Li-Cycle to recycle lithium batteries in Rochester

Li-Cycle announced Monday (Feb. 27) an agreement to receive a conditional loan from the U.S. Department of Energy. It consists of some $375 million for the creation of a lithium-ion battery recycling plant. The infrastructure would be built in Rochester, New York.

According to the company, quoted in CNBC, the plant will be capable of processing some 200,000 electric car batteries annually. The aim of the project is to extract the components and materials used to assemble these batteries and reuse them for new batteries. This will solve part of the problem of access to lithium in the market. It is an abundant element, but difficult and costly to extract from the subsoil.

The creation of lithium mines in the United States has generally met with local opposition. As a result, many companies opt to mine it in third countries. However, as it is not a cheap process, the raw material becomes very scarce and, as a consequence, its price rises. The success of the energy transition from combustion to electric cars depends on a solution to this problem.

The problem of lithium-ion batteries

The goal of many administrations, including that of the United States, is the transition to electric cars. However, this requires making the production of lithium-ion batteries cheaper. In other words, lowering the price of this raw material through increased supply is essential.

For electric cars to become affordable products for the majority of people, they need to become cheaper. Thus, battery production is one of the biggest challenges on the road to sustainability. Although the price of lithium has fallen considerably in recent months, this does not change the fact that the commodity has risen disproportionately in value.

Specifically, over the last three years, the price has increased by 800% on the international market. Demand from the electric car industry is the factor driving the value of lithium and other materials. Consequently, when the industry matures and demand for these cars increases massively, the price of lithium could rise even further. Although lithium is abundant in the subsoil, it is still a scarce commodity in the market and as long as this situation persists, its price will continue to rise.

Li-Cycle’s approach seeks an intermediate solution to the problem of lithium shortages in the battery market. Instead of importing the raw material from the mines, manufacturers will be able to buy these recycled components from this company. In this way, new batteries can be produced from discarded batteries for a market that will be demanding. This would address the issue of the lithium market’s inability to meet the demand from battery manufacturers.

Li-Cycle’s business potential

Li-Cycle is a relatively new company, but with a potential that could be described as underestimated. The company has four plants in the United States in which it processes materials for battery manufacturing. But the new plant they plan to build in Rochester has more ambitious intentions, such as converting recycled materials into elements for the manufacture of new batteries.

When the plant is fully operational, it will then have the capacity to process some 200,000 batteries discarded by electric car users each year. The company also claims that approximately 8,500 tons of lithium carbonate, cobalt sulfate and nickel sulfate will be produced. The company’s announcement becomes a thread of hope for the U.S. authorities to ensure the energy transition and break with dependence on China.

Currently, the US authorities are in the midst of a crusade to develop the local industry for transition-sensitive materials. The latter covers manufacturing and the supply chain. The announcement of credits and financial boosts for the development of these sectors has led to growing anticipation on the part of dozens of companies from different areas.

The conditional credit for Li-Cycle’s lithium-ion battery development is not the first to be awarded by the Department of Energy. Beginning this 2023, the institution provided a similar $700 million loan to the Rhyolite Ridge lithium-boron project in Nevada.

Recycling is indispensable for the industry

From within the company, they are completely convinced of the major role that recycling will play for the electric car industry. In the words of the company’s CEO and co-founder, Ajay Kochhar, recycling is not in the place it should be considering its importance now and in the future.“Recycling is an underappreciated, or underappreciated, relief from that need for supply,” he said.

Next, Kochhar added:

“I think, of course, we need primary sources, that is, mining sources, and secondary sources….. Every unit is welcome, whether it’s lithium, nickel or cobalt. I think, with the overlap of the IRA and the overlap of corporate objectives around the sourcing of these materials, recycling will be very important.”

In as little as 10 years, the executive believes that the recycling industry will meet 10% to 20% of all global demand for lithium, cobalt and nickel for batteries. After 30 years, he continues, recycling will be such a big business that it will account for up to 50% of all demand. In addition, he highlights the fact that all electric car producers now want to produce batteries as well. This means that they need sources of raw materials for batteries.

Li-Cycle stresses the importance of a safe, local and sustainable source for the automotive industries of the future. On the other hand, the company’s management expects the conditional loan agreement to be closed during the second quarter of the year. If so, construction of the Rochester plant will begin by the end of 2023.

As reported by this media, a large number of automotive companies plan to start production of electric cars and also batteries. For Li-Cycle these would be its main customers.

The company’s shares on the stock market

For investors, placing capital in this company could be an exceedingly smart decision. However, this could be the case only in the long term and depending on the official approval of the conditional loan from the Department of Energy. In other words, this means that placing capital in the company requires patience. In the best-case scenario, it would take about a decade for the stock to deliver the expected returns to investors.

As stated at the beginning, this is a relatively new company founded in 2016. Its listing on the stock exchange occurred in August 2021 through a SPAC. As far as strategic investors are concerned, the firm has some of the likes of Glencore, Koch, Strategic Platforms and LG Chem, reports CNBC.

Much like the vast majority of U.S. companies, this one didn’t have a dream year in 2022. At the end of January, the company released its fourth-quarter and year-end earnings report. It evidenced a drop in revenue from sales of recycling products and services. Revenues during the last quarterly stretch of 2022 were $3.5 billion. This is a sharp drop when compared to $4.1 billion during the same period of 2021.

The company’s management assures that the reason for this decline was due to the fall in the price of some metals such as cobalt. Despite these negative fourth quarter numbers, the annual figures were better and rose from $7.5 billion in 2021 to $13.4 billion in 2022. With progress toward the new stage at its lithium battery recycling plant Li-Cycle expects a further rise during 2023.

At the time of writing, the firm’s shares soared 10% in response to the conditional loan announcement.