Eramet suspends battery recycling plant – comment

The French mining and material company Eramet which is planning to set up a hydrometallurgical material recovery plant in Dunkirk in Northern France has announced that the project will be suspended without giving a new timeframe. The plant is one part of a joint project with the large waste management company Suez which has received €67.6M in grants from the EU Innovation fund. Suez, which will build and operate a pre-processing plant, has not commented on the decision or whether also its part of the project will be suspended.

The reason for the suspension is a combination of lack of feedstock due to lower battery production and lack of downstream processors which will buy the recycled materials. The company writes in its Q3 report:

“Due to the lack of ramp-up in Europe of battery factories and their components (precursors and materials for cathodes), there are currently major uncertainties about the supply of raw materials to the plant, and about recycling opportunities for the metallic salts. The required conditions for pursuing a hydro-metallurgical battery recycling plant project in France are therefore not met, and the Group has decided to suspend the project. Convinced of the need to develop a circular economy for critical metals on European soil, Eramet will pursue its studies of the market fundamentals required to make such a project competitive”.

Part of a trend

The suspension is the third project in only four months which has been suspended after BASF and Umicore have announced similar decisions. However there are several other projects which also are uncertain:

Orano which is planing a recycling plant close to Eramet’s planned site lost its joint venture partner only two weeks ago when the car company Stellantis decided to not follow through on the MOU the parties agreed on in 2023. Orano has however not communicated any changed plans and were planing the plant before the potential joint venture was proposed.

A previously announced material recovery plant in Portovesme in Italy, a joint project between the Canadian startup Li-Cycle and Swiss mining company Glencore, seems not very likely to materialise since Li-Cycle remains in a financially challenging position and Glencore has taken the first steps to close down current zinc processing operations on the proposed site, before any other operation to replace it has been confirmed. The parties has previously said that the evaluation work to build a plant will not take place in Italy due to the lengthy permit process.

Another company which might be in difficulties is Revolt, the recycling operation founded and majority-owned by troubled battery maker Northvolt. Although Revolt likely has been playing a key role in the ramp up of Northvolt’s production, with large amounts of scrap being generated, it is still not clear whether the recycling operation can be prioritised when the company needs to focus on ramping up battery production.

Also in Finland the large energy company Fortum has said that its battery recycling operation, the only independent hydrometallurgical plant dedicated for battery recycling in Europe today, is part of the company’s strategic review. In the summer Fortum divested other recycling operations to the private equity group Summa Equity.

Logical correction

The decisions of either exiting recycling projects or suspend the operations beyond 2030 all come at a time when many pre-processing operations struggle to source enough materials. This both raises the prices of feedstock while it affects the costs of goods sold when the plant operates under capacity. In Li-Cycle, which currently operate pre-processing plats in the US and Germany the costs of goods sold were more the two times higher than the revenues in the company’s latest quarterly report.

The challenge with material recovery projects is that they usually are designed for much larger volumes than pre-processing plants and require more than 10 times higher CAPEX. At the same time the hydrometallurgical capacity in both South Korea and China is already significant and increases rapidly in operations with both lower CAPEX and OPEX.

In CES’ latest data on announcements and estimated capacity for Material Recovery in Europe the projected capacity until 2030 has decreased significantly compared to October 2023. Here the suspended projects of BASF and Umicore plays an important role but also indications from Asian cathode players that recycling and precursor production is not to be expected in the near future.

In the data we have not included Glencore and Li-Cycle’s Portovesme project while BASF, Umicore and Eramet are expected to come on line after 2030. It is important to note though that the numbers still include highly uncertain projects such as the British startup Altilium’s plant in Teeside in the UK. The startup has today only limited funding and is first to pull off a very ambitious pre-processing project at the same site. Neither that project is fully funded. The metal processor Aurubis has not officially changed its plans to start a larger recovery plant but has expressed concerns over high costs for energy in Germany. The expansion of Pure Battery Technology’s nickel operation in Hagen, Germany, which will include black mass processing has received a permit as of 2023 but activities seems to be slow. Finally, Revolt’s expansion is still included in the number albeit on a lower level than what the company has announced.

Currently one of the most promising projects is Cylib’s 30,000 tpa plant in Dormagen, Germany. However the newly raised capital of €55M is likely far from what is needed to complete the project given the costs seen in similar projects in the US and Europe.

Comment

All in all the suspensions and exits have put the European market into a likely deficit of recycling capacity which also might make it difficult for future capacity to be added.

That startups like Li-Cycle, Altilium and Cylib, companies that have entirely placed their bets on battery recycling as a business, are rushing to establish operations as soon as possible is natural as they need to build position in the market. However, when companies like Umicore, BASF and Eramet, companies with a wide range of other alternatives to invest in, chose to not build a similar position it shows that market conditions might not be ideal for anyone.

This should put into a perspective where recycling projects in the US are still expanding in high pace on a market that might be even more constrained when it comes to feedstock availability. Also in South Korea has recycled materials become a key ingredient when precursor production is being built out, not least to cater the US market. While new dedicated waste codes for lithium-ion batteries and black mass may make it more difficult to export black mass from Europe to certain countries it basically direct the material to the US, Canada and South Korea as the only OECD countries with significant recycling capacity.

At the end of the day we share the view of Eramet that the biggest hurdle for the European recycling industry is the lack of battery material production (downstream) as well as the slow pace of battery production build out (upstream feedstock generation as well as downstream customers for material producers). Eventually it all comes down to Europe’s capabilities in both EV and ESS production, something that still is very uncertain.