德勤：锂电回收未来可期-中国锂电行业发展德勤观察3.0 China Lithium Industry -Deloitte POV 3.0 Sustainable Future of Lithium Recycle

DeloitteConsultingChina|November,2022

ChinaLithiumIndustry

DeloittePOV3.0:SustainableFutureofLithiumRecycle

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KeyTakeaways

Withtherapidgrowthofglobalnewenergyvehicleindustry,theupstreamresourceconstrainthasbecomeoneoftheburningissues.WhilevariouscountriescontinuetoperfecttheEVbatteryrecyclingpolicysystemunderthecarbonneutralrequirements,theEVbatteryrecyclingindustryhasbeenflourishing,andtheupcomingbatteryretirementtidewillfurtherdrivethedevelopmentoftheEVbatteryrecyclingindustry.TheEVbatteryrecyclingmarketispromisingintechnologydevelopment,businessmodel,andindustrychainsynergy,buttherearestillmanykeychallenges.

Fromthetechnologydevelopmentperspective,theprocessandtechnicalrouteofEVbatteryrecyclingisrelativelyclear.Basedonactualbusinessexpectations,directrecyclewilldominatetherecoverymethodinthemedium-tolong-term:

•ThetwomainwaysofEVbatteryrecyclingarereuseanddirectrecycle.Thelarge-scaledevelopmentofreusefacesenormouschallengesduetosafetyissues,insufficientmarketregulation,theimpactofviciouscompetition,andthelackofindustrystandards.Inthemedium-tolong-term,recyclewithrelativelymaturetechnologiesandcommercialapplicationsisexpectedtobethedominantapproach

•Inthematerialrecoveryprocess,pyro-andhydro-metallurgyarethemainstreambattery-graderawmaterialpurificationandregenerationtechniques,whichhashightechnicalandscalebarriers,whilecreatinghighereconomicbenefits,leadingcompaniesneedtoaddressthesupplystabilityoffront-endbatteryrecyclingchannelsandactivelylayoutrawmaterialrecyclingcapacitytoachievehighercommercialvalue

Fromthebusinessmodelperspective,third-partyandbatterymanufacturerrecyclinghavebeenwell-practiced.Theconstructionofrecyclingnetworksandclosed-loopregenerationareessentialsuccessfactors:

•ThemarketmechanismisthemainchallengeforthecurrentdevelopmentoftheEVbatteryrecyclingindustry.Itforcestheleadingrecyclerenterprisestoenhancetheirscaleandbreakthroughtheprofitabilitybottleneck

•Third-partyrecyclingcompanieshavetheadvantageofrecyclingtechnology,whilebatterymanufacturersandautomotiveOEMsgainedtheadvantageofrecyclingandresalechannels;inthecurrentEVbatteryrecyclingmarket,thekeytosuccessfulbusinessmodelsliesintheconstructionofrecyclingchannelnetworksandaclosed-loopecologyforrecyclingmaterialsforreuse

Fromtheindustrychainsynergyperspective,themultiplesectorsoftheLi-batteryandNEVindustrychainhaveshownthetrendofextendingtobatteryrecyclingindifferentformsanddegrees:

•Upstreamlithiumandnewenergyvehicleindustrytechnologyandmarkettrends,suchasbatterymaterialinnovation,integrationtechnology,batterybanks,etc.,bringimpacttothepowerbatteryrecyclingindustry,andopportunitiesandchallengescoexist

•Anindustryallianceofupstreamanddownstreamenterprisesintheindustrychainmaybeanidealmodelfortherecyclingindustry,aseachmemberenterprisecancomplementeachother’sstrengthsandweaknessesformutualbenefits.However,duetothelongindustrychainandmanystakeholdersinvolved,themodelisstillintheexplorationstageofactualcommercialoperation

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01

02

03

DeloitteObservationsandPOV

TrendofEVBatteryRecycleDevelopment

IndustryoverviewandprospectsofEVbatteryrecycle

ValuechainanalysisofEVbatteryrecycle

Marketchallengesandbusinessimplications

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Industryoverviewandprospects

ofEVbatteryrecycle

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Source:CAAM,MinmetalsSecurities,publicinformation,Deloitteanalysis

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TheImperativeEVBatteryRecycling:AlleviationtoTheConstraintofUpstreamResources

Thescarcityofupstreamresourcesisalong-termconstrainttothedevelopmentofdownstreamapplicationmarket.Thelithiumresourcesupplyanddemandgapisexpectedtoemergeandexpandgraduallyafter2025,reaching145tonnesoflithiumcarbonateequivalentin2030.EVbatteryrecyclingwillalleviatetheconstraintsofresourcesupplyanddemandimbalanceonindustrydevelopmenttoacertainextent.

