Battery Recycling_EU’s battery regulation to drive a big demand as well as regulatory burden; CATL to benefit from Brunp’s operation

Summary of Key Points from the Conference Call Industry Overview - The focus is on the battery recycling industry in the EU, driven by new regulations and increasing demand for recycled materials due to the growth of electric vehicles (EVs) and energy storage systems (ESS) [3][27]. Core Insights and Arguments - Projected Recycling Volume: By 2030, over 1,000 GWh of scrap batteries are expected to be recycled in the EU, translating to more than 300,000 tons of refined black mass, which will yield 28,000 tons of lithium (LCE), 53,000 tons of cobalt, and 15,000 tons of nickel, representing 1%, 1%, and 5% of global supply, respectively [3][19][22]. - Regulatory Impact: The EU's battery regulation mandates that all lithium batteries sold in the EU must be recycled at the end of their life. Non-compliance can lead to severe penalties, including fines and market access restrictions [3][27][32][55]. - Cost Savings: CATL's in-house recycling capabilities through its subsidiary Brunp can help save 5-10% on NCM production costs, assuming abundant scrap availability. Currently, CATL uses 10-15% of recycled materials in its production [3][6][19]. - Recycling Requirements: By 2027, the EU aims for a 90% recovery rate for cobalt and nickel, and 50% for lithium from recycled batteries. Starting in 2031, new batteries must contain a minimum of 16% recycled cobalt, 6% recycled lithium, and 6% recycled nickel [3][27][32][41]. Competitive Landscape - CATL's Position: CATL is the only major battery manufacturer with in-house recycling capabilities, holding over 30% of the global battery recycling market share. This positions CATL favorably against competitors [3][6][19]. - Chinese vs. European Recycling Methods: The mainstream recycling method in Europe is pyrometallurgical, while Chinese players predominantly use hydrometallurgical methods, which generally achieve higher metal recovery rates but generate more chemical waste [6][70][72]. Additional Important Insights - ESG Considerations: The introduction of recycling requirements is expected to reduce some ESG risks associated with the supply chain, particularly concerning transition minerals like cobalt, which have elevated human rights risks [6][19]. - Investment Recommendations: While the current recycling margins are not lucrative, the long-term potential for cost savings and compliance with regulations makes recycling a necessary investment for battery and cathode manufacturers [6][19]. - Market Dynamics: The recycling market is anticipated to grow significantly due to technological advancements, policy incentives, and increased battery production, which will generate more recyclable materials [3][19][22]. Conclusion - The EU battery recycling market is poised for substantial growth driven by regulatory changes and increasing demand for sustainable practices. Companies like CATL are well-positioned to capitalize on these trends through their advanced recycling capabilities and strategic market positioning [3][19][22].