Industry Overview
Currently, lithium batteries are the mainstream power batteries for new energy vehicles. The life cycle of a power battery includes production, use, disposal, decomposition, and reuse. After disposal, apart from a decrease in chemical activity, the internal chemical composition of the battery remains unchanged; only its charge/discharge performance can no longer meet the vehicle's power demands. The physicochemical properties of the power battery itself do not undergo fundamental changes, allowing for recycling and reuse in various ways. Currently, power battery recycling includes cascade utilization and resource regeneration. Calculations show that the theoretical disposal volume of power lithium batteries increased from 5.6 GWh in 2018 to 47.3 GWh in 2022, with a compound annual growth rate exceeding 70%. The corresponding recycling value increased from 580 million yuan in 2018 to 7.86 billion yuan in 2022, with a compound annual growth rate exceeding 90%.
Industry-driven
Currently, my country urgently needs to build a closed-loop industrial chain for power lithium batteries, encompassing "production, sales, use, and reuse," to truly achieve environmentally friendly and pollution-free lithium battery new energy.
With the continuous development of the new energy vehicle industry, the annual newly installed capacity of power batteries surged from 0.66 GWh in 2012 to approximately 57 GWh in 2018, with a cumulative installed capacity exceeding 100 GWh. The demand for positive electrode materials for power batteries is constantly rising, and the prices of their core raw materials, nickel, cobalt, and lithium, are continuously increasing. Simultaneously, a large number of power batteries installed in the early stages will be gradually retired starting in 2018. Improper disposal after retirement will cause significant environmental pollution from various components within the batteries. Furthermore, the government has issued a series of policies clarifying the extended producer responsibility system for power batteries and encouraging the construction of a power lithium battery recycling system. Driven by the aforementioned industry demands, environmental pressures, and policy encouragement, the importance and urgency of lithium battery recycling are becoming increasingly prominent, and the industry is poised for rapid development in the coming years.
Investment Opportunities
The lithium battery recycling industry is still in its early stages of development. Although a number of companies have emerged that started earlier, they are not large in scale, have low industry concentration, and lack a sustainable recycling system.
Looking to the future, only professional manufacturers with a sound recycling system, high-quality customers, strong financial strength, environmental compliance, and early acquisition of hazardous waste disposal qualifications will be able to stand out in a market environment characterized by rapidly growing industry demand and increasingly fierce competition, and ultimately grow into leading enterprises in China's lithium battery recycling field.
The market size calculation in this article uses the installed capacity of power lithium batteries, not the production and shipment of power lithium batteries. Generally speaking, the production of power lithium batteries > the shipment of power lithium batteries > the installed capacity.
01 Industry Overview
1.1 Basic Concepts
Currently, lithium batteries are the mainstream power batteries for new energy vehicles. Lithium batteries can be classified according to their cathode materials: lithium cobalt oxide batteries, lithium manganese oxide batteries, lithium iron phosphate batteries, and ternary lithium batteries (lithium nickel cobalt manganese oxide, lithium nickel cobalt aluminum oxide), etc. Ternary materials generally refer to materials with the chemical composition LiNi<sub>a</sub>XbC<sub>c</sub>O<sub>2</sub>, where X is Mn (manganese) and refers to NCM (lithium nickel cobalt manganese oxide), and X is Al (aluminum) and refers to NCA (lithium nickel cobalt aluminum oxide). Models such as 532, 622, and 811 indicate the ratio of the three numbers a, b, and c in the NCM material; for example, 622 specifically refers to LiNi<sub>0.6</sub>Mn<sub>0.2</sub>Co<sub>0.2</sub>O<sub>2</sub>.
The life cycle of a power battery includes production, use, disposal, decomposition, and reuse. After a power battery is disposed of, apart from a decrease in chemical activity, the internal chemical composition of the battery remains unchanged. Only its charge and discharge performance can no longer meet the power requirements of the vehicle. The physicochemical properties of the power battery itself do not undergo fundamental changes, and it can be recycled and utilized in different ways. Currently, the recycling and utilization of power batteries includes cascade utilization and resource regeneration.
