What kind of danger and opportunity will the "retirement trend" of power batteries bring

What kind of danger and opportunity will the "retirement trend" of power batteries bring



In 2014, the release of the policy of exempting new energy vehicles from vehicle purchase tax led to a comprehensive acceleration of domestic new energy vehicles on the commercial road. If this year is defined as the first year of commercialization of new energy vehicles in China, based on the average service life of power batteries of 5-8 years, the first batch of power batteries put into the market are entering a large-scale retirement period.



Recently, a set of data released by the Ministry of Industry and Information Technology indirectly confirmed the "hot" market in this market. From January to May 2023, 115000 tons of waste power batteries were recycled in China, exceeding the total amount of 10.2 tons last year. More than 10000 waste power battery recycling service outlets have been established in China.



According to China Automotive Research Institute, by 2025, the amount of power batteries that need to be recycled in China will reach 137.4GWh, approximately 1.1 million tons. According to the prediction of CITIC Securities, the global battery recycling industry market size will exceed 150 billion yuan in 2027.



Faced with such a huge market, coupled with the further increase in the penetration rate of new energy vehicles, lithium prices have skyrocketed in the past two years, attracting vehicle manufacturers, battery suppliers, and raw material enterprises to enter.



Since the beginning of this year, industry chain enterprises such as Ningde Times, Greenway, Fangyuan Co., Ltd., and Zhenhua New Materials have announced plans to increase and enter the lithium battery recycling industry; In addition, multiple companies engaged in lithium battery recycling, including Jirui Technology, Xien Technology, Minshan Huaneng, and others, have embarked on the IPO journey, adding another spark to the emerging lithium battery recycling race.



But as the "cake" grows, problems such as a "small, scattered, chaotic" industry pattern and an incomplete recycling system are gradually emerging. According to the Tianyancha app, there have been over 40000 newly established battery recycling related enterprises in the past year, with less than 20% of them having a registered capital of over 10 million yuan. As of now, there are only 88 enterprises on the "white list" of the Ministry of Industry and Information Technology, and there are still "small workshops" enterprises outside the large-scale list on the market.



With the rapid growth of the new energy vehicle market, the power battery recycling market has gradually formed a certain scale, covering from professional battery recycling enterprises to traditional waste recycling enterprises, and even some new energy vehicle manufacturers have started to participate in the battery recycling field, which has made market competition increasingly fierce. "An Guangyong, an expert of the Credit Management Committee of the All China Association for Mergers and Acquisitions, told Caijing. com that companies compete for resources, technology Competitive advantages in channels and other aspects, or key factors for winning in future industry reshuffles.



The Hundred Billion Blue Ocean Behind "Scrap"



As is well known, the battery capacity of digital products such as mobile phones will decrease with increasing usage time, usually with a lifespan of about two to three years. Similar to its situation, as the "heart" of new energy vehicles, the power battery also has a fixed cycle life.



According to national regulations, if the power battery capacity decays to below 80% of its rated capacity, it will face retirement and forced recycling. So, what is the value of retired waste power batteries?



It is understood that there are currently two main paths for the recycling of power batteries in China: cascade utilization and recycling and extracting raw materials. The former belongs to mild scrapping, and retired batteries will be recycled and screened for use in areas such as energy storage, low-speed vehicles, and solar street lights that do not require high battery performance; The latter belongs to severe scrapping, which involves extracting precious metals such as lithium, nickel, cobalt, and manganese from waste lithium battery materials through chemical methods to achieve recycling and reuse.



The value of lithium resources goes without saying much. Driven by the increase in penetration rate of new energy vehicles, the price of battery grade lithium carbonate once soared to 600000 yuan/ton in 2022, and the economy of recycling waste batteries also increased simultaneously. In July last year, the leading domestic power battery recycling company, Greenway, revealed on an interactive platform that the lithium carbonate recovered by the company's power batteries is more than 10% lower than the cost of the original mine. During this period, the price of lithium containing waste has also skyrocketed, even surpassing new goods at one point.



