Insight: China's recyclers eye looming electric vehicle battery mountain

Tianneng Power International

23/10/2017 24:00

* China lithium battery waste to reach 170,000 tonnes next 
yr 
    * Battery recycling industry underpinned by fast EV car 
growth 
    * High recycling costs remain barrier to new entrants 
 
    By David Stanway 
    SHANGHAI, Oct 23 (Reuters) - After years of dismantling 
discarded televisions and laptops, a Shanghai recycling plant is 
readying itself for a new wave of waste: piles of exhausted 
batteries from the surge of electric vehicles hitting China's 
streets. 
    The plant has secured licences and is undergoing upgrades to 
handle a fast-growing mountain of battery waste, said Li 
Yingzhe, a manager at the facility, run by the state-owned 
Shanghai Jinqiao Group. 
    "We believe there will be so much growth in the number of 
electric vehicles in the future," he said. 
    Shanghai Jinqiao will be entering a market that includes 
Chinese companies like Jiangxi Ganfeng Lithium and GEM Co. Ltd, 
whose share prices have risen as they invest in battery 
recycling facilities of their own. That confidence comes even as 
companies face considerable hurdles launching battery recycling 
businesses, including high operating costs. 
    The growth of China's electric vehicle industry - and the 
ambitions of recycling companies - is underpinned by a 
government drive to eventually phase out gasoline-burning cars, 
part of a broader effort to improve urban air quality and ease a 
reliance on overseas oil.  urn:newsml:reuters.com:*:nL4N1M21WQ 
    Led by companies like BYD and Geely, sales of electric 
vehicles in China reached 507,000 in 2016, up 53 percent over 
the previous year. The government is targeting sales of 2 
million a year by 2020 and 7 million five years later, amounting 
to a fifth of total car production by 2025. 
    According to the International Energy Agency, China 
accounted for more than 40 percent of global electric car sales 
in 2016, followed by the European Union and the United States. 
It also overtook the United States as the market with the 
greatest number of electric vehicles. 
    Production in China of the lithium batteries that power 
those cars has also soared. In the first eight months of 2017, 
Chinese manufacturers produced 6.7 billion batteries, up 51 
percent from the year-earlier period, according to industry 
ministry data. 
    All that activity could put China in pole position for 
dominating the global electric car industry, as well as related 
businesses like batteries and recycling. 
    China began promoting electric vehicles in 2009, and as the 
first of those cars reach the end of their lifespan, lithium 
battery waste could be as much as 170,000 tonnes next year, 
industry experts estimate. The figure is likely to keep 
multiplying in tandem with car sales. 
    Dealing with all that waste poses huge problems for China. 
Lithium batteries are not yet classified as hazardous waste and 
are therefore not subject to stringent disposal controls. 
Battery waste includes heavy metals like cobalt and nickel, as 
well as toxic residues that could end up in waterways and the 
soil if not handled properly. 
    Despite the challenges, battery waste also represents a 
significant opportunity for the country's growing recycling 
industry. 
    The China Automobile Innovation Centre, an industry think 
tank, estimates the recycling market could be worth 31 billion 
yuan ($4.68 billion) by 2023. 
    Wang Chuanfu, president of BYD Co Ltd  002594.SZ , China's 
leading electric carmaker, last month described the lithium, 
copper and cobalt extracted from spent batteries as "treasures". 
    Larger companies with high-tech recycling operations are 
already reaping the benefits, including Jiangxi Ganfeng Lithium  
 002460.SZ , Sinolink Securities, a local brokerage, said in a 
note to investors. The company's share price has surged more 
than 200 percent this year. 
    Sinolink also cited GEM   002340.SZ , a self-proclaimed 
"urban miner" that runs China's largest automated battery 
dismantling facility in Shenzhen. GEM's shares have risen more 
than 60 percent since January. 
 
    RECYCLING CHALLENGES 
    Still, the industry faces numerous obstacles. 
    Recycling lithium batteries can be prohibitively expensive 
for many companies. And the industry has yet to agree on the 
standardisation necessary to handle spent batteries more 
profitably and in big numbers. 
    Some executives also say China is not doing enough to 
encourage the industry with subsidies and enforce existing 
environmental regulations. 
    "Speeding up the recycling of lithium batteries is a matter 
of urgency, and has become a major issue for the development of 
the new energy vehicle industry," Zhang Tianren, chairman of the 
battery maker Tianneng Power  0819.HK , wrote in a proposal 
submitted to China's parliament in March. 
    The commercial viability of the sector has been undermined 
by soaring waste treatment costs, as well as high taxes, 
Tianwei's Zhang said. 
    In his paper, Zhang cited one recycling company as saying 
that the value of materials extracted from one tonne of 
lithium-iron-phospate battery waste stood at 8,110 yuan, but the 
cost of recycling them would be 8,540 yuan. 
    Automating the recycling process in China was another major 
challenge due to a lack of standardised product designs, said 
Zhang. 
    Automation was also being held back by poor equipment and 
technology, especially among smaller producers, Xiao Hai, chief 
engineer with the Shenzhen-based Clou Electronics  002121.SZ , a 
company that develops new energy products, said at an energy 
conference in August. 
    The government, meanwhile, is trying to transform the 
country's recycling system into a high-tech regulated industry. 
    Large-scale battery makers are being pressed to establish 
their own recycling facilities, and polluting backyard recyclers 
have been forced to close. 
    China's industry ministry last year urged the sector to 
introduce standardised designs and raise technology to 
"international" levels by 2020. It plans to publish 
comprehensive new battery recycling rules before the end of the 
year. 
    But Tianneng's Zhang said regulators were not enforcing 
policies and penalising unqualified companies. 
    "Because policies are not enforced and there is no clear 
incentive mechanism, lithium battery recycling is not 
profitable," he said. 
    China's Ministry of Industry and Information Technology, 
which regulates electric cars, did not respond to faxed requests 
for comment. The Ministry of Environmental Protection also did 
not respond. 
    Battery companies have for the moment been bearing much of 
the cost of recycling.  While carmakers are technically liable 
for recycling batteries, in practice they sign deals with 
suppliers to recycle batteries on their behalf.  
    Green Cheng, chief executive of Shenzhen Cham Battery 
Technology Co. Ltd, said that recycling was a strain on the 
resources of battery makers. 
    Shenzhen Cham churns out 300,000 lithium batteries a day at 
its factory in Dongguan, in southern China, and lists Geely 
 0175.HK , the automaker, among its partners. The company has to 
pay a recycling company to dispose of batteries. 
    "If manufacturers like us are going to be responsible, then 
the government definitely needs to provide funds to support us," 
he said.  
($1 = 6.6181 Chinese yuan renminbi) 
 
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GRAPHIC: Jiangxi Ganfeng Lithium & GEM stock performance    http://reut.rs/2l1GQO3 
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> 
 (Additional reporting by Brenda Goh and the SHANGHAI newsroom; 
Editing by Philip McClellan) 
 ((david.stanway@thomsonreuters.com; +86 21 6104 1799; Reuters 
Messaging: david.stanway.thomsonreuters.com@reuters.net)) 
 
Keywords: CHINA BATTERIES/RECYCLING