As lithium prices have more than doubled in a year, the economics of used battery recycling have entered a recovery phase. Recycling companies that could not avoid losses during a period of falling mineral prices are regaining profitability in downstream processing as prices for lithium, nickel and cobalt normalise. Analysts also say that 2026 marks a turning point as end-of-life cycles for first-generation electric vehicles begin in earnest, changing the raw-material procurement structure itself.

China's domestic price of lithium carbonate is rebounding sharply. Commodity market data from sources including Trading Economics show lithium carbonate, which hit bottom below 60,000 yuan per tonne in June last year, is trading around 170,000 yuan as of June this year. That is about a 170 percent rise in a year and about 2.8 times the trough. The market generally interprets it as the result of global supply-chain adjustments coinciding with a recovery in electric-vehicle demand.

The price rebound is also linked to a shift in how raw materials are procured. The industry says the used-battery recycling market has relied heavily on defective products from battery plants, known as cell scrap, as feedstock. The more batteries produced for new vehicles, the more scrap is generated. But as the lifespan of early electric vehicles reaches its end, the share of metals recovered from batteries after actual use is rising quickly. SNE Research forecasts that global used-battery generation, measured by battery capacity, will rise about tenfold to 3,339 GWh in 2040 from 338 GWh in 2030. It also expects the recycling market to grow to about 60 trillion won in 2030 and about 200 trillion won in 2040 in value terms.

Behind those projections are assumptions about electric-vehicle battery lifespans and collection flows. The average lifespan of electric-vehicle batteries has recently increased to 14 years from 10 years. That means the point when used batteries reach the market is delayed the longer cars are kept on the road. Still, once batteries reach end-of-life, about 95 percent are collected for recycling or reuse. With longer lifespans, they do not flood the market at once, and most volumes that do emerge are absorbed by the market.

Profitability in the process of extracting metals from black mass, an intermediate product made after collecting, discharging and shredding used batteries, is directly linked to mineral prices. When lithium and cobalt prices stayed in a downcycle, there was little left even after recovery. Industry sources say margins for hydrometallurgical and pyrometallurgical smelting processes are improving as prices return to a normal track.

In South Korea, companies including SungEel HiTech, POSCO, EcoPro and Korea Zinc are operating used-battery recycling businesses. With cathode materials accounting for a significant share of lithium-ion battery costs, and with high reliance on overseas imports for key cathode minerals such as nickel, cobalt and lithium, localising materials through recycling has become a business rationale for these companies.

◆2031 mandatory ratios targeted... competition to pre-empt supply chains intensifies

On the demand side, regulation is underpinning the market. The EU battery regulation, the world's first comprehensive battery regulation, makes it mandatory to use a certain share of recycled materials when producing new batteries. Deloitte says the targets for recycled content are 16 percent in 2031 and 26 percent in 2036 for cobalt, 6 percent in 2031 and 12 percent in 2036 for lithium, and 6 percent in 2031 and 15 percent in 2036 for nickel. For battery makers to meet these ratios, they have little choice but to sign supply contracts in advance with recyclers and secure materials.

Similar incentives are at work in the U.S. market. Under the Inflation Reduction Act, critical minerals extracted by recycling used batteries in the United States or in countries that have a free trade agreement with the United States meet electric-vehicle subsidy requirements regardless of the minerals' original country of origin. That means recycled minerals recovered and refined in South Korea could become a channel to reduce reliance on Chinese materials, a backdrop cited for the rising value of regional recycling infrastructure and collection companies.

Deloitte analysed that minerals recoverable from used batteries within the EU alone could be insufficient for cobalt, lithium and nickel in meeting the 2036 targets. It forecast, however, that the shortfall would be eased significantly by 2040 as electric-vehicle demand stabilises and used-battery volumes rise. It also presented a scenario in which a larger share of lithium iron phosphate (LFP) batteries could reduce mineral usage itself, making supply and demand easier to balance.

Whether post-use batteries can be treated as resources rather than being subject to waste regulation has been a variable that has held the market back. The South Korean government moved to improve the system in July 2024 by announcing plans to build laws, institutions and infrastructure to foster the post-use battery industry. An industry official said, "We are entering a phase where rules are being put in place and mineral prices are supporting it." The official added, "Value-chain restructuring will accelerate around companies equipped with collection networks and smelting capabilities."