With the paradigm shift, the permeability of new energy vehicles has entered a period of steep growth.Global sales and penetration of new energy vehicles have accelerated since 2021: in the first nine months of 2021, the sales of new energy vehicles in China, eight European countries and the United States were 214, 131 / 430000, respectively, compared with the same period last year. In September, the new energy penetration rates of China, eight European countries and the United States reached 17.3%, 24.3% and 5.3%, respectively, compared with the same period last year. + 11.9ppt/14.3ppt/2.8ppt. We believe that the rapid growth of the new energy vehicle industry comes from the resonance of the support of the policy side, the listing of high-quality models on the supply side and the turn of consumption characteristics on the demand side. Based on the experience of the S-shaped growth curve, we judge that the global automobile electrification has broken through the critical point or entered a period of steep growth.

The global sales of new energy vehicles are aimed at 10 million in 2022.Looking ahead, chip concerns have drifted away, the supply of new energy vehicles is expected to ease, and the follow-up industry trend is accelerating. From top to bottom, we estimate that the penetration rate of new energy in China / Europe / US will reach about 20%, 25% and 12% respectively in 2022, and the corresponding sales volume will reach 500%, 300% and 2 million vehicles respectively, with a year-on-year growth rate of about 50%, 50%, 150%, and a total global sales volume of 10 million, a year-on-year growth rate of 70%.

The historic change of industry brings the investment opportunity of the whole industry chain.From the bottom up, the head intelligent electric vehicle enterprises lead the industry, of which Tesla, Inc. sold a total of 627000 vehicles worldwide in the first nine months, + 97% last year; NIO Inc., Li Auto Inc. and XPeng Inc. sold 6.6,5.6 and 55000 vehicles respectively, up 152%, 294% and 195% respectively over the same period last year. Recently, XPeng Inc. and other car companies continue to release new intelligent driving technology, while Tesla, Inc. once again handed over high-quality financial reports and announced global price increases, the new pattern of global automotive technology has become clear one after another, and the advantages of head car companies have emerged. At the same time, according to the above forecast, we believe that the whole industry chain of new energy vehicles, such as power batteries and upstream materials, lithium equipment, will continue to show investment opportunities.

In terms of investment suggestions, we are optimistic about the head new energy vehicle enterprises, and the leading parts enterprises in electric intelligence, including Tesla, Inc. industry chain, electric drive industry chain and so on. Be optimistic about lithium electricity and four major materials, as well as upstream raw materials. In the link of lithium battery equipment, it is recommended to pay attention to subdividing the high-quality enterprises of the race track: for the key manufacturers of process equipment in the middle and rear road, which affect the yield of battery cells; recommend the structural parts manufacturers that grow synchronously with the installed capacity of batteries, and pay attention to the fact that the automation rate is still low at present. The current demand growth accelerated model segment automation equipment manufacturers.

Risk

The shortage of chips in the industry is higher than expected; the launch of new models is not as fast as expected.

Chart: China's new energy permeability is expected to enter the S-shaped growth curve

Chart: the delivery volume of China's new energy car companies continues to reach a new level.

Chart: sales and penetration of new energy vehicles in the United States

Chart: sales and penetration of new energy vehicles in eight European countries

Joint interpretation of the industry

• Automobile

The permeability of new energy vehicles has entered a period of steep growth. The global sales and penetration of new energy vehicles have accelerated since 2021: in the first nine months of 2021, the sales of new energy vehicles in China, eight European countries and the United States were 214,131 / 430000 respectively, which was + 193 / 105 / 101 respectively compared with the same period last year. In September, the new energy penetration rates of China, eight European countries and the United States reached 17.3%, 24.3% and 5.3% respectively, compared with the same period last year, + 11.9ppt / 14.3ppt / 2.8ppt respectively. We believe that the rapid growth of the new energy vehicle industry comes from the resonance of the support of the policy side, the listing of high-quality models on the supply side and the turn of consumption characteristics on the demand side. Based on the experience of the S-shaped growth curve, we judge that the global automobile electrification has broken through the critical point and entered a period of steep growth.

