Automakers and suppliers concerned about the
availability of access to raw materials for electric car batteries
are turning their attention to alternative sources: scrap from
battery production and recyclable metals from end-of-life
batteries.
The expected increase in global EV sales by the end of the
decade will put huge pressure on the supply chain for critical
battery raw materials such as cobalt, nickel and lithium. For
example, despite a current surplus in lithium, demand projections
for the mineral will likely be in deficit by 2027, according to a
forecast by S&P Global Market Intelligence. That will
create a bottleneck for automotive supply and drive the industry’s
focus toward battery recycling to keep EV battery costs down,
according to a S&P Global Mobility analysis.
In addition to the ecological costs of mining, there are
humanitarian concerns accessing certain battery-grade raw
materials — such as sourcing cobalt from the Democratic
Republic of the Congo, where a variety of geo-political issues are
in play. There are also macroeconomic concerns regarding the
regional monopoly of mainland China in vertically integrating
material supply and refining. In addition to investing heavily
in offshore mines, mainland China controls most of the world’s
cobalt and lithium refining — the crucial middle step between
mining and cell manufacturing. More than 60% of both cobalt and
lithium are refined in mainland China.
In response, several countries have been mandating increased
local sourcing of raw materials. But countries not having natural
reserves for these materials will have to rely on recycling
end-of-life (EOL) batteries for their resources. By 2032, S&P
Global Mobility estimates around 900 GWh of EOL batteries will be
available for recycling. That’s the equivalent of batteries for 12
million electric vehicles.
Foreseeing a challenge in securing raw materials, several
automakers have established partnerships with raw-material
suppliers and recyclers. For example, Volkswagen and Audi have
partnered with Redwood Materials in North America, Umicore in
Europe, and Ganfeng Lithium in mainland China for battery
recycling.
Some automakers are setting up in-house operations. Early in
2023, Mercedes-Benz broke ground on a battery recycling plant in
Kuppenheim, Germany, that had been scheduled to begin mechanical
dismantling of EV batteries by year’s end. Tesla also has announced
plans for its battery factories to recycle batteries on-site.
In addition, production scrap is seen as a key play. Scrap
generated during battery manufacturing includes rejected or
defective batteries and materials or components that do not meet
quality standards. It consists of metals, electrolytes, and other
components. Scrap from cell production accounts for a large part of
the total production scrap, followed by battery-pack production
scrap and battery-module production scrap.
The hardest aspect of the battery manufacturing process to get
consistently correct is cell production, due to its complexity.
Therefore, this process inherently generates most scrap. For the
cell, S&P Global Mobility estimates a rate of 4-12% scrap for
steady production, based on the type of supplier and cell type. But
that number can be as high as 15-30% for companies in their
start-up phase. In contrast, for the battery module and pack, a
0.5% to 1.5% scrap rate is closer to the norm.
However, production scrap may see a diminishing rate of return
based on optimization of manufacturing processes, changing battery
chemistries, and even the evolution of the shape of the battery
cell.
Recycling is projected to provide significantly more battery
metals over the next 10 years. In 2023, around 40,000 metric tons
of nickel and 8,400 metric tons of cobalt will be recovered from
recycled lithium ion (Li-ion) batteries and production scrap
globally. Nickel will see a 28.1% compound annual growth rate
(CAGR) to around 382,000 metric tons by 2032, while cobalt will
increase by a 22% CAGR to 51,000 metric tons, according to S&P
Global Mobility analysis.
As a result, recycled cobalt from EOL recycled batteries and
production scrap is expected to meet more than 21% of the global
cobalt demand in 2032, up from around 12% in 2023. More than 19% of
the total demand of nickel in 2032 is expected to be met from these
recycled sources.
The economics of EV battery recycling
Even though there will be an estimated
95 million out-of-warranty electric vehicles by 2033, it’s not
a straightforward equation for high-voltage battery recyclers.
