Mercuria CSR Report 2021 - Flipbook - Page 62
The picture is pretty clear with respect to the scale needed to match the future
demand for technology metals. Can you elaborate more on your earlier point
about the growing importance of recycling and reusing these metals?
Our sole focus is the recycling of lithium-ion batteries and so we do not recycle plastic or aluminum for
example. Lithium-ion batteries are the primary power source for electric vehicles and will continue to be in
one form or another for many years to come. Therefore, the increased manufacturing capacity, and hence
the deployment, of lithium-ion batteries is exponential. That means there are lot more lithium-ion batteries
out there that will reach they end of their life or will do so in the next seven or eight years. Currently lithiumion battery manufacturing is doubling roughly every six months with billions of dollars capital committed to
increasing capacity in the next two to three years for all the automakers and their battery manufacturers.
Most of the growth and capacity remains in China which dominates the production, components, and
supply chain. The pressing and growing need for a viable lithium-ion recycling eco-system is increasing
by the day. First because lithium-ion batteries are highly problematic environmentally; damaged,
defective manufacturing waste cannot be dumped or burned. Therefore, you have to recycle them
from the point of view of environmental responsibility. Second, these metals (nickel, cobalt, lithium)
have considerable residual value. Recycling them correctly in a proper ecosystem reduces their costs
by bringing value back into the supply pipeline. New batteries then become cheaper as they have a
residual value and that is good for the energy transition: it creates more demand for electric vehicles
which means less greenhouse gases. The third issue is that these metals are in structural short supply
and therefore we need to return them to the manufacturing pipeline through recycling. This also
balances the control of the supply pipeline of these critical minerals.
For example, China’s investment over the past fifteen years has enabled it to control sixty-five to ninetyfive percent of the global supply pipeline of all of these metals. Moreover, lithium-ion batteries are not
easy to recycle; they are not like lead acid batteries that you could recycle in your garage. It is complicated
because they have a combustible, liquid electrolyte that burns or blows up when you damage or shred
it. Most of the value is the active material in the black cathode which is encased in resins and adhesives
which have to be removed. It is challenging work which is why Techmet is the primary investor in a
publicly listed company called Li-Cycle (LICY: NYSE) which is now the largest lithium-ion battery recycling
company in North America. We are also investing in a new recycling technology company in Texas
called Momentum, which has patented a membrane solvent extraction (MSX) process to extract high
purity metals from cell phones, hard drives, and other battery waste. Techment, from its inception, has
focused on building value by investing at least a third in production, a third in processing and a third in
recycling and we continue to allocate capital accordingly.
How do you see the market for recycling evolving and what more can be
done to scale it?
Firstly, we need to recycle a 100% of lithium-ion batteries and 100% of manufacturing waste and we will
get there. In the short term, we need to recycle device batteries from smart phones, laptops and home
appliances: this is very important but will become less so after the EV ecosystem evolves. According to
our analysis, if the EV ecosystem is optimally developed over the next ten years, then the recycling of
lithium-ion batteries could provide up to 25% of the input of battery metals into the manufacturing of new
batteries. It is not the solution, but recycling is a material contributor to the energy transition. Obviously,
the cost of recycling is very dependent on the format of the recycled material. If large format lithium-ion
batteries for electric vehicles are designed in such a way to make dismantling easy and quick, then recycling
will be cheaper and more viable. Design makes a massive difference in the economics of recycling.
My last point is that our relationship to Mercuria is very valuable to us as an investor and shareholder
and as a partner in the type of ESG compliant, low carbon supply chain management that we are building
together. We are doing this with Mercuria because we have enormous respect and appreciation for
their commitment to the energy transition and their commitment to our values.
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