China Galaxy: The additive industry opens up a channel for price increases, and the industry is expected to bottom up
The Zhitong Finance App learned that China Galaxy Securities released a research report saying that the core reason for this round of marginal changes in the market is that the demand side has exceeded expectations, and additives can fully benefit from quantitative and structural growth dividends. Combined with limited supply, the industry is expected to bottom out and rise. The core of the upward momentum depends on price elasticity, and related companies will all benefit. It is recommended to focus on companies that have a certain leading edge in technology, scale, cost, etc., and have flexible space or larger companies.
The main views of China Galaxy Securities are as follows:
The price increase channel is open, and there is plenty of room for flexibility
VC (vinyl carbonate) relayed a rapid rise in lithium hexafluorophosphate in mid-November. As of November 28, 2025, the average price was 235,000 yuan/ton, up 408% from the bottom, up to 270,000 yuan/ton; at the same time, the average FEC price reached 54,000 yuan/ton, up 30% from the bottom. The current rise in additives such as VC is mainly due to short-term downstream production schedules rising rapidly beyond expectations, passive inventory consumption, and short supply. The bank calculated that additives account for less than 1% of the total cost of batteries, and the price sensitivity is extremely low. Combined with historical price trends (VC up to 475,000 yuan/ton), considering that raw materials such as lithium hexafluorophosphate fluctuate due to fluctuations in lithium carbonate, additives represented by VC actually have more room for flexibility.
Demand side: structural differences bring a “double hit to growth”
In order to analyze future supply and demand trends, the bank measured the global demand for VC additives from the bottom up. Under certain background & assumptions, the bank made the following judgments: 1) Steady growth in power, total global power battery shipments are expected to reach 1447 GWh in 2026, and the growth rate is stable at around 20%. 2) Domestic and foreign demand resonates, and demand for energy storage is expected to continue to exceed expectations. The bank expects global energy storage battery shipments to increase 62% year-on-year to 822 GWh in 2026. 3) Overall, the size of the lithium battery market (power+energy storage+consumption) will expand by 31% in 2026, and the expansion of the entire market will directly drive the expansion of the electrolyte additive market. This is a “blow to demand growth.” 4) Structurally, due to the faster growth rate of energy storage, the continuous increase in the share of lithium iron phosphate in overseas power, and the increase in addition ratio due to superposition technology upgrades, VC demand is expected to eventually achieve a demand growth rate of more than 64% in 2026. This is the “double impact of demand growth” brought about by the structure. FEC, on the other hand, is mainly benefiting from the further promotion of fast charging technology and silicon-based anode technology in the future. In addition to the growth brought about by 3C lithium batteries, the trend of semi-solid batteries/solid state batteries is also favorable to the growth of FEC demand. The bank expects FEC demand growth to reach 29.5% in 2026.
Supply side: limited expansion of production, bottlenecks in high-load production
Since the beginning of 2022, the additive industry has experienced a three-year+ downturn. The irrational expansion of production has caused the industry to experience a rapid decline in prices due to “internal rolling” competition. In 2024, the related businesses of listed companies all went into a state of loss of cash. Currently, the cash reserves of leading companies have all fallen to historic lows. Based on current profit status and capital, it is difficult for enterprises to have the will to expand production. The industry tends to be more rational, and at the same time, the low price band accelerates the clearance of the industry's backward production capacity. The combined turbulence of events has intensified price fluctuations. The bank believes that downstream electrolyte companies' demand for stocking and supply may form a stronger demand to buy and replenish inventory, so there is expected to be more room for price flexibility. After counting industry supply and demand, the bank believes that the VC production capacity gap in the industry will reach -16,000 tons in 2026. The gap/supply under this caliber is about 15.1%, which means that VC supply is expected to be tight throughout the year. However, FEC maintains a relatively tight balance. If downstream fast charging, silicon-based anodes, semi-solid state batteries, etc. exceed expectations, FEC is also expected to usher in a rapid upward trend. The bank estimates that under certain conditions, if the VC center is 150,000 yuan/ton and the FEC hub is 60,000 yuan/ton, the latest valuations of industry representative companies are all below 12x, which has a strong safety effect.
Risk Alerts
Demand falls short of expectations, risks such as product loss of market and rising raw material prices due to rapid development of new technology.