A tsunami or a drop in the ocean?
How we forecast volumes of lithium-ion batteries available for recycling
Recently when we updated our database for the global lithium-ion battery recycling capacity we also covered the approaching overcapacity the industry will face, both in Europe and North America. In China it’s already a fact. We covered it in this article and our data was also used by Bloomberg sharing an analysis on the same theme.
While capacity is on one side of this equation, volumes of recyclable materials is on the other. It’s clear that the forecast from Circular Energy Storage usually is very different from many of the assumptions that have been done by researchers and recycling startups which often show a much steeper development and use descriptions such as exponential growth, tsunamis or mountains of waste. We often get surprised reactions from new market entrants, investors and politicians when we show that a fast growing battery market not immediately turns into an equally fast growing recycling market.
In this article we will explain the main underpinnings of our analysis and also point out why it may be different from others.
Current CES forecast for end-of-life batteries and production scrap available for recycling shows a global anticipated volume of 1.7 million tonnes of cell equivalent battery waste in 2030. This equates to an increase of 259% compared to 2021, or a CAGR of 15.3%. Of this a little more than half will be production scrap, primarily from cell production. More importantly, around 60% will be available in China while Europe and United States jointly will generate between 25% and 30% of the annual volume during this decade.
As can be seen in the chart above our forecast shows a slower take up in volumes than what most recycling companies do. Sometimes significantly slower. So how can we have so different views?
There are two parameters that create differences in how large the volumes of recyclable materials will be in the future. First there are the input values, which for end-of-life batteries are what is placed on the market and for production scrap how much batteries that will be produced in a particular market. Secondly there is a formula for how batteries that have been placed on the market reach end of life and finally become available for recycling. For production scrap the equivalent number is a ratio determining how much of the production that will go to waste and in which stages.
The first parameter may have a very big impact not least on production waste. An increase of production with 30% will also theoretically increase the amount of production waste with the same percentage. For end-of-life batteries most of the effect will be seen first in the next decade as the biggest driver of lithium-ion batteries placed on the market is the growth of the electric vehicles with longer life cycles than any other battery application.
The second parameter has a more direct impact and it’s very clear that several startups are using a very rudimentary analysis for how batteries become available for recycling. In its most extreme form they resemble the image below with an anticipation that batteries become available for recycling directly after a short use in its application. In fact it’s not rare with forecasts based on a lifespan of EV batteries of 8 years with 100% of the batteries going directly to recycling. To be fair, in China authorities estimated 4-5 years. Other more sophisticated assumptions use parameters such as collection rate and also anticipate some of the volume to be reused in other applications before they reach recycling.
Similarly we often come across forecasts of production scrap which are based on the announced capacity from so called giga factories and a general scrap rate of 10%.
The problem is that none of these assumptions are correct. The way end-of-life batteries reach recycling is much more intricate than this. Likewise, production scrap has nothing to do with rules of thumb or average scrap rates. This complexity matters.
At Circular Energy Storage we have followed 8 large segments of batteries since 2017. Our data dates back to 2000 for the whole world. To follow other segments than just EV, stationary energy storage and portable batteries is key to understand the volumes ahead as many of the large end-of-life streams come from batteries in segments such as personal mobility, industrial applications and backup systems.
We analyse the battery volumes at 7 different stages. These are:
Production of batteries
Use of batteries in R&D and tests
Batteries placed on the market
Batteries in use
Batteries reaching end of life
Batteries available for reuse
Battery scrap available for recycling
Each of these stages can have a fundamental impact on the availability of recyclable materials in specific markets which is the precursor to the last stage, batteries being recycled.
Production of batteries
Battery production generates waste. Both from cuttings and remains in the production system and from rejects at several stages of the production. The amount of waste differ between manufacturer, plant and production line. Of great importance is the level of automation, quality control systems and product maturity. And not least people. The skills, experience and culture has a big impact on how effective battery plants are. In this article we covered our latest forecast which is based on our own research into different battery plants and what companies are doing to prevent waste.
Although we only in a few cases have had access to actual scrap rates per plant or production line we have applied different scrap rates on different plants based on the experience of the manufacturer, known investments in advanced production technology and location of the plant. Our general view is that a scrap rate for an efficient plant is much lower than 10%, all stages combined, and that plants in Asia are more efficient than those in the west.
