After nearly two years of rapid expansion of production capacity, the domestic copper foil industry will enter a "painful period" in 2024, with corporate performance generally turning from profit to loss, and industry giants have also fallen into huge losses.

On February 25, Jiayuan Technology (688388. SH) released a performance report, the company's operating income in 2024 will be 6.543 billion yuan, a year-on-year increase of 31.69%, but the total profit loss will be 266 million yuan, a year-on-year decrease of 1180.74%. Previously, another leader in the industry, Nord shares (600110. SH) also announced that the company will achieve a net loss attributable to shareholders of listed companies of about 310 million yuan in 2024, and Zhongyi Technology (301150.SZ) expects to deduct a non-net profit loss of 117 million yuan to 158 million yuan in 2024.

Behind the increase in income of enterprises is the serious imbalance between supply and demand in the copper foil market. According to the research report released by Haitong Securities, the domestic demand for electrolytic copper foil in 2024 will be 999,000 tons, and the total domestic electrolytic copper foil production capacity is expected to reach 2.113 million tons by the end of 2024, which is in a state of surplus.

Liu Wencheng, Secretary-General of the Electronic Copper Foil Materials Branch of the China Electronic Materials Industry Association, said in an interview with a reporter from the China Times: "In 2024, the domestic production of lithium batteries will maintain rapid growth, but copper foil companies are in a state of comprehensive loss, and the reason is that there is serious overcapacity, resulting in a sharp decline in copper foil processing fees. Looking forward to 2025, individuals are cautiously optimistic about the development of the copper foil industry. On the other hand, the industry will enter the stage of survival of the fittest, and at the same time, mergers and acquisitions may occur, eliminating some enterprises that do not have the ability to survive. ”

The industry leader has turned from profit to loss

According to the announcement of Jiayuan Technology, in 2024, the company will achieve operating income of 6.543 billion yuan, a year-on-year increase of 31.69%; operating profit of -263 million yuan, a year-on-year decrease of 1022.87%; the total profit was -266 million yuan, a year-on-year decrease of 1180.74%; The net profit attributable to the owners of the parent company was -220 million yuan, a year-on-year decrease of 1259.39%.

In the downward cycle of the industry, Jiayuan Technology is not the only company that loses money. The reporter combed the performance forecasts of five domestic copper foil listed companies, Jiayuan Technology, Nord Shares, Zhongyi Technology, Tongguan Copper Foil, and Defu Technology, and found that in 2024, the profits of the above five industry leaders will all turn from profit to loss, and the loss amount will range from 72 million yuan to 375 million yuan.

Among them, NORD shares announced that in 2024, the company will achieve a net loss attributable to shareholders of listed companies of about 310 million yuan, and a net loss attributable to shareholders of listed companies after deducting non-recurring gains and losses of about 375 million yuan.

Zhongyi Technology announced that the net profit loss attributable to the parent company in 2024 will be 72 million yuan to 98 million yuan; The non-net profit loss was 117 million yuan to 158 million yuan.

Tongguan Copper Foil predicts that the net profit attributable to the parent company in 2024 will be a loss, ranging from 146 million yuan to 180 million yuan, and the net profit after deducting non-recurring gains and losses is expected to be a loss of 171 million yuan to 205 million yuan.

Defu Technology announced that in 2024, the net profit loss attributable to the parent company will be 219 million yuan to 245 million yuan, and the non-net profit loss will be 213 million yuan to 240 million yuan.

For the reasons for the loss, the above-mentioned companies all pointed the finger at the fierce competition in the industry, which led to a decline in processing fees and a decline in product gross profit margins. Jiayuan Technology said that during the reporting period, affected by the fierce competition in the lithium battery copper foil industry, the copper foil processing fee dropped significantly, and the gross profit margin of the product decreased compared with the same period last year, affecting the company's profits.

