Fears Over Battery Recycling Overcapacity: Anticipating Feedstock Challenges in Global Battery Recycling

Is the rapid rollout of American and European battery recycling hindered by looming feedstock issues?

This question will be answered over the next 6-11 years as the nascent battery recycling industry enters and exits a “valley of death” where projected recycling capacity will far outpace the feedstock supply of lithium-ion batteries (LIBs) or production scrap.

A big industry concern around battery recycling today is the surprising longevity of electric vehicles (EV) batteries. Even after passing 150,000 miles on the road, EV batteries are showing minimal battery capacity loss. While consumers are delighted about this longevity, it poses issues for battery recyclers investing billions of dollars in large processing facilities.

Today, battery recyclers source around 47% of their feedstock from spent LIBs of retired EVs or consumer electronics. By 2035, spent LIBs will make up 86% of total feedstock supplies. This transition indicates that battery recyclers must survive ten years with high utilization of manufacturing scrap. The most extreme period here will be 2025-2030 as battery recycling capacity will explode by 5x with only a 10% decrease in utilization of manufacturing scrap.

What feedstock battery recyclers use is critically important, especially for countries like the U.S. and Europe which are not major players in cell component or battery manufacturing, the two parts of battery manufacturing producing mineral-rich scrap:

China, Korea, and Japan dominate cell and battery manufacturing, giving these markets firm control over most of the industry’s manufacturing scrap. Without a substantive manufacturing base, battery recycling in Europe and the U.S. will become increasingly dependent on importing increasing quantities of foreign manufacturing scrap.

While battery recyclers often operate well below maximum capacity (typically between 50-90%), the unequal geographic distribution of manufacturing scrap leaves European and American recycling developments at the whim of Asian manufacturers and shippers. Additionally, as battery manufacturers improve efficiency they will reduce the amount of scrap, or wasted material, produced. Simultaneous trends of reduced scrap availability, low EV battery retirement, and increasing competition for feedstock amongst recyclers could squeeze the battery recycling market from three sides at once, forcing companies to end operations in the looming valley of death.

Despite massive public and private investment, Europe and the U.S. are unlikely to significantly alter China’s control over 75% of global battery recycling capacity. While start-ups in Europe and the U.S. are poised to onshore a steady stream of battery materials in the coming decade, the overall output of recycled minerals will be linear until 2030 due to several feedstock access constraints.