The global sales of new energy vehicles are aimed at 10 million in 2022. Looking ahead, chip concerns have drifted away, the supply of new energy vehicles is expected to ease, and the follow-up industry trend is accelerating. From top to bottom, we estimate that the penetration rate of new energy in China / Europe / US will reach about 20%, 25% and 12% respectively in 2022, and the corresponding sales volume will reach 500%, 300% and 2 million vehicles respectively, with a year-on-year growth rate of about 50%, 50%, 150%, and a total global sales volume of 10 million, a year-on-year growth rate of 70%.

The historic change of industry brings the investment opportunity of the whole industry chain. From the bottom up, the head intelligent electric vehicle enterprises lead the industry, of which Tesla, Inc. sold a total of 627000 vehicles worldwide in the first nine months, + 97% last year; NIO Inc., Li Auto Inc. and XPeng Inc. sold 6.6,5.6 and 55000 vehicles respectively, up 152%, 294% and 195% respectively over the same period last year. Recently, XPeng Inc. and other car companies continue to release new intelligent driving technology, while Tesla, Inc. once again handed over high-quality financial reports and announced global price increases, the new pattern of global automotive technology has become clear one after another, and the advantages of head car companies have emerged. At the same time, according to the above forecast, we believe that the whole industry chain of new energy vehicles, such as power batteries and upstream materials, lithium equipment, will continue to show investment opportunities.

With the reform of electric intelligence, China's independent brands are rising rapidly. China's car exports have also doubled this year compared with the same period last year, with exports optimistic in two directions. Great Wall, Geely and SAIC are replacing Japanese and Korean cars in Southeast Asia, and new power car companies are accelerating their exports to the European market. We estimate that China's long-term production is expected to reach 40 million, and the sales of independent brands are expected to grow from the current 7 million to the long-term market space of 30 million.

At the end of the whole car, keep an eye on the head intelligent electric vehicle company. In the process of sales volume of new energy vehicles in the past year, in the mainstream market of more than 150000 yuan, NIO Inc., ideal, XPeng Inc., and Tesla, Inc. and BYD (307.980,-13.76,-4.28%), the leading new energy vehicle companies, performed well. In the fourth quarter, we judge that head car sales will still achieve high month-on-month growth. In the long run, intelligence and other medium-and long-term competitive advantages will be built and enter the deterministic upward channel. From the current results, we can see that the new car companies have a higher level of intelligence, users have stronger access and stickiness, and brands quickly and forcefully occupy consumer awareness. Based on the analysis of the reasons behind, we believe that these advantages come from flexible and agile institutional mechanisms, the transformation of engineer thinking to user thinking, and innovative and open corporate culture. At the same time, due to the double flywheel effect of user growth and autopilot, its existing advantages may be non-linearly accelerated. Based on the above analysis, we believe that the emerging intelligent electric vehicle companies have established medium-and long-term advantages in the current round of automobile industry reform, and will achieve a definite volume with the improvement of the industry electrification rate and intelligence rate.

In terms of spare parts, it is optimistic that it will benefit from the intelligent electrification of the industry and has a strong growth track.

Reiterate that he is optimistic about Tesla, Inc. 's industrial chain. At present, Tesla, Inc. 's products are in short supply all over the world. With the advantages of efficiency and cost, the Shanghai factory has become Tesla, Inc. 's largest production base and export base. The output of 4Q21 and Tesla, Inc. 's Shanghai factory has been increased again. Looking forward, with the commissioning and delivery of German and Texas factories in 2022, Tesla, Inc. 's production and sales will continue to exceed expectations. Tesla, Inc. 's industrial chain has obviously benefited from this.

Starting from the category of spare parts, we have explored high-growth subdivision tracks, including electric drive, thermal management, lightweight and so on. In terms of electric drive, the bicycle value of the electric drive system is more than 10,000 yuan, and the global market space is more than one trillion yuan. Huawei and Ningde era (607.200,-7.84,-1.27%) have entered the bureau one after another. With the progress of battery technology, the focus of the new energy vehicle industry has shifted from battery life to the pursuit of vehicle power performance and handling experience. The electric drive system has become the core system of new energy vehicles, and the value of the bike is more than ten thousand yuan. According to the global annual sales of nearly 100 million vehicles, the market space of electric drive system is more than one trillion yuan. In the era of Huawei and Ningde, electric drive has been laid out one after another. we believe that the electric drive industry chain is expected to resonate with the uplink cycle of new energy vehicles, and it is a big race track for the next trillion market. System integration, process optimization and material volume and price rise are the three major investment lines. At present, the technical upgrade of electric drive system is divided into two levels: system and components. We believe that the integration at the system level has many advantages, such as reducing costs, improving efficiency, optimizing the processes of automobile enterprises, and so on, which is the only way for industrial upgrading, and the most effective; process optimization at the component level, such as flat wire motor, SiC module replacement, oil-cooled motor and other technological changes, can achieve cost reduction and increase efficiency of corresponding single components. Material end, such as permanent magnet, silicon steel sheet, etc., under the resonance of component sales and monomer value, is expected to usher in a simultaneous rise in volume and price.

