Powering the Future 2025

Production scrap Global total End of life 20,500 kt 2040 7,850 kt 2035 1,850 kt 2030 900 kt 2025 250 kt 2020 2020 2025 2030 2035 204052% 47%57%86%94% 2020 2025 2030 2035 204048%53% 43% 14% 6%FIGURE 5 EV batteries reaching end of life, globally Source: McKinsey & Company25The economic challenges pertaining to EVB recycling and second life may hinder the scale-up needed to meet demand. While the IEA expects recycling capacity to outpace recycling demand for EVBs and battery production scrap in the short term (by 2030), based on both the Stated Policies Scenario and the Announced Pledges Scenario,22 there is reason for concern about the long-term outlook of recycling capacity. These forecasts are based on current recycling capacity and company announcements for planned additional capacity, and these plans do not always come to fruition; in fact, current overcapacity may contribute to the reduction, cancellation or consolidation of additional planned capacity, even as the number of EVBs reaching EOL grows exponentially starting in the mid-2030s23 and an increasing number of regions need EVB recycling. Given that it takes years to secure permits and construct and commission recycling facilities, investment must continue apace. Considering the significant capex required for new recycling infrastructure, the uncertainty associated with shifting minerals markets and evolving battery chemistries poses an additional obstacle for recyclers. Volatile mineral markets subject the battery recycling industry to potential negative profit margins when mineral prices are low.24 Additionally, as lithium iron phosphate (LFP) batteries increasingly displace nickel manganese cobalt (NMC) batteries, the lower residual value of LFP (due to the lower prices of the minerals contained in the battery) will probably further challenge the profitability of recycling. 2.3 Challenging economics of recycling and second life Current forecasts for batteries reaching EOL typically focus on end of first life, and do not factor in the potential for second life; however, recycling should be viewed as the last step of a battery’s life, after reuse or repurposing as suggested by the waste management hierarchy derived from the European Union (EU) Council Directive 75/442/EEC.26 The second-life industry – currently in even earlier stages of development than the recycling industry – must scale up significantly to meet impending global demand, but this growth may be impeded by falling prices of new batteries, the perceived value of used batteries, and the cost of battery diagnostics, remanufacturing, logistics and warranties.27 Since batteries are a portfolio product, with battery manufacturers offering several product lines that are fine-tuned for their customers’ application, the battery reuse, repurposing and recycling industries must develop sufficient resilience to maximize value from the ever-growing suite of products that are entering the market. Powering the Future: Overcoming Battery Supply Chain Challenges with Circularity 13