium Prices Continue to Fall 

Taiwan based TrendForce  has released a report saying that June saw a significant drop in lithium prices due to a focus on inventory reduction in the downstream battery sector. Weak demand for lithium salts and sluggish shipments of lithium carbonate—compounded by short-term oversupply—drove lithium carbonate prices to a new low for the year. Prices fell from over CNY 100,000 per ton last month to the range of CNY 90,000 per ton. A far cry from the ‘low’ CNY 230,000/ton in August last year 2023.

Battery costs have fallen in line with declining raw material prices, leading to a sustained decrease in EV battery cell prices. TrendForce’s survey indicates that in June, EV battery cell prices fell by 1-2% compared to May. Monthly ASP for square ternary, square LFP, and pouch ternary EV battery cells were CNY 0.49/Wh, 0.42/Wh, 0.51/Wh, respectively.

In the ESS sector, the mid-year peak in grid-connected installations in China has ended, leading to a decline in ESS cell orders. Additionally, the drop in lithium carbonate prices has not provided stable support for ESS cell prices, resulting in a price decrease. In June, the average price for LFP ESS cells was CNY 0.41/Wh—down 4.2% from May.

TrendForce analysis indicates that competition in ESS cell pricing remains intense, with cell and system makers adopting low-price strategies to secure orders. This has pushed current prices of ESS cells and systems below the cost range for most cells makers and poses a significant challenge to cost control. Major cell makers are now competing in the 300 Ah+ large-capacity cell product segment and by 2Q24, most mainstream suppliers are expected to begin mass production of 300 Ah+ cells, potentially leading to further cost reductions.

TrendForce notes that the lithium battery market experienced a peak season from March to May. However, post-June, demand for raw materials for battery cells has weakened due to sufficient pre-stocking by downstream sectors. Lithium prices are under pressure given current market conditions with relatively loose supply. In July, market demand is expected to remain weak, with lithium prices falling to the sensitive range of CNY 80,000–90,000 per ton. Despite some supply-side contraction, overall supply will still exceed demand as the weak price trend persists.

Consequently, the cost support for EV and ESS cells will continue to weaken and cell prices expected to face downward pressure at the beginning of the third quarter. Stability or a rebound in prices will depend on restocking demand during the peak season at the end of the third quarter.

For India, the lower prices coincide with a shift towards energy storage, particularly battery based storage. They should provide a strong impetus to these plans to move ahead as the financials will be much more viable.

 

Solar Module Prices Continue Slide, With Little Hope Of a Bounce

The story is similar for solar modules, where China based, or Chinese controlled firms have over 80% of the global market. Prices for Chinese solar modules have reached record lows, according to the latest data from OPIS. The benchmark assessment for TOPCon modules from China has fallen to $0.100 per watt, a decline of $0.005 per watt compared to the previous week. Similarly, Mono PERC module prices have also dropped by $0.005 per watt, now standing at $0.090 per watt. These price reductions reflect a broader trend of subdued market activity driven by weak demand. In response, module manufacturers are slashing prices to secure new orders and maintain cash flow. The current tradable indications for TOPCon modules are being reported at $0.10 per watt Free-on-Board (FOB) China. As the market struggles with low demand, these new record low prices highlight the ongoing challenges faced by Chinese solar module makers.

Sluggish demand in the domestic market (vis a vis supply and capacities), besides intense price competition in newer markets like Latin America and the Middle East has left Chinese module makers worried. US prices could also face tougher competition as fresh countervailing duties take effect this month, while Europe supplies face elevated freight costs in the Red Sea region. While calling it  perfect storm would be an exaggeration considering the rampant capacity additions by manufacturers without clear signs of a market ready for it, the fact remains that module prices will not be gpoing anywhere anytime soon. That means a great opportunity for solar fence sitters to make their move now as rather than wait for further drops, they should be locking into current low prices and getting started on their solar transition faster.