德勤锂电白皮书系列之三：锂电回收未来可期（英）-34正式版.docx

德勤China Lithium IndustryDeloitte POV 3.0: Sustainable Future of Lithium RecycleDeloitte Consulting China | November, 2022Reuse: Development Limitation FactorsThe reuse industry has significant development limitations and bottlenecks at the current stage. The downstream application development is expected to be slow before the policy system is improved and the industry standard is established Policy Factor, The reuse industry management system still needs to be improved: The policy management system for the reuse of EV batteries is still in the initial stage of establishment, and it takes time to improve the national regulatory system and local implementation, Policy guidance maintains a moderately positive attitude： Although the policy intends to promote reuse, it also emphasizes the importance of strict management of the safety of EV battery reuse, and is especially cautious towards reuse in energy storage scenarios.2022.02Accelerating the Promotion of Comprehensive Utilization of Industrial ResourcesRequirements to improve the recycling system and management system of end-of-life power batteries, strengthen traceability management within the whole life cycle of battery, promote the safe reuse application of end-of-life power batteries in the field of power backup, charging and replacement2021.09The Management Standards for New Energy Storage Projects (Provisional)Require newly-built energy storage projects to establish a battery consistency management and traceability systems and obtain the safety assessment reports issued by corresponding qualified organization for reuse of batteriesDemand side - uncertain potential:, Low acceptance in the downstream market: Due to unclear standards and immature regulatory system, frequent accidents of battery reused for energy storage have led to low market acceptance. Users are concerned about the safety and consistency of reused batteries, Impact of potential alternative products: the rise of sodium-ion batteries and fuel cells and other technologies may replace and squeeze the market of LFP batteries for secondary useSupply side - "bad money drives out goodM:, Long-standing market confusion: In the absence of effective regulation, many non-compliant small workshops have long been entrenched in the reuse market, and it is difficult for enterprises with high investments to profit and survive in the vicious competitionCollectionNo hazardous wastef management qualification;No invoicing requiredSmallworkshopsReuseNo inspection/environmental treatment;Low production line inputLow costHighefficiencyTechnology Factor, Key technologies to be broken through, industry standards to be established: The battery life-cycle traceability management and industry-standard system are to be established, and technical problems still exist in several sectors of the reuse technology processEvaluation and sorting - Battery specifications are complex, and life evaluation is difficultDetection and screening - Lack of battery use records, complicated detecting technologyRestructuring - High technical barriers to battery consistency managementProduct certification - For the formation of industry standards, product certification is difficultBattery reuse process(一Key technical difficulties sectorsThe current market situation: the current commercialization cases of EV battery reuse are few. Most of the projects are pilot programs, with only a few regular enterprises with qualifications participating, such as GEM, China Tower, etc.; the current reuse market is not yet standardized and in chaos. Market confusion caused by non-compliant small workshops forces the regular enterprises into a dilemma, which makes the market less attractive to enterprises that have not entered, and the market is difficult to scale up in the short termSource: government website, public information, Deloitte analysis© 2022. For information, contact Deloitte China.Recycle: Process Flow of EV Battery RecycleThe main challenge of power battery dismantling and recycling lies in the instability of front-end battery recycling channels that make it difficult to scale up the production of back-end battery grade raw material refiningMechanical ProcessEnd-of-life battery packDischarging &|disassembly Xn-Used cell Typical recycling processa Optional processRecycling productLi SaltCu SaltMn SaltGraphite Q Electrolyte SolventNi SaltThe instability and high cost due to the highly-fragmented battery recycling channels, and the difficulties of pretreatment due to wide range of battery pack specifications are the two main difficulties in the disassembly and recycling processThe mechanical process and the metal refining process after the pretreatment of the battery pack have been relatively mature, can realize the effective conversion of the end-of-life