Expansions in US Li-battery recycling capacity raise concerns over feedstock

Rapidly expanding capacity for the recycling of lithium-ion batteries in the United States and Canada has raised worries over the supply of raw materials to feed processors in the region, sources have told Fastmarkets

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The topic of scrap battery feedstock in North America has been an increasingly urgent talking point at recent recycling conferences and during a raft of recent meetings held by Fastmarkets with major market sources.

Fastmarkets’ analysts estimated around 155,000 tonnes of lithium-ion battery shredding capacity in the US in 2023, which is forecast to rise to almost 230,000 tonnes this year. But limited available feedstock means that most units will be unable to operate at healthy capacity utilizations.

“We expect just 90,000 tonnes of scrap batteries from end-of-life (EOL) and manufacturing scrap in the US this year, meaning more than twice as much shredding capacity as scrap battery feedstock,” said Julia Harty, senior energy transition analyst at Fastmarkets.

‘War’ for batteries?

For some new or expanded units in the region, it means a battle to get their hands on feedstock.

“In North America right now, there is a war for batteries. You might have the best technology to shred, but if you don’t have feedstock, you don’t have anything,” a North American recycling source said in May.

That quote was put to panelists at Fastmarkets’ Lithium Supply and Battery Raw Materials Conference 2024 last month in Las Vegas, and responses varied.

“This is the problem when you’re building much more capacity… If you produce precursor cathode active materials (pCAM) or CAM, recycling is one part of your supply,” Hans Eric Melin, manging director of consultancy firm Circular Energy Storage, said then. “You’ll always be able to source material, be it recycled or virgin material, but if you’re a recycler, there’s a limited supply [and] a lot of players in the same market.”

“What is really happening is that [recyclers] are driving up [scrap] prices, which is good for the [original equipment manufacturers] and others that have batteries, but it just becomes more and more difficult to make money from it,” Melin said.

“That is exactly the same situation we’ve had for five years in China,” he added. “The biggest cost for Chinese recyclers who recycle lithium iron phosphate batteries (LFP) is feedstock. What we are creating is a low-margin business by adding a lot of capacity.”

A major trader source, who has participated in tenders for production scrap from US original equipment manufacturers (OEMs), told Fastmarkets on Wednesday July 17 that the competition involved in the bidding process was “brutal.”

Production battery scrap was attracting bids from both North American and Asian firms – the latter of which were looking to export the materials – pushing up payables for the material close to levels seen in transactions for the further-processed black mass, he said.

Different types of capacity

But Ryan Melsert, chief executive officer at American Battery Technology Company (ABTC), said at the Las Vegas event that not all new capacity is created equal, drawing a distinction between those firms that can grind batteries into black mass and those that can close the loop by producing recycled battery metals from scrap batteries.

OEMs would be much more likely to supply their scrap to firms that fit the latter profile, he said.

“I think this is a normal supply-demand balance just like you have in most industries. There’s a lot of recycling capacity that has come along in the last year or two, but I don’t think it’s all the same quality of capacity,” Melsert said.

“The scrap market for spot has been around for quite a while, but a lot of the new material is coming from the big OEMs from their end-of-life material – from their service centers – and they only really want to work with companies who can sell them back recycled product,” he added. 

ABTC operates a recycling plant in the US state of Nevada that will have capacity to process 20,000 tonnes per year of battery feedstock material into recycled metals, with production scheduled to begin “early next year,” Melsert told Fastmarkets at the event.

For Tim Johnston, co-founder of recyclers Li-Cycle and Blue Horizon Advisors – where he’s also a partner – speaking about battery supply and demand is an oversimplification, with not all recyclers able to take all batteries.

“There are segments which are much more competitive than other segments. The material which is dry and doesn’t contain electrolytes – lots of people can process that material and you can export that material,” he said.

“Cell-to-pack architecture, embedded cells within packs which you can’t disassemble – much harder, fewer recyclers, less competitive, better economics. It’s not straightforward,” he added.

Furthermore, Harty expects any current supply tightness to ease over the coming years.

