Bigger, better & faster circular part 2
How start-ups are trying to capitalize on business opportunities in battery recycling in North America
In part 1 of this article, Jannis introduced us to the economic incentives to the US recycling boom. Part 2 brings us up to speed with the three main trends in recycling batteries in North America.
How do start-ups Redwood Materials, Li-Cycle and Ascend Elements use the money to realize recycling, and try to earn money? Three major trends of current practices and strategies emerge.
1. Holistic approach: providing the full recycling service
The recycling of batteries is complex and requires in-depth know-how on many levels. Used batteries must be collected, discharged, and dismantled before mechanical processes separate and metallurgical processes refine the materials. In addition to logistics, shredding and metallurgy, detailed regulations on transport and handling must also be known.
Redwood, Li-Cycle and Ascend Elements take advantage of this complexity and offer suppliers and customers a full service for processing old, discarded batteries - from advice on transportation to mechanical shredding and the supply of new, sustainable materials for battery production. Targeted, flexible processes can cover as many types and sources of batteries as possible - effectively a one-stop shop for closed-loop battery recycling.
The pricing of the recycling service offered by companies like Redwood, Li-Cycle or Ascend Elements is measured according to the value of secondary materials for customers including the processing costs of recycling end-of-life batteries to generate a beneficial operations [1]. At larger scale, the high costs like plant construction or operational costs such as for energy can thus be turned into a profitable business in the future.
2. One step further: integrating precursor and battery material production
At Li-Cycle, the process ends with the production of secondary raw materials for new batteries, mainly lithium carbonate, nickel sulphate or cobalt sulphate for cathode material production. Li-Cycle is therefore an ideal supplier for battery material manufacturers.
However, Redwood Materials and Ascend Elements go one step further and see promising business opportunities in the integration of the next step in the loop, the production of cathode and anode materials and precursors of these materials. Especially since battery material production is currently hardly taking place in the US and is sourced mainly from China, the control of secondary materials, facing the trend towards building local supply chains according to the IRA, offers the opportunity to integrate and deliver even more value to customers.
Ascend Elements has developed its own patented process which directly uses the recycled materials for cathode and anode material production. Within their business model, Redwood and Ascend Elements, can profit from its recycling process by selling secondary raw materials as well as cathode or anode materials in the future, depending on what is more beneficial for individual customers.
3. Large networks: partnering with suppliers and customers
For successful recycling business models, it is not enough to offer customers valuable materials and services through innovative recycling processes. The production and use of EV batteries is only just being developed on a large scale. Long lifetimes therefore mean that batteries will only be suitable for mass recycling in a few years or decades [2].
In order to be profitable long term, the large plants must be operated at full capacity now and in the future. Close and long-term partnerships with suppliers and customers are essential for this, and an intelligent collection and take-back system from decentralized customer who turn to supplier in circular value chains is crucial [1].
Li-Cycle has opted for a so-called spoke-and-stroke model. Decentralized spokes are set up at locations in North America where the density of battery and EV production and customers is high. Regional partners transfer discarded batteries to a total of four spokes in Ontario, Arizona, Alabama and New York.
At these spokes, the first steps in the mechanical shredding process are taken to produce black mass, which is then transported to the central hub in Rochester for further processing into secondary raw materials. This logistical system not only offers customer proximity but is also intended to minimize transport costs of discarded batteries, considered hazardous goods, as well as improve the CO2 footprint of the produced secondary materials. Li-Cycle's current partners include car manufacturer GM, battery manufacturer LG Chem and KION.
Redwood, on the other hand, takes a different approach of establishing a large network. The central recycling plant in Nevada also aims to be fully utilized through numerous partnerships, such as with Panasonic, VW, Ford, Toyota, Nissan, Amazon, Lyft, or Power Bikes. However, Redwood supplements the supply streams with active customer engagement in a collection system throughout the US. Redwood hosts local recycling events with individuals and organizations, establishes widespread collection points for old batteries and even offers individuals the opportunity to send batteries to the company. This is supported by Redwood through organization actions and detailed instructions for transportation.
Guaranteeing capacity utilization is currently a major challenge. It will perhaps be resolved in the future with greater political interest in domestic and sustainable supply chains and rising supply of used batteries. However, customers are already very interested in the secondary materials business model, and providing financial and strategic security through partnering. Ascend Elements has entered into partnerships with Honda, Jaguar Land Rover and Orbia Flourinated Solutions. Just recently, the company also announced a long-term contract for the purchase of precursor cathode materials worth $5 billion with a US-American producer.
All in all, one thing is obvious: large recycling and supply networks will emerge to make recycling viable.
