The Inflation Reduction Act is also notable in that it focuses on defining how much battery material is coming from domestic production. As of the recent funding, Ascend is valued at $500 million. It is seeking to commercialize an efficient method, termed “Hydro-to-Cathode™,” to turn used lithium-ion batteries into new components. Jaguar Land Rover and SK Group, along with other investors, have put $300 million into the firm. Figure 2: China Is a Leader When It Comes to Processing Battery MetalsĬonclusion: Recent Activities Show Companies Making Moves on This FrontĪscend Elements is a startup that is aiming to be an emerging center of battery production in the southeastern U.S. Based on what we can see today, we have to imagine that Western countries would prefer a greater independence of supply away from a dependence on China if that can be a reasonable possibility. Therefore, as we look at figure 2 and see that China is the major processor of some of the most important battery metals, we can foresee that this may be a major source of tension for Western countries. and China, it is very difficult to know what might happen. In 2022, when one is trying to analyze the possible forward path of the relationship between Western countries - namely the U.S. Geopolitics May Offer a Natural Push Toward Recycling Firms It is then estimated that in the mid-2030s, end-of-life batteries will supersede scrap materials from factories, but extracting the valuable lithium, cobalt, nickel and other metals from existing end-of-life batteries is generally a more involved process than processing scrap metals from factories 2. This scrap could account for 78% of the pool of recyclable materials in 2025. This is important to understand in that it tells us the materials being recycled are not expected to be actual batteries that were used for multiple years in electric vehicles - rather, the inputs into recycling will be more likely scrap material from the increasing number of gigafactories coming into live operation.

That day will likely come - but not immediately. However, we are still early in terms of electric vehicle adoption, so we don’t have electric vehicles at scale heading to the scrapyard at the end of their usable lives. It is simple to picture the idea of electric vehicles ending their useful lives and heading to the scrapyard, similar to any other vehicle.

Typically, if one is thinking of a framework, we believe it should include attention to the idea, attention to the timing, and then attention to the specific companies to improve the chances of a more successful outcome. Similarly, even if we get the idea correct and the timing right, we must find the correct companies. We focus a lot on the idea, in this case, ‘recycling batteries.’ Some of us may have this idea, think it is good, and stop.īut what if we are early? What if there are not yet enough batteries to be recycled, and most people are just buying new batteries? Our idea may then be at risk of not being one that can generate strong returns. In this context, of course, one must think of the specific elements to be correct to secure the best chance of a positive return on a thematic investment.

The concept and idea might be clear but getting the timing of the possible takeoff right can be tricky. It may be the case that we are early - and this is sometimes an issue in thematic equity investing. Certain countries and regions have lots and lots, while others don’t have any. The map in figure 1 also makes another important point - the specific metals used in the manufacture of batteries are not evenly dispersed across the globe. Instead of constantly sourcing more nickel, cobalt, lithium and other metals, if the existing stock of metals is already out of the ground and in use in various physical products, it would be more efficient to use them again and again. Intuitively, recycling battery metals makes a lot of sense. Figure 1: Today’s Supply Chain Requires Critical Materials to Move 50,000 Miles Before Making Their Way into a Cell… Batteries are a critical example, and securing supply is a topic that many regions are thinking about today.

The COVID-19 pandemic laid bare the fact that many things have built toward highly globalized supply chains. Redwood Materials, a company that is focusing on battery recycling, articulates it very clearly in the title of figure 1 and then in their infographic. We believe foreseeing the demand for batteries dropping at any point in the near future is difficult.īut there is a problem. We want to transition from significant emissions of greenhouse gases toward more sustainable, climate-neutral sources of energy. Those of us following the markets in 2022 have tended to hear certain words again and again:

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