From PowerPoints to Overcapacity: The Battery Recycling Boom That Wasn’t

If there’s one shared sentiment echoing across the global battery recycling sector right now, it’s disappointment. The volumes simply haven’t come. Feedstock is tight. Some recyclers are running on fumes. Others are filling capacity—but only by paying so much for the material that margins disappear. And 2024 was the worst year yet: price drops across battery metals meant material acquired at premium prices had to be sold at a loss. For many, that was the final straw.

At Circular Energy Storage, this wasn’t a surprise. Since we published our first forecasts in 2017—and especially since our 2018 data release—we’ve consistently warned that recyclable battery volumes would rise much more slowly than industry projections implied. Every time we’ve revised our numbers, it’s been downward. And still, we’ve remained largely accurate.

The image below illustrates our updated historical volumes, layered over that 2018 forecast. While others have speculated about tsunamis of waste and mountains of batteries society would struggle to handle, we’ve stuck to more conservative ground. Not because we’re pessimists—but because the data tells a different story.

Chart from Circular Energy Storage's second report from 2018 compared with historical data and our latest supply forecast for battery scrap

Of course, we should acknowledge the irony: verifying historical battery recycling volumes is remarkably difficult. The reporting infrastructure—almost everywhere—is underwhelming. Even in the EU, where formal waste reporting has existed for decades, the data lacks granularity, timeliness, and often any real connection to the actual movement of batteries.

In China, it’s been common practice for trade groups to quietly rebrand expired forecasts as historical facts. That was the case with the often-quoted 200,000 tonnes of EV battery waste in 2020—a number derived from a 2017 assumption about battery lifetimes, not actual data. And since most analysts rely on previous analyst estimates, the result is a kind of self-referential cycle. Analysts, including CES, end up drawing maps of terrain that no one has fully walked.

But here’s the thing: empty plants don’t lie. They are, in some sense, the ultimate market audit. The physical facilities now operating far below capacity stand as proof that many business plans were based more on wishful thinking than verified supply.

A Market Driven by Slide Decks, Not Scrap

The last five years have been a difficult environment for sober analysis. Battery recycling became a darling of sustainability narratives, a go-to slide in every cleantech pitch deck. Maps with logos of still-imaginary gigafactories were used to justify enormous projections of scrap. EV recalls were reinterpreted as signs of vast volumes of end-of-life batteries about to flood the market. Countless startups declared themselves industry leaders simply by filing patents for lab-scale processes—or by promising scale before even breaking ground.

In many cases, investors were sold the idea that trash could be turned into treasure—with margins of 50% or more. And in fairness, the market did respond: over $10 billion has already been invested, with even more committed. The problem is that the underlying material market, at 2025 price levels, is still only worth around $4 billion in total material value.

Battery recycling became a catch-all "opportunity"—one that supported everyone’s narrative. Critics of electrification used recycling’s challenges to argue that EVs replaced one problem (emissions) with another (toxic waste). Advocates used the same challenges to justify rapid investment in circular solutions. Many fed by a steady diet of numbers increasingly detached from reality.

When volumes didn’t show up, the story shifted: from end-of-life batteries to production scrap. Then, when that lagged too, forecasts jumped to 2040 or 2050 volumes—numbers conveniently irrelevant to today’s cash flows and investment cycles.

At one point, it even became fashionable to suggest that scrapping 10-year-old EVs early was virtuous—because it enabled battery recycling and the production of new batteries—while completely disregarding the impact this could have on the residual value of the vehicles those batteries came from. And even as feedstock forecasts across the industry matured, it often seemed like numbers lost their meaning—as if they always applied to someone else, never to “us.” Forecasts, too, became negotiable. In three separate projects, clients explicitly asked us to revise our feedstock projections upward to better support their narrative. Naturally, we declined.

Scaling Losses in a Fixed-Supply Market

The real challenge for recyclers is simple: it’s very difficult to scale volume and stay profitable at the same time. Western recyclers have traditionally built upstream-oriented businesses. By specialising in the safe transport and handling of hazardous waste, they could charge for services, while adjusting downstream economics based on whatever material was available.

But newer entrants, many born in the last 5–8 years, approached the industry differently. They saw it as broken—inefficient, under-innovated—and aimed to flip the model. With better tech, they would pull in volumes others missed, claiming value that would otherwise be lost to landfills.

This narrative—often backed by academic claims that less than 5% of lithium-ion batteries are recycled—became something of a foundational myth. But as readers familiar with our work know: it’s simply not true. Lithium-ion batteries are not landfilled—unless the entire device is. Instead, they tend to remain in use for a long time in products that are often exported, and the batteries themselves are frequently reused or repurposed. This significantly delays recycling and shifts the location of available feedstock, often to overseas markets.

Meanwhile, the global recycling market already existed. Batteries were, and are, often recycled near where they were produced, in China and South Korea – because that's where the materials are needed. Most recyclers don’t openly share where batteries are shipped, because supply relationships are one of the few real competitive advantages in this space.

The consequence of all this? We now have a global overcapacity in pre-processing in every key market. Dozens of facilities that aren’t even half full. Many of them are financially unsustainable. The only reliable way to increase volume is to pay more for feedstock—which erodes margins and increases risk exposure to metal markets. Since April 2022, prices have only increased in two out of nine quarters, and combined with low utilisation rates, this has often resulted in costs of goods sold far exceeding revenues.

