A global rush into battery recycling is good news for automakers worried about future raw material supplies. However, the influx of new facilities poses a serious threat to the recycling sector because there isn’t nearly enough scrap to support them all.
Several well-known automakers, specialised in recycling businesses, and even the mining Glencore Plc are investing heavily in the process of turning waste into the materials required to power the electric vehicle revolution. As a result, according to consultancy Circular Energy Storage, the capacity for recycling batteries globally will increase by over 10 times between 2021 and 2025 and is anticipated to outpace this year’s supply of waste.
While the industry waits for early EV models to start turning up in large numbers at garbage yards, shortages are expected to last well into the next decade. By 2025, there may be three times as much room for recycling factories as there will be scrap to power them. Naturally, the old batteries will eventually start to pour in, but recycling businesses must exist in the interim.
Although recycling is meant to be a vital and environmentally sound alternative to the limited mined production of metals like lithium and cobalt, some are already discussing replacing their operations with freshly mined material. Automobile manufacturers have been rushing to secure future supplies due to worries about raw material shortages, which have recently caused prices to soar.
In the past year, lithium prices in China have increased more than fourfold, and they are expected to continue to grow as new supply concerns are raised by a power crisis brought on by a drought in the Sichuan province.
Before legislation requiring companies to use more recycled materials in their batteries starting in 2030, automakers in Europe urgently need to establish the factories. Independent recyclers must also act rapidly, and those who can secure enough quantities of the raw materials recovered from the batteries may still find success. But as a result, the business is expanding so quickly that plants are being built at an excessive rate.
Nobody is really looking at each other, and they seem to think there will be a lot of scrap and end-of-life batteries, Hans Eric Melin, the founder of Circular Energy Storage, said by phone. But if you look at the level of capacity that’s coming online, it’s huge in relation to what we need.
Old, used-up batteries and leftovers from battery manufacturing are the two main categories of recycling feed. However, the majority of the EVs already in use will stay on the road for many years, and even when the cars are wrecked, the batteries are frequently sold for further usage.
Additionally reducing waste at their facilities, battery manufacturers are leaving even less material for recyclers.
According to recent study by Benchmark Mineral Intelligence, manufacturing waste will make up 78% of the available scrap supply in 2025 while end-of-life batteries will make up 22%. The market won’t reach an inflection point where volumes of used batteries available to recyclers start to rise until the mid- to late 2030s, according to the consultancy.
Previously, the majority of investment has been concentrated in China, which has more than 80% of the global capacity for battery recycling. Because more EVs have been on the road for a longer period of time, here is also where the first significant wave of scrap is anticipated to appear. Over the past year, there have been numerous plans for new recycling facilities around Europe and North America, but such facilities will have to wait even longer for the supply to begin to increase.
In terms of where the scrap is coming from, China is going to be dominating supply, Benchmark analyst Sarah Colbourn said by phone. It’s quite an opaque market to understand, but the overwhelming majority of capacity is in China and the volume of scrap available will be higher in China.
In order to recycle used batteries, they must first be disassembled and reduced to “black mass.” From this, specialized chemicals for use in new batteries are produced.
According to Ajay Kochhar, chief executive officer and co-founder of Canadian recycling firm Li-Cycle Holdings Corp., the biggest bottleneck is probably for the businesses that are primarily focused on processing black material. In Rochester, New York, the business aims to build a new $485 million facility where it will manufacture high-value chemicals. The company’s quick growth has drawn the attention of short sellers wary of its technology and development expenditures, but this year, mining giant Glencore invested $200 million in it as a gesture of support.
Supply for us is not an issue, we have more batteries than we can typically handle, Kochhar said. But there is a question about how that will evolve for the industry as a whole.
However, according to Kunal Sinha, global head of recycling at Glencore, the company anticipates the next several years will be challenging for the recycling industry as a whole. Glencore invested in Li-Cycle because it sees promising long-term potential.
If you’re building a standalone battery recycling business, that business is now under pressure, Sinha said in an interview in London. Some of the recycling-only business models will not succeed, or at least will be very stressed, because they’re going to be waiting for all that scrap to arrive.
If future shortages arise, Li-partnership Cycle’s with Glencore may provide a solution by supplying raw materials from Glencore’s own mines to replace trash supplies until scrap levels begin to increase significantly, according to Sinha.
With rival recycler Redwood Materials announcing plans for a $3.5 billion battery-chemicals complex in Nevada that will be supplied with a mixture of mined and recycled raw materials, others are already embracing a hybrid strategy.
What will it take for the supply of waste to actually start increasing, then?
Even when cars are wrecked, the batteries are frequently purchased by customers who are ready to pay thousands of dollars to reuse them in other cars or in uses that require less power, such energy storage systems.
According to CES, it could take old batteries at least 15 years and in certain circumstances up to 25 years to reach recycling facilities.
The efficacy of rules intended to get customers to clean out their drawers and recycle old electronics will determine the availability of the batteries found in old electronics, which are another significant source of supply.
Recycling companies will rely substantially on the scrap created during the battery-making process in the near future. But even that is under threat; last month, CES cut in half its long-term predictions for industrial scrap in order to take into account significant improvements in production efficiency over the last few years.
The shortfall won’t persist forever, though. By 2030, recycling will still still make up less than 10% of the world’s supply, but during the next ten years, it will increase significantly. However, in order to support the rapid expansion of the electric vehicle industry, car manufacturers will continue to rely heavily on miners, and shortages are expected to continue as well.
The scale of demand is just incredible, and the mining aspect needs some attention, Benchmark’s Colbourn said. One thing I can say for certain is that we’ll still be facing deficits, and recycling isn’t going to be able to plug that gap any time soon.