NORD shares also said that from the perspective of the terminal market, affected by the domestic macroeconomic impact and overseas trade wars, tariff barriers, etc., the growth rate of new energy vehicle sales has slowed down, and the lithium battery copper foil market is still in a state of oversupply in a short period of time, and the market competition is fierce, resulting in a sharp decline in copper foil processing fees and at a low level, and the company's profit margins are compressed. In addition, the price of copper, the main raw material for copper foil products, is generally on an upward trend in FY2024, resulting in an increase in the actual production cost of the company's copper foil. In summary, the company's overall gross profit margin in 2024 will decrease and gross profit will decrease.

The reporter learned that in order to cope with the fierce competition brought about by the imbalance between supply and demand in the domestic market, many companies are seeking to expand overseas markets to increase profit margins. On February 26, Jiayuan Technology told the "China Times" reporter that on the one hand, the company is continuing to optimize the structure of copper foil products and increase the proportion of high value-added products; On the other hand, it is actively tapping the potential foreign market and continuously strengthening the layout of the overseas market.

It is understood that Jiayuan Technology announced in January this year that it would establish a cooperative relationship with an internationally renowned battery manufacturer, sign a purchase order, and supply lithium battery copper foil to it. This is the second time that the company has received orders from overseas customers after the introduction of new overseas customers in 2024.

"Since the second half of last year, the industry as a whole has been gradually improving. Although the company is still generally in a state of loss, the market demand is generally increasing. Jiayuan Technology said.

Will we be able to get out of the trough in 2025?

Copper foil is an important part of lithium batteries. In recent years, with the rise of new energy and energy storage industry, the domestic electrolytic copper foil market has ushered in rapid development, and many enterprises have made cross-border layouts. However, after two years of rapid capacity expansion, the domestic copper foil market has entered a stage of oversupply.

According to the research report released by Haitong Securities, on the demand side, China's demand for electrolytic copper foil in 2024 will be 999,000 tons, of which 618,000 tons will be lithium battery copper foil and 382,000 tons of electronic circuit copper foil respectively. On the supply side, by the end of 2024, the total domestic electrolytic copper foil production capacity is expected to reach 2.113 million tons, including 1.414 million tons of lithium battery copper foil and 702,000 tons of electronic circuit copper foil.

The imbalance between supply and demand even leads to vicious competition in the industry's processing fees. The Electronic Copper Foil Material Branch of the China Electronic Materials Industry Association conducted a survey in October 2024, and at that time, the cost range of domestic lithium battery copper foil product processing fees was 20 yuan-22 yuan/kg, and the cost range of electronic circuit copper foil processing fees was 16-18 yuan/kg. However, the price of copper foil products of many enterprises in the industry has been seriously lower than the variable cost, and individual enterprises have even won the bid with a sales and processing fee of less than 10 yuan/kg in order to obtain orders.

"At present, the processing fee of the copper foil industry has rebounded slightly, and the increase in 2025 depends on downstream demand. According to the agency's forecast, lithium battery production will maintain double-digit growth in 2025, and in this case, copper foil processing fees may rise slightly in 2025. Liu Wencheng said.

Haitong Securities Research Report also mentioned that the overall processing fee of the copper foil industry is less likely to decline further. However, it believes that since the overall production capacity is still in a state of surplus, it is unlikely that there will be a significant price increase.

Looking forward to 2025, the research report believes that on the one hand, with the gradual clearing of production capacity, the industry will concentrate on the head enterprises, and the head enterprises will take the lead in reducing or turning around losses, and enterprises with a high proportion of high-end products, high utilization rate and better cost control will have more competitive advantages; On the other hand, the industry has now entered the stage of cost support, corporate profitability is under pressure, with the gradual clearing of production capacity, the relationship between supply and demand improves, and the overall capacity clearance may continue until 2025.

Liu Wencheng believes that in 2025, the copper foil industry may get out of the trough from three paths, one is to accelerate the survival of the fittest in the industry and eliminate a number of old production capacity; Second, with the development of emerging industries such as new energy, energy storage, low-altitude economy, and robots, the downstream battery demand will continue to grow, thereby helping to digest excess capacity; Third, mergers and acquisitions may occur in the industry, and some enterprises that do not have viability will be eliminated.