Supply:resourcepressure

ResourceshortageinChina

High-qualitymineralresourcesarerelativelyscarceinChina.Therearefewhigh-qualityhardrocklithiummines,andthetechnologyandproductioncapacityoflithiumextractionfromsalt-lakebrinerequirebreakthroughs.

Uncertaintyofinternationalsupply

Thesupplyofglobalrawmaterialsisconcentrated,andtheproductionfluctuateswildly.EmergenciessuchastheepidemicoutbreakandtheRussian-Ukrainianconflicthaveexacerbatedtheuncertaintyoftheglobalsupplychain.

Longcapacitydevelopmentcycle

Thedevelopmentcycleofrawmaterialsandmineralsisrelativelylong.TheresourceproductionexpansioncycleisaboutfourtimesthatoftheEVbatteriesexpansioncycle,thusleadingtothemismatchbetweensupplyanddemand.

300

200

100

-37%

-1%

Globallithiumresourcesupplyanddemandprojection

(Tenthousandtonnes/LCE)

GloballithiumsupplyGloballithiumdemand

400

2022E2023E2024E2025E2026E2027E2028E2029E2030E

Demand:surgingEVmarket

Strongapplicationdemand

TheEVmarket,asthemainapplicationscenariooflithiumresources,hasenteredaperiodofrapidgrowth,andthesalesvolumeofEVsinChinaincreasedbymorethan150%year-on-yearin2021.

DifficultyinalternativeR&D

TheR&DofEVbatterieswithdifferentchemicalsischallenging.Inthelongrun,Li-batteries,whichhavearelativelyfixeddemandformineralresources,willstillbethemainstay,anditishardtofindanalternativesolutionintheshortterm.

Intensivecompetition

Batterycompaniesmaintainarapidpaceofexpansiontoseizemarketshareanddrivethedemandforupstreamresources,amidtheincreasinglyfiercecompetitionintheEVbatteryindustry.

63%

+38%

26.6

63%

19.1

62%

13.5

62%

+81%

9.1

62%

6.0

4.7

61%

3.4

67%

71%

0.8

35.7

GlobalEVBatteryRecyclingMarketSizeProspects

ThedevelopmentoftheglobalEVbatteryrecyclingmarketisabouttoaccelerate,whichisexpectedtoexceed10billiondollarsinthenextfiveyears,amongwhichtherecyclingmarketofthelithiumisthemostconsiderable

GlobalEVbatteryrecyclingmarketsizeprojection1

46.5

CoMn

BillionUSD2

LiNi

63%

20212022E2023E2024E2025E2026E2027E2028E

Source:AnsonSecurities,Wind,publicinformation,Deloitteanalysis

Remarks:1.Estimatebasedonthetheoreticalrecyclablequantityandpriceoflithium,nickel,cobaltandmanganese;2.ConvertedattheannualaverageexchangerateofUSDtoRMBin2021(1USD=6.45RMB)

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2029E

2030E

6

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EVBatteryRecyclingMarketDrivers-MacroPolicyGuidance

Afteryearsofdevelopment,batteryrecyclingpoliciesandlegislationindevelopedcountriesarecompletewithstricterrequirements;Chinahassignificantlyacceleratedtheintroductionofbatteryrecyclingpoliciesoverthepastdecade,aimingtopromoteandensuretheconstructionofrecyclingsystemsandguidethestandardizedandintegrateddevelopmentoftheindustry

PolicyandlegislativesystemsindevelopedcountriesstartedearlyandarerelativelymatureChina’spolicyguidancehasbeenstrengthenedinrecentyears

NorthAmerica

Completefederal,stateandlocalbatteryrecyclingregulations

TheU.S.DOE2021

Enablestheend-of-lifereuseoflithium-ionbatteriesandrecyclingofcriticalmaterialsatscale,plantheconstructionofafullcompetitivevaluechainintheUnitedStates,andpromotethedevelopmentofcost-effectiverecyclingtechnology

NationalBlueprintforLithiumBatteries2021-2030

TheU.S.EPA1996

Createstheframeworkforthepropermanagementofhazardousandnon-hazardoussolidwaste,includingrechargeablebatteries,lithium-ioncarbatteries,etc.

