Shulou(Shulou.com)11/24 Report--

The wave of power battery decommissioning is coming.

In recent years, with the rapid growth of sales of new energy vehicles in China, the installed capacity of power batteries has increased rapidly, from 2016 28.2GWh to 154.5 GWhJing in 2021, with a five-year compound annual growth rate of 41%.

Touyuan: Zhongtai Securities, while the average life of vehicle power batteries in China is 6-7 years. Based on this, it can be calculated that the first batch of new energy vehicle power batteries used on a large scale in China before 2017 will be in the coming 2023 and 2024, ushering in the first wave of retirement.

Recycling and disposal of decommissioned power batteries can obtain metal oxides containing chemical elements such as nickel, cobalt, manganese, lithium and so on, which are the raw materials in the upper reaches of the power battery industry chain. According to Grammy, a power battery recycling company, the cost of obtaining lithium carbonate through battery recycling is 10% lower than that of purchasing raw ore.

The recovery and disposal of decommissioned power batteries will become an important business opportunity. According to Everbright Securities, the recycling of power batteries, including ternary batteries and lithium iron phosphate batteries, will form a market of hundreds of billions of yuan in 2030. At present, the industry has attracted many companies to join the bureau. Data show that in 2021 and 2022, the number of domestic battery recycling enterprises increased by 25000 and 35000 respectively.

However, there has been a "Bad money drives out good" phenomenon in the power battery recycling market. According to 36 krypton, only 30% of waste and retired power batteries flow into formal recycling enterprises, and nearly 70% of waste and retired power batteries fall into the hands of second-hand vendors and small workshops, which causes serious environmental pollution. it is also not conducive to the healthy and orderly development of the industry.

This paper attempts to explain three problems:

1. How does the small workshop "Bad money drives out good" occupy 70% of the power battery recycling market?

two。 How serious is the environmental pollution caused by the disposal of waste and decommissioned power batteries in small workshops?

3. Who will be the ultimate winner in the field of power battery recycling?

1. The power batteries of old or retired new energy vehicles are still of great value and are generally used for echelon utilization and disassembly and recycling.

Echelon utilization means that when the performance of the power battery drops to 70% of the original 80%, although it no longer meets the standards for the use of new energy vehicles, it can be used in situations with low battery performance requirements after disassembly, testing, classification and reorganization. Such as energy storage, low-speed electric vehicles and other fields.

Disassembly and recovery means that the power battery can extract metal oxides containing nickel, cobalt, manganese, lithium and other chemical elements by means of crushing, sorting and extraction, and return to the battery factory as raw materials for power battery production and reuse.

Figure source: compared with the echelon use of Zhongtai Securities, the technical barrier is high, the industry profit is low, and the profit of disassembly recovery is higher. This is because the prices of lithium, nickel, cobalt and other battery raw materials have risen sharply in recent years. According to my Iron and Steel Network, the price of battery-grade lithium carbonate was 547000 yuan / ton on December 26, after breaking the 600000 yuan / ton mark in November. By contrast, at the beginning of 2021, it was only about 50,000 yuan per ton.

The price trend of battery-grade lithium carbonate was captured in my Steel net in the first three quarters of this year, and most of the power battery recycling companies made a lot of money. Of the 41 power battery recycling concept stocks in the first three quarters, 30 achieved significant revenue growth and 21 reported positive net profit growth, 12 of which grew by more than 100 per cent, according to Wind.

This has also attracted more players to join in, with the number of domestic battery recycling enterprises increasing by 25000 and 35000 respectively in 2021 and 2022. Even VC and PE are flocking to the track, such as lithium recycling company Jinsheng Xinneng, which completed two rounds of financing this year, attracting a total of 13 investors.

Behind the popularity of power battery recycling, the phenomenon of "Bad money drives out good" appeared.

In general, after the power battery is retired, the battery will be returned directly to the car company. According to the data of the Ministry of Industry and Information Technology, among the 15000 new energy vehicle power battery recycling service outlets in China, more than 95% are owned by automobile companies. These outlets generally sell the recycled power batteries to compliant downstream battery disposal enterprises for disassembly and recycling or echelon utilization.

However, in the secret of power battery recycling, tens of thousands of small workshops have become the real "protagonists". According to 36 krypton, only 30% of waste and decommissioned power batteries flow into formal recycling enterprises, and nearly 70% of waste and retired batteries fall into the hands of second-hand vendors and small workshops.

The reason is that the number of power battery recycling enterprises has increased, and under the influence of supply and demand, the supply of waste and decommissioned power batteries is seriously insufficient, resulting in the battery recycling industry becoming a strong seller's market, directly driving up the recovery cost of batteries. Compliant battery processing enterprises have large investment in environmental protection and high operating costs, so they do not have an advantage in the competition. And some unqualified, low cost of environmental protection of small workshops, can use higher prices to "snap up" waste and decommissioned power batteries.