Although recycling requires less energy and generates less
pollution compared with mining, the economics of recycling may not
always be favorable without policy support.
A recent report by S&P Global Mobility (subscription
required) noted that differing regional government policies can
hinder consistent strategic plans for OEMs. For example, while the
EU passed regulations in July 2023 mandating EV battery recycling,
the US does not have similar legislation in place – opting instead
for incentives for manufacturing with local content, as outlined in
its Inflation Reduction Act.
Western OEMs and suppliers must also contend with the ascendancy
of mainland China – the largest market for end-of-life new-energy
vehicles (NEVs) – which is projected to dominate the skyrocketing
recycling scene. Total production scrap is expected to rise from 40
GWh in 2023 to 135 GWh in 2032, with end-of-life batteries expected
to rise from 16 GWh in 2023 to 438 GWh in 2032, according to
S&P Global Mobility analysis.
Despite the size of the Chinese market, there is little
opportunity for new, foreign players to enter the battery-recycling
business there. The 10 largest hydrometallurgy battery recycling
plants in mainland China already process a total of more than 1
megaton of batteries. In addition, in 2022, China had nearly 8,000
recycling players (each with more than RMB 10m, or $1.5m, in
registered capital); that number grew to 20,000 in 2023. Most of
these firms currently focus on production scrap, but EOL recycling
is projected to exceed production scrap in China in 2026, and in
the rest of the world in 2027.
As such, recyclers looking to get into the game will likely have
better chances and more opportunity setting up shop in the EU and
US, the S&P Global Mobility report stated.
Not that EOL recycling is an easy task. Changes in EV battery
systems will potentially make recycling more difficult. Dismantling
the pack, the crucial step in pre-treatment for recycling, is labor
intensive in that it must be done manually for a high-voltage
battery cell and module. That will become more complicated as the
industry moves from cell/module/pack to cell/pack – where the cell
body will be nearly impossible to disassemble manually because of
its module configuration. And by 2030 the pack and body
configuration is set to be in nearly 50% of EVs.
Changing battery chemistries affect processes
Availability of metals for recycling will vary significantly by
region and technology rollout. Owing to current demand for lithium
iron phosphate (LFP) batteries, mainland China will generate a much
higher availability of lithium from recycled batteries than other
regions. But the availability of cobalt and nickel will be much
lower for those batteries.
However, growth in demand for new-tech nickel cobalt manganese
(NCM) batteries in mainland China will ramp up much faster than LFP
batteries – thus increasing nickel recovered from EOL batteries in
the long term.
North America will have a stronger share of high-nickel
batteries. Between 2023 and 2032, availability of cobalt, nickel,
and lithium from EOL batteries and production scrap should grow at
CAGRs of 23.8%, 26.2% and 27.3%, respectively, according to S&P
Global Mobility estimates.
The US will likely be among the most active markets moving
toward cobalt-free Li-ion batteries, which will keep the demand for
cobalt from the region in check.
Europe is expected to have the highest levels of battery
recycling across all regions until the end of the decade, owing to
tightening local-sourcing regulations. Between 2023 and 2032 in
Europe, the availability of cobalt, nickel, and lithium from EOL
batteries and production scrap will likely grow at CAGRs of 24.7%,
33.4% and 32.1%, respectively.
Other than just serving as a source for critical battery raw
materials, recycling will play a key role in reducing the
environmental impact of batteries. During the life cycle of an EV,
battery cell manufacturing and raw material mining make the largest
contribution toward CO2 emissions. As such, battery recycling can
be seen as
a win on the sustainability front, as it will improve the
mine-to-wheel ESG score for EVs.
Matthew Beecham and Srikant Jayanthan contributed to this
report.
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This article was published by S&P Global Mobility and not by S&P Global Ratings, which is a separately managed division of S&P Global.
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- Source: http://www.spglobal.com/mobility/en/research-analysis/ev-raw-materials-supply-crunch-battery-recycling.html