1.2 Industrial Chain
The upstream of the lithium battery recycling industry consists of manufacturers and users that generate waste batteries and their materials, including battery material plants, battery manufacturers, new energy vehicle operators, and end users; the midstream consists of lithium battery recycling outlets, recycling and reuse companies, and companies that utilize batteries in a cascade manner; and the downstream consists of lithium battery material manufacturers and users of cascaded batteries.
New batteries pass through battery manufacturers, vehicle manufacturers, and car dealerships before reaching car owners. Car owners then replace their old batteries with new ones at after-sales service centers and battery leasing companies. Simultaneously, these centers and leasing companies collect used batteries and transfer them to battery recycling or secondary use companies. Batteries used by secondary use companies eventually return to recycling companies after being scrapped. These recycling companies generate recycled materials, which then flow to battery manufacturers to be made into new batteries, and finally to vehicle manufacturers, forming a complete closed loop of "production—sales—use—reuse".
(1) Cascaded utilization is a recycling method that extends the service life of power lithium batteries. Generally speaking, when the capacity of the power lithium batteries in new energy vehicles decays to about 80%, the batteries no longer meet the power requirements and are discarded. However, at this time, the batteries can still be used in industries such as energy storage, and can be deployed in places such as telecommunications tower base stations, commercial and residential energy storage stations, and electric vehicle charging energy storage stations. Compared with lithium iron phosphate, ternary lithium batteries have a shorter lifespan and higher safety risks, making them unsuitable for cascaded utilization in complex environments.
Currently, the bottlenecks restricting the development of the secondary battery utilization market mainly include the high recycling price and processing cost of retired batteries, and the difficulty in ensuring battery performance consistency. Secondary battery utilization has high technological barriers, with key technologies including discrete integration technology and remaining life prediction technology. The key to remaining life prediction lies in full lifecycle monitoring, i.e., establishing a big data traceability system platform to systematically analyze retired batteries and obtain big data on their eligibility for the secondary battery utilization market. Due to technological and cost factors, large-scale marketization and widespread adoption of secondary battery utilization will take time in the short term, and it will not be the focus of this article.
(2) Resource recycling involves crushing, dismantling, and smelting scrapped power batteries to recover and utilize resources such as nickel, cobalt, manganese, and lithium. Through resource recycling, over 95% of metallic elements such as nickel, cobalt, and manganese, and over 70% of lithium (some manufacturers can achieve 90%) can be reused, resulting in significant economic benefits. The produced nickel, cobalt, manganese, and lithium salts can be used to produce ternary precursors and cathode materials, which can then be used in the manufacture of lithium battery cells.
1.3 Current Status of the Industry
1.3.1 Current Status of the Power Lithium Battery Recycling Industry
Before 2014, lithium batteries were mainly used in consumer electronics such as mobile phones and laptops. Due to their small size, simple structure and composition, and ease of collection and transportation, their recycling was mostly handled by traditional nickel-metal hydride and nickel-cadmium battery recycling companies. After 2014, the production and sales of new energy vehicles increased significantly. Driven by this demand, power batteries became the product with the highest consumption share among lithium batteries in 2016, and their share is expected to continue to increase rapidly, becoming the mainstay of the lithium battery market in the future. The proportion of lithium batteries used in consumer electronics will shrink to a relatively low percentage. Due to differences in technology and application scenarios, the average lifespan of power batteries is 3-5 years, and they are currently just entering the stage of large-scale retirement and scrapping. Therefore, my country's power lithium battery recycling market is still in its infancy.