EV batteries to recyclable high-purity raw materials; in the situation of sharply- rising lithium metal raw material prices, large-scale production, stable supply of end-of-life batteries and client relations can realize considerable economic returnsSource： public information, Deloitte analysis1111© 2022. For information, contact Deloitte China.Recycle: Mainstream Battery-grade Material Extraction TechniquesRecycling enterprises generally refine the valuable metals in end-of-life EV batteries through hydro or pyro-metallurgy, which are highly-technical maturity and with clear steps, while other emerging processes, such as biological processes and supercritical CO2 extraction, are still in the early stages of research and development; currently, in China, EV battery recycling enterprises' processes are mainly based on hydrofiLi-Cyde Fortum 霹；包Source: Anson Securities, Dongguan Securities, public information, Deloitte analysisiimicor ACCUREC GanfengLitMum KJ Illi1© 2022. For information, contact Deloitte China.Low cost and energy-efficientHigh investment and energy-intensiveFacilities/Energy costRequire process effluent treatment to avoid water pollutionRequire gas clean-up process to avoid toxic air emissionEfficiency/PeriodHigh recovery and purity, but relatively long recycle periodThe recovery rate is relatively lower, but is capable of recovering various heavy metals such as Hg and Zn命Process complexityRelatively more complicated, and needs to be adjusted optimized for certain battery chemistriesSimpler pretreatment methods but not effective for Lithium-iron- phosphate (LFP) batteriesRecycle: Prospects of Battery Recycling in Different Chemical SystemsThe distinctions in battery chemical structure and properties determine the recycling mode, reuse method, value and market size of end-of-life EV batteries. The development of reuse of LFP is restricted to the current conditions, and the future recycling market is expected to be dominated by the direct recycle of ternary (NMC) batteriesComparison of batteries in different chemical systemsComparison of batteries in different chemical systems/1Projection on the China recycling market size by battery typeBillion USD2Billion USD2relatedLFP batteriesTernary (NMC) batteriesRecycle valueNo valuable metals contained, the theoretical recovery value is about 1,441 USD/tonneContain nickel, manganese and cobalt. The theoretical recovery value is about 6,651 USD/tonneCycle lifeThe average cycle life is about 4,000, and the capacity declines slowly1The average cycle life is estimated at 2,000 times or lowerBattery safetyMore stable, less likely to experience thermal runaway and ignition at high temperaturesAt abnormally high temperatures, the possibility of fire and explosion is relatively large The chemical properties of batteries determine their different recycling methods: LFP batteries are more suitable for reusing due to their relatively low material cost, good stability and long lifespan NMC batteries are more suitable for recycling due to their relatively high material cost, poor stability and short lifespan.The development of NMC batteries starts later than LFP, and the recovery rate also lagged. End-of- life LFP batteries are more suitable for reuse. However, reuse has not yet achieved technical breakthroughs currently, and it is challenging to achieve economies of scale. It is projected that the recycling market of NMC batteries will continue to lead in the short and medium term.Source: CICC, Everbright Securities, Tianfeng Securities, public information, Deloitte analysisRemarks: 1. Estimated based on the predicted average metal price of respective year； 2. Converted at the annual average exchange rate of USD to RMB in 2021 (1USD = 6.45RMB)© 2022. For information, contact Deloitte China.13Value chain analysis of EV battery recycle© 2022. For information.© 2022. For information.contactDeloitteChinaDevelopment Trend of Li-battery and NEV Industrial ChainWith the transformation of the industry to market-driven development, the lithium battery and NEV industry will further evolve from a chained-form to a mesh ecology with deeper cooperation and mutual empowerment, in which each sector of the industry chain shows the trend of extending to battery recycling in various forms and different degreesLithium battery industrial chain extends to battery recyclingLithium battery industrial chain extends to battery recyclingResources ExploitationIndustrial Chain SectorIndustrial Chain DirectionA Industrial Chain FutureExpansion Direction©Enterprises in multiple sectors extend to battery recycling Technologvbased extension: Resource refining enterprises and anode, cathode raw material manufacturers have the technical similarity in recycling and extraction technology, which drives their extension to the recycling. Resourcebased