• Dianxin

We still maintain the 280GWh global installed capacity forecast in 2021. The latest global installed capacity forecasts for 2022 and 2025 are 520GWh and 1610GWh, respectively, up 3% from the previous value, mainly from the domestic market.

At present, it is suggested that we should pay attention to three main lines of structural change next year. The first one is that the accelerated penetration of electric vehicles in the United States brings Alpha opportunities, focusing on lithium battery and materials companies that account for a high proportion of market demand in the United States. The second main line comes from the game of price. It is suggested that attention should be paid to the repair of battery profits caused by the cost and pressure transmission of lithium batteries. At the same time, the logic of price increase in the scarce material links in the middle reaches is expected to be partially realized, focusing on lithium batteries, copper foil, negative electrodes and diaphragm links. The third suggestion is to pay attention to the Alpha opportunities brought about by the switching of technical routes, focusing on the improvement of lithium iron installed permeability in mainframe plants such as Tesla, Inc. and XPeng Inc., as well as the opportunities of lithium iron phosphate industry chain brought about by energy storage, as well as the opportunities for continuous improvement of high nickel permeability.

The first main line, the volume of the U. S. electric car market will greatly boost the demand for power lithium electric equipment. Considering the preference for battery life in the US electric vehicle market, it is expected to be dominated by ternary battery demand in the medium term. We expect the installed demand in the US market to reach 74.8GWh in 2022, with an increase of 121.0%, accounting for 99%, driving the demand for ternary positive electrodes to reach about 130000 tons and an increase of 112.6%. We suggest that we focus on lithium materials companies that cut into the supply chains of Panasonic, LG chem and SKI. At present, Panasonic has become a major lithium battery supplier in the United States due to its deep binding of Tesla, Inc.. Volkswagen / Ford and General Motors with SKI are expected to become the core battery suppliers in the US market in the future. we think that Panasonic supply chain is the most flexible in the short-term US market.

The second main line recommends that there are expected varieties of price increases. This year, affected by fluctuations in the prices of upstream raw materials, the gross profit margin of power batteries has been suppressed, mainly due to the mismatch of the business negotiation cycle between battery factories and downstream mainframe factories. With the opening of the lithium battery bargaining window, we believe that based on the discourse power of lithium batteries in the industry chain and the ability to conduct reasonable transmission to the downstream, we suggest that the current time should focus on the potential upward revision of next year's profit forecast brought about by changes in lithium battery prices. In addition, subject to the gross profit margin pressure of major customers of downstream lithium batteries, materials in short supply in the early stage, such as copper foil, negative electrode, diaphragm, ferric phosphate, and so on, have not made excess profits, as the logic of the price increase of lithium batteries is realized, the relevant materials are expected to follow up, and there is the possibility of a secondary market that is expected to be realized.

The third main line we continue to be optimistic that the new car cycle will bring lithium iron phosphate and high-nickel structural opportunities. With the global delivery of Tesla, Inc. iron lithium models in 2022, as well as domestic BYD, XPeng Inc., Wuling Miniev and other main engine factories, iron lithium version models are also expected to be released, bringing catalysts in the field of lithium iron phosphate power. The other side of the energy storage market is on the eve of the outbreak, and the catalysts, including the compulsory allocation and storage policies of various provinces and cities, the "double control of energy consumption" policy and the adjustment of electricity price mechanism, are expected to drive the economic benefits of domestic energy storage, and the permeability of energy storage is expected to accelerate. with reference to the development process of new energy vehicles, we think that there are many potential catalysts on the policy side in the early stage of the development of energy storage industry, and we are optimistic about the Alpha market in the field of energy storage in 2022. Lithium iron phosphate is the biggest beneficiary. At the same time, high nickel ternary will still be the mainstream technology of long-lasting models. The proportion of high nickel ternary shipments in total shipments of ternary materials in June 2021 has increased to 39%, an increase of 18 percentage points compared with 21% at the end of 20 years. And we expect that the process of high nickel will continue to speed up in the future, in addition to the cost advantages of higher nickel than 811 ordinary high nickel ternary, from the requirements of leading battery companies. We also need to constantly promote technological innovation to maintain the technological leadership of the second-tier echelon in order to continue to consolidate competition.

