EU battery recycling industry faces multiple scale-up challenges

With low cobalt and nickel metal prices, slowing EV sales and challenges to recent gigafactory projects, the European lithium-ion battery recycling supply chain is facing a number of headwinds.

Participants at the GDMMC Asia EU Li-ion battery recycling conference in The Hague held over Nov. 25-26 discussed in depth some of the key challenges facing the build-out of a localized European supply chain.

Greater incentives, certainty required

There was broad agreement that current EU policies are not sufficient to entice established metals players with large balance sheets to invest more deeply in the region's nascent battery recycling supply chain.

Recent difficulties, such as Swedish battery maker Northvolt filing for Chapter 11 bankruptcy, underline the challenges facing Europe's battery supply chain.

While there is a push from original equipment manufacturers (OEMs) to develop the battery supply chain, the policies and funding available from the EU appear geared to attract startups and smaller players, with the profitability not yet present for more established players to enter the supply chain.

In a rare recent example, Glencore took a larger equity stake in battery recycler Li-Cycle, but this was only after the startup faced headwinds in its quest to independently develop European and US operations, including its flagship black mass processing hub in Rochester, New York.

This could change if a startup is successful, Wei Zhang, Huayou Recycling's managing director for Europe and North America, told delegates.

In late 2023, Huayou Recycling, a subsidiary of Huayou Cobalt, entered a partnership with German startup Tozero to supply battery waste from end-of-life electric vehicle batteries and battery production scrap. Huayou Cobalt is currently building its first European high-nickel cathode active material (CAM) production plant in Hungary.

"The EU lacks an equivalent to the US Inflation Reduction Act (IRA) and needs support to create an EV market -- it's hard to make huge investments of hundreds of millions without certainty. It's not even clear what the prevailing battery chemistry could be in 5-10 years," Nils Steinbrecher, managing director of recycler SK TES's European operations, said.

Park Soo Chul, managing director at SungEel Hi Tech Europe, which has invested in recycling facilities in Hungary and Poland, said there needs to be a push for government subsidies to incentivize lithium-iron-phosphate (LFP) battery recycling.

Currently, economics for recycling LFPs do not work in Europe, Park said, amid relatively low supply for LFP production scrap and end-of-life volumes, in addition to higher labor and energy costs.

Low cobalt and nickel metal prices have also put downward pricing pressure on more prevalent European Ni-Co black mass.

Platts, part of part of S&P Global Commodity Insights, assessed EXW Europe cobalt payables at 63% basis European cobalt metal on Nov. 27, with nickel payables at 63% basis LME nickel, up from 55% in May. However, the calculated Platts Ni-Co black mass price stood at $1,879/mt EXW Europe Nov. 27, down from a recent high of $2,265/mt on May 21. These assessments were basis Platts specifications of minimum 3% Li, minimum 5% Co, minimum 12% Ni content in black mass.

"I want to see bold action to put more EVs on the European market," Hans Eric Melin, managing director at Circular Energy Storage, said.

Year-to-date registrations of battery electric vehicle (BEV) sales in the EU were down 4.9% year over year in January-October 2024, according to the European Automobile Manufacturers' Association.

Higher costs, design concerns denting EU competitiveness

High labor costs and stricter safety and environmental regulations in Europe relative to Asia are a key factor in making the additional step of dismantling of large format batteries, prior to shredding, uneconomic for recyclers, market participants said.

This is also impacting the quality of the black mass produced, as greater contaminants are inputted into the shredder which ultimately impacts the value of the black mass when sold.

Lower labor costs and potentially looser safety and environmental regulations in Asia may allow recyclers to dismantle large battery packs into cells prior to shredding, boosting their competitiveness and the quality of the black mass they can produce.

"The disassembly of batteries is a big challenge, and often the technical papers provided by OEMs [for disassembly] are impractical -- it's not commercially viable," said Tom Seward, key account director at Ecobat Solutions, which has black mass production facilities in the UK and Germany. "Certain battery packs are designed with no consideration for recyclability or reuse -- it's like if a car got a puncture and you'd have to replace the entire car."

Clearer guidance regarding battery sorting by chemistry, for companies sending batteries to recyclers, would also allow greater cost efficiency for recyclers, with unsorted batteries of varying chemistry uneconomic to accept. Some recyclers also suggested that volumes of end-of-life (EoL) batteries below 100 mt were difficult to accept.

The expected growth in EoL battery supply globally should help support this concern among European recyclers. The larger capacities for black mass processing in South Korea are currently prompting market players in South Korea to pay more to attract feedstock from Europe, where black mass production is growing quickly but local hydrometallurgical capacity to process this black mass is lagging.

S&P Global Mobility, a separately managed unit of S&P Global, forecasts that globally available EoL batteries will increase from around 64 GWh in 2024 to 1,590 GWh in 2036, with the recycling rate expected to rise from 36% to 52% over the same timeframe.

Longer-term, the business model for battery recycling in Europe is expected to move more to a closed-loop tolling model. This is the preference of OEMs, which want to maintain ownership of the battery and control of the final recycled product, event participants said.

The overarching view from the conference was that greater financial support is needed to match the incoming regulation and to grow the wider European battery supply chain to a large enough scale that makes the various parts -- from greater EV adoption, to second-life, to black mass and recycled salts production -- viable and competitive in the long-term.

"The European battery recycling industry is still in primary school, but we already have a PhD level of regulation," SK TES' Steinbrecher said, summing up the current market malaise.