The full lifecycle value chain of power batteries. Green Beauty provides pictures

Reporter Hu Yawen from China Times. net. cn reports from Beijing

With the large-scale recycling of new energy vehicles, battery recycling has become a new growth point. In 2015, China experienced its first explosive growth in sales of new energy vehicles. Almost 9 years have passed, and at least 331000 vehicles have exceeded their service life of 5-8 years.

The most valuable products among discarded batteries are re extracted cobalt sulfate, nickel sulfate, and lithium carbonate. An increasing number of research reports and company layouts indicate that China has established a battery recycling supply chain, with over 360 active recycling companies in the market. By the end of 2023, China's recycling capacity has increased to 3.3 million tons per year. This is an amount far exceeding that of existing retired power batteries.

From the perspective of companies with battery recycling businesses, their processes are relatively interconnected, and precursor manufacturers with wet smelting processes are at the forefront. Among the well performing companies, Guangdong Bangpu, Greenmei (002340. SZ), and Huayou Cobalt (603799. SH) under CATL (300750. SZ) all entered the market between 2015 and 2017. In 2023, related businesses will account for nearly 30% of Greentown's revenue, reaching 7.56 billion yuan. The reporter from Huaxia Times learned from Greentown that the scale of scrapped cars has significantly increased this year, and it is expected that the recycling volume will increase by 50% compared to last year. Zhang Jinhui, a senior researcher at Xinluo Information, told reporters that the scale of scrapped vehicles last year was about 120000, which is not a large supply, and it will take several years to truly increase the quantity. In the context of numerous industry entrants and low operating rates, making money through battery recycling is not an easy task.

Ideal fullness, realistic bone feeling

Recently, the activity of the battery recycling industry has been very evident, and the recycling of power batteries seems to be no longer a potential business opportunity. According to the announcement of Ganfeng Lithium Industry (002460. SZ) on July 6th, the company has signed a "Strategic Cooperation Agreement" with Jiangxi Ganfeng Lithium Industry Group and Nanjing Environment Group, and the three parties will carry out comprehensive cooperation in the field of waste battery recycling and lithium battery application. The joint venture company will build a 300000 ton waste battery recycling base in Jiangsu Province. Based on a total investment of 1 billion yuan, the investment cost per 10000 tons is 33.33 million yuan. Jinjing New Energy (01783. HK), a Hong Kong listed company, has crossed over from the construction industry to the recycling of power batteries, which is now the largest source of revenue. Jinjing New Energy recently announced that it is accelerating its layout of power battery recycling projects in Hong Kong and the Greater Bay Area through partnerships with several internationally renowned companies, such as Tesla (NASDAQ: TSLA) and Guoxuan High Tech (002074. SZ). It is expected that the initial annual processing capacity will reach 10000 tons.

The voice that China is about to enter a retirement growth period for lithium batteries is spreading in the industry, and companies currently have high expectations for battery recycling. Both Green Beauty and Huayou Cobalt industry representatives expressed to reporters the good development status of the company's battery recycling business. In terms of recycling volume, Greentown expects to achieve a 50% growth.

Chen Xunsheng, consultant of the China Nonferrous Metals Industry Association, has publicly stated that by the end of 2023, China will have built a physical recycling capacity of 1 million tons of power batteries, with a capacity to recycle over 100000 tons of lithium, ranking first in the world. Bloomberg New Energy Finance reports that by the end of 2023, China's recycling capacity has increased tenfold, from 325000 tons per year in 2018 to 3.3 million tons per year. By the end of 2030, the company has announced an additional annual production capacity of 20.2 million tons, some of which are already under construction. In terms of market size, data from Tianfeng Securities shows that under optimistic expectations, the total market size of retired power battery tiers and recycling is expected to reach 104.89 billion yuan by 2030. According to Deloitte Consulting's 2022 report, it is expected that the global power battery recycling market will exceed 120 billion yuan in size in the next five years.