• Mechanical

The total demand for lithium power equipment from 2021 to 2025 exceeds 600 billion yuan. From top to bottom, combined with the growth of new energy vehicle power battery demand and stock capacity renewal demand, we estimate that the global lithium equipment market is about 137.3 billion yuan in 2023, 169.2 billion yuan in 2025, and more than 600 billion yuan in 2021-2025. From a bottom-up perspective, we have counted 13 leading battery factories in the world, including domestic CATL, BYD and foreign LG Chemical, Samsung, SKI, etc. By the end of 2020, the total production capacity has been 435GWh, and the planned new capacity is close to 2TWh, most of which will be put into production before 2023, and we estimate that the total investment in new equipment exceeds 300 billion yuan.

Lithium power equipment manufacturers have a limited number of large-scale enterprises and are currently facing a shortage of production capacity. Lithium power equipment belongs to uncalibrated equipment, equipment manufacturers with large-scale production capacity need to have excellent management and R & D capabilities, the head of the enterprise has obvious advantages. In 2020, there are only 4 enterprises with operating income of more than 1 billion yuan for lithium power equipment. The number of lithium power equipment manufacturers with large-scale supply capacity is limited, the current industry generally exists the situation of capacity shortage, the contradiction between supply and demand is obvious.

The back-road equipment in the battery manufacturing process is very important to the good rate and efficiency of the battery manufacturing. The cell manufacturing process includes coating, die-cutting, winding / lamination, capacitive formation, testing and other links, in which die-cutting, winding / lamination and sub-volumetric forming have high technical requirements, and the leading enterprises have obvious advantages.

The automation rate of the model needs to be improved urgently, and the advantage of the head supplier is obvious. Mold automation can improve the degree of automation of battery enterprises in loading and unloading, testing, cleaning, welding and assembly, and help battery factories or vehicle factories to shorten manufacturing time, improve efficiency and ensure safety. However, at present, the automation rate of module and PACK section of battery enterprises in China is still low, which has a lot of room for development.

The growth of the battery structure is synchronized with the battery installation, and the head enterprise is always strong. Different from other equipment, battery structure depends on CAPEX input, and depends on battery factory OPEX growth, which has sufficient power for long-term growth. We estimate that the global demand for lithium battery structures will be about 40 billion yuan in 2025.

In terms of investment suggestions, the lithium battery equipment link suggests that we should pay attention to the subdivision of high-quality track enterprises: the middle and rear process equipment manufacturers who have a key impact on the yield of battery cells; pay attention to the model segment automation equipment manufacturers whose automation rate is still low and the current demand growth is accelerating; pay attention to the structural parts manufacturers who are growing synchronously with the installed capacity of batteries.

• Non-ferrous metal

First, lithium:

2021Q4, 2022 lithium supply and demand balance change direction, there is no doubt that supply and demand is still increasingly tight. On the demand side, the marginal impact of lithium demand on the demand of new energy vehicles is increasing. The power sector accounts for 45 per cent of global lithium demand in 2021 and will rise to 78 per cent by 2025. Then, the higher-than-expected production and sales of new energy vehicles will have a greater and greater impact on the balance of lithium supply and demand. From a specific point of view, assuming that global sales of new energy vehicles reach the order of 10 million in 2022, global lithium demand will increase from 479000 tons of LCE in 2021 to 680000 tons of LCE in 2022, an increase of 43 percent over the same period last year.

On the supply side, according to the expansion progress announced by the world's major lithium resources projects, the global lithium supply will grow from 485000 tons of LCE in 2021 to 668000 tons of LCE in 2022, an increase of 38 percent over the same period last year, and the supply growth of the lithium industry in 2022 will still be difficult to catch up with demand. What is more noteworthy is that next year's supply increment is mainly contributed by SQM, ALB, Talison, Pilbara and other leaders, while overseas salt lake leaders are affected by local policies, environmental protection requirements, communities and other factors to release greater uncertainty.