In classic Silicon Valley fashion, the market began racing to the bottom—hoping to be the last one standing. But unlike other platform businesses, you can’t create more batteries to recycle. You can only recycle what physically exists. The tragedy is that everyone loses when private equity-, venture capital-, and government-backed startups drive up material prices—draining both the available volume in the market and their own margins.

Why CES Stayed Conservative—And Got It Right

CES was founded out of frustration from within the recycling industry: too little reliable data, and too many overly optimistic assumptions. Our data model rests on three core principles:

• Go beyond the battery – We analyse the applications that use batteries: their functions, sales trends, resale patterns, and failure modes.

• Be granular – We model battery usage at the level of specific products and regions. This allows for early corrections as real data emerges.

• Avoid dependence on external forecasts – While we cross-reference external sources, we always build our own models from the ground up.

  
  

That first principle—focusing on applications rather than just the batteries themselves—has been crucial. It enables us to understand not only how long batteries last, but also how they’re used and stored, how they’re traded, and ultimately how and where they reach end of life. This has been key to getting the early years right.

Granularity helps us even when we’re wrong. By modelling nearly every EV model globally, we may miss on some—but we’re right on others. As new data becomes available, we update past and future forecasts with precision. This means we can already be reasonably confident in our accuracy through 2035 and beyond—unless disruptive events such as new trade barriers or breakthrough technologies dramatically reshape the market.

We also spend considerable time understanding the business models of the companies operating in the market—and where future business activity is likely to focus. That, in the end, determines where batteries will go, and how fast.

What Comes Next—and What Investors Should Watch

Yes, volumes are rising. More batteries are placed on the market every year, and early EVs are reaching end-of-life for the first time due to aging and declining value.

But lowered EV forecasts and persistent economic uncertainty have significantly increased the risks of downstream investment—especially in a market where precursor and cathode manufacturing already carry substantial risk. In the U.S., industrial policy and tariffs may offer some protection. In Europe, policymakers are caught between climate goals and the need to support a struggling automotive sector, creating a dynamic in which not only recycling but also other midstream operations are constrained by faltering battery demand.

In China, the recycling overcapacity is so extreme that operations are only viable when vertically integrated with materials production. What China does have, however, is a growth engine in its EV industry—an industry that is striving for global dominance. This is reflected in our latest battery demand update published on CES Online in June. It creates the world’s strongest base for battery value chain growth—providing the capital and scale to invest in new products and expand capacity.

For investors investing in Western battery recycling operations, the key takeaway is this: Access to batteries matters more than access to technology. Being close to feedstock—and having a model that works even at low volumes—is critical.

The logic is simple. While we rarely say it out loud, the ideal position in any business is to hold a monopoly. That’s how you protect pricing power and margin, even as volume grows. Battery handling and collection are local-market activities. But once batteries are shredded and processed into black mass, the game shifts to the global market—a market dominated by major players, often based in Asia, who are more deeply invested and operate under commodity price exposure that’s virtually impossible to influence from the outside.

There’s nothing preventing new players from entering and challenging this dominance—but there’s also nothing to suggest it will be easy, or that it can be done simply by replicating what leading Asian recyclers and materials producers are already doing. A recycling business that aims to generate profits through refining and battery materials production must be evaluated based on its ability to compete in this global arena—not primarily on its recycling capabilities, but on its resources to invest in R&D, product development, and relentless cost efficiency. A few companies are assembling the capital and scale needed to join this race—but for most Western recyclers, it’s simply a weight class too high.

What Recyclers Should Do Next

Most recyclers should look upstream. They need partnerships with OEMs, waste collectors, and dismantlers. Reuse and repurposing should be viewed not as ESG window dressing, but as strategic bridge solutions: ways to secure future feedstock while generating near-term value.

The e-waste industry has already offered a case study. Once a favourite among investors, it evolved into the ITAD (IT Asset Disposition) industry. This shift was driven by the consolidation of products and product types as electronics matured. Just compare your desk or living room today with how it looked 15 years ago—and again 15 years before that—and the trend becomes obvious.

Recyclers should also charge for what they’re good at: logistics, compliance, and safe handling of hazardous materials. A shredder doesn’t need to run every day—it needs to represent certainty and capability, which may be at least as valuable as the material yield itself, at least for the industry at large.

That logic also applies to the customers of recyclers. If OEMs, battery producers, car dismantlers, or compliance schemes want to avoid future monopolies or price exposure, they must invest in or engage with end-of-life strategies that secure long-term value and maximise control. This can be done in partnership with recyclers, as well as with repurposing companies and transport providers.

Finally, recyclers should broaden their market scope. EVs, portable electronics, and stationary storage are just three segments. At CES, we follow more than 40 subsegments—many of which are less crowded, more stable, and more accessible for recyclers willing to do the groundwork.

A Market Recalibrated

The reality is that many battery recycling companies operating today should never have been started. But now that they exist, the industry has something it didn’t have five years ago: tested infrastructure, operational learning, and a broader talent base. That’s not failure—that’s progress. At least for the industry at large.

What happens next depends entirely on strategy. The companies that survive and grow will be those that base decisions on facts, not faith. To develop a future-proof business case, it’s not enough to understand your own position—you must also understand the logic of your suppliers and customers.