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20 July 2022

Chinese manufacturing recovers from lockdowns

China’s State Council Information Office has issued statistics which show the added value of industrial enterprises posting 3.4% year-on-year growth to $2.4 trillion in the first half of the year. After lockdowns earlier in 2022 saw a decline with April down 2.9% year-on-year, a V-shaped recovery occurred in June.

The country’s 3.4% manufacturing sector growth is higher than the overall economy’s performance, which reached 2.5%. Manufacturing has grown to 28.8% of the economy, up from 26% in mid-2021. Manufacturing investment grew 10.4% year-on-year in H1 2022, with 7.4% of the growth occurring in Q2 – almost double the figure for fixed-asset investment. Another standout figure was total exported goods, which grew by 13.2% to $1.65 trillion.

Within renewable energy manufacturing the biggest growth figures by far have been produced by the battery sector. EV battery output rose by 176.7% to 206.4 GWh, with June alone seeing 16.1% month-on-month growth to 41.3 GWh. Within the 206 GWh, ternary lithium-ion batteries grew 125% to 83 GW and lithium-ion phosphate grew 227% to 123 GW.

In the first half of 2022, 85 new battery factories were announced in China, with an investment of $90 billion. For comparison, the entirety of 2021 saw only $100 billion invested in battery factories. The single largest manufacturer CATL says it will reach production capacity of 670 GWh come 2025.

Electric vehicles grew by 111.2% by value and 130% by number of units, with 2.66 million made so far this year – compared to the 4.3 million electric vehicles sold worldwide in H1 according to SNE Research, with global market growth of 60%. Within China, EVs reached 22% market share of new sales, while fuel cell vehicle production and sales tripled to 2,000 and 1,000 respectively.

No mid-year statistics for wind turbine manufacturing have been released yet, but domestic demand is high thanks to “base project” and offshore wind initiatives. The end of domestic subsidies has seen wind project developers bargain for substantially lower costs, with an around 10% price decline for turbine purchases in Q1, bucking the trend of general global inflation. In Q1 2020 the price of turbines in China was $600 per kW – now it has fallen to half that, or even less, as the industry caught up on the trick of larger turbine sizes, outweighing even the rise in the cost of steel.

Solar manufacturing grew by 31.8%, with 114 GW manufactured as of May – so around 140 GW by the end of June. Photovoltaic glass production grew by a massive 121.6%, but that particular supply chain element is prone to fluctuating over- and under-capacity.

The most important supply chain element for solar is of course polysilicon, with 341,000 tons produced so far within China in 2022 and another 41,000 tons imported. The 341,000-ton domestic production figure is a 74% increase over H1 2020 and a 52% increase over H1 2021. However, the June 2022 figure of 61,600 tons is 1% lower than May, and July may decline even further as several factories enter maintenance at this time of year. The increased output over the past two years is mostly due to higher capacity utilization, with a relatively small increase of around a quarter to production capacity, and the new facilities are still ramping up. Only in late 2022 and 2023 will we see production capacity (not immediate output) for this crucial segment of the solar supply chain double or triple.