Why smartphone batteries won't be an important source of cobalt in Europe

Over the last days we have read in media about the potential to recover cobalt for EV batteries from smart phone batteries. Not really breaking news as these batteries, together with the alikes from laptops, tablets and cameras have been the main feed stock of waste lithium-ion batteries for years.

But there is certainly room for improvement. 1.6 billion smartphones have been claimed (by Fairphone) to lie idle in people’s homes to basically no use.

With a 100% recovery efficiency that’s cobalt for 400,000 Chevy Bolt or almost 20% of all electric vehicles expected to be sold in 2018.

So why don’t we go out and get 'em?

Before answering that, let’s just ask ourselves if 1.6 billion is a number that makes sense.

Last year we bought another 1.4Bn new smartphones to be able to take even better selfies, and send new emojis. That’s only slightly fewer than the year before.

Research tells us that about 50% of the smartphone buyers will keep the phone they already had.

Usually because they thought they needed a spare. But actually, when people are asked about how many spare phones they have in their drawers, the average is 1.65 phones per user. Given that we 2017 were 2.4 billion smartphone users that means the total number could be even higher: 3.96 billion phones could lie idle in people’s homes doing no more good than storing old photos nobody knows how to retrieve.

But is it really that simple? Not really. Let’s just look at the chosen populations in this kind of research. In 4 out of 9 studies the survey responders were students at universities in UK and US. Two studies asked less than 100 people. Interestingly in surveys with unspecified participants the average hoarding was significantly less and it was less frequent in low income groups and non western countries.

What if we have asked the wrong people?

Let me take by your hand, and lead you through the streets of London (or Los Angeles, Sao Paulo, Nairobi, Guangzhou…)

Between the Turnpike lane and Wood Green tube stations, a stretch of half a mile not far from where I live in North London, there are some 30 shops which sell mobile phones. The area is highly diverse with people from all cultures and income groups. However, the high street, where all the phone shops are, is less frequented by the really wealthy.

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There are three different kind of stores, of which all are part of the same eco system.

First we have the carrier stores. O2, Vodafone and EE as well as some independent retailers are offering almost free iPhones when signing a 24 months’ plan.

Secondly we have the cheap phone stores. These are the stores you will go to when you start to crunch the numbers in the carrier’s deal and realise you can buy an iPhone 7 Plus for less cash than you expected, and then use a dirt cheap plan with no phone attached. Usually these stores have 100s of phones on display, many of them of the same type. And if you fancy something less extravagant they will also have old-fashioned feature phones and a couple of Blackberries on sale.

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Lastly we have the second hand shops. Sometimes they look very similar to the cheap phone shops, and indeed they are packed with cheap phones. We also have franchise stores like CEX that have conceptualized the buy back process. Here you will find phones which often looks like brand new but also those with scratches and more wear and tear.

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How are these shops connected and what on earth has it to do with cobalt?

Patience please.

The carrier stores are the “top producers” in the reverse food chain of smartphones. It’s through them and their equivalents on the web the chain is fed with new phones.

Increasingly often their deals include buy back of the old phone, which can trigger a decision through a discount on the new contract. These phones are, together with those purchased through sites like Envirofone and phones from insurance companies, the main supply to the next store category, the cheap phone stores.

However not directly.

Even though many phones will be checked and prepared for sale in the UK (or elsewhere in Europe or US) the majority of the phones will travel to Hong Kong and then further to Shenzhen in China. Here these phones will be graded and refurbished in plants which often look nothing short of the factories that made the phones in the first place. Broken phones will be used for spare parts in phones in better condition or to be sold on the local component markets. Phones with heavy wear and tear will go to the domestic market or to markets like Africa and other Southeast Asian countries. The best phones will be sent to stores all over the world. Often, which is the case in Wood Green High street, they will in fact be sold as new. They will come in branded boxes with at least similar peripherals as if you would have bought them from the original vendor.

Basically this means that many phones will travel from O2’s store to the cheap phone store next door, via Hong Kong and Shenzhen.

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Finally phones will be sold in the second hand stores. A company like CEX will keep the phone for sale in the local store and will normally don’t do any refurbishment. However other stores, that usually also provide repair service will buy phones and then sell them further to traders. Again, these phones will travel to Hong Kong most likely with a different, less demanding destination after it has been refurbished.

The consequence, together with the fact that all Apple phones and an increasing number of Android phones have built in batteries, is that most batteries are harvested in China. The same thing is happening with laptop and tablet batteries.

These batteries contain about 20% cobalt. And they are an important feed stock for Chinese recyclers that use them to produce ternary cathode material to new batteries.

But this is only a marginal phenomenon?

No it’s not. Because with the smartphone everything changed. As when it seemed impossible to figure out if your contact list was stored on your SIM or on your phone, both Apple and Android has made transitions between phones significantly easier. It’s also easier to wipe out all the data yourself and trust that it is gone. Add to that the ability to upgrade the software which enables you to use a five year old phone and still enjoy the same functions as someone with a brand new.

According to IDC the reuse industry will ship more than 150 million smartphones in 2018. That’s less than 10% of the entire market but it’s more than 15% of the smartphone market in 2013 (the year my own iPhone 5S was the top seller). Also to be able to ship 150 million phones you need as much as the double amount to begin with. That’s 300 million. Additionally, the most popular phones are the Big2: Apple and Samsung, which dominate the Western markets.

On top of that we have the entire direct reuse industry like Ebay and informal second hand stores. To not mention the charity industry. Although programs for homeless and other disadvantaged people will absorb some of the volumes, a large portion of these phones is also going overseas. And these are not included in IDC’s numbers.

This is why you won’t see many phones in the e-waste collection. And why so few batteries go to battery recyclers in Europe and North America. But it’s not the entire reason. Because the same companies that buys the phones in Hong Kong are also interested in the waste batteries the e-waste companies remove from the phones. Some of them will be relabeled and sold as “non-original but new” when they actually are “original but old”. Which is one of the reasons why a battery replacement on Wood Green High Street costs £20.

But with a cobalt price north of $80/kg they might sooner rather than later go directly to Chinese cathode production supported both by Chinese subsidies and favorable prices downstream due to high local demand. The value of the cobalt in 1 kg mobile phone batteries is today over $16 or £13. Reuse companies usually pay $4 per kg. If that can yield 25% good batteries to sell for $1 each it will generate $10 per kg with three quarters of the batteries left to sell to recyclers. A fairly good deal.

In Circular Energy Storage’s analysis of the end-of-life market for lithium-ion batteries, we are bearish on lithium-ion recycling in Europe and North America. This is one of the reasons. If you are interested to understand the basics of the market you are welcome to contact us.

Finally, could a deposit be used to pull the phones from people’s drawers?

Well, then it must be high. I admit that I have one phone also in my drawer. It’s a Samsung Galaxy S3 from 2012 (which I picked up from an e-waste recycling bin in Sweden). Yesterday in Wood Green I got an offer of £35 for it (while I was offered £55-£105 for my iPhone 5S). As you can see below it’s not bad on the Internet either.

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Do people care about £35? Well I certainly do. And if you belong to the more than half of UK households that brings in less than £115 a day before taxes, I am sure you do. People with lower incomes buy smartphones but they won’t make a museum out of their old ones. They will sell them. If you would like to buy a nice bottle of wine tonight you should do that too.

So what would make the batteries stay in Europe?

Make sure the phones and batteries are graded and refurbished here. And let’s start to make batteries so the recyclers have someone to sell their material to.

Hans Eric Melin