From the perspective of resource protection, China's cobalt, nickel, manganese, and lithium reserves only account for 1%, 3%, 4%, and 7% of the global total reserves. According to the research report of Hua'an Securities, waste power batteries are rich in metal content and are high-quality urban mining resources. Taking ternary materials as an example, for every 100g of ternary power batteries recovered, 12g of nickel, 5g of cobalt, 1.2g of lithium, and 7g of manganese can be recovered, while other types of power batteries can also recover varying amounts of metals such as nickel, cobalt, lithium, and manganese. The content of non-ferrous metals in waste batteries is much higher than that of primary minerals, "said Hua'an Securities Research Report.



In addition, from an environmental perspective, metals such as nickel, cobalt, and manganese contained in power batteries can cause harm to human health and ecosystems. Improper disposal of waste power batteries can cause significant environmental pollution. Therefore, the significance of recycling, treating, and reusing retired power batteries is highlighted.



Against the backdrop of booming production and sales of new energy vehicles and the first wave of power battery retirement, the scale of power battery return to the market is rapidly expanding.



A recent research report released by China CITIC Construction Investment shows that in 2015, the installed capacity of new energy vehicle power batteries in China was 16GWh. Starting from 2021, it doubled and reached 295GWh in 2022, with a compound annual growth rate of over 50%. Based on the 5-8 year battery service life, it is estimated that the number of power battery scrapped will increase sharply around 2026, with a total scrapped capacity of over 100GWh. After 2032, it is expected to enter the TWh era, with a CAGR of 33% from 2022 to 2035, The power battery recycling industry will maintain a long-term prosperity. According to estimates, the power battery recycling industry will have a market space of 100 billion yuan around 2030.



With the popularization of new energy vehicles and the arrival of battery replacement cycles in the first and second batches of new energy vehicles in the early stage, the lithium battery recycling industry has developed rapidly. Although the decline in lithium carbonate prices has had a certain impact on battery recycling enterprises this year, it is still a hot topic of the trend. "Dong Xinrui, an expert and investor in the Beijing Intellectual Property Expert Database, told Caijing.



New and old players enter the game



Pursuing profit is the nature of capital. Faced with the vast blue ocean market and policy support, power battery recycling has suddenly transformed from a niche market to a "star" track under the spotlight.



Since the beginning of this year, more manufacturers of lithium battery positive electrode materials have joined the "circle of friends" for lithium battery recycling. On May 23rd, Fangyuan Co., Ltd. disclosed that the company plans to invest no more than 2 billion yuan in two phases to construct a project for recycling 300000 tons of lithium iron phosphate batteries and producing 80000 tons of lithium iron phosphate cathode materials annually.



Another positive electrode material manufacturer, Zhenhua New Materials, announced its entry on August 3rd, announcing its intention to engage in the recycling, treatment, and comprehensive use of waste lithium-ion batteries and materials.



Riding the hot east wind of the track, the field of battery recycling has sparked an IPO wave. At present, multiple companies engaged in lithium battery recycling, such as Jirui Technology, Xien Technology, and Minshan Huaneng, are sprinting for IPOs; At the end of 2022, Jinsheng Xinneng, which received two rounds of financing worth several hundred million yuan and had a valuation of 12 billion yuan, has initiated a listing guidance filing, with CICC serving as the guidance institution.



More capital also seems to want to "seek gold" from it. Since 2022, several companies engaged in lithium battery recycling, including Shunhua Lithium, Hengchuang Ruineng, Bocui Recycling, Ruilong Technology, and Jiecheng New Energy, have received large amounts of financing.



At present, the domestic enterprises that enter the power battery recycling industry can be mainly divided into four categories: power battery manufacturers represented by Ningde Times and BYD, vehicle enterprises represented by SAIC and BAIC, lithium battery material manufacturers represented by Huayou Cobalt and Ganfeng Lithium, and third-party recycling enterprises represented by Greenland.



As the "big brother" of power batteries, Ningde Times was one of the earliest companies to enter the recycling industry. In 2015, when the wave of new energy vehicles emerged in China, Ningde Times acquired Bangpu Recycling to recycle the local power batteries. On the lithium battery recycling track, Ningde Times has publicly revealed that the recycling of waste power batteries by Bangpu Cycle in 2021 will account for 50% of the national total. The recovery rate of nickel, cobalt, and manganese is over 99%, and the recovery rate of lithium is over 90%.



