There is no such thing as status que in battery reuse and recycling

What we saw in 2021 and what we expect from 2022

A few words about how we at Circular Energy Storage experienced the market in 2021 and what we will look for in 2022.

When battery recyclers buy scrap lithium-ion batteries, or black mass, the not so specific intermediary powder from crushed cells, the prices are usually set as a percentage of the price at London Metal Exchange (LME) of the cobalt and nickel contained in the material. Usually that percentage, or discount, is around 50% to 80%, often after a fixed process fee is applied. However, in China the discount is currently hovering around 110%. That means that recyclers are paying more for the batteries than what they theoretically can get paid for the material inside them.

Or does it really mean that?

In the batteries there is also around 2% of lithium. Obviously the most vital substance in the batteries but also notoriously known for being unprofitable to recover from scrap. But that essentially depends on its value. Since the beginning of 2021 the price of lithium carbonate, the chemical required to make many of the various lithium-ion cathode types, has increased with almost 900%. In all cell chemistries but LCO, lithium is currently the most valuable element. In fact, an LFP cell, known to be the least valuable battery chemistry for a recycler, has today a recoverable value which is higher than any nickel-based cell at the beginning of last year.

Prices for active materials based on metal contained in Ni/Co/Mn sulphate (battery grade) and lithium carbonate (industrial grade). Prices from Shanghai Metal Market. All others on metal prices from London Metal Exchange.

Generally high raw material prices are great for any recycling industry. The higher the price, the more value can be shared throughout the value chain and drive the material through the initial costly collection and preparation phase on to the value-creating processing of the material. And this is also what now is happening. When there is value in the market more players put in more effort (and $) to make sure valuables aren’t left behind.

But for batteries the surge in material prices have also another effect: batteries are becoming more expensive. For the first time in several years the prices for batteries in electric vehicles increased in the last months of 2021 as reported by BNEF. Together with the already ongoing crunch in semiconductors this is taking its toll on the electric vehicle industry which can’t keep up with the rapidly increasing demand we see in the whole world. This has led to a huge increase in prices for all kinds of used vehicles, but not least for EVs.

One year ago, the average value for a used Tesla Model S (base model) 2012 in the US was $31,350. Now, when the model is another year older, it’s close to $36,500. The average price for a Nissan Leaf from 2011, an 11-year-old car, has increased from $5450 to $7,628 in the US and in the UK the average Leaf from 2011 will set you off £6,580 or $8,800. This means that a car that might have been written off after a collision a year ago, will now often be worth enough to repair. Workshops and traders in export markets, which are the big buyers of both used and write-off vehicles that still have a slight chance to make it back on the road, now either must pay more or accept even more damaged vehicles, which they now can afford as prices generally are higher.

The situation is similar in China, where export of the used vehicles has become more and more common but where also the importance of the domestic secondhand market has increased, due to lack of enough supply of new cars.

Add to this an increasing oil price which makes an EV with only a 40 miles range to a vehicle a commuter can pay off quickly. We then have enough evidence to suggest that electric vehicles, and their batteries, will remain for many years on the road.

This hasn’t had an immediate effect on recyclers as it hits harder against the reuse market, where most used EV batteries end up. Although we haven’t seen a signficant rise in prices for these batteries, the prices at least remain stable despite that the batteries technically get older. That prices for the most popular batteries will remain high is also supported by the increase in number of companies which now are working to organise the trade, develop technology for testing and grading of the batteries and design new applications for repurposed cells and modules.

Observed prices not adjusted for volume. Collected from open market placed, ATFs, retailers and reuse companies.

During 2021 we saw a huge spike in investments and announcements of new recycling capacity over the whole world. There is today not one continent (besides Antarctica) which hasn’t at least a shredder for lithium-ion batteries. In our database we list over 150 recyclers with an announced and/or estimated capacity that this year will exceed 1 million tonnes. Most of it is based in China and South Korea where it’s tightly connected to the production of battery materials. Far from this capacity is filled or even in operation. There is simply not enough material available, something that has caused huge frustration among larger Chinese recyclers after hefty investments.

Based on assessment 31 January 2022. Combination of announced and estimated capacity.

In Europe and the US many recyclers are eying the expected volumes of production scrap from new cell manufacturing plants that are announced on almost monthly basis. These volumes will together with test and R&D batteries, as well as batteries that didn’t make it into its products, or were returned to the vendor, be the main volume for recyclers the next 10 years. But also this is something that might not happen completely as expected.

What the last two years has taught us is how fast this industry is moving and changing. In the beginning of 2020 LFP as a chemistry was almost declared dead in the EV industry. However, with the launch of CATL’s cell-to-pack technology and BYD’s blade battery – and Tesla’s adoption of the former – this changed completely. Suddenly LFP, which basically exclusively is produced in China was in the plans for several car makers which now raises questions for several battery start-ups as almost all of them have chosen the more expensive high nickel route. Nickel- and cobalt-based batteries are not only more expensive. They are also more sensitive to supply chain disruptions. In 2021 CATL also initiated production of sodium-ion batteries, a chemistry that in Europe and the US have remained in the labs. Meanwhile the announcements of different types of solid-state batteries cause headlines every week. The new startups and even some of the incumbents, which in some cases have treated the product as secondary to the actual production, might have a difficult terrain to navigate which of course will have an impact on the volumes.

Add to this the problem with increasing prices. As many car makers still can’t turn a profit from electric vehicles, an increased battery cost causes requirements on savings elsewhere, or they will need to increase the prices of the vehicles. This is once again where China comes in. In the country that sold more EVs than any other region in the world in 2021 a large share of the vehicles is made up of small vehicles that both can rely on smaller batteries and are cheaper to produce and own. This while several Chinese start-ups are trying to make a real dent in Tesla’s segment with luxurious and technically advanced vehicles. By the end of 2021 about 65% of the 10 best sold EVs in the world were produced in China. Four out of the ten most popular EVs in Norway in December were at least partly made in China.

This is the reason why we in our research are looking closely at one question: What happens if the best and the cheapest cars are made in China?

What happens with battery production? With material production? And obviously reuse and recycling.

Similarly, we also look more and more closely at concepts like battery swapping and vehicle-to-grid (V2G) solutions. BJEV, Nio, Geely and now also CATL have solutions for battery swapping. Volkswagen has joined Hyundai, Kia and Nissan in enabling V2G. Equally exciting are all new applications which in many ways can disrupt the car as we know it: micro mobility, electric VTOL vehicles and buses.

At Circular Energy Storage we have worked hard to change the structure of our data platform CES Online to continuously collect, analyse and publish data that reflect all of these fast-moving changes. Although we are experts in the end-of-life market we pay as much attention to the upstream markets because of its importance downstream.

During 2022 we will focus even more on this as the market becomes more complex. There is a significant risk that shortages in the battery supply chain will not only cause disruption in supplies but also in business models and geographical focus for different companies.

We will also work to make more granular data available which is part of our ambition to make the service a real tool for anyone involved in the lithium-ion battery life cycle.

We brace ourselves for a year at least as exciting as last year.

If you are interested in our research please learn more about our research platform CES Online here.