A global rush to recycle batteries is good news for automakers worried about the future supply of raw materials. But the wave of new factories poses a big risk to the recycling industry itself: there isn’t enough scrap metal yet to feed them all.
Major automakers, specialist recyclers and even miner Glencore are all pouring money into turning waste into the products needed to fuel the electric vehicle revolution. As a result, global battery recycling capacity will grow nearly 10-fold between 2021 and 2025 and is expected to exceed available scrap supply this year, consultancy Circular Energy Storage said.
Shortages are likely to persist over the next decade as the industry waits for the first models of electric vehicles to hit landfills in large numbers, and by 2025 there could be three times as much space recycling plant than scrap metal to run the factories.
Some are already talking about supplementing their factories with freshly mined materials – a counter-intuitive solution given that recycling is supposed to be a crucial and environmentally friendly response to the limited mining production of metals like lithium and cobalt. Automakers have scrambled to secure future supplies amid concerns over raw material shortages that have driven prices up in recent months.
For European automakers, there is an urgent need to build factories before regulations that will force them to use more recycled materials in their batteries from 2030. Independent recyclers must also act quickly, and the recovery of raw materials contained in the batteries could still prove lucrative for those who can secure an adequate supply. But the result is that the burgeoning industry is collectively building factories far too quickly.
“Nobody is really looking at themselves, and they seem to think there will be a lot of waste and end-of-life batteries,” Hans Eric Melin, the founder of Circular Energy Storage, said over the phone. “But if you look at the level of capability that’s coming online, it’s huge compared to what we need.”
There are two main types of recycled food: old and used batteries and waste from battery factories. But most EVs being driven today will stay on the road for years, and even when cars are scrapped, the batteries are often resold for reuse. Battery manufacturers are also reducing waste in their factories, leaving even less material for recyclers.
By 2025, 78% of the available scrap supply will come from manufacturing waste, while end-of-life batteries will account for 22%, according to a new study from Benchmark Mineral Intelligence. It won’t be until the mid-2030s that the industry will reach an inflection point where the volumes of used batteries available to recyclers will start to increase, the consultancy predicts.
When it comes to where scrap metal comes from, China will dominate the supply
Reference Analyst Sarah Colbourn
Previously, most investment was concentrated in China, which accounts for more than 80% of the world’s battery recycling capacity. This is also where the first big scrap wave is likely to emerge, as more EVs have been on the road for longer.
“When it comes to where scrap is coming from, China is going to dominate the supply,” Benchmark analyst Sarah Colbourn said over the phone. “It’s a pretty opaque market to understand, but the overwhelming majority of capacity is in China and the volume of available scrap will be higher in China.”
To recycle used batteries, they are first dismantled and shredded into something called “black mass”, which is then processed to produce specialist chemicals for use in new batteries.
According to Ajay Kochhar, chief executive and co-founder of Canadian recycling startup Li-Cycle Holdings Corp, the biggest bottleneck is likely to be for companies focused primarily on dealing with black mass.
“Supply for us is not an issue, we have more batteries than we can usually handle,” Kochhar said. “But there’s a question about how that’s going to evolve for the industry as a whole.”
Glencore invested in Li-Cycle because it sees strong long-term prospects, but expects the next few years to be challenging for the sector as a whole, said Kunal Sinha, global head of recycling at Glencore.
Others are already taking a hybrid approach, with rival recycler Redwood Materials announcing plans for a $3.5 billion battery chemical plant in Nevada that will be powered by a combination of mined and recycled raw materials.
So what will it take for the supply of waste to really start to increase?
Even when vehicles are scrapped, batteries are often salvaged by buyers willing to pay thousands of dollars to reuse them in other vehicles or in less demanding applications like energy storage systems. It could take 15 years or more for old batteries to finally arrive at recycling plants, and in some cases up to 25 years, according to CES.
In the short term, recyclers will rely heavily on the waste produced during the battery manufacturing process. But even that is under pressure – last month CES cut its long-term forecast for manufacturing scrap by more than half to reflect major advances in production efficiency in recent years.
Updated: September 03, 2022, 04:30