In January of this year, Ningde Times once again announced that Bangpu Recycling plans to invest 23.8 billion yuan in Foshan City to build a large-scale production base with 500000 tons of battery recycling. According to the company's financial report, in the first half of 2023, Ningde Times achieved a revenue of 12.682 billion yuan in battery materials and recycling business, a year-on-year increase of 6.41%, accounting for 6.7% of the total revenue, with a gross profit margin of 16.95%.



Located in the middle of the industry chain, power battery manufacturers have a diverse range of battery recycling channels, which is conducive to ensuring the supply of raw materials and improving their bargaining power with the upstream. Currently, Ningde Times has formed a strong alliance with companies such as Beijing Mercedes Benz and Bangpu Recycling to build a closed-loop recycling system for upstream and downstream power batteries, including "vehicle enterprises battery enterprises recycling enterprises".



In addition to battery manufacturers, raw material suppliers at the upstream of the industry chain are also extending their reach to the recycling process of waste batteries, forming an industrial closed-loop by recycling key valuable material resources such as lithium, cobalt, and nickel from waste batteries, thereby achieving a business model of cost reduction.



Huayou Cobalt Industry is a typical case of upstream battery material companies entering the lithium battery recycling business, and the company has established joint ventures with multiple well-known battery manufacturers such as LG. The subsidiaries of Huayou Cobalt Industry, Huayou Quzhou, Resource Recycling, and Jiangsu Huayou, have respectively entered the first batch, second batch, and fourth batch of the list of enterprises that meet the "Industry Standard Conditions for Comprehensive Utilization of Waste Power Batteries in New Energy Vehicles" issued by the Ministry of Industry and Information Technology.



Last June, Ganfeng Lithium also announced an increase in battery recycling business and signed a cooperation agreement with power battery manufacturer Honeycomb Energy. As of the end of 2022, the company has formed a comprehensive recycling and processing capacity of 70000 tons of retired lithium batteries and metal waste.



In terms of third-party recycling enterprises, Greenland acquired the equity of Kailike in 2012 to enter the lithium battery recycling market. In 2022, the business of recycling and cascade utilization of power batteries at Greenway achieved a revenue of 622 million yuan, a year-on-year increase of 312.60%. The recycled and dismantled power batteries reached 17400 tons (2.1GWh), an increase of 98.11% year-on-year, accounting for over 10% of the total scrapped power batteries in China.



In 2023, it is planned to recycle and dismantle 35000 tons of retired power batteries, and the power battery recycling business will fully enter large-scale commercialization, becoming a growth pole for the company's performance. Recently, Greenland announced on the interactive platform that it is actively promoting the construction of precursor material production and power battery recycling bases in Europe, ensuring that the company's domestic and international power battery recycling volume reaches over 250000 tons by 2025.



This type of enterprise has professional battery recycling technology, but is weaker than battery manufacturers and lithium battery material manufacturers in terms of recycling channels and industry chain collaboration. Therefore, third-party enterprises are also strengthening upstream and downstream cooperation in the industry to fill the gaps.



Greenway mentioned in its financial report that in 2022, the company has established a targeted cycle model from the green scrap end to the green product end with companies such as Shanhe Intelligent, Ruipu Lanjun Energy, Landau Automobile, Mercedes Benz China, and Ningde Times, and established a new energy full life cycle value chain model of "power battery recycling - battery reuse - material remanufacturing - battery remanufacturing".



The market pattern is uncertain, and industry chain alliances may become inevitable



As a group of enterprises enter the market, the battery recycling industry faces the risk of "bad currency driving out good currency".



Since 2018, the Ministry of Industry and Information Technology has successively released a list of four batches of enterprises that meet the industry standards for the comprehensive utilization of waste power batteries in new energy vehicles, and 88 enterprises have been selected for the "white list". However, according to the Energy Storage Application Branch of the China Chemical and Physical Power Industry Association, less than 25% of retired batteries currently flow to whitelisted enterprises, and 75% of their business is digested by small workshops and enterprises that have not yet entered the whitelist.



