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Europe needs EV recycling revolution to meet net-zero goals: study

26 April 2022 Cristina Brooks

The EU's failure to recycle enough metals used in EV batteries and motors could be the downfall of its energy transition plans, a study found.

A 25 April panel debate of NGOs and politicians marked the launch of the study, conducted by Belgian University KU Leuven and funded by non-ferrous metals producers and recyclers trade association Eurometaux.

Challenges lie ahead in Europe's expected demand for the heavy metals used to make strong magnets found in EV and wind turbine motors, aka rare earth elements, and the cobalt and lithium found in EV batteries.

Future supply chain hurdles are foreseen due to the lack of capacity for mining, refining, and recycling of rare earth elements.

If Europe doesn't meet 25% of its own demand for rare earth elements by 2030, the study found, it will not achieve its stated net-zero goals.

Recycling alone can meet 200% of the demand for the rare earths that are "hardly recycled" today, the study found.

"The use of [recycled] raw materials has increased over the years. More than 50% of iron and platinum are recycled, and this covers 20% of consumption, but for materials for batteries like rare earth elements, the EU has insignificant capacities," European Commissioner for the Internal Market Thierry Breton said in a speech, adding, "Less than 1% of end-life magnets are being recycled here."

Globally, several materials needed for the energy transition may be in short supply by the end of the 2020s, the study found.

Addressing the lack of cheap rare earths recycling capacity is possible but needs to happen soon, said KU Leuven Researcher Liesbet Gregoir. "Recycling is the key lever, but we have to take action now to get that availability when it comes," she said.

"There are challenges: these recycling streams are new, we have to scale them up; there are no cost-effective solutions for rare-earth recycling," she continued.

The EU should also launch commodity markets for rare earth elements and lithium, as it grows existing markets for metals such as aluminum, copper, and nickel.

However, one expert sounded a note of skepticism on the 70-90% recycling rates the study said should be targeted. "The recycling figures look optimistic, especially when compared to recycling input rates for major industrial metals, all below 40%, having both well-established recycling systems and steadily but not so strongly increasing use rates as battery materials," said Head of Business Unit, Raw Materials at Fraunhofer Institute for Systems and Innovation Research ISI Luis Tercero Espinoza.

Espinoza suggested battery material recovery rates of up to 45-75% were possible, citing a 2021 study by a German government advisory body, the National Platform Future of Mobility.

EVs to drive demand

The study pinpoints EV manufacturing as the biggest factor behind Europe's hunger for the studied materials, noting it is set to account for 50-60% of future demand, followed by requirements in PV manufacturing and electric grids.

A third of end-of-life EVs are not recycled in Europe, but with new laws they could join the circular economy, it found.

EV battery recycling is also currently low, but as it increases so will the recycling of pure cobalt, now mostly recycled in the form of alloys.

Recycling rates for EV battery and motor materials like silicon, lithium, nickel, cobalt, and rare earths need to increase to rates between 70% and 90%, according to the study.

Cobalt and lithium are both used in EV batteries. The EU's 2030 energy transition goals, outlined in its "Fit for 55" policy package, will require a 350% increase in cobalt consumption and a 3,500% increase in consumption of lithium, now mainly used in the ceramics sector.

In EVs, rare earths are used in both traction and auxiliary motors, and these supplies could come from end-of-life wind turbine and EV motors, found the study, but they must grow 7-13% per year for the next decade. It is hoped this demand will abate as batteries are optimized.

It would be possible to meet European demand while keeping domestic rare earths mining and production low (25% of demand) by recycling imported batteries, the study's authors said. After 2040, Europe will be ahead of many other areas of the world in utilizing high volumes of recycled materials, it said.

While the shift to greater dependency on metals for EVs requires more recycling and mining (with potential negative impacts on waste, local biodiversity, and pollution), it requires fewer materials than traditional cars overall because EVs require no fuel.

In addition, the study found using recycled metal allows for CO2 savings of between 35% and 96% compared with newly mined metal.

Russian nickel, steel dependency

Commissioner Breton said a "new geopolitics of supply chains" following Russia's invasion of Ukraine added urgency to the net-zero push for metal recycling.

Europe's 2030 goals will also require a 110% increase in nickel demand, the study found.

But nickel supply concerns after Russia's invasion of Ukraine triggered a hurried covering of short positions on the London Metal Exchange at the start of March and prices rocketed higher.

By the end of the month, nickel price forecasts for the year had increased by 45.9% according to S&P Global Commodity Insights.

"Russia is the third biggest producer of nickel and stainless steel," European Parliament member Hildegard Bentele said during the panel debate.

Russia supplies 13% of EU iron and steel imports, but last year, Russian officials warned that the EC's proposed tariff on high-carbon metal imports would hurt these Russian industries.

Nickel and steel are not the only metals in flux. High energy prices, exacerbated by the invasion, have resulted in 10-40% of Europe's production capacity for aluminum, zinc, and silicon capacity being taken offline, the study's authors noted.

EU bans on Russian imports, for example coal, have added further pressure to Europe's existing energy transition efforts.

Scaling up EV battery manufacturing and recycling has been on the EU's agenda since 2017 when the executive European Commission (EC) set up the European Battery Alliance, before launching its net-zero-aligned policy proposal, the European Green Deal, two years later.

From 2027, the EU will require battery control systems to include data to ease their recycling or reuse under the modernization of EU battery legislation announced in 2020. One of the aims of modernization is better tracking of battery materials through the supply chain.

Certification schemes for metal supplies already exist, and the EU and Canada last year agreed a raw materials partnership.

In February, the EC also proposed a directive on corporate sustainability due diligence that would require large companies to monitor environmental and social risks caused by their supply chains.

Beating back competition from China

Europe's industrial sectors have set targets to grow cleantech and renewable energy sector manufacturing across the continent.

For example, the European Solar Initiative has set a target for 20 GW of solar panel manufacturing by 2025, but European solar panel manufacturers have gradually ceded to competition from China, according to the study.

China dominates silicon production currently, but more recycling of the silicon found in the anodes in EV batteries and in solar panels should spur new value chains for European recycling of pure silicon as demand doubles by 2050.

The study pointed to China's contribution to global oversupply of silicon and aluminum, lowering prices and hampering European production.

"Europe has anti-dumping duties in place for aluminum and silicon to safeguard against proven dumping from Chinese state-funded over capacity. Trade defense will continue to be required when there is evidence of unlawful trade practices," the report found.

While steel is also needed for the energy transition, the EU recently accused Chinese companies of selling cheap renewable energy steel components to EU buyers, posing a problem for European manufacturers.

The study also highlighted the future challenge for Europe of competing with "China's vertically integrated rare earths and magnets value chain."

Posted 26 April 2022 by Cristina Brooks, Senior Journalist, Climate and Sustainability

This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.


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