my country's lithium battery recycling market is still in its early stages, characterized by immaturity and a lack of standardization. Traditional nickel-metal hydride battery recycling companies and hydrometallurgical metal recycling companies were the first to enter the market, leveraging their established recycling networks and years of technological accumulation to capitalize on market trends and quickly penetrate the lithium battery recycling sector. However, due to the limited volume of scrapped power lithium batteries and the underdeveloped recycling system, these companies primarily rely on strategic partnerships with downstream ternary cathode material manufacturers and power lithium battery manufacturers, using waste materials from these plants as their main source to ensure a supply of recycled raw materials. Furthermore, the existence of numerous small recycling workshops with outdated equipment, lacking relevant qualifications, posing serious safety and environmental hazards, and employing various unethical methods to secure recycling channels is a significant issue. These workshops often operate under the guise of recycling, engaging in simple battery refurbishment and selling inferior products as high-quality ones. They compete for raw materials from used batteries by offering high prices, severely disrupting the normal order of the power battery market and squeezing the profit margins of legitimate third-party recyclers.
Currently, both third-party recyclers and domestic power battery manufacturers have recognized the enormous market potential of the lithium battery recycling industry. According to preliminary statistics from GGII (Gaogong Lithium Battery Research Institute), over 30 companies are currently involved in the power battery recycling sector, including GEM Co., Ltd., Huayou Cobalt, BNP Paribas Group, Ganzhou Haopeng, Jinyuan New Materials, Xien Technology, Fangyuan Environmental Protection, Qiantai Technology, Sound Group, CALB, Beijing Saidemei, Xunying New Energy, Camel Group, Xiongtou Power, Taili, Dongpeng New Materials, Guanghua Technology, Zhongtian Hongli, Zhongyou Recycling, Yancheng Xingchuang, and Jianeng Energy. A rough estimate suggests that the lithium battery recycling capacity claimed by these companies far exceeds the projected amount of scrapped batteries in recent years; industry insiders indicate that over 60 new or expanded projects will be launched in 2019. This demonstrates the rapid growth of the lithium battery recycling market. However, the rush and seemingly chaotic expansion also indicates that the industry is still in its early stages. Only with industry standardization and competitive elimination will the market gradually mature.
In addition, power battery manufacturers, as the main entities responsible for the producer responsibility system as clearly required by policy, and new energy vehicle manufacturers, as the operating entities directly connected to the end market, are either directly acquiring professional third-party recyclers to improve their own industrial chain or signing strategic cooperation agreements with them to jointly build a recycling network in order to accelerate their layout.
1.3.2 Resource Recycling Technology Route
Due to the strong demand in the power battery market, recycling and reusing waste batteries can effectively alleviate the scarcity of metals such as cobalt and lithium, and reduce the production cost of power batteries. The recycling of waste power lithium batteries mainly focuses on the extraction of valuable metals from the cathode material. The main processes are: (1) complete discharge; (2) disassembly to separate the components such as the cathode, anode, electrolyte and separator; (3) alkaline leaching, acid leaching and impurity removal of the cathode material; and (4) extraction and enrichment of valuable metals.
Lithium battery recycling can be divided into three main categories based on extraction processes: wet recycling, dry recycling, and biological recycling. Wet recycling is more complex but offers high recovery rates for valuable metals and allows for targeted recycling of finished products, making it the current mainstream recycling process. Dry recycling, due to its lack of specificity, tendency to cause secondary pollution, and high energy consumption, is generally used as a preliminary stage for metal recovery and is often paired with wet recycling. Biological recycling offers advantages such as low cost, low pollution, and reusability, making it the ideal direction for long-term battery recycling development; however, it is currently still in the research and development stage and lacks commercial application cases.
1.4 Laws, regulations and industrial policies
In recent years, various ministries and commissions of the state have gradually standardized and improved the recycling market for waste lithium batteries by deepening and strengthening their policies. To date, a number of policies and regulations related to lithium battery recycling have been issued.
