The rush to supply minerals like lithium, cobalt and nickel for electric vehicle (EV) batteries has catapulted a once niche industry into the limelight. One company gaining attention is Li-Cycle, a Canadian lithium-ion battery recycler that is building North America’s first commercial hydrometallurgical battery resource recovery hub in Rochester, New York.

Ajay Kochhar, the company’s CEO and president, tells fDi that awareness of the EV supply chain amongst politicians and the public has “changed 180 degrees” in recent years. The mining industry used to be its “own little echo chamber”, with conferences focused on specific minerals like cobalt and lithium, according to Mr Kochhar. “Now you have original equipment manufacturers, cellmakers and other investors at the table,” he says. 

In February 2023, Li-Cycle received a $375m loan from the US department of energy to assist its plans to build its hub in Rochester and network of spokes, where it shreds manufacturing scraps and end-of-life batteries into ‘black mass’ powder. This powder is then transformed into usable battery-grade metals at one of its ‘hub’ facilities. “These are all very technical and complicated industries, or parts of the supply chain,” says Mr Kochhar, adding that the challenge now is “how do we make it digestible” and easier for the public to understand how important this is for the future of the economy.

Inflation Reduction Act provisions

Due to the importance of batteries for electric mobility, the industry has become increasingly sought after by governments and ensnared in geopolitical tensions between the West and China. “As a commercial, corporate perspective, we always have to find balance and be independent,” says Mr Kochhar, noting that the largest battery makers have their facilities in East Asia, including China, South Korea and Japan.

Before Covid-19 and the Inflation Reduction Act (IRA), Li-Cycle had a “pretty heavy” China strategy, as it sought to source scrap from where most of the world’s batteries are produced, says Mr Kochhar. “What’s changed is that we can actually have a very scalable, viable, large business, mainly building in North America and Europe,” he says.

The IRA further emboldens the plans of Li-Cycle through direct support from the production tax credit (PTC), which gives eligible manufacturers up to 10% cost reimbursements for the production of renewable energy components.

Mr Kochhar says that there’s a “pretty significant impact” from the PTC, which Li-Cycle hopes to benefit from production of lithium, nickel and cobalt at its facility in Rochester, New York. The US Treasury Department published its guidance in May 2023 on the “domestic content requirements” for companies to be eligible for the PTC.

Mr Kochhar says that their battery-maker customers want to keep the recycling material supply chains domestically, or at least continental: “There’s not a huge desire long-term to keep things flowing around the world with the massive carbon footprint that results from that.”

Europe’s recycling focus

While the IRA has heavily incentivised domestic production, Europe has been slower to offer clear monetary incentives to companies in the clean energy supply chain. However, Mr Kochhar is very positive about Europe’s requirements for new batteries to have certain amounts of recycled material — 16% for cobalt, 6% for lithium and 6% for nickel in 2030.

“That’s a big deal for us,” he says, noting that automakers and cell makers are trying to work out how to meet those recycling targets, which are set to rise to 26% for cobalt, 12% for lithium and 15% for nickel by 2035. 

Some industry experts worry that it will be difficult to supply that amount of recycled material domestically compared to the amount of available expected material. In contrast, Mr Kochhar believes it will be possible, but will be a “gradual process”.

The challenge for the US, North America and Europe is to balance environmental concerns with the need to expeditiously bring online mines, refineries and other parts of the EV supply chain, according to Mr Kochhar.

“Critical minerals will be the linchpin,” he says, adding that workers involved in the construction and operations of gigafactories will be another significant challenge for the EV supply chain.

This article first appeared in the June/July 2023 print edition of fDi Intelligence