Listen: Black Mass: battery recycling to play a critical role in EVs globally

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Scott Yarham:

Hello and welcome to the Platts Future Energy podcast by S&P Global Commodity Insights, where today, we'll be talking about battery recycling, or black mass as it's commonly referred to.

Black mass will play a critical role in the future supply of battery raw materials. When batteries reach the end of life, it can be collected, dismantled, and shredded to produce black mass, a type of electronic waste from which critical materials including lithium, nickel, cobalt, and manganese can be extracted. The recycling of black mass has become increasingly important and a supplement to virgin material supply, as well as reducing the carbon footprint in the battery supply chain. Platts have launched nine daily black mass assessments in response to this market demand.

Today, we'll be unpacking these assessments, understanding the opportunities and challenges that black mass market offers, and what the future of this developing battery metal market looks like. Today, I'm joined by Jesline Tang, associate editor and part of the Platts battery metals pricing team, and also Joyce Wang, director of Automotive Research and Analysis at S&P Global Mobility. Look, let's get straight into it. Joyce, maybe I could come straight to you then. Could you describe what black mass is and what is driving this battery recycling business?

Joyce Wang:

Thanks, Scott. Black Mass is actually one of the outputs from battery recycling. Actually, battery recycling is still at the initial stage. It's not a major business with high margin and standing supply chain. So if we talk about the drivers of this business, I think there are three key drivers. First of all, to meet carbon neutrality targets. As you may know, the top countries such as Europe, US, Japan, and Korea have announced they're going to meet the carbon neutrality targets in 2050. And China has announced to meet the carbon neutrality targets in 2060. So to align with these national targets, top vehicle manufacturers have announced to meet their carbon neutrality by a specific year. For example, Mercedes Benz, we heard that they announced to meet their carbon neutrality by 2039. Some of them even listed the roads to achieve the target. For example, Volkswagen has announced that battery recycling is one of the four focus areas to the way to zero in their 2021 conference.

So meeting carbon neutrality targets is definitely the top driver. And also we see that to overcome the potential supply shortage of battery and of key raw materials, according to our market intelligence research, we will face a lithium shortage and a nickel shortage again in 2026. So that's the second drivers. And last but not the least, we think to solve both demand and supply issues is also a key driver. As you may have heard, due to the new vehicle sales, there will be a big growth of battery demand in the next few years.

So for example, in 2030, we estimate that there will be more than 1000 gigawatt-hours battery will be in demand, which is five times current demand. So how to meet those momentous requirements. On the other side, nine or 12 years later, all of those batteries will be retired. So how to deal with such a big amount of waste battery to avoid environment pollution. So we think that meeting carbon neutrality targets, overcoming the potential supply shortage of battery metals and also solving the demand and supply issues. That's three factors drives battery recycling business.

Scott Yarham:

Fascinating, Joyce, thank you. And I know we are going to get into a lot of those drivers and challenges that this market faces, but before we do that, I'm very keen to learn more about the assessments that Platts have launched. We've obviously already got a very well-established offering for existing battery materials and very mature markets such as lithium, cobalt, nickel and manganese. But black mass is fairly new as you mentioned, Joyce, it's still nascent. Jess, maybe you could talk a little bit about what these assessments are covering and exactly what are the details surrounding these?

Jesline Tang:

Hi Scott. Sure. So as you mentioned earlier, we have rolled out nine daily assessments. So just to give a very brief overview of what we are assessing. First, we're splitting them by region. Five of these assessments are for China, whereas the other four are actually for the European markets. Now, we have a nickel-cobalt black mass assessment for both of these regions. So these would include all sorts of battery scrap as well as end-of-life batteries that contain nickel, cobalt and lithium. And in China specifically, we also have an assessment for lithium iron phosphate or LFP black mass. So the reason for this is that as we know in the Chinese market, the EV battery market is actually very much dominated by LFP batteries. Since about 2022, we have seen that LFP is making up a share about 50% to 60% as compared to 30% to 40% for NCM batteries.

So it is expected that in the next couple of years or so, we will be looking at a very vast amount of LFP batteries reaching their end of life. Even at the current stages where we are not seeing as much end-of-life batteries because of the fast expansion of battery capacity in China, you innovatively get some batteries scrapped in the chain as well. So within the Chinese market, some recyclers have also hopped into this space to take advantage of the recycling of LFP black mass in order to produce more lithium for the market. For the LFP black mass and nickel cobalt markets, they are priced slightly differently. So if we talk about how it's priced in Europe for example, typically we will look at the pricing of nickel and cobalt and as price basis nickel and cobalt metals as opposed to the nickel and cobalt chemicals that are actually used in batteries.

In the Chinese market, actually in the past few years or so, they have also adopted the metal basis method, but especially in 2022 where we started to see very strong growth in the chemical space and also a disconnect between the metal as well as the battery chemical prices. We have seen a shift of the pricing of black mass from metal towards the chemicals. For example, pricing basis, nickel sulfate, cobalt sulfate. And in the case of lithium, lithium carbonate. In Europe, lithium carbonate is sometimes not priced and this is because some recyclers do not have the capacity to actually recover lithium, therefore it is not priced in the assessment.

