There was overcapacity of lithium battery anode materials, and Shanshan's net profit fell by more than 60% in the third quarter

Affected by the overcapacity of anode materials, the industry leader Shanshan Co., Ltd. (600884.SH) performed poorly in the third quarter.

On the evening of October 30, Shanshan Co., Ltd. disclosed that its revenue in the third quarter was 5.241 billion yuan, a slight increase of 3.41% year-on-year, and its net profit was 189 million yuan, a year-on-year decrease of 65.48% and a decrease of 57.07% from the second quarter.

Shanshan Co., Ltd. said that the negative electrode and polarizer business was affected by changes in the industry market environment, and the product price fell year-on-year, which was one of the main reasons for the decline in its net profit. Anode material is one of the four core materials of lithium battery.

Another leading anode material company, Putailai (603659.SH), announced its financial report on October 27, with revenue of 3.881 billion yuan in the third quarter, a year-on-year decrease of 14.1%, and a net profit of 324 million yuan, also a year-on-year decline of more than 60%.

Regarding the sharp decline in net profit, Putailai said that the anode material industry has sufficient production capacity supply this year, and downstream battery customers have entered the stage of destocking, and the industry is facing downward pressure on capacity consumption and prices.

Shanshan Co., Ltd. also said in the semi-annual report that the rapid expansion of the production capacity of the anode material industry in recent years has led to a phased and structural overcapacity in the anode material industry in the first half of 2023, and market competition has intensified. In addition, the growth rate of domestic new energy vehicle sales has slowed down, and the demand for anode materials from downstream battery companies has declined. Multiple factors eventually led to a significant year-on-year decline in the price of anode materials, and the industry's profitability narrowed.

According to the latest data from Xinchun Consulting, on October 30, the average price of mid-end artificial graphite anode was 34,500 yuan/ton, down nearly three percent from the beginning of the year.

At present, Shanshan Co., Ltd. has completed the strategic layout of about 700,000 tons of graphite anode materials.

Last month, Shanshan Co., Ltd. announced that its subsidiary, Shanshan Technology, plans to set up a project company in Finland and invest in the construction of an integrated base project with an annual output of 100,000 tons of lithium-ion battery anode materials, becoming the second Chinese enterprise to deploy anode material factories in Europe.

The net profit of BASF Shanshan Battery Materials Co., Ltd. (hereinafter referred to as BASF Shanshan), the cathode business carrier, declined significantly year-on-year, which was another major reason for the poor performance of Shanshan in the third quarter.

BASF Shanshan was formerly known as Hunan Shanshan Energy Technology Co., Ltd. (hereinafter referred to as Shanshan Energy), a holding subsidiary of Shanshan Co., Ltd. In May 2021, Shanshan Co., Ltd. announced that it had signed an Equity Purchase Agreement with BASF, and after the completion of the transaction, Shanshan's shareholding in Shanshan Energy will be reduced from 68.6438% to 49%, and BASF will hold 51% of its equity, and Shanshan Co., Ltd. will be renamed BASF Shanshan.

According to BASF's Shanshan official website, the company's products and business cover raw materials, cathode material precursors, cathode active materials and battery recycling. In the first half of this year, BASF Shanshan lost more than 200 million yuan, and in the first half of 2022, the company's net profit was close to 800 million yuan.

In February this year, Zheng Yonggang, the founder of Shanshan Co., Ltd., died suddenly of a heart attack, and the company has not yet confirmed a new actual controller. As of the close of trading on October 30, Shanshan's share price rose 0.14% to close at 14.21 yuan, with a market value of 32.1 billion yuan.