This production capacity plan has almost announced that the battery recycling industry cannot escape the challenge. According to data from the China Society of Automotive Engineers, the total amount of retired power batteries in China will reach 580000 tons by 2023. Tianfeng Securities predicts that the total retirement of power batteries in China is expected to reach 380.3 gigawatt hours (about 3 million tons) by 2030, with a 10-year compound annual growth rate of 48.9% from 2021 to 2030, and is expected to show exponential growth in the future. This means that, with more recycling capacity already available, if the aforementioned capacity is implemented as planned, the gap between recycling capacity and the supply of waste resources will further widen. Zhang Jinhui stated that the installed capacity 5-8 years ago roughly corresponds to the current recycling volume, and the main limitation of the market is that the current supply is not large enough. Secondly, each leading power battery manufacturer has established its own internal circulation system. This means that there is less circulation in the market.

And the next significant increase in volume may have to wait for 3-4 years. From the perspective of new energy vehicle installed capacity, besides 2015, there has also been explosive growth in 2021. According to the Notice on Financial Support Policies for the Promotion and Application of New Energy Vehicles from 2016 to 2020, passenger car manufacturers shall provide a warranty period of no less than 8 years ｏｒ 120000 kilometers (whichever comes first) for core components such as batteries and motors. For a period of 8 years, the significant increase in future supply will have to wait until 2028.

However, the increase in production capacity may not be rapid. The relevant person in charge of Greenmei revealed that the current factory, including overall equipment, automation, and assembly lines, is relatively complete and trains the corresponding number of workers based on the supply of batteries. Due to the combustion risk of lithium batteries, in order to ensure safety, workers generally need to undergo one year of training before they can start working.

In addition, companies with poor qualifications may also be cleared. In recent years, the number of companies involved in battery recycling has been increasing. According to statistics, from 2018 to 2023, the Ministry of Industry and Information Technology released five batches of 156 companies that meet the industry standards for the comprehensive utilization of waste power batteries in new energy vehicles, commonly known as the "white list" in the industry, which is equivalent to a "regular army". Among them, the number of cascaded utilization enterprises still ranks first, accounting for nearly 60%, more than those with recycling qualifications. In terms of subdivision, qualifications can be divided into dismantling and recycling, hierarchical utilization, as well as crushing into black powder and smelting qualifications. The relevant person in charge of Green Beauty believes that although there are many enterprises with qualifications for recycling and comprehensive utilization and crushing into black powder, there are very few enterprises that can truly turn black powder into usable metal resources. In order to promote the better development of the recycling industry, it is also recommended to regulate small factories in policy supervision and strengthen whitelist screening.

Pioneer enterprises take the lead

Although the current market space for imagination is limited and making money is not easy, from the perspective of environmental protection and the entire industry chain, it is necessary for enterprises to layout battery recycling capacity. The recycling of recyclable battery materials is a very definite demand. Battery recycling is a necessary step for battery companies to complete a commercial closed loop. Zhang Jinhui explained that nowadays, major raw materials such as nickel, cobalt, and lithium rely on imports, and scrapped batteries can cause pollution. Taking Ningde Times as an example, the recovery rate of nickel, cobalt, and manganese is over 99%, and the lithium recovery rate is over 90%.

In actual lithium battery recycling, a radius of 500 kilometers within a circle is a reasonable recycling radius, which can safely send the batteries in this area to the recycling station for recycling. Battery recycling includes two directions: hierarchical utilization ｏｒ regeneration of waste batteries. Simply put, cascading utilization refers to the screening and reorganization of batteries with reduced capacity, such as converting power batteries into batteries used in energy storage, low-speed vehicles, communication base stations, and other fields. Recycling involves collecting waste batteries, processing black powder, such as dismantling batteries, crushing batteries, separating, purifying, and smelting multiple processes, ultimately extracting metal materials for reuse. The relevant person in charge of Greenmei told reporters that the current recycling market may still be dominated by 3C electronic devices.