For our own assessment, however, we do also have a lithium payables for the nickel cobalt assessment as well because we do see that moving forward into the future, particularly for lithium, which will be used in any type of lithium-ion battery chemistry, there will be strong demand for this material and very strong opportunities in this space that recyclers would want to cash in on as well. So this is a very brief kind of explanation of what we are assessing at Platts for black mass.

Scott Yarham:

Thank you, Jess. I know that this has been a great challenge in terms of the research that we've conducted in developing these assessments. And one of the challenges has been the lack of standardization that we see in black mass. These are not parcels that are clearly categorized and actually most cargos that we've seen are absolutely mixed in terms of the quality but also in terms of the contaminants. Thinking about this as one of the challenges, what other challenges would you say faces the black mass market moving forward? If I could go to you, Joyce.

Joyce Wang:

That's a great question. So I think we can analyze the challenge from short term and long term. The short term is limited to waste, the battery still need to be split between reuse and recycling. So if we have very limited waste, the battery go to recycling. How can we generate enough black mass? Because the other portion of waste, the battery will just go directly to reuse. So that's the key challenge we are facing in short term. And take China as an example, the price of waste battery for reuse is almost 10 times higher than the price of waste battery for recycle. So definitely the waste battery owner will sell their waste battery to reuse instead of recycling. So I think lack of resources is the first challenge for recycle black mass. So that's the short term challenge.

And if we talk about the long term, and we know that the collection channel will be the long term challenge, as you may know, there are production scrap and waste of battery. The production scrap is a quite straightforward supply chain. For example, the battery cell manufacturer produce the battery cell and they will also, because of the scrap rates, there are also some production scrap. So recycle can easily get those productions scrap, but however, in terms of waste battery, for those end-of-life battery, who is responsible for collecting those end-of-life battery? Take China as example, there are around 3000 junkyards, however, they just collect less than 50% of end-of-life battery. Therefore, the other half of the end-of-life battery just to go to the gray market. So that's also the challenge for the long term.

Scott Yarham:

Thanks, Joyce. And as just mentioned with regards to the actual way that these markets are priced, we certainly see this as an evolving market. As I say, the lack of standardization right now means that your cobalt content or nickel content or even your lithium content can vary. And I mean the variance can be huge, at times, incredible. What also happens then is the impurities and therefore how high the tolerances are depending on who the converter is. Hence, why in terms of the assessments that we have, we've set minimums as opposed to maximums and therefore focusing really on the payable percentages and not actually on the dollar amount that's actually paid. So Joyce, in regards to how the market is set up at the moment, could you go into a little bit about what the current business model is of battery recycling and what is the trend?

Joyce Wang:

So currently, there are three business models. If we talk about the production scrap, some battery cell manufacturers will recycle that production scrap in-house and some of them will assign a contract manufacturer. So what does contract manufacturer mean? It means the battery cell manufacturer will sign a contract with the recycler and they will send that production scrap to the recycler. However, when the recycler recycled that material, they will send that raw material back to battery cell manufacturer. So it means the business model for the contract manufacturer, they just make money from a percentage of, let's say, the manufacturing cost. So they will not sell the output to other customers. They just send it back to who sell those battery scrap. So that's the second contract manufacturer.

The third business model which is the buyer-trader, we say the pure buyer-trader relationship. So for example, a battery cell manufacturer will just sell their production scrap to the buyer or trader and if the buyer is a recycler, they will just recycle the material to black mass or the other metal sorts. And once those recycling completed, they will sell this recycled material to the other raw material provider or the chem suppliers. So that's the typical three business model for the production scrap on recycling business. And we see that if we talk about the trend, we think contract manufacturer is the preferred business model for both battery cell manufacturer and recycler because they have booked the business and also booked the raw material. So it seems a win-win business model for both battery cell manufacturer and the recycler.

Scott Yarham:

Thanks, Joyce. Jess, given what Joyce just mentioned, I'm very keen to learn a little bit more about the fact that we are pricing on a percentage payable and it's not on the fact of it's a straight calculation, it is actually an assessment, as this percentage is obviously negotiated between whoever that buyer and selling is. I was keen to know about what drivers you might expect to see. I mean obviously, we've talked about impurities, but could you say something perhaps on the fact that on black mass and recovering these critical raw materials that these are non-mined and therefore are quite competitive as opposed to virgin materials?

Jesline Tang:

Yes, actually that theory is actually correct. So especially in the Chinese market where we've seen quite a big boom in recycling. So we do see a number of bigger players for example GEM as well as Brunp, but there are also many smaller ones and they're all competing for materials. As Joyce mentioned earlier, some will operate on a contract, it's not so bad because they can secure materials directly from the battery manufacturers, but there's only so much production scrap to go around and there's not as much EOL batteries as what is expected a couple of years down the road. It's still an industry that is very competitive in terms of material. That's why kind of how the whole payable system kind of takes off. And something that we've increasingly observed is that in the past, particularly in the Chinese market, is that they only used to publish one payables for all of the materials in the battery.