Tu Yuan: according to a survey conducted by Zhongtai Securities, including the China Science News and other media, the sources of waste and retired batteries in small workshops are partly obtained through the auctions of waste and retired batteries by car companies, and some of them are purchased directly from car companies through connections; and a large part comes from B and C batteries from battery factories.

2. Compared with the regular power battery treatment enterprises, small workshops will have hidden dangers in the stage of echelon use and disassembly and recycling of power battery treatment.

Small workshops carry out the "operation" of step-by-step use of decommissioned batteries, which is simply processed, and then packaged as new batteries to flow back to the market, which leads to endless trouble after the subsequent use of batteries.

Small workshops disassemble and break up waste batteries and refine cobalt and lithium inside the batteries, which will cause waste and pollution. First of all, in the pretreatment link, the small workshop for power battery disassembly way is rough, mainly through manual and mechanical assistance, the efficiency is low, and the fineness is poor, easy to mix with copper, aluminum, plastic and other impurities; in the power battery crushing, most of the crushing equipment of the small workshop is transformed from the mine roller crusher, the crushing precision is poor, and the powder particle size variance is large after crushing. Secondly, in the post-treatment stage, small workshops are unable to launch expensive equipment and chemical reagents, so they have to deal with them in a physical way, resulting in higher carbon emissions.

Cao Hongbin, a researcher at the Institute of process Engineering of the Chinese Academy of Sciences, holds a negative view on the participation of small workshops in power battery recycling. He said that before 2013, there were serious problems in the domestic lead-acid battery recycling industry. Small unqualified workshops illegally recycled lead-acid batteries and directly discharged waste acid, causing serious pollution to the environment. At present, the lithium-ion batteries used in new energy vehicles are less polluted than lead-acid batteries, but if they are not recycled and disposed improperly, they may repeat the mistakes of lead-acid batteries in those years and cause more pollution.

A 20-gram mobile phone battery can pollute 1 square kilometer of land for 50 years, not to mention bigger and heavier car power batteries. Automobile power battery contains a variety of heavy metals such as nickel, cobalt, manganese, as well as electrolytes, fluorine-containing organic compounds and so on.

Taking lithium hexafluorophosphate in the electrolyte of lithium-ion power battery as an example, this solute is easy to hydrolyze into harmful substances such as phosphorus pentafluoride and hydrogen fluoride in the air environment, which has a strong corrosive effect on human body, animals and plants. It is possible to bring pollution or even catastrophic consequences.

At the same time, power battery recycling, through the operation of small workshops without professional equipment and technology, is also easy to lead to production accidents.

In January 2021, a power battery processing company in Ningxiang, Hunan Province, caused an explosion and fire due to improper handling, resulting in one death and many injuries. Zhou Dao, a second-hand dealer in the power battery recycling business, said danger and instability exist in all aspects of recycling and disposal, according to the Future Automotive Daily. He used outsourced third-party freight trucks to transport waste power batteries, which caused a short circuit to burn out the steel plate and "almost burned all the batteries" because of a backlog of goods and no insulation protection.

At present, the living environment of small workshops in the field of power battery recycling is not very good, and the situation they are facing is very grim. If they are not transformed into formal third-party processing enterprises, they may slowly withdraw from the market in the future.

First, the technology of the small workshop has reached the ceiling. At present, the most commonly used power battery treatment method is wet smelting, which requires treatment enterprises to have mature recovery lines, including expensive equipment and various chemical reagents, while small workshops are not only difficult to have equipment and chemical reagent resources at the same time. It is also difficult to form economies of scale, thus assembly line production.

In addition, compared with the old generation battery, the recovery and treatment of new ternary battery and lithium iron phosphate battery is more difficult, and the technology of small workshop is difficult to achieve. Moreover, the B and C battery of the battery factory, another source of waste power batteries in the small workshop, is also decreasing because of the technological progress of the battery factory and the reduction of the scrap rate.

Second, the number of players increases, profits become smaller, small workshops are more likely to be eliminated. As the price of battery-grade lithium carbonate continues to rise, the number of players entering the industry is growing rapidly. Although these formal recycling enterprises are not as flexible as small workshops, they are better than small workshops in recycling technology, brand competitiveness, product quality and safety, and are relying on a large number of characteristics to squeeze the living space of small workshops step by step.

What is even more damaging to the small approach is that the profits of power battery treatment have begun to decline. According to a report by Sino-Thai Securities, the recent gross profit margin of ternary batteries and lithium iron phosphate batteries is only 23.95% and 17.89%, which has dropped significantly. In the future, as there are more and more retired power batteries, profits may continue to decline.

Formal power battery processing enterprises, big business, and many enterprises have financing as a backing, better able to cope with the decline in profits. The survival of small workshops is closely related to profits. If profits continue to decline, they will be eliminated.