Due to the low threshold for power battery recycling, the industry competition still presents a situation of "small, scattered, and chaotic". Caijing. com searched for "power battery recycling" related enterprises on the Tianyancha app, and found over 100000 results. There were over 40000 enterprises established within one year, of which over 40% were small-scale enterprises with a registered capital of less than 1 million yuan.



In addition to the Bangpu cycle controlled by Greenway and Ningde Times, the industry as a whole is still in a period of barbaric development without leading leaders, "said Dong Xinrui.



Guosheng Securities pointed out in its research report that the biggest barrier to power battery recycling is channel barriers, and the difficulty lies in collecting enough waste batteries at a lower cost.



This has caused a practical problem, which is that leading enterprises are out of stock, but power batteries that need to be scrapped flow into the hands of "small workshops" that do not have the ability to disassemble, causing environmental pollution and even allowing waste batteries with safety hazards to enter the market. Battery recycling involves toxic and harmful substances, and improper handling may cause environmental pollution. Therefore, strict environmental measures need to be taken to ensure that the recycling process has no negative impact on the environment, "said An Guangyong.



In addition, although there is huge imagination space and a market worth hundreds of billions, the lithium battery recycling industry has not yet entered a true "explosive period".



Jirui Technology pointed out in its prospectus that although the state has stipulated that power battery capacity should be retired when it decays to 80%. However, in actual use, due to cost and other factors, batteries with a decay rate of up to 80% often cannot be fully retired.



According to GGII data, the actual recycling volume of retired batteries in China in 2022 was 411000 tons, a year-on-year increase of 37.1%, accounting for 70.2% of the total theoretical retirement volume of lithium batteries. The gap between theory and reality may be one of the important factors delaying the arrival of the "retirement wave".



In addition, the level of power battery recycling technology and recycling system also urgently need to be improved and improved. An Guangyong believes that there are various types of power batteries, and the recycling process involves technical difficulties such as material separation and extraction, which require continuous innovation and improvement of recycling efficiency. In addition, the cost of battery recycling is high, and whether the recycled materials can be effectively utilized and profitable requires a better balance between the economy and environmental protection.



In fact, in recent years, government departments have actively promoted the construction of a recycling system for retired power batteries. Since 2014, multiple departments such as the Ministry of Industry and Information Technology, the National Development and Reform Commission, and the Ministry of Ecology and Environment have successively introduced relevant policies to guide and support the development of the new energy vehicle power battery recycling industry, formulated industry goals, plans, and regulatory requirements, promoted the safe and hierarchical application of waste power batteries in the fields of backup, charging, and swapping, encouraged business model innovation, strengthened upstream and downstream integration of the industrial chain, and guided all parties to high-quality promote the construction of the recycling system.



On July 19th, at a press conference held by the State Administration for Industry and Information Technology, Tao Qing, spokesperson for the Ministry of Industry and Information Technology and director of the Operation Monitoring and Coordination Bureau, stated at the meeting that the management measures for the recycling and utilization of new energy vehicle power batteries should be studied and formulated, and the recycling and utilization system should be continuously improved.



Faced with adverse competition in the field of power battery recycling, some leading enterprises have also started to "gather together" and explore a new business model of "waste for raw materials", where recycling enterprises collect waste from battery and material factories through agreements. After extracting nickel, cobalt, lithium and other metals, they produce battery grade nickel, cobalt sulfate, and lithium salts, which are then returned to battery and material factories.



For example, recently, Greenland announced that it has signed a strategic cooperation agreement with its subsidiary, Ripland Energy, to explore a "waste for raw material" cooperation model. Greenland will supply 30000 tons of lithium iron phosphate or ternary cathode materials to Ripland Energy, while Ripland Energy will supply a business volume of 5GWh of finished power battery products to Greenland.



Last May, BMW Group also joined forces with Huayou Recycling, a professional manufacturer of waste batteries, to recycle domestic electric vehicle power battery raw materials in a closed-loop manner. The decomposed raw materials, such as nickel, cobalt, lithium, etc., were provided to BMW's battery suppliers for the production of brand new products