Why Battery Recycling Has High Market Potential
2022 confirmed the spectacular growth of electric vehicles (battery electric + plug in hybrid) with more than 10 million units sold worldwide. As a result, demand for batteries surged with a 65% increase from 2021 to 2022 to 550 Gwh. The entire EV supply chain is therefore building production capacity that can meet such an exponentially growing demand. This market shift puts pressure on the supply of critical metals used in batteries – like nickel, cobalt, lithium and manganese. As they are recoverable resources, closed-loop battery recycling appears as a sustainable solution addressing material availability and battery end-of-life challenges.
Technological and Business Model Choices are Necessary to Make Battery Recycling Profitable
Cost remains the biggest barrier for now as end-of-life battery volumes are low. Mining is still cheaper than small-scale recycling. But according to projections, two levers can make recycling cost-competitive in the mid-term: metal recovery rate improvement and economies of scale. FEV Consulting expects that, by 2040, recycling costs per kg of battery will drop 36%, making the recoverable value superior and thus recycling profitable.
There are several approaches to battery recycling. Battery packs first need to be carefully dismantled. After discharge, packs are opened to get rid of cables, coolant liquids and other unwanted materials. Modules are then removed one by one under constant temperature control. Once dismantled, one option is crushing and shredding the modules to produce a powder containing all the target metals, called black mass. This black mass is then processed by hydrometallurgy, a series of bulk chemical treatments aimed at extracting the metals. The most common include sulfuric acid, sodium hydroxide and solvents.
Another method, called pyrometallurgy, uses heat to smelt dismantled waste batteries and separate the metals. Modules are first preheated at a low temperature (under 300°C) to safely let electrolytes evaporate. Then, a series of thermal reactions is performed at various temperatures to get rid of plastics and to make metals melt successively, creating alloy phases.
At the moment, the industry is still exploring both methods and hybrid processes to determine the most efficient one. Many factors play a role, like the amount of generated wastewater (hydro) vs. high energy usage (pyro). Moreover, there are many patented technical innovations that aim at improving the recycling process. For example, while Umicore is working on black mass pre-heating for removing impurities, Ascend Elements is developing a proprietary hydro-to-anode solution to yield active anode material at the end of the recycling process.
While process optimization is a significant driver for profitability, the economics of battery recycling are also affected by the input. Indeed, battery chemistries differ in the amount of metals they contain which, in turn, will determine profits. For now, most EV batteries use the NMC chemistry – including nickel and cobalt – but in the future, LFP batteries may become the norm. As they do not include nickel and cobalt, LFP´s future high penetration will pose a profitability challenge for recyclers. Cell design will affect recycling economics too: cell-to-chassis architecture will make dismantling more challenging while, in the long-term, solid-state batteries will require a change in the use of chemicals.
A Global Race to Catch Up with China
Among global economies, Europe and North America are ramping up their industry in a race to catch up with China, leading the world production of batteries with a 77% market share. In the European Union, the Net Zero Industry Act proposal aims to set a target of 90% of the Union´s battery demand to be met through local production by 2030. In the US, the Inflation Reduction Act, passed in August 2022, allocates billions of dollars to create a domestic EV supply chain.
No matter the method, China is the most mature recycling market because it has the highest BEV penetration. As end-of-life batteries are expected to represent 750,000 tons by 2025, the government is pushing national giants like CATL or Green Eco Manufacture to invest into standardized, high-capacity recycling facilities. Although the country is a leader across the whole supply chain, material scarcity is expected as demand booms, hence a strong focus on creating a circular ecosystem. China applies a vertically integrated model where companies complete all the steps in-house, from dismantling to new cell production.
The European market is the most dynamic, with many new plant announcements and joint ventures, pushed by a stringent regulatory framework. 50% of the battery´s weight must be recycled and it will increase to 65% by 2025. Companies like Northvolt or Umicore have set ambitious goals as the market is expected to grow 30% annually from 2022 to 2030. More than 10 recycling facilities are planned across Europe in the next five years.
In North America, the slower EV adoption makes the market a less dynamic one. But in the US, the government seeks to reduce the country´s dependency on foreign material supply, hence massive investments in the form of the IRA. New plants are announced and joint ventures are formed, like between Glencore and Electra in Canada.
Whether in Europe or in North America, players divide their activity between secondary plants that collect batteries and produce black mass and a main plant that further processes it into battery grade materials. Li- Cycle, a Canadian recycler, calls that the hub and spoke approach.
Battery recycling has a major role to play in the electrification of vehicles. For now, it remains at a pilot stage for most companies as its business model requires adjustments and scale. However, combined with booming EV sales in China, Europe and North America, the need for a more circular economy will make it an inevitable part of the EV supply chain.