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The battery recycling market is witnessing a dynamic evolution, marked by eight key trends shaping the industry’s landscape and driving sustainability efforts forward. Julia Harty, energy transition analyst at Fastmarkets explores these in more detail.
High battery metal prices in 2022 incentivized additional metal supply to come online. However, this influx of additional supply of lithium, nickel and cobalt flooded the market causing prices to fall.
Despite this being a supply-side story, we have adjusted our battery demand forecast down 4-7% due to a weaker economic outlook and lower than expected electric vehicle (EV) sales. However, overall, we still expect the energy transition to lead to strong demand growth for batteries and the key battery metals which should mostly overshadow any macroeconomic issues.
From September 19, 2023 to February 20, 2024, the Fastmarkets spot battery grade lithium carbonate equivalent (LCE) cif CJK fell 47%, the LME nickel cash official fell 17% and Fastmarkets cobalt in-whs Rotterdam fell 8%. NCM, NCA cif South Korea black mass nickel and cobalt payables trended downwards after peaking in July 2023 at 81.5%. In 2024, payables have been rangebound between 65.5-68.
Inferred black mass prices for NCM, NCA cif South Korea peaked at $6,590 per tonne in August 2023 before trending steadily downwards with a low of $2,088 per tonne on February 14, 2024.
Incentivised by the high metal prices of 2023, many new entrants joined the recycling market. Due to lower investment requirements and shorter timelines to get permits, we are seeing shredding facilities come online much faster than refining leading to overcapacity for shredding, particularly in Europe and the US.
Fastmarkets is hearing caepx costs of £3 million for sorting, discharging and dismantling plants, £30 million for shredding facilities and £300 million for hydrometallurgical refining facilities. We also hear of timelines of 1-2 years to get a shredding operation online versus 5-10 years for hydromet to get online.
Overcapacity for shredding has led to strong competition for scrap batteries. Scrap battery prices weren’t hit as badly as black mass prices and European gate fees have fallen slightly. On the post-treatment side, an influx of primary metal supply and therefore lower demand for metals meant refiners had to compete with primary metal producers to supply the market.
Some refiners struggle to go beyond technical grade to battery grade and end up having to sell their technical grade battery metals and we’ve heard of technical grade running at a 20% discount to battery grade. Since black mass prices tend to trend a month behind metal prices meaning the refiners output was falling in value before their input costs were being reduced. All these issues have led to profit margins being squeezed with reports of some projects running at a loss and low utilization rates for shredders and refiners (as low as 20-30% for shredders).
We expect exponential growth of EoL scrap and, by 2033, we expect enough scrap batteries (production scrap and EoL) to be able to meet shredding capacity.
However, because the influx of EoL black mass is rising faster than the current announced refining project expansions, we expect the market to move into greater undercapacity for black mass refining.
Refining projects face challenges of higher capex, nervous investors, challenges getting to battery grade metals, trickier impurities such as fluorine and heavy metals, permits and waste disposal challenges.
We’ve seen a strong correlation between the previous month Fastmarkets spot battery grade lithium carbonate cif CJK price (M-1) and the current NCM, NCA cif South Korea cobalt and nickel payables. This is because contracts will use today’s black mass payable with last month’s average metal price.
This means when our LCE price falls, a month later the black mass payable will fall. We forecast weakness in the LCE price until 2026 before trending upwards to 2034. Based on this, we expect the NCM, NCA cif South Korea nickel and cobalt payable to fall until 2026 before a strong recovery.
We forecast the LME nickel cash official price to remain weak until 2019 being rangebound at low levels before seeing a strong recovery until 2034.
The story for cobalt is a little different with strong price growth until 2034 due to a growing cobalt deficit. When we combine our black mass payable forecast with our LCE, nickel and cobalt price forecasts this gives us an NCM, NCA cif South Korea inferred price forecast increasing significantly until 2034. Please contact Fastmarkets directly to find out more about actual price values from our price forecasts.
The US and European value chains are made up of a larger number of smaller-sized companies making strategic partnerships increasingly important. These partnerships can provide access to funding, access to a new region or market and access to a wider network of the supply chain.
Small scale companies are looking for larger companies for investment and to leverage their network to help them keep up with their peers and prevent them getting pushed out of the market. Non-recycling companies are looking for where they should try to enter the recycling value chain and when is best to do so.
Asian companies are looking for small scale European companies especially ones who have permits who can help them to enter the European market. Investors are looking for companies that have the best growth potential. These strategic partnerships are likely to evolve into more vertical integration.
There is a lot of vertical integration in the Asian market, which is 5-10 years ahead, such as CATL and BYD, whereby a production scrap cell can be recycled back into a new cell by the same company in the same country.
In the US there might be a scrap battery collector, a company that does sorting, discharging and dismantling, a shredder, a refiner going to technical grade, a refiner going to battery grade, a pCAM or CAM producer and then eventually the finished product will likely go to Asia to be made into a cell before either being finished into an EV in Asia or possibly returning to a US gigafactory.
The battery metal and recycling markets have short-term challenges to face but longer term, the market looks set for strong growth.
Recently, there have been a lot of new entrants to the recycling market which is looking crowded. We expect strong competition and eventually for the market to contract to a smaller number of stronger companies.
Fastmarkets has identified the below as key advantages that we expect the companies who will survive the downturn to have.
The Fastmarkets Battery Recycling Outlook includes 10-year battery supply and black mass price forecasts to give material manufacturers, battery makers, automakers and battery recyclers the insights and forecasts to understand and leverage the increasing recycled supply. Keep up to date with cobalt price insights and lithium insights on our dedicated market pages.