As important as the scrap rates are the assessment of actual production and where this production will take place. In this case Circular Energy Storage’s data takes a conservative approach to capacity from new players as we are of the opinion that scale and historical market presence will benefit the already established players. We currently can find supporting evidence for only a few new companies to make it to commercial scale, and thus treat several other startups merely as hopefuls which in the future may or may not have an impact. Only very limited volumes are assigned to these players and in many case we don’t expect them to produce batteries at all.
The total volume of batteries produced is then limited by the amount of batteries that is estimated to be placed on the market with some head room for waste, storage and batteries in transport.
Batteries used in R&D, tests, returned to vendor and in stock
This is maybe the most hidden category of materials to recycle, and still one of the biggest streams for many recyclers today. Batteries used in test vehicles and pre-production fleets will prematurely be classified as end-of-life as the vehicles shouldn’t be sold on the regular market. There will also be tests which automatically will end the battery packs’ lives. From the former category a lot of these batteries will not go to recycling but are instead a prime source for second life projects where batteries are repurposed and used in other applications by the OEMs. These are projects we keep track of.
A significant amount of batteries are also kept in stock either before they have been in use or since they have come back from the market, either inside the equipment they power, or as modules or even cells. Changes in market conditions such as shortages in other components, new priorities for different vehicle models or a temporary weakened demand cause tonnes of batteries to become obsolete already before they have been used. The same reasons alongside not performing host products, in which the batteries are installed cause batteries to come back from vendors without a day of usage. Also these batteries increasingly make their way to the reuse market but there are also commercial agreements in place which stipulate collectors and recyclers to ensure proper recycling of both batteries and their host products.
As these batteries are recycled prematurely they still represent an disproportionally high volume for recyclers especially in regions with a significant automotive industry. However all of these volumes don’t necessarily scale with increased sales but rather with the commitments of the OEMs to go electric, which result in more models. The volumes here are calculated based on our experience and knowledge about the size of test fleets and nature of R&D activities applied to the different vehicle models usually in the markets where they are developed.
Batteries placed on the market
With “placed on the market” we mean batteries that are sold either with the applications they power or as replacement batteries. Our main focus is to track the actual applications and then apply our battery data to these volumes, but we also model replacements based on our own research on battery lifetimes and usage patterns.
The granularity of our data differ between segments. While we use battery data of every single car model placed on the larger markets in the EV segments we use average weights and capacities for batteries in portable electronics, personal mobility, backup systems and industrial applications. These average battery sizes and chemistries are based on our own research and then applied to volume data from the various markets. For energy storage systems we rely on other analysts’ forecasts of capacity being deployed while our own research is used for maritime applications.
Today we cover three regions: Europe (EES), United States and China. As we also track the global numbers we also have “Rest of the world” as a category. In the light EV segment this category has for several years almost been synonymous with Japan, South Korea, Canada and Australia but with an increasing growth in Southeast Asia and South America the category is getting more and more complex and we are about to deepen the coverage with a more detailed lens for a number of markets.
While real historic data is used to define volumes in the past we use a combination of our other analysts’ forecasts for the battery and battery material market at large as well as specific segments while we build our own proprietary battery data to keep track of chemistries, pack sizes and specific applications.
Batteries in use
This stage is the most import stage of all. The understanding of how batteries are used and traded over their lifetime is key to be able to draw conclusions of end-of-life volumes. This is also why we spend a lot of time doing research in this field. Our research include collection of data on battery performance, application usage, prices of used applications and not least the trade of the equipment and vehicles the batteries are installed in.
For instance we have for four years been following the prices on both used ICE vehicles and used EVs in order to understand when EVs will reach values low enough to be deemed as end-of-life. The answer is that the values remain high enough to keep the vehicles on the road for more than 15 years. We have collected price data on portable electronics for more than 7 years and can show similar patterns.
What’s important to understand is that products that contain lithium-ion batteries are “employed” to do different jobs for their users. Over time that job can change, adapted to the abilities of the product. An EV with a 50 kWh battery that has lost 50% of the capacity can still perform a job as good as an old Nissan Leaf with 100%, making it suitable for everything but long distance travel. And that old Nissan Leaf with 50% left is still ok to use for picking up children after school or to go shopping in town. A lap top with only 30 minutes left on the battery will still work while it is plugged in. Mobile phones stored in a drawer may still play a role in people’s lives remaining there as backups, storage of old images and apps or just pure nostalgia. People payed a lot of money for the devices and see little reason to let them go.