To sum up, the growth rate of demand exceeds that of supply, and demand is easy to exceed expectations, but supply is easily lower than expected due to capacity cycle and various policy, epidemic and climate factors. 2021Q4, 2022 lithium supply and demand balance change direction, the overall or gradual shortage. Recently, we have observed that downstream materials, batteries and other links have begun to increase prices, so the smooth transmission of prices downstream is more conducive to the sustainability of lithium prices at high levels.

From a longer-term perspective, we expect lithium demand CAGR in power batteries to reach 59% in 2021-2025, overall lithium demand growth will reach 38%, and lithium supply growth will reach 35% in 2021-2025, which is lower than the growth rate of demand. There is a clear trend towards shortage in 2021-2023, and the supply and demand of the lithium industry will basically maintain a tight balance in 2024-2025.

In the short term, the main logic is still that resources are king. The corresponding trend of the core industry is that the profits of the lithium industry chain are transferred upstream, one is supply and demand, and the supply response speed of upstream lithium concentrate capacity is inherently slower than that of mid-stream lithium salt capacity. Under the background of sustained growth in demand, upstream resources will continue to be the most scarce link, while most lithium concentrates have been locked by long orders, and lithium concentrates that can be put into the spot market are even more scarce. On the afternoon of October 26, the third Pilbara lithium concentrate auction price reached 2350 US dollars / ton, the corresponding lithium salt production cost will be close to 170,000 yuan / ton, the increase in lithium ore auction price also reflects the current shortage of upstream raw materials is increasing.

In the long run, sustainable growth is king. First of all, there is no shortage of lithium resources, but what is missing is time. With the rise of this bull market, the capital penetration, policy support, lowering of technical threshold, gradual training of technical personnel and technology spillover of the global lithium industry are being rapidly interpreted, and the supply increment from 2023 to 2025 and beyond will gradually fall to the ground. Although according to our forecast, although the industry boom in 2022 and beyond is still hot, there is no need to overexpect the huge increase in lithium prices in 2021, and the cyclical thinking of price increases needs to turn more to the growth thinking of the industry. Accordingly, the valuation system of the relevant targets in the secondary market is bound to undergo reconstruction.

We believe that the ability of sustainable growth is the fundamental factor that determines the final outcome of listed companies, and it is also the key to determine the change of the valuation system. The ability of sustainable growth should meet three major conditions: the first is the governance mechanism and entrepreneurship, the second is the internalized industrial capacity, and the third is the strong ability of investment and financing.

II. Cobalt-nickel cathode integration: the two major concerns are gradually being digested by the market, and the cobalt-nickel plate is expected to usher in a revaluation.

First, the dispute over ternary iron and lithium. We do not deny the development potential of iron lithium in the future, but we need not be too pessimistic about the three elements. First, after a sharp increase in the price of lithium iron phosphate, the performance-to-price ratio of ternary relative to LFP is returning. As of October 22, lithium iron phosphate was quoted at 88,000 yuan / ton, with an increase of 132% in 2021YTD. The positive price quotation for lithium iron phosphate was 21.5 million yuan per ton, and the increase in 2021YTD was 80.62 million yuan per ton. The increase of lithium iron was significantly higher than that of Sanyuan.

Second, after the release of major projects of wet-process nickel this year and next year, the situation of high nickel prices may be alleviated, the pressure on the cost of three yuan will be marginal reduced, and more importantly, the medium-and long-term worries of the market for the high cost side of nickel will be alleviated. Sanyuan's long-term market share is expected to increase, and there is a revaluation basis for the secondary market valuation of the relevant sectors.

Third, from the bottom line point of view, under the previous overseas assumption, the ternary CAGR is 58%. Let's take a step back and assume that the proportion of lithium installed overseas will be increased to 50% in the future, and the ternary installed demand CAGR will still be 47% in 2020-2025, which is still not low in absolute terms. At present, the listed companies of the ternary system have become a valuation depression in the new field of electricity, so we should pay more attention to the matching of the absolute growth rate and the target valuation, rather than the relative growth rate of the LFP system.