Next: Expansion to Europe
Despite major investment and promises, rapid expansion also comes with risks. Due to a lack of recyclable materials, Redwoods initial plans to produce cathode material precursor from spent batteries had to be bridged by purchasing mined lithium [3]. Li-Cycle recently had to announce a revision of the current hub construction project in Rochester due to excessive costs that amount to around $960 million [4, 5]. As a result, the stock market value fell by 50% within one day, and a significant number of Li-Cycle’s staff has already been cut recently to save costs [6]. However, as a major strategic partner, Glencore has supported Li-Cycle with an additional $75 million to their initial investment of $200 million to also bridge the raising costs in Rochester [4]. Additionally, the recyclers face rising competition.
The IRA is increasingly attracting European companies to the US. The Swedish battery producer and recycler Northvolt announced a battery production plant in Canada, in contrast to Europe a free-trade partner of the US, including a in-site recycling plant [7].
However, recycling start-ups also see great business opportunities in Europe and a market that is worth entering. Regulations around minimum recycling standards in new batteries and the Battery Passport [8] as well as the current Critical Raw Materials Act [9] also promote local supply and value chains in Europe, which offer opportunities for large-scale recycling.
Redwood recently announced the acquisition of a recycling company in Germany [10], whereas Li-Cycle is currently setting up several spokes in Europe and is planning its first hub in Sardinia in cooperation with the Swiss mining giant Glencore [5]. Lastly, Ascend Elements has formed a joint venture with a Polish company to recycle EV batteries in Poland and Germany. [12] The know-how in Europe is extensive, but there are also major challenges in Europe. In addition to numerous requirements for transportation, energy and labour costs are particularly high in some countries.
Technical recycling processes for old batteries from electric cars and other devices are always being researched and optimized. It is difficult to say today how new technology would be established in business models in practice. Nevertheless, these initial trends can be identified in terms of how companies in the US intend to take advantage of the opportunities and rise to the challenge.
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References:
[1] Wesselkämper, J., von Delft, S. Current status and future research on circular business models for electric vehicle battery recycling. Resources, Conservation and Recycling, 206, 107596 (2024). https://doi.org/10.1016/j.resconrec.2024.107596
[2] Wesselkämper, J., Dahrendorf, L., Mauler, L., Lux, S., von Delft, S. A value chain independent from primary raw materials – Towards circularity in China, Europe and the US. Resources, Conservation and Recycling, 201, 107218 (2024). https://doi.org/10.1016/j.resconrec.2023.107218
[3] The War Below: Lithium, Copper, and the Global Battle to Power Our Lives. Ernest Scheyder. Atria/One Signal Publishers (January 30, 2024).
[4] Li-Cycle Announces $75 Million Strategic Investment from Glencore. Li-Cycle (2024); https://investors.li-cycle.com/news/news-details/2024/Li-Cycle-Announces-75-Million-Strategic-Investment-from-Glencore/default.aspx
[5] Li-Cycle, Newsroom; https://li-cycle.com/newsroom/
[6] Li-Cycle to cut 17% of staff amid battery recycling growing pains. Reuters (2024); https://www.reuters.com/sustainability/li-cycle-cut-17-staff-amid-battery-recycling-growing-pains-2024-03-26/#:~:text=March%2026%20%28Reuters%29%20-%20Battery%20recycler%20Li-Cycle%20%28LICY.N%29,building%20a%20crucial%20processing%20facility%20in%20New%20York.
[7] In North America. For North America. Northvolt, 2023; https://northvolt.com/manufacturing/six/
[8] Regulation (EU) 2023/1542 of the European Parliament and of the Council of 12 July 2023 concerning batteries and waste batteries, amending Directive 2008/98/EC and Regulation (EU) 2019/1020 and repealing Directive 2006/66/EC. European Union (2023); https://eur-lex.europa.eu/eli/reg/2023/1542/oj
[9] Critical Raw Materials Act. European Commission (2024); https://single-market-economy.ec.europa.eu/sectors/raw-materials/areas-specific-interest/critical-raw-materials/critical-raw-materials-act_en
[10] Redwood Materials, News; https://www.redwoodmaterials.com/news/
[11] Neumann, J., Petranikova, M., Meeus, M., Gamarra, J. D., Younesi, R., Winter, M., Nowak, S., Recycling of Lithium-Ion Batteries—Current State of the Art, Circular Economy, and Next Generation Recycling. Advanced Energy Materials. 12, 2102917 (2022). https://doi.org/10.1002/aenm.202102917
[12] Ascend Elements, News & Insights; https://ascendelements.com/