“The offtake agreement with Glencore will now include 100% of the MHP, in addition to the previous off-take rights for lithium carbonate, to establish a strong commercial framework for the Rochester Hub project,” Louie Diaz, Li-Cycle’s vice president of corporate affairs, told Fastmarkets on Thursday.
Sources have been skeptical as to whether the Ontario-based battery recycler would be able to sell the material. The agreement could strengthen Li-Cycle’s case for the DOE loan, which requires assurances that the company can meet current and future financial obligations.
“The payment terms and working capital facilities for the commercial agreements needed to align with the requirements of the proposed DOE loan,” Diaz said. “By amending the commercial agreements now, then it helps support the DOE loan process.”
Currently, the only US entity producing MHP is Nth Cycle; an overwhelming majority of MHP is imported from Indonesia. Li-Cycle’s MHP production could also strengthen its case for the DOE loan from this perspective, given the regional demand for MHP amid ongoing efforts to strengthen US supply chains for critical materials.
The loan was first announced in February 2023 and could reach $375 million, but Li-Cycle said it was seeking to increase that amount in the company’s 10-Q report in August 2024.
Efforts to secure DOE loan
Li-Cycle has emphasized its efforts to secure the DOE loan as a crucial step in moving forward with the Rochester hub.
The company announced in its 2023 third-quarter earnings call in October of last year that it would pause construction at the facility, with chief executive officer Ajay Kochhar citing higher-than-estimated costs and financing delays.
“Closing the US DOE loan remains our top priority,” Kochhar said during the company’s 2024 second-quarter earnings call in August. “We continue to work closely with the DOE Loan Programs Office to advance toward definitive financing documentation and satisfying [the necessary conditions] for loan disbursement.”
In its 10-Q report, however, the company said that “there can be no assurances that the closing of the DOE loan or any other financing transaction would be sufficient to restart construction or complete the development of the Rochester Hub.”
Sources have expressed concern about the loan but have noted the importance of the company in a market fraught with difficulties in expansions and production.
Li-Cycle reports losses, cuts production
The halting of the Rochester project is not the only roadblock Li-Cycle has faced recently.
In the company’s 10-K report filed last March, it said that “based on its recurring losses from operations since inception… negative cash flows from operating activities… and the pause on construction of the Rochester Hub project… [Li-Cycle] has concluded that there is substantial doubt about its ability to continue as a going concern.”
Li-Cycle also said in the report that it was slowing down operations at its New York, Alabama and Arizona facilities, and pausing plans for facilities in France, Norway and Hungary, as well as for the Portovesme hub in Italy.
Leases in Singapore and Millhaven, Ontario, expired in 2024, with no plans for renewal. In its 2024 second-quarter report, Li-Cycle said that it would transition its Ontario facility from an operational pause to closure.
On March 12, just before its 10-K report was filed, Li-Cycle announced it had received an additional $75 million investment from Glencore, which built on previous investments of $225 million. As part of the agreement, Li-Cycle would appoint two additional nominees of Glencore to its board of directors, bringing Glencore-nominated board members to three.
Despite these setbacks, Li-Cycle said it has completed its technical review of the MHP scope of the Rochester hub, advanced the go-forward execution plan for the hub and refined cost estimates with the local market to evaluate the project’s total cost estimate, according to the October 31 press release.
Kunal Sinha, global head of recycling for Glencore and a member of Li-Cycle’s board of directors, said, “We are pleased to support Li-Cycle’s Rochester Hub plan through an amended commercial framework that will include both lithium carbonate and MHP.”
“Glencore is committed to creating a closed-loop battery materials supply chain and our ongoing partnership with Li-Cycle is a key part of this strategy,” he added.
Nickel prices remain weak
Although Li-Cycle’s MHP production – should Rochester come online – would provide much-needed supply to the North American supply chain, the efforts come while nickel prices remain weak.
The LME three-month nickel price has continually dropped in recent weeks, falling sharply since its early-October high of $18,225 per tonne on October 3, to a low of $15,800 per tonne on October 31.
Such decreases in base metals pricing have negatively affected demand for black mass as well, particularly in South Korean markets, which rely heavily on imports.
Li-Cycle currently produces black mass at its US plants in Arizona, Alabama and New York, as well as in Germany.
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