From the left: Mark Santangini, Kirk Frost and David Carrey sort batteries during a tour of the Li-Cycle battery recycling facility in Kingston, Ont. on May 26.Lars Hagberg/The Globe and Mail
The Canadian company at the forefront of the burgeoning lithium-ion battery-recycling industry is facing one of its biggest tests – and has a chance to assert its dominance over an increasingly crowded field of competitors.
Li-Cycle Corp. LICY-N, which is headquartered in Toronto and launched operations in Kingston, has rapidly expanded in the past couple of years, opening large facilities across the United States, building similar ones in Germany and Norway, and striking a partnership with commodities giant Glencore PLC GLNCY. It’s cited by industry analysts as one of two or three companies outside Asia (where the sector is more developed) best positioned to capture value from the predicted flood of used electric-vehicle batteries in the decades ahead.
The momentum is a source of national pride, evidenced by Prime Minister Justin Trudeau taking European Commission President Ursula von der Leyen on a tour of the Kingston site during her Canadian visit this year. Amid widespread concerns about the reliability and sustainability of battery supply chains, Li-Cycle could significantly help reduce the sector’s reliance on mining by recovering minerals such as lithium, nickel and cobalt from used batteries.
But the business model hasn’t been fully proven out yet. The plants Li-Cycle has opened (and most of those in development) represent only half the equation. They’re what it calls “spokes,” where used batteries are broken down to produce black mass, a powdery substance containing the key minerals. Li-Cycle sells that product to other companies, which process it into battery-grade minerals, mostly in Asia.
Now, across the border in Rochester, N.Y., Li-Cycle is preparing to open the first of its “hubs,” separate facilities where it will do the processing itself so it can sell the minerals, which is where the real value is. And notably, the hub promises to produce lithium, whereas Li-Cycle’s current offtakers are only extracting nickel and cobalt.
Mr. Frost, left and Mr. Carrey sort batteries on a conveyer at the Kingston battery recycling facility.Lars Hagberg/The Globe and Mail
During a lengthy interview, Li-Cycle chief executive officer Ajay Kochhar made clear how much hinges on the Rochester project – which the company, with a current net worth around $1.3-billion, expects will allow it to become profitable.
“That’s where a lot of our corporate dollars and focus are at,” he said. “We’re on track to start commissioning it this year. That’s the big push. And then next year is really a ramp-up year. But it’s a very pivotal moment for us.”
Mr. Kochhar also delved into how Li-Cycle established early-mover advantage with a model that’s different than that of most competitors, why he believes it will be able to keep its edge as more players enter the field and where Canada could fit in future expansion.
Asked about his industry’s broader trajectory, he predicted recycling could account for more than half of battery mineral content by the 2040s – a forecast in the same range as those of others around the sector, if at the more optimistic end.
The challenge for companies jockeying for position in that future market, which has informed Li-Cycle’s strategy, is that for now they’re literally fighting for scraps.
Into the 2030s, at least, few batteries in the first big wave of EVs will have reached their end of life. So recyclers will continue, as now, to rely on limited feedstock. That includes batteries from consumer electronics, decommissioned energy storage systems and recalled EVs. And it will increasingly include manufacturing scraps from all the battery factories that automakers are opening, which Li-Cycle projects will rise from 20 per cent of its intake last year to 67 per cent by the end of this decade.
Electric battery components move along a conveyor belt.Lars Hagberg/The Globe and Mail
Li-Cycle’s spoke-and-hub strategy is a fairly unique way of contending with the scaleup’s bumpiness. Other companies in this space – including Nevada-based Redwood Materials, most commonly mentioned alongside Li-Cycle as an early North American leader – are going with a small number of big facilities, with all recycling operations in one place. Li-Cycle is instead setting up a higher number of spokes, where it can gather recyclable material and convert it to black mass, which it will then send to its hub for processing.
One advantage of that approach, Mr. Kochhar said, is reducing transportation costs by avoiding shipping large batteries and scrap across the continent. Another is how it affects capital costs.
“Frankly, it makes our rollout easier,” he said. “You have more sites, but you’re not biting off massive chunks at a time. You can incrementally inch into a market, then build on it.”
The other overarching aim in quickly getting those sites off the ground has been building credibility with automakers (among them Volkswagen and Mercedes-Benz), battery makers (including LG Energy Solution) and others who supply recyclable materials and in some cases could become customers for recovered minerals.
“There’s a reputational thing – they don’t just want to work with anybody,” Mr. Kochhar said, pointing to safety and environmental standards. (As a benefit on both those fronts, as well as in maximizing mineral recovery, Li-Cycle touts a process to produce black mass that shreds batteries using a liquid solution rather than fire and heat, as is more common in the industry.)
Among sectoral experts consulted for this story, the consensus was that the relationship-building has gone swimmingly so far. “The thing that makes them stand out is the partnerships they have,” said Emilio Soberon, of the international commodity consultancy SFA (Oxford).
Those relationships could prove durable enough to make it harder for competitors without a head start to elbow in, even if they boast new technologies.
Li-Cycle contends that its processes are agnostic enough to withstand EV-making evolutions, such as a possible shift from lithium-ion to lithium iron phosphate batteries, which have different compositions that don’t involve nickel or cobalt.
Plastic components (shredded foil) in the drying room.Lars Hagberg/The Globe and Mail
He acknowledged that more revolutionary shifts – such as widespread adoption of solid-state batteries, which have dramatically different chemistry – could pose more of a challenge. But Li-Cycle is already building IP to confront that prospect, he said. It’s helped by having a window into some of the advances being pursued via scrap received from research-and-development projects – another example of the value of existing relationships.
But before anyone gets too far ahead of themselves, all eyes are on what’s being built in Rochester.
The hub seems to be on schedule. Li-Cycle has avoided long wait times for factory equipment, Mr. Kochhar said, by placing orders early in the planning process, back in 2021, ahead of competitors across the growing sector.
Still, notwithstanding a demonstration hub that Li-Cycle ran in Kingston, a commercial-scale one using hydrometallurgical technology to process as much as 35,000 tonnes of black mass annually is uncharted territory for the company. Only once it’s operational will Li-Cycle’s projections – including mineral sales revenues five to six times higher than what it gets for black mass – truly be tested.
Presuming it goes fairly smoothly, Li-Cycle is on pace to begin building other hubs. That could start with one in Italy, which Li-Cycle and Glencore are jointly pursuing and would apparently be larger than the Rochester hub.
As for Canadian expansion plans, the company is currently limited to expanding its existing spoke, building a new facility in Kingston with higher efficiency and double the current one’s capacity, more in line with newer U.S. spokes in Arizona and Alabama.
Eventually, “Canada is certainly on deck if we move to a second hub” in North America, Mr. Kochhar said.
Li-Cycle considered an Ontario location for its first hub but ultimately decided there was a “better overall package” in New York, he said. And that was before the U.S. Inflation Reduction Act layered on subsidies that Canada is struggling to match.
But as he noted, it was also before Canada’s EV supply chain really started to take shape, including planned Volkswagen and Stellantis-LG battery factories in Ontario and in-the-works facilities to convert battery-grade minerals into cathode active materials (including one by Belgian metals refiner Umicore SA near Kingston) that battery makers can use.
It’s all part of the desire, which Mr. Kochhar said he hears constantly from automakers, to make EV supply chains more local.
Li-Cycle’s promise of recycling minerals from batteries, close to where they’re produced or consumed, fits neatly into that.
Now it’s time to prove it can make good on its full proposition.
Adam Radwanski