The good news about battery production scrap
our latest assessment of waste from cell manufacturing
Today we are publishing our new data set on battery production scrap on CES Online. The set is based on bottom-up estimates of the global battery production by individual manufacturers and is aligned with our forecast of 3,362 GWh of lithium-ion batteries placed on the market in 2030. The data shows that there will be significantly smaller volumes of battery scrap available than what we have previously estimated.
From a previous forecast of 1.7M tonnes of scrap in 2030 we have cut this to almost half of that amount, to 911,655 tonnes*.
The difference is most significant by the later part of the decade and is bigger in Europe than anywhere else.
Behind this gigantic adjustment are mainly three factors which are all connected:
Lower scrap rates than previously anticipated.
A race towards high quality/high yield production among the larger battery manufacturers.
An anticipated consolidation of market players with leaders taking a bigger piece of the pie.
What we are seeing is an industry that, although it’s under constant change and in rapid growth, starts to mature. It is now 6 years ago Tesla started to produce cells in their first “Gigafactory”. At that point in time there simply weren’t any cell manufacturing plants with capacities exceeding 10 GWh. Today 14 plants have passed that level and several others are under construction.
This expansion has not come without costs. Not least in quality which has been suffering for many of the rapidly expanding manufacturers. This has resulted in low yield rates and large amount of waste. Both LG Energy Solutions and Panasonic have operated with yields under 80% and so has BYD when scaling up production of its blade battery. New formats and new plants have with only few exceptions always lead to a large number of rejects in various stages of the production.
But with problems come solutions and experience. With the use of advanced automation and artificial intelligence the large manufacturers strive to make the production both more consistent and transferable geographically. Several Asian battery manufacturers have experienced more quality issues in Europe and North America than in their original home markets. One solution for this has been to first set up production in Japan or South Korea and move it first when it has been proven. Another way is to remove the source of most problems – people. With a higher degree of automation, the second largest battery maker, LG Energy Solutions has for instance significantly improved its yield, first in China and then in Poland. The project, which is called Dreamline, will now in its third iteration be used to design and scale up the battery production in the company’s joint venture with General Motors in the US.
As important as the entire production process are improvement of different subprocesses such as mixing, slitting, or welding. In most cases this has brought up the yield well above 90% and in several cases the rejects are under 1 %.
In China the development is similar. High degree of automation and single digit reject rates paired with small amounts of other waste from slitting or casing.
The largest amount of production waste primarily comes from NMP, the solvent used for the application of the cathode material to the batteries’ current collectors. Compared with waste caused by rejects, NMP is not a part of the battery and can be recycled to be reused in the manufacturing process. Thus, it’s not part of the volumes we are listing. The data published on CES Online are recalculated as “cell equivalents” and refer mainly to cathode and anode scrap, sheets of aluminium and copper as well as casings. As the cathodes and anodes come earlier in the process this means that there is a higher share of cathode and anode material than for instance of electrolyte as its added later.
The extensive resources used to improve yield and quality are motived by both cost and reputation. With material costs at record highs, constant losses from product rejects are not sustainable in an industry where operating margins already are below 5% especially for companies operating outside of China. In the same time, recalls, due to defect cells are extremely costly and is also damaging for the brand and customer relations.
This is where the pursuit for a high first-time-yield becomes strategic. With the rapid expansion of the battery industry over the whole world the ability to generate cash and invest in efficiency and productivity provides the leading companies with significant advantages on a market where size already plays an important role upstream, in the sourcing of battery materials. In terms of volume, CATL, a company which started in 2011 and today is the worlds’s largest battery maker, currently has a market share of 33%. By only adding LG Energy Solutions, BYD, Panasonic, Samsung SDI and SK On this big 6 has 80% of the market. That new entrants, with less resources, higher cost structure, shorter experience and rarely any distinguishable product differentiation, will take significant market share, or even any, is with few exceptions according to us unlikely. Not least when they still need to make its way through the already 20% long tail of the market.
For the scrap generation this is crucial. As a larger and larger share of the world’s batteries will come from manufacturers with long experience and advanced production technology – the main means to keep the scrap rates down – our position is that the scrap rates will decrease significantly and approach 4% and even 3%, with both rejects and naturally generated waste included.
On top of this comes the other big question we have been pointing at in previous articles: what happens if China makes the cheapest and best cars in the world? Already today the battery production and its auxiliary production is dominated by Chinese players. If Chinese automotive companies continue to take market share in Europe, North America, as well as in new EV markets like South America and Southeast Asia, it will also lead to a further concentration of the battery production to the country. It will then of course also further concentrate the production scrap to the region.
A forecast with lower volumes of production waste obviously has a big impact on the volumes of material available for recycling overall. In Circular Energy Storage’s scenario of 3,362 GWh placed on the market in 2030 scenario the total volumes available for recycling (cell equivalent) amounts to 916,000 tonnes of material available for recycling in 2025 and 1.6M tonnes in 2030. This is still a significant volume. Important to note is that of this volume about 970,436 tonnes or 60% is expected to be available in China.
However its not only volumes in themselves which are impacted. Fewer players in the market will also mean fewer contracts for recycling of production waste and they will likely be concentrated to fewer markets. Recyclers which prove their capabilities to efficiently recycle and reprocess the material, and make it available for the large manufacturers, will definitely have the chance to have a seat at the table but with the same company as buyer and seller of the material we forsee a rapid race towards lower margins. Especially considering that the material from the beginning is unwanted and that larger battery companies increasingly can process the material in house.
Our new data is available from today on CES Online and include our estimates of volumes per region and chemistry. From today we are also publishing the combined amount of lithium, nickel, cobalt and manganese from both end-of-life batteries and production scrap.
Learn more about CES Online here.
*This number was previously incorrectly stated as 714K tonnes due to exclusion of two new chemistries.
