Revitalizing resources: Trends, challenges and opportunities in battery recycling

The global surge in electric vehicle adoption is increasing the demand for recycled battery raw materials as an alternative feedstock to meet sustainability targets. A slowdown in EV sales growth this year coupled with an oversupply of battery metals can weigh on battery recycling, but policy drivers as well as the long-term forecast for EV adoption remain positive, underscoring the importance of the growing battery recycling space.

EVs offer significant advantages over internal combustion engine automobiles with the potential to achieve complete circularity of raw materials, as the recovery rate for such materials like nickel, cobalt, copper and lithium can exceed 90%.

Slow EV sales, oversupply pressure prices

China's passenger EV sales reached 7.74 million units in 2013, or 59% of total global sales, according to S&P Global Commodity Insights data. This year, the China Association of Automobile Manufacturers had forecast 11.5 million units as the country's EV sales target. However, EV sales reached less than half of that target at 4.94 million units over January-June.

Demand in Europe remained bleak as well. Mercedes-Benz saw a 35% year-on-year decline in EV sales in the second quarter, it said July 26. Umicore trimmed its 2024 battery materials sales forecast to be slightly below 2023 levels as it cited weak demand for EVs in H1.

The market also faces pressure from oversupply. A wave of new mining output coming from Brazil, Argentina, Africa and Canada is expected to keep the market balance in surplus, with an expected oversupply of 71,000 mt in 2027, according to forecasts by Commodity Insights' Metals and Mining Research team.

The slump in EV sales and oversupply of battery raw materials have put recycled lithium carbonate at a discount to virgin material. Platts assessed primary battery-grade lithium carbonate at Yuan 80,000/mt ($11,210/mt) July 30 and recycled lithium carbonate at a discount of Yuan 1,000/mt to the prime material, Commodity Insights data showed.

Black mass, the intermediate material from processing end-of-life batteries, is also facing similar challenges with battery chemical prices down across the board.

Platts assessed Ni-Co black mass lithium, cobalt and nickel payables at 70% basis the respective battery-grade chemical salts July 30, unchanged on the week. The theoretically calculated all-in price of Ni-Co black mass stood at Yuan 23,837/mt DDP China, down Yuan 529/mt on the week. Despite stable payables, the all-in price has been inching down amid the downtrend in cobalt and nickel sulfate prices, according to Commodity Insights data.

Platts assessed battery-grade 20.5% Co cobalt sulfate at Yuan 28,700/mt July 30, hovering near the all-time low of Yuan 28,000/mt DDP China since the launch of the assessment in May 2018. The nickel sulfate DDP China price has been hovering at sub-Yuan 30,000/mt levels for six consecutive weeks since June 18, the data showed.

Policy to be key support for battery recycling

Notwithstanding weak EV sales growth this year, governments worldwide continue to implement stringent regulations and incentives to promote their adoption and are localizing their supply chains. These policies not only encourage the development of recycling infrastructure but also create economic incentives to accelerate the transition toward a circular economy.

China is by far the largest market for EVs and the region continues to lead in terms of production scrap and available EOL batteries.

The country had started regulating battery reuse and recycling in 2018 by requiring EV manufacturers to establish collection and recycling facilities for spent batteries. In 2021, it placed a ban on importing EOL batteries and black mass that contains hazardous materials like lead and cadmium. Battery recycling in China has become a critical component of the country's strategy to address environmental concerns as well as resource scarcity, as it remained largely reliant on imports due to a lack of own lithium, cobalt and nickel resources.

In South Korea, the government released plans in December 2023 to invest Won 38 trillion ($28.8 billion) over 2024-2028 to support the secondary battery industry. Japanese companies like Sumitomo Metal Mining and Mitsui & Co. have also announced plans to set up domestic recycling facilities.

The US and Europe are experiencing a wave of investments in battery recycling as companies seek to fulfil policy mandates or qualify for additional subsidies. The US Inflation Reduction Act automatically qualifies EV battery materials recycled in the US for subsidies, regardless of their origin. Under the Critical Raw Materials Act, EU capacities of strategic raw materials are required to source at least 10% of mined material from the bloc, process at least 40% of that locally and be made 25% from recycled material. This has driven wide-ranging investments in battery recycling to reduce dependence on critical metal imports.

Growing landscape of recycled raw materials

As the global attention shifts toward sustainability and energy transition, Commodity Insights anticipates a substantial rise in the role of recycled battery material in the EV supply chain. S&P Global Mobility forecast that EOL automotive batteries will reach a staggering 530 GWh by 2030, becoming a significant source of raw materials supply for battery and EV manufacturing.

While recycling is expected to be the dominant approach for the first life of batteries, accounting 60% of all retired batteries by 2032, other solutions such as reuse and repurpose will eventually also end up in recycling.

In the short term, production scrap from gigafactories will serve as the primary source of recycling. Global production scrap is estimated to reach 86 GWh by 2024, with a projected increase to 200 GWh by the end of the decade. Combining all sources, available feedstock for battery recycling will amount to 522 GWh, equivalent to 16% of total battery demand by 2032.

However, the path ahead is not without challenges. Concerns on the geographical concentration of cobalt and nickel resources are greater compared to lithium, not to mention ESG risks such as the environmental impact of nickel mining in Indonesia and artisanal mining in the Democratic Republic of Congo. There are also challenges in developing new assets, such as longer permitting times, stricter ESG requirements and even social license.

As the race for critical minerals continues to intensify, the world will seek to maximize all available resources to achieve energy transition goals. The development of a circular economy through recycling will definitely have a key role to play.

Interactive developed by Leah Chen, Zuyu Tian, Louissa Liau, Euan Sadden, Katharine De senne, Noah Vasquez, Samantha Beh, Vincent Khoo, designed by Chris Isles