TheResourceConservationandRecoveryAct

TheU.S.StateGovernments

Makesregulationsforthetypesofwasterecycling,disposalmethods,cost,etc.toencourageallpartiesintheindustrychaintocollaboratetohelpproperlyrecyclebatteries

Europe

Enhancedrequirementsand

strengthenregulatorysystems

EU2022

Theproposedbatteryregulationssetincreasedtargetsrelatedtopowerbatteryrecycling,withstricterrequirementsforbatteryrecyclingmeasuresandbatterymetalmaterialrecoveryrates

NewEURegulatoryFrameworkforBatteries

Switzerland2022

GuidetoWasteissuedbytheFederalOfficeforEnvironmentalclarifyrulesforrecyclinglithiumbatteriesforvehiclesandencourageautomotiveOEMstoimplementenvironmentallysounddisposalsystem

FOENGuidetoWaste

Germany2021

Regulatoryagencies(StiftungEAR)havetheresponsibilitytoregulatethebatterymanufacturingmarketandtocheckthecollectionandrecyclingefficiencyofeachrecyclingsystemandreportmarketparticipation

BattG2

Japan&SouthKorea

Regulatetheindustryfromthelegislativelevel

SouthKorean’sParliament2021

Easeregulationformandatorybatteryrecyclingofpreviouslyregisteredvehiclesandallowforenvironmental-friendlyutilizeofend-of-lifebatteriestoimprovethesecondaryutilizationrateofpowerbatteries

CleanAirConservationAct

TheMinistriesofJapan2004

TheJapanPortableRechargeableBatteryRecyclingCenter(JBRC),jointlyauthorizedbyJapan'stwocentralministries,aimstopromotethecomprehensiverecyclingofusedrechargeablebatterymaterials

DietofJapan2001

Manufacturingenterprisesshouldfulfilltheresponsibilityofrecyclingtheusedproducts,followthe3Rprinciple,andencouragethatend-userssendend-of-lifebatteriestospecialrecyclingsites

TheLawforPromotionofEffectiveUtilizationofResourcesinJapan

China

Graduallyimprovetheestablishmentofthepolicysystemtostrengthentheregulationandpolicyimplementation

MIITandothertwo2022

Todevelopandintroducenewenergyvehiclepowerbatteryrecyclingmanagementmethodsandrelateddepartmentalrules

ImplementationPlanforIndustrialCarbon

DioxidePeaking

MIITandotherseven2022

Topromoteupstreamanddownstreamcooperationintheindustrychaintobuildrecyclingchannels

AcceleratingthePromotionofComprehensiveUtilizationofIndustrialResources

NEA2021

Requestforestablishingthebatteryconsistencymanagement,andmakerequirementsfortheevaluation,monitoringandsupervisionofenergystorageprojectsforsecondaryuse

TheManagementStandardsforNewEnergyStorageProjects(Provisional)

MIIT2020

TopromotetheNEVpowerbatteryrecyclingsystemdevelopment,andtoestablishanumberofexemplaryenterprisesforthesecondaryuseandrecyclingofwastepowerbatteries

KeyPointsofEnergyConservationandComprehensiveUtilizationinIndustryin2020

MIITandothersix2018

Implementationoftheextendedproducerresponsibilitysystem,clarifytheprimaryresponsibilityfulfillersofbatteryrecycling

InterimMeasuresfortheManagementofRecoveryandUtilizationofNewEnergyVehiclePowerBattery

MIIT2018

Establisha“comprehensivemanagementplatformfortraceability”tocollectinformationonthewholeprocessfromproductiontorecyclingofpowerbatteries

InterimProvisionsontheManagementofTraceabilityofNewEnergyVehiclePowerBatteryRecycling

Source:governmentwebsite,EverbrightSecurities,publicinformation,Deloitteanalysis

End-of-lifeLi-battery

Li-batteryprocessscraps

Cathodeprocessscraps1

+43%

840

621

453

325

227

156

104

1,483

1,119

61

DrivingFactorofBatteryRecyclingMarket:TheUpcomingTrendofEVBatteryRetirement

TheretirementtideofEVbatterieshaspromotedthegradualreleaseofrecyclablebatterywasteanddriventhedevelopmentofthegloballithiumrecyclingmarket,withthevolumeofend-of-lifebatteriesandprocessscrapsrisingataCAGRof43%overthenextdecade;TheChinesemarket,whichleadstheglobalEVmarket,isalsoexpectedtousherinconsiderablegrowthinthefieldofLi-batteryrecycling

