Lithium-Ion Battery Recycling Market: Drivers and Restraints

By Battery Power Staff

February 16, 2021 | The lithium-ion battery recycling market is driven by a variety of key drivers and restraints that vary market to market, Akihito Fujita told the audience of the Advanced Automotive Battery Conference, Europe last month. Fujita is a senior manager at Nomura Research Institute America and he pays particular attention to the LIB battery market.

Market outlook is complicated, he explained, and varies heavily depending on the strengths and weaknesses of each part of the puzzle. He outlined five drivers that define market scenarios: LIB market expansion, cost structure and profitability, technology and investment, balance between reuse and recycling, and regulations and safety requirements.

Five Drivers

LIB market expansion, including government subsidies and regulations, impacts the electric vehicle market as well as OEMs’ electrification strategies. These, in turn, impact the demand and profitability of recycling efforts. The volume of waste batteries for electric vehicle batteries is very small, Fujita said. Consumer batteries make up the vast majority of recyclable batteries—about 97,000 tons in 2018. China and South Korea hold the majority of LIB recycling volume—China with 69%, Korea with 19%. Over 20 companies are involved in recycling waste batteries in China and six in South Korea. In the EU and North America, on the other hand, waste batteries are not routinely collected, but exported or sold for reuse to Asian processors.

Cost structure and profitability of recycling itself is important, including the automation of the process, energy costs to run the facilities, and regulations and options for dealing with toxic gases. In Europe and the US, it is difficult to make battery recycling economically viable, Fujita said. Recyclers must pay for spent batteries. Transportation and dismantling of batteries are labor-intensive and not automated. And the metallurgy required to extract nickel, cobalt, manganese, lithium, aluminum, and copper does not lend itself to economies of scale. For example, in Europe in 2020, NRI estimated that if the cost of battery recycling was $63/kWh, the revenue realized from selling the extracted metals only came to $42/kWh.

The situation is changing, though. NRI believes that after 2025 recycling costs will go down thanks to improved automation, transportation, and metallurgy efficiencies as volumes increase. “NRI believes that after 2025, Europe should be a profitable market for recyclers based on economies of scale,” Fujita said, and predicts even stronger profitability by 2030. In China, LIB recycling is already profitable due to its scale and local factors such as lower electricity costs and less stringent environmental compliance.

Technology and investment opportunities for recyclers will impact the scale of their work, in particular the ability to raise capital. Monetizing the recycling business requires a collection system and extraction chemistry, and to do both at scale. It will be hard for single recycling companies to achieve that. “It will be important for multiple companies to work together to overcome these hurdles,” Fujita said.

Each market also has a unique balance of recycling and reuse. For instance, Fujita explained, in Japan there is a lot of focus on battery reuse, and not as much on recycling. In China, though, battery recycling is more established and only recently have reuse companies been gaining traction.

In the early stages of market formation, Fujita believes that a dedicated player for lithium-ion battery recycling—rather than a company doing both recycling and reuse, or a firm offering general battery recycling for multiple chemistries—will be at a disadvantage. In fact, Fujita says that lithium-ion battery reuse is seen as a more profitable market in Asia. “Although there are various challenges, NRI believes that it is important to achieve total optimization by appropriately combing reuse and recycling.”

Finally, local regulations can dictate the minimum level of recycled content in new batteries, and these types of regulations greatly impact the market. In Europe, NRI predicts that rule-making will be necessary to make the lithium-ion battery recycling business profitable. In China, illegal recycling players are still very active, processing up to 70% of waste LIBs. Fujita says these illegal players operating without compliance will hinder the development of a sustainable lithium battery recycling industry.

2025 Predictions

Of these factors, compliance with regulations and active technical development are the two factors that most impact LIB recycling profitability, Fujita believes. Currently, NRI ranks the Chinese LIB recycling market as unsustainable growth: many illegal players are not complying with regulations. “I hope this situation will change by 2025,” Fujita said, based on stricter governance put in place in 2019. If so, China could achieve a sustainably profitable LIB market by 2025.

In both the US and EU, battery recycling is not economically viable right now, but both markets are technically ready, with startups investing in both the science and technologies needed to scale recycling. NRI predicts these markets will move to sustainable profitability, surpassing China by 2025.

Finally, in Japan, a few major companies are piloting lithium-ion battery recycling, but LIB recycling is not currently accepted by the market and is not economically viable. “If this continues, Japan companies will fall behind after 2025 when the market for lithium-ion battery recycling is established,” Fujita said.