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White Paper: Battery recycling
Lithium-ion batteries (LiBs) already power the world’s personal electronics, and are set to grow even further as battery-electric vehicle (BEV) production ramps up to eat an ever-larger slice of the personal transportation pie. With all of the new and ever-larger battery volume products to come, it is inevitable that attention will focus on how to dispose of the batteries once the product they’re in reach their metaphorical end of the road. While it’s true that many LiBs have second life applications and options for refurbishment ahead of them, in the end, these can only prolong their useful life before they must ultimately must be disposed of.
LiB disposal systems vary widely across the world, but in all of them recycling is growing rapidly in importance. Not only are critical raw materials in battery production plainly insufficient for future demand from virgin sources alone, recycling will become easier as feedstock sources become more concentrated from the predominance of larger format EV batteries. Ideally, virtually all electric vehicle batteries will eventually be recycled, not only to minimize their environmental impact but also in order to recover their materials to produce new ones.
For all that the sector is expected to experience fantastic growth, the volume of batteries recycled is less than a tenth of that sold in 2019. Only part of that is due to low recycling rates. Batteries to be recycled today reflect the amounts sold 2 to 6 years ago (depending on application), and LiB sales have grown so fast that they quadrupled from 2014-2019. Additionally, the vast majority of volume available today is still from consumer electronics products, which makes them hard to collect and highly distributed. The coming of battery-electric vehicles will change that equation – larger batteries mean more battery mass in one place, which means that it is easier to gather – but for now, the sector is still in its infancy.
The major question now is not if, but how investors and policymakers can make global-scale LiB recycling a reality. Unfortunately, there remains a major unresolved question for policymakers and for businesses: Will LiB recycling operate like a traditional car battery recycling business, with legal structures in place and recyclers being paid gate fees in order for them to process economically? Or can the high value of LiB metals mean that private recyclers can make a profit independently of government structures?
Two Visions of Lithium-Ion Battery Recycling
Nowhere in the world is LiB recycling more developed than in the EU and China. However, the sectors have developed starkly differently, and provide contrasting visions for what things may look like in the near future.
In the EU, strong regulation in the form of the Battery Directive (and its upcoming replacement) has produced a sector that is focused on LiB recycling for regulatory compliance. Relatively early in the deployment of LiBs in consumer electronics, EU countries developed a policy to give responsibility for battery waste disposal to the producers of the batteries or consumer products containing them. LiBs were at first only a small part of this “producer responsibility” system and today are collected along with many other types of waste batteries, where they are disposed of by a constellation of providers across different countries. Most of these recyclers are relatively small and are not vertically integrated with battery cathode manufacturing. Some perform all recycling activity in-house, while others perform a limited number of front-end operations such as sorting, disassembly and recovery of battery electrode powder (also known as “black mass”) which is then sent to a downstream recycling provider, often a nickel smelter that feeds black mass as an adjunct.
One major feature of EU regulation has been that it mandates an escalating percentage of the battery’s material that must be recovered, even if that recovery is not necessarily economical. This has had a major effect on technologies developed for EU battery regulation compliance. Any technique which results in destruction of a part of the battery is automatically disfavored by EU regulation, and so pyrometallurgical techniques are increasingly disfavored even though combustion of plastics, graphite, and other parts of a scrap battery simplify the processes of separation. What pyrometallurgy still does occur does not feed whole batteries but has as many front-end steps to recover non-metal components as possible. Moreover, even purely hydrometallurgical recycling techniques developed in the EU focus on recovering minor, low-value components such as electrolyte and the accompanying solvent, graphite, and plastic scrap.
China provides a stark contrast in that LiB recycling is driven almost entirely by private companies without any overarching regulatory drive. While some national regulation has been put in place, the real actors driving the sector began well before the regulations were promulgated in order to service the country’s massive LiB battery cathode manufacturing sector. These manufacturers have long built massive battery manufacturing facilities, but have had trouble acquiring the materials to operate at full capacity. As a result, these players have vertically integrated recycling operations into their cathode manufacturing processes, first beginning with waste cathode scrap, and then continuing with LiB scrap purchased from collectors rather than relying on gate fees or producer responsibility systems. Without a doubt this has produced the world’s most extensive collection and recycling system for LiBs. For comparison, in China national lead-acid car starter battery recycling rates were no more than 30 percent in 2019, according to the Shanghai Metals Market.