Through analysis, we found that current policies are mainly reflected in the following aspects:
(1) Implement the Extended Producer Responsibility (EPR) system. The "Technical Policy for the Recycling and Utilization of Power Batteries for Electric Vehicles" (2016) jointly issued by the Ministry of Industry and Information Technology, the National Development and Reform Commission, and other five ministries, and the "Implementation Plan for the Extended Producer Responsibility System" (2017) issued by the General Office of the State Council, clearly point out that it is necessary to strengthen the main responsibility of car companies in the production, use, recycling, and reuse of power lithium batteries, and require car companies to establish a commitment system for after-sales service of new energy vehicle products (including battery recycling), implement traceability information management for power lithium batteries of new energy vehicles, and track and record the recycling and utilization of power lithium batteries.
(2) Establish and improve the power battery recycling system and encourage the development of demonstration projects. In early February 2017, the Ministry of Industry and Information Technology, the Ministry of Commerce, and the Ministry of Science and Technology jointly issued the "Guiding Opinions on Accelerating the Development of the Renewable Resources Industry," which clearly stated: ① Focusing on the Beijing-Tianjin-Hebei region, the Yangtze River Delta, the Pearl River Delta, and other areas where new energy vehicles are concentrated, support should be given to establishing a universally applicable and economically viable recycling model and carrying out demonstration applications; ② Electric vehicle and power battery manufacturers should be responsible for establishing a waste battery recycling network, using after-sales service networks to recycle waste batteries, compiling and publishing recycling information, and ensuring the standardized recycling and safe disposal of waste batteries; ③ Car manufacturers should implement battery traceability information management and track and record the recycling and utilization of power batteries.
(3) Strengthen industry supervision of enterprises. In September 2018, the Ministry of Industry and Information Technology of China released the first batch of the "Industry Standard Conditions for Comprehensive Utilization of Waste Power Batteries for New Energy Vehicles", which made clear requirements on the relevant qualifications that enterprises engaged in the recycling and utilization of power batteries should have.
02 Market Analysis
2.1 Driving Factors
2.1.1 It is of great significance to environmental protection.
Recycling spent lithium batteries is of great environmental significance. Once spent lithium battery materials enter the environment, metal ions such as nickel, cobalt, and manganese in the positive electrode material, carbon dust in the negative electrode, and strong alkalis and heavy metal ions in the electrolyte can all cause heavy metal pollution or organic pollution. These pollutants can then enter the human and animal body through the food chain, seriously affecting environmental quality and human health.
Table 5: Pollution of Lithium Battery Components
2.1.2 Strong Demand for Power Batteries
Since 2014, a series of policies related to new energy vehicles have been introduced, propelling the entire industry chain into a period of rapid development. my country's development plan sets a target of 2 million new energy vehicle sales and over 5 million vehicles in use by 2020. In 2018, the production of new energy vehicles reached 1.27 million units, and sales reached 1.256 million units, representing a significant increase of over 60% compared to 2017. With the continuous record-breaking production and sales of new energy vehicles, the power lithium battery industry has experienced explosive growth.
Meanwhile, compared to lithium iron phosphate batteries, ternary lithium batteries have the advantage of high energy density, meeting the strict requirements of the state for new energy battery subsidies. As a result, the proportion of ternary lithium batteries in the power battery field has risen rapidly. In 2018, the installed capacity of ternary lithium batteries accounted for about 78% of the total installed capacity, while lithium iron phosphate accounted for about 19%.
2.1.3 Effectively alleviate raw material shortages
With the rapid development of new energy vehicles, the demand for ternary lithium batteries continues to increase, making the demand for raw materials such as nickel, cobalt, manganese, and lithium more urgent. This has directly led to a sharp rise in the prices of related raw materials. Since 2014, the unit price of electrolytic cobalt and battery-grade lithium carbonate has increased by 2-3 times, and nickel and manganese have also seen a sharp increase in a short period of time.