From the perspective of industry players, the main power battery recycling companies include GEM, Guanghua Technology (002741. SZ), Tianqi Co., Ltd. (002009. SZ), Guangdong Bangpu, Huayou Cobalt Industry, Haopeng Technology (001283. SZ), Times Energy, Ganfeng Lithium Industry, Zhongwei Co., Ltd. (300919. SZ), and others. The reporter found that many of these are upstream raw material and material end enterprises of power batteries. Regarding this, the relevant person in charge of Greenmei told reporters that from the perspective of whitelist companies that meet policy requirements, a large part actually belong to precursor (positive electrode material raw material) manufacturers. The technology used in this process is interconnected with the wet smelting required for battery recycling. For companies that want to enter the whitelist, technology is a hard barrier. According to relevant regulations, the comprehensive recovery rate of nickel, cobalt, and manganese should not be less than 98%, the recovery rate of lithium should not be less than 85%, and the comprehensive recovery rate of other major valuable metals such as rare earths should not be less than 97%.

Channel is king, automation is the way out

In addition to the technological reserves of wet, pyrometallurgical, ｏｒ material repair processes, the strength of the harvesting channels for recycling enterprises is equally important. In a battery recycling supply chain, it can be divided into upstream suppliers of waste lithium batteries, midstream lithium battery recycling enterprises, and downstream demanders of recycled materials. The business model revolves around the recycling entity, which is the channel for supplying batteries. Tianfeng Securities' viewpoint points out that the differences in recycling channels directly determine the quality of the business model. Among them, automobile manufacturers have the strongest channel advantage and are at the core of the industry chain. Battery manufacturers have an industrial closed loop, which is the most stable. For third-party enterprises, the depth and breadth of cooperation with vehicle manufacturers and battery factories will determine the core competitiveness of the enterprise.

At present, this is a market dominated by the B-end. The relevant person in charge of Greenmei told reporters that the scale of the mobile end is relatively large, and the power sector is not particularly mature. The company mainly cooperates with large commercial vehicle enterprises and government agencies (new energy buses, public transportation). At present, Gree has established cooperative relationships with BYD (002594. SZ), GAC (601238. SH), and some Korean companies. In the long run, he also stated that the main focus will still be on binding with car companies and battery factories. Because the B-end market is more targeted, car companies can better evaluate vehicle models and provide feedback to consumers. Consumers can entrust their used batteries to recycling companies for disposal. Recycling companies can also return value to consumers at an appropriate price after recycling battery materials.

From the perspective of future development, this is still an industry that requires policy guidance. Compared to small workshops that have advantages in recycling channels and prices, enterprises above a certain scale need to bear the costs of production, management, and taxation, and are at a disadvantage in terms of profits. The phenomenon of bad money driving out good money has emerged. The relevant person in charge of Green Beauty also mentioned that they can indeed feel the competition brought by some small workshops. However, he also believes that many small workshops only perform simple disassembly on the recycled lithium batteries. Compared to companies that simply carry out crushing processing, the ability to handle the entire process of waste lithium batteries and turn black powder into usable metal resources (such as precursors ｏｒ positive electrode materials) will be even scarcer in the future.

In the face of internal competition, automation may be the future direction. As a hazardous chemical, the danger of lithium batteries is widely known. How to disassemble the battery from the vehicle and battery pack while ensuring safety has become a significant challenge. In the view of the relevant person in charge of Greenmei, the difficulty lies in the fact that there are many specifications of lithium battery chassis for new energy vehicles, about tens of thousands of specifications. On the one hand, it is high-risk, and on the other hand, its structure varies. So companies need to disassemble according to different chassis and structures. Nowadays, the degree of automation in dismantling equipment varies among different enterprises. Flexible automation equipment not only has the ability to disassemble various types of power batteries, but also can avoid some safety hazards related to manual labor. From this perspective, there are still untapped growth opportunities in the power battery recycling industry.

Responsible Editor: Li Future Editor in Chief: Zhang Yuning