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.
- Oversupply of battery metals has pushed down prices
- Weak metals prices are causing black mass payables and inferred prices to fall
- Lower metal demand is leading to lower recycling utilization rates
- Refining under capacity will grow as an influx of end-of-life (EoL) black mass hits market
- Black mass payables expected to fall until 2026 before strong recovery
- Black mass inferred prices to increase over next 10 years
- Strategic partnerships are becoming increasingly important in the US and European recycling markets
- Certain advantages will separate out which companies will survive these market headwinds
1. Oversupply of battery metals has pushed down metal prices
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.
2. Weak metal prices have caused black mass payables and inferred prices to fall
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.
3. Lower metal demand has led to lower recycling utilization rates and squeezed profit margins
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).