Globally, my country is rich in nickel and manganese resources. Its basic nickel ore reserves are approximately 2.9 million tons, ranking eighth in the world; its basic manganese ore reserves are 40 million tons, ranking sixth in the world. Overall, my country can achieve a balance between supply and demand for nickel and manganese.
Global cobalt reserves are estimated at 7 million tons, with an extremely uneven geographical distribution. They are mainly concentrated in the Democratic Republic of Congo, Australia, Cuba, the Philippines, Canada, and Russia, with the first three countries accounting for 70% of global reserves. my country's basic cobalt reserves are approximately 80,000 tons, mostly as by-products, making mining difficult. Therefore, my country faces a severe cobalt shortage, with an import dependency rate as high as 90%.
my country's lithium reserves, equivalent to approximately 5.8 million tons of lithium metal, rank third in the world. However, resource extraction is challenging, as the resources are mainly distributed in Sichuan, Qinghai, and Tibet, where the ecological environment is fragile and transportation capacity is limited. Large-scale mining and utilization in the short term is highly unlikely, and domestic production capacity cannot meet the surging demand for power batteries. Currently, my country relies on imports for 70% of its lithium needs.
Through lithium battery recycling, valuable metals in the cathode materials of retired ternary batteries can be reused in the manufacture of ternary cathode materials, partially meeting future demand for power battery manufacturing, reducing dependence on imported raw materials, helping companies control the adverse effects of rising raw material costs, and effectively alleviating the tight supply of cobalt and lithium in my country. This has extremely high strategic significance and economic benefits.
2.2 Market Size Calculation
2.2.1 Market Size of Power Lithium Battery Resource Utilization
The cathode materials for recycling power lithium batteries mainly include lithium iron phosphate and ternary lithium batteries. Based on the standard parameters and chemical formulas of lithium iron phosphate and ternary lithium batteries, and combined with the recent market prices of nickel, cobalt, manganese, and lithium, the recycling value of each GWh of power lithium battery is calculated, as shown in the table below:
According to the calculation, the theoretical recycling value of each GWh of lithium iron phosphate cathode material is about 100 million yuan. Due to the specific composition differences, the theoretical recycling value of ternary lithium cathode materials, from NCM333 to NCM811, is between 330 million yuan and 190 million yuan.
The installed capacity of power lithium batteries is projected to grow from 47.4 GWh in 2018 to 166.6 GWh in 2022, with a compound annual growth rate of over 30%.
Based on information from various industries, we make the following basic assumptions:
(1) According to the 13th Five-Year Plan, the production of new energy vehicles needs to reach 2 million units by 2020;
(2) Given the low energy density of lithium iron phosphate, its installed capacity is expected to decrease year by year, dropping to 5 GWh in 2020 and remaining thereafter, with the remaining installed capacity of power batteries being supplemented by ternary lithium batteries;
(3) In the short term, 523 is the absolute mainstay of ternary lithium batteries. At present, first-tier battery manufacturers have begun to mass-produce 622 and 811. It is expected that 622 will be a transitional product, and 333 will completely disappear after 2018.
(4) In different application environments, the service life of power lithium batteries is generally 3-5 years. The service life calculated in this study is 4 years.
(5) The amount of power lithium batteries scrapped in the current year is 80% of that in N-4 years plus 20% of that in N-3 years.
Based on the above assumptions, the market size for the resource utilization of power lithium batteries is predicted as follows:
Note: Nickel, cobalt, and manganese prices are based on pure metal prices; lithium prices are based on battery-grade lithium carbonate prices.
According to the above calculations, the theoretical amount of scrapped power lithium batteries increased from 5.6 GWh in 2018 to 47.3 GWh in 2022, with a compound annual growth rate of over 70%. The corresponding recycling value increased from 580 million yuan in 2018 to 7.86 billion yuan in 2022, with a compound annual growth rate of over 90%.