Theprojectionofglobalrecyclableend-of-lifeLi-batteriesandbatteryproductionscraps

GWh

20212022E2023E2024E2025E2026E2027E2028E2029E2030E

GlobalEVbatteryinstallationsharesin2021

China

Othercountriesandregions

52.1%

China’sEVbatteryinstallation154.5GWh

•WiththevigorousdevelopmentoftheglobalEVmarket,theinstalledcapacityofEVbatterieshasrisenrapidly.TheservicelifeofEVbatteriesisabout5-8years.Therefore,thefirstbatchofbatteriesputintothemarkethasusheredina“retirementtide”,especiallyintheChinesemarket,wheretheproductionoutputandsalesofEVsandEVbatterieshavesoaredsince2015.

•End-of-lifebatteriesaretheprimary“rawmaterials”forEVbatteryrecycling.TheadventoftheEVbatteryretirementtidewillcontinuetoproviderecyclablewastefortheLi-batteryrecycling.

Source:SNEResearch,ChinaAutomotiveBatteryInnovationAlliance,Wind,AnsonSecurities,publicinformation,Deloitteanalysis

Remarks:1.ConvertedtotheamountofEVbatteriesthatcanbeproduced

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Recyclingmethods

•End-of-lifebattery

Pros

Cons

Reuse:utilizationofthe

Inspection,Dataevaluation

Properties

detection

Resistance

determination

Reusablepack

Reusablemodule

Reusablecell

Recycle

RecyclingMethodsofEVBattery

Reuseanddirectrecyclearethemostgenerallyacceptableandenvironmentallyfriendlymethodsofbatteriesdisposal.Large-scaleapplicationsofEVbatteryreuseischallenging,andEVbatteryrecyclingmightbedominatedbydirectrecycleinthemediumandlongterm

capacityofbattery

residual

Low-speed

vehicles

UPS

Reuseapplication

Energystorage

Recycle:recoveryofmetalmaterialsandotherresources

Anodematerials

Graphite,silicon-basedmaterials

Cathodematerials

Lithium,cobalt,nickel,manganeseandothermetaloxides,recycledbydirectmethodandextractivemetallurgy

Othermaterials

Metalshell,electrodematerial,

recycledbydismantling,

shreddingandsorting

End-of-lifebattery

Electrolyt

Recycledbyextractingmethods

＋Increasevalue:optimizetheutilizationofbatteriesandmaximizetheresidualvalue

＋Costreduction:reducethecostofenergystorage,low-speedelectricvehiclesand

otherrelatedindustries,andpromotethedevelopmentofthecirculareconomy

＋Reducepollution:effectivelyreducethepollutionofwastelithium-ionbatteriesand

reducewasteofresources

＋Highrecoveryrate:Matureintechnology,thustheresourcerecoveryrateishigh

＋Simpleprocess:Theprocessismorestraightforwardthanreuse,andthereisnoneed

forscreeningandsafetyassessment

＋Complementarytechniques:acombinedapproachcanbeappliedtoimprovethe

economicbenefitsofrecyclingandsolvetheproblemofenergyover-consumption

‒Applicablelimitations:notsuitableforternary(NMC)lithiumbattery,difficultyto

maintaineconomiesofscalesubjecttomanyqualifications

‒Inefficiency:Theevaluationprocessofbatteriesistime-consumingandinefficient

‒Potentialsafetyrisks:Theinternalsafetyhazardsofretiredbatteriesarehighly

concealed,whichaffectstheremaininglifeandsafetyofthebatterypack

‒Costissues:Thepyrohasalargeinvestmentandhighenergyconsumptionintheearly

stage,whilethehydroisrelativetime-consuming

‒Environmentalpollution:Bothpyroandhydrocausesevereenvironmentalpollution

easily,andtherequirementsforpollutiontreatmentarehigh

‒Uncertainty:EmergingtechniquessuchasbiologicalprocessesandsupercriticalCO2

extractionarestillinstartup

Source:CAAM,AnsonSecurities,publicinformation,Deloitteanalysis

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PolicyFactor

TechnologyFactor

Low

cost

Collection

Small

workshops

Highefficiency

Reuse

Demandside-uncertainpotential:

•Lowacceptanceinthedownstreammarket:Duetounclearstandardsandimmatureregulatorysystem,frequentaccidentsofbatteryreusedforenergystoragehaveledtolowmarketacceptance.Usersareconcernedaboutthesafetyandconsistencyofreusedbatteries