This focus on serving the cathode manufacturing sector extends into other aspects of the Chinese recycling sector as well. In contrast to the EU, Nexant E&CA’s study of technologies operating in China has shown a priority solely for valuable metals recovery, with plastics, electrolyte and graphite scrap often disposed of through destructive means like calcination. While the Chinese sector largely does not generally use fully pyrometallurgic processing, many players have enthusiastically embraced pyro-hydrometallurgic hybrid processing despite the potential environmental implications and lower recovery percentage that results.
Outside of these two regions, LiB recycling operates on a more ad hoc basis. To an extent, Chinese demand for LiB scrap has encouraged the setup of subsidiary recycling operations that ship their product to China, particularly after in 2017 China banned imports of e-waste. Notably, major operations have set up to process imported e-waste in South Korea. However, major potential markets such as those in North America remain relatively untapped, with indications that both compliance-driven and materials recovery-driven models could be possible.
Despite extensive development, neither the EU nor China provide definitive answers to what the final business model will be
On the one hand, there is little doubt that government support helps LiB recycling industry set up more quickly, and it certainly allows for recycling to pursue other goals besides pure profit as the EU Battery Directive or its likely successor regulation does. On the other hand, profitable recycling is an attractive possibility because it opens up many opportunities for rapid, privately driven sector-wide deployment and the capture of windfall profits once large volumes of battery scrap become available – and from the policymaking side, it means that battery disposal is less of a problem.
Despite the highly developed battery recycling sectors in China and the EU, the truth is that evidence from the field on business models is mixed.
Private lithium-ion battery recycling industry has taken firm root in China, and producers have been reported to pay for feedstock rather than accepting tipping fees. In addition, a privately driven, independently developed waste battery collection industry has developed to serve the sector. All of this would seem to suggest that battery recycling can be profitable without regulation. However, this is complicated by a number of different factors. One major issue is the high degree of integration that the Chinese recycling sector has with its own domestic cathode manufacturing. The lithium-ion battery sector has been widely reported to be feedstock constrained. This, combined with the well-known preference of Chinese businesses for operating rates and high-volume production over profitability, leads to the possibility that the various battery recycling firms in China have been using the profits from battery cathode manufacturing to support recycling through high transfer pricing or inter-firm supply agreements. In addition, these reports of battery feedstock bounties may only apply to lithium-ion batteries with the most valuable metal contents, and not all types.
Despite being relatively opaque, even clarity on the profitability of enterprises in the EU would also fail to provide clear evidence. While EU regulation does mandate that all battery types be recycled, which removes a source of uncertainty seen in the Chinese case, the EU’s Battery Directive’s emphasis on materials recovery has increasingly caused processes to focus on otherwise uneconomical components of LiBs. In addition, the EU’s focus on national rather than pan-European implementation of its LiB recycling has caused a proliferation of small manufacturers that cannot take advantage of economies of scale.
Finally, in areas where battery recycling is notably underdeveloped such as North America, lithium-ion battery recyclers are known to accept tipping fees for offtaking feedstock, as would be expected from an otherwise unprofitable, compliance-driven sector. However, this too is not necessarily indicative of profitability in the sector as North America and other jurisdictions such as Australia are known to have had such limited capacity for recycling lithium-ion batteries and other forms of e-waste that they exported vast volumes to China until 2017, and continue to do so by proxy. Regardless of the ultimate value of the enterprise, one would expect a recycler to accept tipping fees as a windfall reward for offering waste offtake ability in a constrained market.
Technoeconomics Provide The Missing Link
The question of whether battery recycling can be profitable once the industry enters a more mature state ultimately comes down to a question of economics. NexantECA recently completed an economic study based on major competing technologies for lithium-ion battery recycling which sheds some light on this question.
One major aspect to consider is what battery types must ultimately be recycled. The majority of value in a given lithium-ion battery is contained in only three components: lithium, nickel, and cobalt. Manganese and aluminum, though a component of many otherwise valuable LiB cathodes, are both uniformly recovered as low-value oxides. Iron found in olivine-type lithium iron phosphate (LFP) cathodes is also widely considered to be low-value because it cannot be recovered while retaining its structure. As a result, the recovery value of a battery varies widely based on the type of LiB being recycled. To investigate a wide variety of scenarios, NexantECA investigated thousands of potential scenarios with different proportions of batteries drawn from 8 major types of LiB cathode currently in use.