We have also been following the sales of used EVs in over 10 markets over the world to understand how vehicles are exported and imported during their lifetime. This has a direct effect on the availability of recyclable volumes as more than 30% of certain vehicles are exported from markets like Europe and United States and obviously never come back. The batteries in these vehicles are for lost for recyclers in the original markets. This is a development which can be seen even more clearly in portable electronics where large amounts of mobile phones, tablets and laptops are exported from western markets long before they, or the batteries, reach end of life.
To factor in 30% export and and a lifetime of 15-25 years for batteries lives in particular vehicles compared to an 8-10 years straight end-of-life rate with assumption that 98% will go to recycling makes a huge difference which only gets bigger in a rapidly growing market.
What’s important to understand is that lithium-ion batteries usually don’t have a life of their own but are part of the devices, equipment and vehicles they power.
Batteries reaching end of life
Still, finally at some point batteries will reach their end of life. We define end of life for a battery when it is removed from its original application. This means it can reach end of life already day one when for instance a car is involved in an accident or a phone is dropped in the canal. It can in fact even remain in a device even when it’s completely dead as long as the device can be powered through alternative sources.
That’s why we go through several thousands of auctions of end-of-life vehicles, spend times in battery collectors’ warehouses and talk to remanufacturers, traders and recyclers about the actual materials they deal with. We have also worked with some of the largest users of backup batteries, energy storage systems, electric buses and forklifts to understand the lifecycles of these batteries and when a battery is deemed as not fit for purpose anymore. A high power drain battery in a backup solution has for instance a much lower threshold for being replaced due to to capacity fade than what a forklift has.
Another factor which is extremely important, not least for recyclers, is how batteries are reaching end of life and when they do it. An EV battery which usually is under warranty for 8 years will also remain in the hands of the OEM if it has to be replaced during its warranty period. If it’s removed from a totalled vehicle by a car dismantler however it’s either the insurance company or the car dismantler that owns the battery. That’s why we separate these two end-of-life streams as the outcome will be completely different. Already today the majority of the batteries under warranty will go back to the same application after being refurbished or remanufactured. A battery removed by a car dismantler however will be sold to the highest bidder. This means it will not only go for use in different applications but also that it will often be geographically distributed and many times exported which again affects the remaining volume in the original market. That recyclers have agreements with OEMs is important primarily for the volumes that are generated from test and R&D batteries and from remanufacturing processes where the modules or cells couldn’t be reused. However the majority of EVs, portable devices and personal mobility vehicles are completely out of the OEMs control.
A special way for batteries to reach end of life is through recalls. As of late we have seen large recalls of by General Motors, Hyundai and BMW. These recalls have been so big that they have caused clear bumps in the end-of-life volumes on regional level. In our data these recalls are added to the end-of-life volumes as soon as we have enough information. We do however not factor in future recalls. That does not mean that we don’t expect them but only that they are so different in nature, happen in different places and can’t just be dealt with as an average increase in volumes. For instance in both the case of Hyundai and General Motors the recyclers which have been processing the batteries have not been among the usual suspects. In the case of Hyundai the recall even triggered the construction of a complete recycling plant.
Batteries available for reuse
Another market which is heavily misunderstood is the reuse market. There has for many years been theoretical debates concerning the potential of reusing lithium-ion batteries, primarily EV batteries and predominately in energy storage systems. During this time most of the batteries that have been reaching end of life have been just that – reused. However the idea that an EV battery will be removed from a vehicle when it has 80% of its capacity left is just not happening. Usually it takes many years for this to happen, unless the vehicle has been used as a taxi or Uber and that point the whole value of the vehicle has decreased often to a point where a battery replacement does not makes sense from a financial point of view.
Most of the large scale energy storage systems which today are based on second life batteries contain batteries coming from pre-production fleets, exchange programs or from warranty replacements. The systems indeed seem to work well and are in some cases prepared to host real end-of-life batteries that have been in the market for longer time.