Second, under the trend of high nickel without cobalt, the medium-and long-term demand for cobalt should not be too pessimistic. Considering that ternary batteries will still occupy a considerable share, and the rapid release of high-nickel batteries will also offset some of the decline in cobalt content per unit, we think that cobalt supply and demand will be a steady tightening process in the future. The supply of nickel sulfate is still relatively tight. At present, the proportion of acid solution of nickel bean nickel powder is about 50%, and the high scene demeanor will be maintained at least until next year.

Third, we are firmly optimistic about the short-term and medium-and long-term fundamentals of cobalt and nickel. According to our estimates, the global demand for cobalt will reach 274000 tons in 2025, the CAGR will be 17% in 2021-2025, and the CAGR in the field of power lithium will be 38%. At present, it will maintain a tight balance up to 2025. Nickel will directly benefit from high nickel demand, global nickel demand will reach 3.79 million tons in 2025, CAGR will be 11% in 2021-2025, CAGR in the field of power lithium electricity will be 58%, especially nickel sulfate, it is prone to structural market.

III. Rare earths

First, in the medium and long term, the demand for new energy vehicles has accelerated, resulting in a strong demand for rare earth magnetic materials, and rare earth praseodymium and neodymium ushered in a turning point in supply and demand.

1. The core logic of supply and demand is the major inflection point of rare earth praseodymium and neodymium supply and demand First, the global new energy vehicles have entered a market-driven era. After the output of new energy vehicles increases to 10 million in 2022, we expect that the pull of new energy vehicles on magnetic materials will reach 32000 tons in 2022, an increase of 62% over the same period last year. In the next five years, the demand for new energy vehicles will reach 49.1%, which is the strongest area driven by the demand for rare earth magnetic materials. Second, driven by the era of carbon neutralization and everything electric drive, wind power, variable frequency air conditioning and other fields ushered in rapid growth. We expect the total demand for praseodymium oxide CAGR to reach 12.8% in the next 5 years.

2. The rare earth supply pattern is optimized, the upstream rare earth praseodymium and neodymium supply is relatively rigid, and the increment is limited in the next 3- First, the domestic implementation of total target control, the CAGR in the past three years is only 11.5%, the future flexibility is limited. Second, at present, the main overseas rare earth producing areas are the United States, Australia and Myanmar, which are basically close to full production, and the development of mines under construction is slow. It is expected that the global rare earth praseodymium and neodymium will enter into a shortage and expand gradually from 2022 to 2025, with a shortage of 1161max 50636025 tons respectively from 2022 to 2025.

Second, in the short term, the supply-side power cuts in Jiangxi and the customs closure in Myanmar have formed a strong pressure on the upstream, driving the price of praseodymium and neodymium oxide to hit a new high since 2011. As of today, the price of praseodymium neodymium oxide has reached 670,000 yuan per ton, up 63% since the beginning of the year.

1. Jiangxi is an important place for the production of rare earths, and the impact of power restriction on supply can not be underestimated. According to AM data, Jiangxi smelting separation production capacity in 2019 is 43000 tons, accounting for 16.7% of the total domestic production capacity; smelting separation output is 33000 tons, accounting for 24.0% of the total domestic output. According to the quota data released by the Ministry of Natural Resources in 2021, Jiangxi's quota is 8500 tons of ionic rare earth mines, accounting for 44 per cent of the total quota and 5 per cent of the total quota. At the same time, smelting and separation plants in Jiangxi also handle imports of rare earth minerals from Myanmar, which reached 23000 tons of rare earth REO in 2020, according to customs data. We believe that, from the perspective of separation capacity and division of strength, Jiangxi plays an important role in the supply of rare earth raw materials in China, and power restriction in the province is bound to bring about the shortage of upstream raw materials and push up the price of rare earths.

2. It is difficult to reverse the interruption of rare earth imports in Myanmar, and domestic mineral sources remain tight. Since the rebound of the epidemic, the Burmese government has taken strict prevention and control measures, superimposed political tension, affecting the normal production and export activities of rare earths. According to customs data, imports of rare earths from Myanmar in August were-93% month-on-month, almost interrupted. So far, Myanmar has not cleared customs. In 2020, Myanmar imported 23000 tons of rare earth REO to China, accounting for 16% of China's rare earth target and 115% of China's medium and heavy rare earth target. We believe that due to the shortage of raw materials and high mineral prices, the production of rare earth plants is restrained, or the output of future separation plants is affected, and the supply of rare earths will continue to be suppressed.

