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The three key things you don’t know about the lithium-ion battery recycling market

Battery recycling is widely expected to provide the lithium-ion battery (LiB) industry with a long-term solution to some of its greatest challenges, including the scarcity of supply of battery-grade active materials and finding ways to close the loop on the supply chain to improve ESG credentials. By 2030, the pool of global metals recovered (primarily nickel, cobalt, lithium, and manganese) via LiB recycling is expected to be close to 2 million tonnes per annum, rising to nearly 8 million tonnes by 2040 at a compound annual growth of 16 per cent between 2030 to 2040 (source: Rho Motion, 2023).

At this early stage of development in the LiB recycling industry, multiple actors in the value chain are taking proactive steps to build the capability and capacity to recycle second-life production and battery scraps, however, at present, no single LiB recycling player outside of China has comprehensively resolved the challenge to convert second-life scrap materials to battery-grade materials as a viable business at scale.

Unsurprisingly, there is little transparency and consistency when it comes to reporting key performance indicators in the LiB recycling space; cost structures, payables, feedstock inputs, recycling throughputs, process flows and recovery rates are all closely guarded as emerging players strive to create viable scalable business models whilst protecting their IP.

This, of course, makes it incredibly challenging to produce meaningful comparisons from recycling operation to operation, which, accordingly, deters investors from making key investments that are needed to stimulate growth in the sector. In the absence of definitive harmonisations, Rho Motion presents some of its key observations for those considering positions in the sector.

There is no consistent mechanism for payables

Recycling players wish to model their profitability and tolerance to market and future supply chain dynamics through an understanding of payables, whether those are for black mass, battery-grade active materials or intermediates. The choice of business model is likely to be strongly determined by the profitability, for example, the type of tolling or buy/sell arrangement.

At present, the price mechanism for black mass payables is developing but not robust, while those involved in post-treatment hydrometallurgical processing are not always sure as to whether recycling should command a processing or green price premium, cost pass-through or another pricing mechanism. The difference in composition and purity of recycling outputs, particularly black mass, from operation-to-operation means there is always likely to be ambiguity in the pricing of those materials, and therefore should be treated as speciality materials with unique price points, agreed between buyer and seller, rather than a market price.

The mechanism for pricing of payables is likely to evolve as current recycling players recycle greater volumes of production scrap than battery scrap; the former commanding a higher recovery price because of the higher purity inherited from the feedstock. The evolution of pricing is also likely to change as end-of-life battery volumes, especially from electric vehicles, become the dominant feedstock in the early 2030s. Recyclers will be faced with the prospect of deciding whether they are comfortable taking on a tolling arrangement if it minimises the risk of securing access to increasingly greater volumes of feedstock material.

Current evidence collated by Rho Motion suggests that tolling arrangements don’t really exist as a gate fee but are more incorporated into revenue models based on the metal payable (based on purity and recovery rate), essentially a concept of an implied tolling charge. Payables are expected to be around 60-70 per cent, like those achieved in chemical refining. Equally, recovery rates for any given operation must be scrutinised before definitive conclusions can be made regarding the potential payable. Fundamentally, the questions that should be asked are: what is the recovery rate being reported and for what material?

Profitability delta is likely to be wide from operation-to-operation; treat financial comparisons with caution!

Recycling process flows are often a closely guarded secret and therefore it’s virtually impossible to understand the true cost structure of all recycling operations. For hydrometallurgical players, the differential on the opex can be incredibly wide, determined by multiple variables such as the type of reagents used, maintenance, and utilities; owed to the unique requirements of the operation, including feedstock inputs, processing steps, type of reagents, quality of the output and yield and level of vertical integration from the point of disassembly through battery-grade chemical recovery. Furthermore, both capex and opex will be determined by the degree of vertical integration within the process, for example, those that can perform pre-treatment (black mass refining) and post-treatment (hydrometallurgical extraction) are likely to find a clearer path to cost optimisation than, say, those who only undertake post-treatment by inheriting black mass from third-party suppliers. Fundamentally, profitability is sensitive to the cost structure, payable and the recovery rate.

The current landscape from battery collection to black mass refining is a Wild West

At present, most of the world’s black mass-produced is either transported to South Korea or China because it is logistically easier and cheaper than transporting batteries for disassembly and shredding. Modern processes include local collection hubs, with initial comminution and separation of materials to obtain black mass. Currently, the industry is the Wild West for the collection and sale of EoL batteries, with middle-men acting within and setting unique price points based on their capability and output, some of whom are merely brokers with little experience.

Greater regulatory control would, in theory, harmonise this part of the supply chain, but requires a universally agreed global policy to remove the disparities associated with handling, processing, transporting, storage, and disposal of batteries and black mass material. Furthermore, the fact there are likely to be multiple battery technologies available for EOL in the next decade means that recyclers and investors should get comfortable with the idea that it will be difficult to harmonise the composition of black mass content and therefore more pertinent to pivot according to the availability of EOL battery feedstocks that are available.


The LiB recycling industry is still in its early stage of development, however, multiple players are taking an early position to build capability and capacity to address the tremendous opportunity on the horizon, especially when a significant volume of EOL batteries from electric vehicles becomes available for recycling post-2030. And, they will require investment to scale.

Those involved in the LiB recycling sector are trying to gain a better understanding of the cost structures and payables to determine profitability, however, this is currently challenging when most of the operations are at pilot-scale or conceptual. For recyclers, payables will be key to determining profitability, driven through evolving contractual arrangements, both with suppliers and off-takers. The type of business model will be determined by the economics, and therefore will likely be unique to the specific operation. For vendor due diligence, understanding the unique commercial and technical challenges for battery recyclers will be key to determining the level of risk and, ultimately, the potential financial rewards for any given asset.

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