And in the past actually when the DM prices were lower, it was not even priced at all. For an example, they would say, "Okay, perhaps a one parcel of a nickel, cobalt, manganese black mass, I have an X percentage of cobalt and y percentage of nickel." And then based on that content, they kind of negotiate a percentage payable onto the metal price. And what we've seen change first of all is that they split up this payable because they saw that there was different value for cobalt and nickel. And again for cobalt, there's also more black mass sources available because we also have production scrap as well as end-of-life batteries coming from consumer electronics that use lithium cobalt oxide. So obviously those are chemistries that contain more cobalt compared to NCM. So first we saw that slip between cobalt and nickel, and over the past two years when we saw the boom in lithium prices, that's where people also started to consider pricing lithium independently as well.

And this is why we have rolled out separate payables for lithium, cobalt and nickel. And we are tying these payables to the chemicals because most of the recyclers will actually produce, as an end product, the salts that will go back into the batteries. So for example, from an NCM black mass, the end product will most likely be cobalt sulfate, nickel sulfate and lithium carbonate. For lithium carbonate, it's a bit tricky. So what we have heard is that sometimes depending on the recyclers' technology, they're only able to obtain industrial or what some people call technical rate carbonate, which will have to be further refined to produce battery rate carbonate. Whereas for LFP, there are some recyclers that can directly produce all the way to battery rate carbonate. So then that pricing basis would also be slightly different, but for the sake of giving the market a reference on how a parcel of this black mass might cost, that's why we've also rolled out that all-in calculated price as well, basis Platts' own daily battery assessments.

Scott Yarham:

Excellent, Jess, thank you so much. That obviously dispels maybe the impressions that firstly that the batteries are not recycled, they are destined for landfill. And actually, if we're thinking that, anything that is sent to landfill is actually a waste of critical materials and therefore this is big business. I need then to know how big the sector of the market could actually get. Joyce, could you potentially talk about how much supply is actually going to come online from this? Is this a solution and will it be a big enough solution to address those looming deficits that you talked about early in the podcast?

Joyce Wang:

There are two portion consist of the market sizing of battery recycling. One is production scrap, the other is end-of-life battery. So currently, because the new energy vehicle is still young, according to our research, currently, the average age of a BEV in China is just 2.3 years old, so it's pretty young. So it hasn't arrived the age to be retired. So currently, what you can see is the production scrap account for the biggest portion of the whole battery recycling market.

So according to our research, currently in 2023, the total production scrap in Great China, which is around 48 GWh. And in next 10 years, it will increase to 119 GWh. So that's just oncoming from the available battery production scrap, but it includes the cell production scrap, module production scrap and pack production scrap. So you can see that it's a fast-growth market, but however, it is definitely happened to reach the same level as the other, let's say the mining market. So that's the reality. But however, when the end-of-life batteries become older, definitely, there'll be more and more caution, I mean the market sizing from those end-of-life battery. So that's also the opportunity for battery recycling players.

Scott Yarham:

Thanks, Joyce. So I take from that then that this market is going to continue growing and there will be a shift in terms of production scrap to actually retired EV batteries that are not repurposed for energy storage or any other solutions. So therefore, it is a solution that will add a portion, I guess, of supply, but still insufficient potentially to address those deficits, particularly as you saw in the acute deficit with lithium and nickel if those EV targets are going to be met and actually achieved. This has been a fascinating conversation. I perhaps maybe just end on just one last question. If you look at the battery recycling market today, who is leading the race in terms of the capabilities of recycled batteries, and how do you expect this to play out for the rest of the decade?

Joyce Wang:

Yeah, that's a great question. So we can reply to this question from two angles. First is the market size and second is the technology. So if we talk about the market size, definitely China. According to our vehicle in use forecast, currently the share of China in the electric vehicle in use account for 53% of the global market, and it will continue to increase in the next decade. Meanwhile, we also see faster growth in Europe and United States because of the strong new vehicle sales strategy in those regions. So that's the leading regions from market size perspective.

And the other angle, if we talk about the technology, currently China, the hydro method to recycling battery, which has a major process and also has served multiple customers to support the high efficiency or recycled material. So if we talk about the technology, definitely we think China has a major recycle technology, especially in hydro. The other one, the pyro, the Umicore has this recycling technology specifically located in Europe. We think that could also be a potential market to leading this recycling technology.

Scott Yarham:

Perfect, Joyce, thank you very much. We've covered a lot of ground in today's podcast and like many topics when it comes to batteries, it's quickly evolving and especially I imagine with this particular topic, it'll evolve even further and quicker as we move forward. But it’s been fascinating to talk to you both. So I would just like to say thank you very much Joyce for joining us and Jess for your insights as well on the pricing conversation, and also I'd like to thank you, the listener, for listening. This Future Energy episode was produced by Felix Fernandez in London. And if you'd like to learn more about our battery metal assessments, particularly the launched black mass assessments, please do reach out to battery_metals@spglobal.com. And if you'd like to receive our weekly battery metals email and information, please also do reach out to the team. You can stay ahead of the evolution of energy and navigate the pathways to a low carbon global economy with the Platts Atlas of Energy Transition, your map to the sustainable commodity markets of the future. Explore the Atlas by visiting spglobal.com/atlas.