3.Q4 demand is expected to be good, continue to be optimistic about the upward price of rare earths. 2021Q3 peak season is not prosperous, but Q4 traditional peak season replenishment demand is still in the ascendant, superimposed rare earth group integration expectations, rare earth prices continue to rise. The price of short-term rare earth praseodymium and neodymium has reached a new high since 2011, and the demand for magnetic materials downstream has been restrained in the short term, but we believe that, considering that large downstream factories enter the peak season, coupled with the expected integration of rare earth groups, the supply will be further optimized and tightened. It is still expected to boost the demand for rare earth magnetic materials.

• Chemical engineering

There has been a pullback in the stock prices of the industry in the recent cycle, but we think that the overall economy remains unchanged. On the one hand, the capacity expansion of some energy-consuming products under the double control of energy consumption is more constrained, not only the current supply is limited, but also it is still difficult for the industry to supply in the medium and long term. At the same time, from the point of view of demand, the production schedule of the new energy vehicle industry chain continues to increase month-on-month. Today, China Gold Electric vehicle Industry chain telephone will further increase the sales demand of electric vehicles for 22 years. Here we are mainly optimistic about two main lines:

1. Supply and demand pattern short-term prosperity of the track, such as lithium iron phosphate, PVDF industry and so on. Take PVDF as an example, in the short term, due to the continued strong downstream demand for new energy, mainstream enterprises (with lithium products) basically announced production expansion in the middle of this year, and gradually began to have capacity to put into production in the middle of next year. We believe that the shortage of supply and demand in the industry is expected to last until the second half of next year. In the long run, we estimate that the global demand for lithium and photovoltaic PVDF will be about 120000 tons by 2025. According to the price of 167000 yuan / ton, the overall market capacity is expected to exceed 20 billion yuan. From a technical point of view, it is difficult to use PVDF products for lithium electricity, and it is more difficult for related enterprises to change production. As the application of PVDF in lithium electricity is more customized, different material formulations can be aimed at different types of batteries (such as different materials have different swelling ability in different electrolytes), we think that the speed of technology diffusion is slow.

2. We continue to be optimistic about the expansion of capacity boundaries, through their own advantages to cut into the field of new energy companies. How to look at the competitive advantages of chemical leading enterprises in entering the field of new materials: first, chemical leading enterprises have the ability of low-cost manufacturing. The reason why the leading chemical enterprises can stand out in the original industrial competition and defeat other competitors is that in the process of competition, they cultivate the ability of low-cost control (including the low cost of production and the low cost of investment). The main raw materials used in the production of new energy materials are chemical raw materials, metals and so on. Traditional chemical enterprises can extend to the field of new energy materials and establish cost advantages based on their resources, products (by-products) and other advantages. Taking lithium iron phosphate and DMC as examples, phosphorus chemical industry and titanium dioxide enterprises can enter the production process of precursor ferric phosphate based on their phosphoric acid resources and by-product ferrous sulfate respectively, while coal-to-ethylene glycol enterprises can produce DMC through technological transformation with lower investment, which can establish a certain cost advantage.

The second advantage is large-scale manufacturing capacity. Because the current new energy vehicles have passed the stage of permeability from 0% to 5%, followed by 10% 50%. Large-scale manufacturing capacity is very important in this process. In this respect, the leading chemical enterprises have relatively advantages. In the past, some small enterprises had some first-mover advantages in the process of permeability from 0% to 5%. But if you want to enter the second stage of popularity, not only battery materials, including batteries, but even electric vehicles, must have the ability to manufacture on a large scale. The third advantage is the knowledge of chemical synthesis. Whether cathode materials, anode materials, electrolytes, electrolytes, they rely essentially on the knowledge of chemical synthesis. Compared with some chemicals, the difficulty of synthesis is actually lower. We believe that new energy materials are related to the original battlefield of chemical leading enterprises, and they are the advantages of traditional chemical leading enterprises. What is relatively special is the diaphragm, which tests not the ability of synthesis, but also the technology and equipment of pulling the membrane. In addition, once the chemical leaders enter the field of new energy materials, making use of their advantages in chemical synthesis knowledge will promote the evolution of the battery system to a certain extent. Based on low-cost large-scale manufacturing, the advantage of industrial chain extension, and the professional ability of chemical synthesis, we believe that the leading chemical enterprises will be able to enter the mainstream supply chain system.