Northvolt files for chapter 11 – which impact will it have on the European recycling market? (updated)

Updated 13:54, 22 November

The Swedish battery maker Northvolt filed the 21st of November for bankruptcy protection (chapter 11) in the US. The procedure means that the troubled battery maker can continue operations while restructuring the operations with access to necessary funds for this process. The company says in its statement:

“Northvolt will continue to operate as usual during the reorganization, similar to other international companies that have used the Chapter 11 process to reorganize their financial obligations. The company will continue to make deliveries to customers, while fulfilling obligations to critical vendors and payment of wages to employees. The Chapter 11 restructuring process in the U.S. is distinct from a bankruptcy or administration proceeding in Sweden or many other countries.

Importantly, this process will allow Northvolt to access new sources of funding, including approximately $145 million in cash collateral. In addition, one of Northvolt’s existing customers has committed to provide $100 million in new financing to support Northvolt’s business operations in the form of debtor-in-possession (DIP) financing, which is a specialized type of financing for businesses that are restructuring through a Chapter 11 process.

Northvolt Ett, the company’s flagship battery gigafactory in Skellefteå, Sweden, and Northvolt Labs in Västerås, Sweden will remain operational as Northvolt ramps up production to meet commitments to its customers. Northvolt Germany and Northvolt North America, subsidiaries of Northvolt AB with projects in Germany and Canada, are financed separately and will continue to operate as usual outside of the Chapter 11 process as key parts of Northvolt’s strategic positioning”

Northvolt was one of the first battery startups in Europe to focus on large scale production and have had an ambitious strategy to produce batteries with as low carbon footprint as possible. This has also involved recycling and the company has built a plant for both pre-processing and material recovery in Skellefteå with the aim to scale up the facility to 125,000 tonnes of infeed capacity. The company has also been producing cathode material and aimed to close the loop by develop a system which would enable recycled materials from both production scrap and end-of-life batteries to go back to pCAM and CAM production. The recycling operations was early organised in a separate company, Revolt.

The biggest problem for Northvolt has been to scale up its production, which during several years have been far under expectations, primarily due to inconsistent quality of the cells. This has also generated scrap from the production which has been processed at Revolt’s facility.

Although the goal for Northvolt is to continue its operations and scale up production there is an obvious risk that this will not succeed. The pressure from incumbents with larger operations, longer experience and positive cashflow has together with the general fall in prices for lithium-ion batteries put Northvolt in a very challenging situation.

As a big player both upstream and downstream a complete shutdown of Northvolt will have effect on the future European recycling volumes. On the other hand, as the problems have been that the production volumes have been too low and as scrap mainly has been processed in-house. The effects will not be so big for the market as whole. The most likely scenario is that non-fulfilled orders, primarily from Audi and BMW instead will be fulfilled by LG Energy Solution or Samsung which mean that production will still remain in Europe. Scrap volumes are however expected to be lower as these operations today have a significant higher yield than what Northvolt has had and are expected to have over the next years.

How scrap volumes are affected

In our latest forecast from October 2024 the scrap volume generated by Northvolt in 2025 were estimated to 1,800 tonnes based on a production rate at 2.3 GWh. This was expected to increase to 10,440 tonnes in 2030 over the company's three previously announced plants in Skellefteå and Gothenburg in Sweden and in Heide in Germany.

Compared to the rest of Europe we had estimated that the production scrap from Northvolt would be only 3.8% of the production scrap in Europe, mainly due to a slow expansion given both delays caused by the financial difficulties and challenges to compete with other players and battery chemistries.

Of volume about a third is expected to be generated in Novo Energy's plant in Gothenburg, which is being built by a joint venture between Northvolt and Volvo Cars. Here, Volvo Cars has announced that they are looking at buying Northvolt's share and look for a new partner. It means the the plant's destiny will be disconnected from Northvolt but also that there is still a lot of uncertainty of whether the plant will be built at all.

Given that all production scrap was expected to be processed by Northvolt's recycling subsidiary the effect on the market is basically none.

How recycling capacity is affected

In our assessment of recycling capacity Revolt is estimated to have a possible run rate of 8,500 tonnes in material recovery in 2025 which then is expected to increase to 25,000.

In an European perspective this is far from insignificant. Even if Revolt's capacity in 2030 in our current estimate represent only 6% of the total capacity it is important to note that:

1. Revolt is operational/close to operational

2. Revolt's process can separate materials to separate salts which reach end-of-waste status

3. Other estimates are highly uncertain which questions about funding and willingness of moving forward from owners in several cases. Part of the capacity also require infeed in North America (Glencore in Kristiansand, Norway)

Thus, Revolt's capacity could when fully operational be considered as one of the most advanced processes on the continent.

There are also ongoing talks to find additional external partners for Revolt or a complete sale of the business. That could potentially mean raised ambitions for the operations.