•Impactofpotentialalternativeproducts:theriseofsodium-ionbatteriesandfuelcellsandothertechnologiesmayreplaceandsqueezethemarketofLFPbatteriesforsecondaryuse

Supplyside-“badmoneydrivesoutgood”:

•Long-standingmarketconfusion:Intheabsenceofeffectiveregulation,manynon-compliantsmallworkshopshavelongbeenentrenchedinthereusemarket,anditisdifficultforenterpriseswithhighinvestmentstoprofitandsurviveintheviciouscompetition

Nohazardouswastemanagementqualification;Noinvoicingrequired

Noinspection/environmentaltreatment;

Lowproductionlineinput

2022.02

2021.09

•Thereuseindustrymanagementsystemstillneedstobeimproved:

ThepolicymanagementsystemforthereuseofEVbatteriesisstillintheinitialstageofestablishment,andittakestimetoimprovethenationalregulatorysystemandlocalimplementation

•Policyguidancemaintainsamoderatelypositiveattitude:Althoughthepolicyintendstopromotereuse,italsoemphasizestheimportanceofstrictmanagementofthesafetyofEVbatteryreuse,andisespeciallycautioustowardsreuseinenergystoragescenarios.

AcceleratingthePromotionofComprehensiveUtilizationofIndustrialResources

Requirementstoimprovetherecyclingsystemandmanagementsystemofend-of-lifepowerbatteries,strengthentraceabilitymanagementwithinthewholelifecycleofbattery,promotethesafereuseapplicationofend-of-lifepowerbatteriesinthefieldofpowerbackup,chargingandreplacement

TheManagementStandardsforNewEnergyStorageProjects(Provisional)

Requirenewly-builtenergystorageprojectstoestablishabatteryconsistencymanagementandtraceabilitysystemsandobtainthesafetyassessmentreportsissuedbycorrespondingqualifiedorganizationforreuseofbatteries

Collection

Disassembly

Certification

Detection&Screening

Evaluation&Sorting

Restructuring

•Keytechnologiestobebrokenthrough,industrystandardstobeestablished:Thebatterylife-cycletraceabilitymanagementandindustry-standardsystemaretobeestablished,andtechnicalproblemsstillexistinseveralsectorsofthereusetechnologyprocess

Evaluationandsorting-Batteryspecificationsarecomplex,andlifeevaluationisdifficult

Detectionandscreening-Lackofbatteryuserecords,complicateddetectingtechnology

Restructuring-Hightechnicalbarrierstobatteryconsistencymanagement

Productcertification-Fortheformationofindustrystandards,productcertificationisdifficult

Batteryreuseprocess

Keytechnicaldifficultiessectors

Reuse:DevelopmentLimitationFactors

Thereuseindustryhassignificantdevelopmentlimitationsandbottlenecksatthecurrentstage.Thedownstreamapplicationdevelopmentisexpectedtobeslowbeforethepolicysystemisimprovedandtheindustrystandardisestablished

MarketFactor

Thecurrentmarketsituation:thecurrentcommercializationcasesofEVbatteryreusearefew.Mostoftheprojectsarepilotprograms,withonlyafewregularenterpriseswithqualificationsparticipating,suchasGEM,ChinaTower,etc.;thecurrentreusemarketisnotyetstandardizedandinchaos.Marketconfusioncausedbynon-compliantsmallworkshopsforcestheregularenterprisesintoadilemma,whichmakesthemarketlessattractivetoenterprisesthathavenotentered,andthemarketisdifficulttoscaleupintheshortterm

Source:governmentwebsite,publicinformation,Deloitteanalysis

disassembly

Pretreatment

End-of-lifebatterypack

Discharging&

Usedcell

Battery-gradeMaterialsExtraction&RefiningProcess

Blackmass

(incl.Li,Ni,Cu,Mn,etc.)

LiSalt

CuSalt

NiSalt

MnSalt

Graphite

ElectrolyteSolvent

Usedelectrolyte

Plastics,Cu/Alfoilsetc.

Electrolyterecovery

Hydro-metallurgy

Dismantling,shredding&sorting

Pyro-metallurgy

Recycle:ProcessFlowofEVBatteryRecycle

Themainchallengeofpowerbatterydismantlingandrecyclingliesintheinstabilityoffront-endbatteryrecyclingchannelst