Low-cost intermediates pose challenge to adopting black mass in battery supply chain

As the global battery supply chain pivots toward using recycled material to feed the growing demand for battery raw materials, participants are increasingly weighing the cost implications

At present, the battery recycling industry is largely confined to a select number of companies and regions. But capacity is ramping up quickly in the face of growing legislative pressure as well as the drive to localize supply chains.

“Recycling is an important part of our future plans,” one cell manufacturer told Fastmarkets. “It’s just a matter of how we approach it.”

Market participants across the globe have highlighted two distinct challenges in adopting black mass as a primary feedstock in the manufacturing of battery chemicals: availability of supply and high prices.

Black mass is primarily traded based on the value of its nickel and cobalt content, given that these two products often make up the highest material content and are high in value.

The nickel content of the black mass is typically priced as a payable to the London Metal Exchange official nickel cash price, while the cobalt content is typically priced to Fastmarkets’ cobalt standard grade, in-whs Rotterdam price.

The payable format of pricing is common in the nickel cobalt market, with cobalt hydroxide and nickel mixed hydroxide precipitate (MHP) both widely priced in the payable format.

This familiarity in pricing format, however, leads market participants to directly compare price levels, and due to the current supply tightness of black mass, price gaps have emerged, forcing participants to reconsider their approaches.

Current supply dynamics

A growing shift in China toward lithium-iron-phosphate (LFP) battery chemistries as well as macro-economic conditions have suppressed demand for electric vehicles, resulting in lower demand for nickel and cobalt in China.

Nickel and cobalt sulfate prices did briefly recover after the Lunar New Year following a flurry of purchasing activity. Since then, however, prices have trended lower.

Fastmarkets’ weekly price assessment for nickel sulfate min 21%, max 22.5%; cobalt 10ppm max, exw China was 37,000-38,000 yuan ($5,376- 5,522) per tonne on March 17, down by 3.35% from 38,000-39,600 yuan per tonne on March 10.

And Fastmarkets assessed the price of cobalt sulfate 20.5% Co basis, exw China at 42,000-43,000 yuan per tonne on March 17.

These falling sulfate prices have resulted in lower demand for intermediates. Market participants have been expecting significant oversupply, particularly as production of intermediates ramps up in Indonesia.

Fastmarkets research currently forecasts a surplus of 4,000 tonnes of cobalt in 2023, and the nickel market is forecast to record a surplus of 198,000 tonnes in 2023.

Meanwhile, the availability of high-quality black mass remains limited globally, with consumers and traders observing significant challenges in securing supply.

“The [black mass] market is still very young,” one black mass producer told Fastmarkets. “There are not many producers, and competition to secure batteries [for recycling] is high.”

On a recent roadshow throughout Asia, market participants pointed out that this tight supply is currently supporting high payables for black mass.

“Prices for black mass are high due to the limited number of producers and suppliers,” one trader in the region told Fastmarkets.

Price competitiveness

Current payables for black mass are trading at around 70-80% depending on the specifications of the material and the location, Fastmarkets understands.

Market participants reported that payables are often higher in China versus other countries because Chinese refiners are able to recover lithium more effectively. They are therefore able to pay a higher price for the nickel and cobalt given that they are able to obtain the additional value.

“When lithium prices are high, black mass payables can go above 100%,” a second trader said.

This was particularly prevalent in late 2022, when spot lithium hydroxide was trading at record highs of $80-84 per tonne. At the time, payables for nickel and cobalt reportedly reached a peak of 130%.

Since then, lithium prices have fallen off, prompting lower black mass payables.

Fastmarkets assessed the lithium hydroxide monohydrate LiOH.H2O 56.5% LiOH min battery grade, spot price cif China, Japan, and Korea at $64-68 per kilogram on March 21.

These current payables for black mass are relatively high compared with other intermediate feedstocks, particularly when specifications of the material are considered.

“At current price levels, it’s hard to break even on battery chemicals when using black mass,” one producer source told Fastmarkets.

Cobalt hydroxide product from the Democratic Republic of Congo is both cheaper and of higher purity, the producer source said, adding that, with demand low, it is difficult to justify producing from black mass.

The cobalt hydroxide payable indicator, min 30% Co, cif China, % payable of Fastmarkets’ standard-grade cobalt price (low-end) was 55-63% on March 17.

Similarly, payables for nickel MHP are broadly in line with black mass, although they often come with a higher purity of nickel content, of 35-45% as compared with the 10-20% content of black mass.

Fastmarkets assessed the nickel mixed hydroxide precipitate payable indicator, % London Metal Exchange, cif China, Japan, and South Korea at 70-76% on March 17, up from 68-72% on March 10.

“Legislative pressure will be crucial in driving adoption,” the producer source said.

Added ‘green’ value

There is a view among some market participants that although the price point of black mass is higher than for other intermediates, it does offer distinct added value due to its green credentials.

“In my view, black mass has a key value because it’s recycled,” a third trader said.

Many of the intermediate products used in the battery industry rely heavily on countries with significant environmental and social concerns, which are challenging for the industry to navigate.

But a higher raw material price could result in costs being passed on to consumers, and it is not yet clear if this will be widely accepted.

“We want to produce green batteries, but it only works if consumers are willing to buy green batteries,” a battery manufacturer said.

Keep up to date with global market insights and predictions for 2023 and beyond with our NewGen forecasts.

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