2.2.23C Digital Battery Resource Utilization Market Size
Digital batteries are mainly used in smartphones, tablets, laptops, cameras, and power tools. Therefore, the calculations are primarily based on the shipment volume of these types of digital products and the average battery content to estimate the usage of digital batteries. According to publicly available data, lithium cobalt oxide batteries are currently the most common type of digital battery used. Therefore, the calculations are mainly based on important parameters such as the molecular formula, specific capacity, and actual energy density of lithium cobalt oxide to estimate the recycling value of 3C digital batteries.
According to this calculation, the scale of digital battery recycling is expected to grow from 2.83 billion yuan in 2018 to 3.66 billion yuan in 2022, with a compound annual growth rate of about 7%.
03 Key Participants
3.1 Power battery manufacturers are actively deploying resources.
Driven by policies and the market, power battery manufacturers, as the main entities responsible for producer responsibility, have increasingly entered the field of power lithium battery recycling. Their recycling models and key participants are as follows:
Source: Compiled from publicly available information
3.2 Professional Expansion of Third-Party Recyclers
The recycling model, primarily driven by professional third-party battery recycling companies, requires these companies to build their own recycling networks and logistics channels for centralized processing of used lithium-ion batteries. The recycling model and key participants are as follows:
04 Industry Development Trends and Characteristics of Potential Enterprises
Based on the above information, we conclude that: on the one hand, with the continued high growth in demand for power lithium batteries from new energy vehicles, the increasing industry concentration of power battery manufacturers, the growing proportion of ternary lithium batteries, and the transmission of cost pressures to the entire industry chain, lithium battery recycling has significant economic benefits and resource regeneration significance, and its recycling value continues to increase; on the other hand, the producer responsibility system requires power battery manufacturers to establish efficient and environmentally friendly recycling systems, making lithium battery recycling both necessary and mandatory. With the first wave of retired power lithium batteries approaching, the annual volume of retired lithium batteries will grow rapidly over the next five years, presenting significant development opportunities for power lithium battery manufacturers, third-party recyclers, and other environmental protection companies.
We believe that lithium battery recycling companies that can stand out in a market environment characterized by rapid growth in industry demand and increasingly fierce competition should possess the following characteristics:
1) Well-established recycling network. For any resource recycling company, raw material recycling is always of paramount importance. Only by ensuring sufficient quantity and reasonable acquisition costs can the profitability of resource recycling companies be guaranteed. At present, professional third-party recyclers have relatively weak channels in the power battery recycling industry. A large amount of raw materials come from the scraps and waste of battery manufacturers and individual recyclers, resulting in weak bargaining power. In the future, companies that first establish a real competitive advantage in the recycling system will have huge growth potential.
2) Excellent Customers. Since the competitive landscape among upstream power lithium battery manufacturers is largely established, and these manufacturers are both raw material suppliers and downstream customers for lithium battery recycling companies, only by establishing strong cooperative relationships with major power lithium battery manufacturers and ensuring that recycled products meet their high-performance requirements can lithium battery recycling companies guarantee their healthy development.
3) Strong financial strength. Currently, the resource recycling industry generally adopts cash transactions for the purchase of raw materials, which puts companies under considerable cash pressure. Sufficient cash is a prerequisite for ensuring a stable supply of raw materials.
4) Environmental Compliance. With increasingly stringent environmental policies, environmental compliance is fundamental to the survival of companies in the environmentally conscious lithium battery recycling industry. However, it should be noted that resource recycling generally deals with waste resources that have some value. For years, some unscrupulous companies in my country have used illegal methods to dispose of waste resources for profit, causing even greater harm to the environment. In the long run, policies will not tolerate this.
5) Prepare for hazardous waste disposal qualifications in advance. Although waste batteries have not yet been officially included in the list of hazardous wastes, there has been ongoing discussion in the industry. Due to the presence of various heavy metal ions in lithium batteries, it is expected that they are more likely to be included in the list of hazardous wastes in the future.