Another major aspect to consider is the technology in use. As it exists today, the big divide in battery recycling technology is between pyrometallurgic and hydrometallurgic technology, both of which are outgrowths of older, established processes. These technologies have fundamentally different inputs and capital requirements.
Pyrometallurgic methods see batteries fed into metal smelters (or else purpose-built smelting furnaces) that use high temperature chemistry and separation to get valuable metals out as reduced species. Today, a large portion of the world’s LiB recycling capacity relies on nickel and copper smelters. However, these processes are inherently limited by the fact that only a small part of their input can be batteries. There is only one purpose-built pyrometallurgical process for recycling batteries, which is Umicore’s UHT process.
Hydrometallurgic technologies, and related technologies that incorporate some pyrometallurgic processing but stop short of reduction, primarily use strong acids to dissolve valuable metals and then use a combination of temperature and pH manipulation along with solvent extraction to selectively purify and recover dissolved metals as salts. These processes are derived from experience in the mining industry where similar leach processes have long been used to recover valuable metals from oxide ores of nickel, cobalt, copper, and other non-ferrous metals. The majority of purpose-built LiB recycling processes use a primarily hydrometallurgical flow.
NexantECA found in its study that the ability for a battery recycler to accept lithium-ion batteries and process them profitability is fundamentally mixed. Battery feeds with high levels of valuable materials in the electrode produce acceptable returns on investment; however, if iron or manganese content in the feed reaches above an approximate combined 40 percent of the metal entering the process, even the most economical processes cannot produce an acceptable profit.
In the extreme case of a feed composed solely of LFP batteries, NexantECA’s modelled hydrometallurgic process would produce less than half of the revenue needed to offset the cost of processing, with recovered lithium carbonate as the top product, copper and aluminum current collector foil scrap as distant second and third, respectively. The result is even worse for a pyrometallurgic process as in these scenarios lithium is lost to the slag, for which there is no current process to recover it.
One longer-range worry given these economic results is that as battery cathodes move towards lower cost materials, the value proposition of recycling will change drastically. We have already seen many new chemistries to reduce the proportion of cobalt in LiB cathodes, with the latest NMC versions to hit the market containing nickel at 8 times the molar ratio of cobalt and major manufacturers such as Tesla committing to LFP batteries. Future battery chemistries promise further reductions in the use of metals with unstable or insufficiently expanding supply chains. While this may have salutary effects on the availability of low-cost batteries on the market, it is likely to detrimentally affect LiB recycling economics in the future simply due to the lower value of these components.
The implications of this study are that LiB battery recycling can handle only a limited amount of LFP and LMO batteries before the processes become uneconomical. Clearly, with LFP batteries gaining in popularity in many applications including automotive ones due to their low cost, and the continued low but steady penetration of LMO batteries in automotive battery packs due to their rapid charging and discharging properties, certain lithium ion batteries will require tipping fees or other forms of government supported payments in order to process the materials for metals recovery.
While the good news is that a privately funded and supported lithium-ion battery recycling business, much like the recovery of precious metals from automotive catalytic converters, can support itself with a large proportion of the LiBs sold today, the fact remains that private recyclers will likely seek to reject as much LFP and LMO batteries as possible. Many recyclers and recycling service companies are undoubtedly developing their announced technologies for cathode sorting on waste batteries for just that purpose, not merely for process optimization. Moreover, it suggests that the Chinese solution is ultimately incomplete, especially considering that the majority of waste battery mass currently available in China is LFP (though the largest domestic users have relatively recently switched to other battery chemistries).
The bad news, however, is that for the foreseeable future, reaching 100 percent levels of recycling will require public support. While these batteries do contain valuable supplies of strategic metals, particularly lithium, their value is certainly not enough to justify recycling on a private basis with today’s technology. The safe and environmentally friendly disposal of low-value batteries is already a strong government imperative, but outside of the EU these systems have not been explicitly updated for the reality of coming volumes of lithium-ion batteries. The gaps in private profitability shown by NexantECA’s study adds urgency to the already strong need for regulatory frameworks.
The Author...
Joshua C. Velson, Consultant
Americas
About Us - NexantECA, the Energy and Chemicals Advisory company is the leading advisor to the energy, refining, and chemical industries. Our clientele ranges from major oil and chemical companies, governments, investors, and financial institutions to regulators, development agencies, and law firms. Using a combination of business and technical expertise, with deep and broad understanding of markets, technologies and economics, NexantECA provides solutions that our clients have relied upon for over 50 years.