However the majority of the EV batteries will reach end of life at car dismantlers where the OEMs simply don’t have access to them and where it is difficult for anyone to consolidate the right amounts of batteries of the same type and capacity. Instead these batteries usually find their way into completely different applications such as conversion of ICE vehicles to EVs, DIY residential energy storage, range extension in other EVs or electrification of boats. An important aspect is that the benchmark price for batteries in these segments are much higher than in stationary energy storage which means the sellers can sell the batteries to a higher price. They are also more small scale and don’t require the same number of similar packs or modules.
Reuse is not only happening in the EV segment. Reuse of 18650 cells in laptops and modems have for a long time been an important business for battery collectors. These cells have been used in power banks, household appliances such as battery assisted lighting and toys. 2170 cells from Tesla Model 3 has also many times made its way into the refurbished cell market. Both startups and the DIY community are reusing modules or cells from scooters and ebikes and increasingly we see projects based on forklifts and backup power batteries.
Reuse has a big impact on recyclable volumes but what the future will look like is not straight forward. Circular Energy Storage keeps track of prices for used EV batteries and they actually increase when raw material prices have soared, due to shortage of batteries and price hikes for alternative batteries. But what will happen with EV batteries which are as much as 20 years when they reach end of life, especially when the market for newer used batteries will be bigger and may serve as a more attractive alternative? Still there are no signs of a smaller appetite which means recyclers are often disqualified from acquiring many batteries unless they are running reuse operations of their own. The price is simply too high.
Batteries available for recycling
As the final step we currently provide data on is the volumes available for recycling. These are the batteries which have reached collectors or recyclers and where the main purpose is not reuse but to disintegrate the cells, recover the materials and produce new materials, either salts or metals.
That batteries reach recyclers in one particular market does not automatically mean it will be recycled there, especially not after they have been pre-processed, which usually means that the cell have been melted into an alloy or have been mechanically separated and turned into scrap metal and black mass (a mix of the cathode and anode materials). Even if battery packs and cells are complicated to move both domestically and cross border this type of trade is happening all the time. Batteries can be moved as products for reuse, they can be smuggled and they can also, usually after a long notification process, legally be moved between countries where both import and export of waste batteries is permitted. Today both batteries and production scrap is moving from Europe and North America to India and South Korea but there is an increasing interest from recyclers in Indonesia, Turkey and even in China to acquire scrap cells, although import of waste batteries is not permitted in the country.
Even more material is moved when it has been pre-processed. In the case of North America’s largest processor by volume, Glencore, the material is exported to Norway to Glencore’s facility which turns a cobalt and nickel matte into nickel and cobalt metal. A lot of that material has already its origin in Europe through several European pre-processors. Production scrap from LG Energy Solutions’, SK On’s and Samsung’s plants in Europe is shipped back to South Korea for processing and so is a large amount of the recalled EV batteries, both in the US and Europe.
To really define what actually is recycled in each market is a delicate task. Not least because the recycled materials many time is mixed with other recyclables or with virgin materials.
The importance of recycling in the future and of sophisticated data
Recycling is today an important part of the battery value chain. It helps keeping losses from production on a lower level that otherwise would have been the case and it turns an ever ongoing feed of end-of-life batteries into new materials that again are used in new batteries. If lithium-ion batteries today still would only be used in portable devices we would have a market where as much as 50% of the materials could be supplied by recycled batteries.
The challenge is that the new markets for lithium-ion batteries are growing much faster, from a lower base, and the batteries are placed in applications which last much longer than before. In picking studies we have done in both Europe and the US the average age for mobile phone batteries that enter the collection facilities for sorting is 5.5 years. That’s a big difference compared with applications which might last 15, 20 and even 25 years and where the amount of batteries based on the first years of EVs placed on the market were only marginal (15 GWh worldwide in 2015 vs >2,000 GWh in 2030).
This means that the bold targets by the European Union to ensure recycled content in batteries will for most material producers be impossible to obtain if only end-of-life batteries sourced in Europe were used.
However as we pointed out, more than half of the volumes recyclers are dealing with today is production scrap, especially in China and South Korea where most of the battery makers are based. If this is included in the recycled content it will be possible to meet the targets as long as the scrap rate is high. However from a resource perspective this is a zero sum game as the recycled content is only replacing the virgin material that originally was lost in the first round of production.
From recyclers point of view it will soon be very clear that knowledge about where volumes will emerge, what the chemistry are and what alternative the seller have for the materials, will become key to correctly forecast volumes. That is exactly what our ambition is to provide.