Third, the policy is becoming stricter. From the national level, in recent years, China's policy on the recycling of decommissioned power batteries has become stricter.

In terms of specific policies and regulations, in 2017, the General Office of the State Council issued the implementation Plan of the extended producer responsibility system, which will promote automobile companies to jointly assume the responsibility of power battery recycling and disposal together with battery factories.

In 2021, the five departments jointly promulgated the measures for the Management of echelon Utilization of Power batteries for New Energy vehicles, stipulating that power battery cascade utilization enterprises should fulfill their main responsibility, implement the extended producer responsibility system, and ensure the quality of echelon products produced by the enterprise. as well as standardized recycling and environmental protection disposal after scrapping.

In 2022, the Ministry of Industry and Information Technology also issued the interim regulations on traceability Management of Power batteries for New Energy vehicles, clearly pointing out that a "traceability management platform for battery recycling" will be established to collect information from the whole process of production, sale, use, scrapping, recycling and utilization of power batteries, and monitor the performance of recycling responsibilities by the main bodies of each link.

In addition, the Ministry of Industry and Information Technology has published four batches of power battery recycling whitelist enterprises to actively guide the regularization of power battery recycling.

These policies will further squeeze the living space of small workshops, which will eventually withdraw from the field of power battery recycling and disposal.

4. According to Everbright Securities, the recycling of power batteries including ternary batteries and lithium iron phosphate batteries will form a market of hundreds of billions of yuan in 2030. However, at present, the pattern of retired power battery recycling in China is uncertain. So, who will win in the end?

Apart from small workshops, the current power battery recovery and disposal of players are mainly divided into three categories, namely, battery factories, car companies, formal third-party processing enterprises, the three types of players have their own shortcomings.

The battery factory participates in the recovery and disposal of decommissioned batteries in order to reduce the cost of battery materials and improve the bargaining power of upstream raw materials vendors. Battery factories mostly form the closed-circuit recycling of waste batteries through the establishment of subsidiaries, the acquisition of battery treatment enterprises, cooperation with treatment enterprises and so on.

Car companies have a sound car sales network, which can efficiently complete the recycling of waste batteries, and car owners are more willing to hand over retired power batteries to car companies. In practice, automobile companies generally use an alliance composed of upstream and downstream members of the industry to build a power battery recycling network, participate in the disposal of decommissioned power batteries, and form a closed loop of the industry chain.

Third-party processing enterprises, due to their own weak recycling channels, generally cooperate with battery factories or car companies to obtain waste and decommissioned power batteries. Compared with car companies and battery factories, third-party processing enterprises often have key treatment technologies that can efficiently use recycled power batteries. For example, Sinorama Technology, a third-party processing company, has been developing technologies related to the life cycle of decommissioned power batteries since 2011, and has mastered the core technologies such as lithium-ion battery state estimation, active equalization, disassembly and recycling, repair and regeneration.

In the current situation of serious shortage of waste and decommissioned power batteries, recycling channel has become the most important link in the whole power battery recycling chain, and has the right to speak in the industrial chain, so car companies and battery factories have natural advantages. If the third-party processing enterprise wants to survive, it can only be deeply bound with the first two. Even, some small workshops are because of illegal means to bind with the former two, thus "Bad money drives out good", barbaric growth in the industry.

However, with the arrival of 2023 and 2024, the first batch of new energy vehicle power batteries used on a large scale before 2017 will usher in the first wave of decommissioning. At that time, the supply of retired power batteries was sufficient, and the channel was no longer the decisive factor in the industrial chain, but technology was. The spring for the third party to deal with enterprises is coming.

Therefore, according to the technological advantages, the third-party processing enterprises may become the final winners in the field of retired power battery recycling in the future. And small workshops that may face a continuous decline in profits, if they upgrade their technology and become formal third-party processing enterprises, with the advantages accumulated before, they can also get a piece of the pie in the upcoming wave of power battery decommissioning.

[full text reference]

[1] "2022 Power Battery Recycling Industry report: power Battery decommissioning Tide, Recycling track tuyere is coming", China-Thailand Securities

[2] "Power Battery Recycling: hundreds of billions of sales," Fang Ye "gathering for gold", Future Automobile Daily

[3] "be on guard against the" secondary pollution "caused by the scrapping tide of power batteries, Economic Information Daily

[4] be on guard against explosive pollution! Retired power batteries are pouring into the "black market", China Youth Daily

[5] "70% goes to second-hand vendors! Hundreds of billions of power battery recycling market: beware of the "combat effectiveness" of small workshops, China Science Daily

[6] "Anhui enterprises compete for power battery recycling", 36 krypton

This article comes from the official account of Wechat: che Bai think Tank (ID:EV100_Plus), author: Chen Zhongshan, Editor: a Feng, typesetting: Haotian

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