29 May 2026
Balancing the battery loop: Why recyclers must manage ambitious growth with strategic caution
Article Summary
The promise of battery recycling as a solution to critical material constraints remains strong, yet near-term market conditions tell a more cautious story. Learn how slower EV growth and delayed battery retirements are reshaping expectations for how and when the sector scales.
As EV sales growth slows, the battery recycling industry faces a growing mismatch between capacity and near-term supply. Many recyclers expanded on the assumption that large volumes of end-of-life (EOL) batteries would arrive quickly. Instead, those volumes are likely to come later, more gradually, and in smaller amounts than expected. This raises the risk of overcapacity similar to what battery manufacturing is already experiencing, with underused plants and pricing pressure across the battery recycling market.
For miners, cell makers, automakers, recyclers, and policymakers, the next few years will determine whether battery EOL becomes a bottleneck or a strategic advantage in building a more resilient and localized EV ecosystem.
The industry once focused on the risk of structural shortages in lithium, cobalt, and nickel. That concern has not disappeared, but it has become more nuanced. Although battery demand is still expected to rise strongly through 2037, EV battery recycling is no longer just about solving an immediate materials crisis. It is becoming a way to build a supply buffer that strengthens resilience and supports regional industrial strategies.
According to S&P Global Mobility, global EOL lithium-ion battery availability is expected to rise from 45.5 GWh in 2025 to around 330 GWh by 2030, and roughly 1,430 GWh by 2037. These timelines reflect average EV lifespans of 7 to 12 years, meaning the large cohorts of EVs sold in the early 2020s will mainly retire in the early 2030s.
Formal recycling volumes will also rise as policy support strengthens. But growth will be slower than earlier forecasts suggested because EV markets have weakened, while collection, transport, and processing challenges persist. The expansion of second-life applications is also delaying the flow of batteries into recycling.
Second life versus recycling: managing the trade-off
Not every battery leaving a vehicle goes straight to dismantling. Many, especially lithium iron phosphate (LFP) batteries with long cycle life, retain enough capacity for second-life uses such as energy storage systems, off-grid charging, and grid balancing.
How this trend creates a trade-off
Second-life use extracts more value from each battery and extends the useful life of embedded emissions and materials. But it also delays the return of critical minerals to the supply chain, sometimes by several years or even a decade.
Chemistry plays a major role in EV battery recycling economics
Nickel-cobalt-manganese (NCM) batteries, particularly high-nickel types such as NCM811, contain more valuable metals and therefore offer stronger recycling incentives. In Greater China, about 45% of NCM EOL batteries were recycled, compared with just 12% of LFP batteries.
LFP is harder to recycle profitably because it contains no nickel or cobalt, and lithium prices remain weak. In those cases, regulation becomes critical to sustaining the battery recycling market. Policies such as Europe’s Critical Raw Materials Act (CRMA) can compel recovery even when market incentives are insufficient.
Second-life systems also face practical constraints: high integration costs, safety concerns, uncertain economics, and the difficulty of combining batteries that have aged differently. So, while second life may delay recycling, it does not eliminate the eventual need for scaled, efficient battery recycling capacity.
Recycling as a major raw material source
According to S&P Global Mobility, recycled materials from EOL batteries and production scrap could supply 35.9% of global cobalt demand, 30.7% of nickel demand, and 21.9% of lithium demand by 2037.
Today, production scrap still outweighs EOL batteries as a recycling feedstock because the EV fleet is relatively young. Gigafactory rejects, off-spec cells, and electrode scrap are currently the largest near-term source of recoverable material. Over the next decade, however, EOL volumes are expected to overtake scrap.
The long-term strategic importance is clear. Cobalt recovery is particularly attractive because of its value and its role in evolving battery chemistries. Nickel, supported by continued use of NCM cathodes and growth in high-nickel variants, is also positioned to provide nearly a third of demand through recycling by 2037.
Lithium is more complex. Although recycled lithium could still supply more than 22% of demand by 2037, this is lower than earlier estimates because low lithium prices and the rise of LFP weaken recycling economics. Without regulation, lithium recovery may fall short of its potential.
Regional divergence in the batter recycling market
Europe is likely to achieve the highest formal recycling rates, driven by strict regulation and a preference for high-nickel NCM chemistries. Under the EU Battery Regulation, targets for 2025–2035 cover recycling efficiency, material recovery, and minimum recycled content in new batteries. By 2031, lithium-ion recycling efficiency must reach 70%, cobalt and nickel recovery 95%, and lithium recovery 80%. By 2035, new batteries must include minimum recovered material shares of 20% for cobalt, 12% for nickel, and 10% for lithium.
The CRMA adds another layer by targeting 25% of EU annual consumption of key raw materials from local recycling by 2030. Europe has also tightened control over black mass by classifying it as hazardous waste and banning exports to non-OECD countries, aiming to keep critical materials within the regional circular economy.
Between 2024 and 2037, Europe’s EOL battery-derived cobalt, nickel, and lithium availability is projected to grow at compound annual rates of 32.5%, 48.3%, and 41.8%, respectively.
Greater China will lead in total recycled battery volume because of its enormous EV fleet and mature recycling ecosystem. But because the region relies heavily on LFP batteries, its recovered cobalt and nickel volumes will be lower than Europe’s in relative terms.
Mainland China’s regulatory model emphasizes traceability, standardization, and extended producer responsibility. Unlike Europe, it classifies compliant high-grade black mass and EOL batteries as non-waste raw materials, making imports easier and reinforcing its role as a global battery recycling hub.
North America sits between Europe and China. The Inflation Reduction Act helped drive rapid recycling investment and local supply-chain buildout. But collection and processing systems remain less mature, and policy changes may weaken EV adoption, which would reduce future EOL battery supply. The region’s longer-term outlook will depend on policy durability, battery chemistry trends, and EV market growth.
Automakers are increasingly treating EOL battery management as a strategic function rather than a compliance exercise. Tesla says 100% of its scrapped lithium-ion batteries are recycled through a mix of in-house processing and external partnerships. Other OEMs, including Stellantis, BYD, and Geely, are combining repair, remanufacturing, second-life use, and recycling within broader circular economy programs.
This shift reflects a broader industry view: battery circularity is becoming central to cost control, regulatory compliance, and long-term supply security.
Battery Recycling Outlook
By the mid-2030s, hundreds of GWh of EOL batteries will be entering recycling streams each year, and recycled materials are expected to supply a significant share of global cobalt, nickel, and lithium demand.
Battery recycling is now becoming a core pillar of the EV transition and a strategic tool for supply security, sustainability, and industrial competitiveness.
But recyclers need to scale with discipline. If capacity is built too aggressively ahead of actual EOL supply, the sector could repeat the overcapacity problems now affecting battery manufacturing. That risk is especially acute when lithium prices are low and LFP batteries dominate, reducing the financial incentive to recycle.
The winners will be companies and investors that stay flexible, phase capacity in line with realistic EV and energy storage demand, and adapt to regional policy and chemistry shifts. In battery recycling, long-term growth is real, but timing will be everything.
See what’s next for battery supply and demand. Access our forecasts. From raw materials to packs, understand what’s coming next.
This article was published by S&P Global Mobility and not by S&P Global Ratings, which is a separately managed division of S&P Global.