extension: Battery enterprises, OEMs and battery banks and other power exchange service companies are predicted to take advantage of resources to expand downwards into the recycling and establishing a recycling system.Battery Charging & Replacing Facilities OEM & Consumption® Battery recycling enterprises extend to other sectors, Through dismantling end-of-life batteries, recycling enterprises are likely to expand to raw materials, cathode materials manufacturing etc., forming a closed loop within the industry chain.Source: public information, Deloitte analysis1515© 2022. For information, contact Deloitte China.EV Battery Recycling Industrial ChainLithium battery recycling, which has a substantial development momentum, is taking shape to support a sustainable EV supply chain. Up and downstream players in the industry use their advantages to develop vertical cooperation and seek opportunities to gradually extend the industry chain coverage, forming a closed-loop industrial chain from battery recycling to battery material reproduction and integrationKeyPlayersFeaturesrecycler(XV- tediincealliancesBusiness ModelRecycle and reusei Evaluation/ScreeningBattery manufacturing ) Vehicle manufacturingEnd-of-life batteryRecycleRemanufacturingReuseLi-Cycle I Cirba SolutionsRedwood MaterialsExtend to the whole industry chain through self construction/ acquisition (excluding vehicle manufacturing)Forming a closed loop of the whole industry chain through selfFocus on commercial recycling solutions to create economies of scaleExtend from recycling to both ends of the industrySource： company website, public information, Deloitte analysis1616© 2022. For information, contact Deloitte China.Business Model: Third-party RecyclingThird-party recycling companies, as the primary recycler of EV batteries, independently establish a recycling service network to complete the process from battery recycling to resource utilizationIllustration of third-party recycling/Business model analysisModelfeaturesThird-party recycling companies, as the primary recycler of EVbatteries, generally are entrusted by battery and vehicle manufacturers to complete the transportation, recycling and subsequent resource utilization of end-of-life EV batteriesProsHighly mature and professional recycling processes, which are widely used, can realize more efficient recycling of end-of-life EV batteriesConsThe self-built recycling service network poses severe challenges on its high recycling costs, difficulties in transportation and storage, and limited material resale channelsKeyplayers天奇股伤TSL XT JfcMIRACLE AUTOMATION Li-Cycle umicoreGHTCCH光华科技ACCURECSource: CITIC Securities, Everbright Securities, Tianfeng Securities, public information, Deloitte analysis© 2022. For information, contact Deloitte China.Third-party Battery Recyclers: GEM (1/2)sen格林美sen格林美GEM pays attention to the construction and maintenance of recycling networks and industrial ecology. Meanwhile, the company is committed to building a new energy life-cycle value chain and has established an industrial chain advantage in the field of power battery green treatmentThe pioneer circular enterprise of end-of-life battery comprehensive utilizationKSF 1: Secured resource channels and strong recycling networkKSF 2: Globally-advanced new energy life-cycle value chainThrough deepened collaborative development of the industrial chain, the company continues to expand its recycling and resale channels and successfully construct EV battery recycling facilities and laboratories in South Africa, South Korea, Indonesia, etc., with its partners. It is expected to deploy a recycling business in Europe in 2022 to accelerate its global business layoutStable resource channelsGEM has reached recycling cooperation with more than 500 OEMs and battery suppliers worldwide:Car manufacturersXPENG三一nTOYOTABattery suppliersLISTENNational recycling networkCountry-wide integrated recycling networks and the unique "2+N+2" pattern of power battery recycling businesses2 Two battery recycling centersOther recycling networksN covering more than 60% of totalNEV in China, Two resource utilization4and remanufacturing parksIn order to create a closed-loop value chain for the entire life-cycle of EV batteries, the company has tackled many technical challenges in recycling. It is working to ensure the safety of the raw material supply system for new energy material recycling, address the urgent need for the supply chain of critical new energy raw materials, and realize the recycling and deep processing from waste to raw materials for high-end brand products. GEM Revenue share by business in 2021New energy materials business“Recycle + Remanufacturing”The company builds a collaborative recycling industry chain system, and upgrades its business from waste recycling to new energy materia