Electric car: battery race demands recycling – 09/08/2023 – Market

From East Asia to Europe and North America, companies in the battery supply chain are investing billions of dollars in recycling capacity as they face projected shortages in the raw materials that will power the next generation of electric vehicles.

But as automakers, battery producers and miners develop their own recycling capacity or partner with experts in an effort to make supply chains safer, greener and, ultimately, more profitable, issues still need to be resolved. fundamental elements of the nascent industry.

“Right now, everyone is worried about what to do to set up all the battery factories we need,” said Andreas Breiter, who runs McKinsey’s Center for Future Mobility in North America. “But in about ten years the question will be what do we do with all these batteries when they come back.”

It’s not yet clear which battery chemistry will prevail in the global race between Chinese producers CATL and BYD and their Korean and Japanese rivals, making it difficult to know which recycling processes will be needed.

Uncertainty also hangs over future regulation, material prices, recycling technologies, and even who will own an EV (electric vehicle) battery at the end of its useful life—all of which will play a role in the development of the industry. and the viability of specific business models.

“There’s a sense of disarray in the industry because no one has been through this before,” said Simon Linge, chief executive of battery producer and recycler Lithium Australia.

“There will be people who are not even talked about today and who in five or ten years will emerge as major players in the market.”

Battery recycling, which typically involves smelting, chemical treatment or both, also has its own environmental impact, and recyclers face the challenge of demonstrating that their production will remain greener and more economically interesting than mining the materials, given advances in the cleanest extraction techniques.

With few EV batteries already reaching the end of their useful life, the main sources of raw materials for recyclers remain cells from consumer products like laptops, and “scrap” from battery factories.

Production scrap will represent 53% of the raw material for battery recyclers in 2025, according to McKinsey projections. But that number will fall to 43% by 2030, 14% by 2035 and just 6% by 2040 as more EVs are sold — the International Energy Agency predicts the global fleet will grow to 350 million vehicles by the end of this decade .

“We see industrial scrap as the main driver of recycling volume this decade,” said Tim Johnston, president of Li-Cycle, a New York-listed battery recycler backed by commodities group Glencore. “The end of battery life will be in the next decade.”

The upcoming transition poses a dilemma for recyclers because the logistics and business models for recycling scrap and end-of-life batteries are very different.

For recyclers focused on scrap production, it makes sense to have facilities close to battery plants to circulate materials back into the production process.

In North America, where battery production is being boosted by US President Joe Biden’s climate legislation, this has led to a series of partnerships between manufacturers and recyclers.

Redwood Materials, a recycling startup founded by former Tesla chief technology officer JB Straubel, announced a deal last year with Panasonic, the EV maker’s battery partner, to supply nickel-rich cathode materials for the new factory. from the Japanese cell phone maker in Kansas.

Similar partnerships have been agreed between Canada-based Li-Cycle and Korean producer LG Energy Solution, and between Massachusetts-based recycler Ascend Elements and Korean battery maker SK.

End-of-life batteries, on the other hand, need to be collected from vehicles and assessed for safety and performance before being dismantled and subjected to the recycling process.

With cellphone and car manufacturers and individual consumers likely to claim ownership of a battery, it’s unclear how recyclers will ensure a steady supply.

One model is to have the battery manufacturer, automaker or third party own the battery for its entire useful life. A battery manufacturer could lease it to an automobile manufacturer and then to a consumer, and then reuse or recycle it when it can no longer power a vehicle.

Sam Abuelsamid, an analyst at Guidehouse Insights, said the model is “a kind of loan securitization — you’re securitizing the battery,” and that it could be a natural fit for automakers, which already operate captive finance arms that lend money to customers. for new vehicles.

In China, where the EV, battery and recycling markets are more mature than in the West, CATL has formed a closed-loop partnership, allying its recycling subsidiary Brunp with Chinese recycling group GEM and Mercedes-Benz China to recycle batteries after the useful life.

This offers a potential model whereby automakers — some with battery ambitions — and recyclers work together to secure end-of-life batteries to create their own closed-loop systems.

In the US, Redwood Materials is building closed-loop partnerships with Volkswagen, Ford, Volvo and Toyota.

But some industry executives, noting the logistical challenges of overseeing the collection, assessment, transportation and dismantling processes as well as recycling itself, are skeptical that the closed-loop system will prove attractive in the long term.

The model is further complicated by the fact that a battery that is no longer suitable for use in a vehicle can still be used for other purposes, from lighting streets and houses to powering appliances or offering energy storage.

“It is absurd and against all logic not to try to make the most of used electric vehicle batteries, knowing the effort, research and development, energy, materials and investments involved in their development”, said José María Cancer Abóitiz, responsible for the Mobility Lab at insurance company Mapfre.

Noting that the recycling market is already “much less structured” than the rest of the battery supply chain, Mathias Miedreich, chief executive of Belgian recycler Umicore, predicts the market will bifurcate as recyclers build supply chains separated for scrap and end-of-life batteries.

“It’s a question for companies like us where to have their battery facilities,” Miedreich said. “You should put them near the battery world or near where the [fabricantes de automóveis] develop their cycle? It may be that two ecosystems are forming.”

The industry will also be shaped by technological and political developments in Europe and the US, where they strive to limit China’s dependence on emerging industries and establish domestic supply chains.

The European Union has passed regulations aimed at creating a “circular economy” of batteries, preventing spent units from leaving the block, determining that they have a minimum recycled content of 16% for cobalt and 6% for lithium and nickel.

Brussels aims for 65% of the weight of lithium-ion batteries to be recycled by the end of 2025.

Sarah Colbourn, senior analyst at consultancy Benchmark Mineral Intelligence, said Chinese recyclers, who are currently “way ahead” of their Western peers in technology and scale, are looking to enter European and American markets through partnerships with local players.

She highlighted EU officials’ “real concern” about battery materials leaking from Europe to China, harming the development of Europe’s recycling industry.

One option considered in Brussels, she said, is for “black mass” — the pressed remains of batteries after removal of unwanted steel and plastic — to be redesignated as hazardous waste, as a way of preventing it from leaving the block.

Another consideration for Western recyclers is whether the lithium iron phosphate, or LFP, batteries that dominate the Chinese market will win the global battery race against the nickel-manganese-cobalt, or NMC, batteries in which Korean and Japanese manufacturers are specialized.

Because iron phosphate is much more abundant than the nickel and cobalt used in NMC batteries, the value of materials recovered from recycling an LFP battery is considerably less, meaning LFP recyclers tend to have significantly lower margins. .

This problem is smaller in China, where recyclers operate on a large scale and with lower capital costs. But it could have repercussions for Western recyclers — and, in turn, Western ambitions for environmental and resource security — if the LFP prevails.

Meanwhile, McKinsey’s Breiter notes that the industry could still be upended by proprietary techniques developed by a new generation of small recycling companies.

“New technologies are announced all the time, new technologies are in development, and there could be a breakthrough at any time,” he said.

“We don’t know what we will recycle in the future, we don’t know what techniques we will use, we don’t know how regulations will evolve, nor how the materials market will work,” added Breiter. “These are the things that will determine the commercial viability of the recycling model.”

Translated by Luiz Roberto M. Gonçalves