“Over the next 10 years, we expect the situation to improve as a flood of EOL batteries comes onto the market. From 2029 onward, the amount of scrap batteries will be greater than the amount of shredding that has currently been announced,” Harty said.

US scrap battery volumes are set to soar over the next 10 years. While only 6% of lithium-ion battery scrap in the global market was in the US last year, the percentage will rise to 11% by 2034, according to the latest Fastmarkets research estimates.

US overcapacity increases

Despite the new uplift in pre-processing recycling capacities, there is still a lack of post-processing capacity to consume black mass in the US, sources said.

“When we look at black mass refining, there is a significant undercapacity, with 20,000 tonnes of weighted refining capacity in the US expected in 2024,” Harty said.

“Companies are being more tight-lipped about potential expansions and new refining projects, as there have been a few high-profile examples of delays, spiraling costs and closures to refining projects,” Harty said.

Recycled battery materials firm Ascend Elements has a commercial-scale plant in Kentucky on track to open in the first quarter of 2025 for production of 1,250 tonnes of pCAM per month, according to the firm. Singapore-based lithium-ion battery recycling company Green Li-ion this year started producing battery-grade cathode and anode materials from black mass and cathode powder in Atoka, Oklahoma.

Major recycler Redwood Materials is also developing capacity to produce recycled battery metals in the US. But it is primarily consuming end-of-life batteries and production scrap collected at its plant in Nevada instead of black mass. Redwood is receiving more than 10 GWh per year of lithium-ion batteries, a company spokesperson said in May, but “we have not been feedstock constrained to need to source black mass.”

Other firms that have reportedly been developing capacity to consume black mass in North America include Li-Cycle’s Rochester, New York, project and Canada’s Lithion Technologies, which plans to start refining in the future after its recent start of shredding operations in Saint-Bruno-de-Montarville, near Montreal.

US exports set to continue?

As a result of the widening oversupply in black mass, most market participants expect that a significant volume of US black mass will continue to be exported over the short and medium term, while a portion of the material may be stored in warehouses until it can be processed domestically.

Talk of export restrictions or bans on US black mass are occasionally heard, but most market participants told Fastmarkets they don’t believe any will come to fruition anytime soon, if ever.

Rising South Korean capacity to consume black mass has provided a high-paying option for North American black mass, which has low metal impurities, fitting Fastmarkets’ specification of maximum 2% copper and 2% aluminium contents.

Spot deals in late June and early July were heard at 75-78% CIF Korea for payables of nickel and cobalt including value of lithium in US-origin NCM black mass, before weakening battery metal market sentiments caused Asian consumers to reduce bids for black mass in recent weeks.

Fastmarkets’ weekly assessments of the black mass, NCM/NCA, payable indicator, nickel, cif South Korea, % payable LME nickel cash official price and of the black mass, NCM/NCA, payable indicator, cobalt, cif South Korea, % payable Fastmarkets’ standard-grade cobalt price (low-end) were both 68-75% on Wednesday July 17, down by 1-2 percentage points week on week.

The weekly assessment of the black mass, NCM/NCA, payable indicator, lithium, cif South Korea, % payable Fastmarkets’ lithium carbonate 99.5% Li2CO3 min, battery grade, spot prices cif China, Japan & Korea was 3-5% on Wednesday, unchanged week on week.

In the US market, offers were heard for black mass with 20-25% nickel content at payables of 75% ex-works US last week, with bids heard at 73-74% ex-works. Bids for NCM black mass with 15-20% nickel content and maximum 2% copper and alumnium content were heard from consumers in the US market at 60-65% ex-works.

Fastmarkets proposes to launch weekly assessments for black mass payable indicators, ex-works US from early August.

As for post-processing units, Harty expects “more capacity to come online” in the coming years but says it will be interesting to see what happens to surplus black mass in the meantime.

“Will this be exported to Asia, will it be used in pilot research and development projects or will it be stockpiled in anticipation of future refining projects?” she said.

“One thing is for sure – the dynamic battery recycling markets are sure to keep us on our toes,” she added.

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