Inflation squeezes Li-Cycle recycling hub

In spite of the growing need for domestic supplies of critical battery materials to power zero-carbon energy technologies, Li-Cycle Holdings Corp. announced a pause in construction of its planned Rochester recycling hub due to escalating costs the U.S. is presently facing.

Established in Ontario, Canada, Li-Cycle has developed a method to safely and sustainably recycle spent lithium-ion batteries with its unique proprietary solvent extraction process that will be employed via a "spoke and hub model."

With the spokes existing as a distribution network that will take in all types of lithium-ion batteries and transform them into an inert product that is shredded, separated, and shipped to a hub for further processing, this method is aimed at localizing recycling and production of domestic battery materials.

Under Li-Cycle's strategy, each centralized hub will be fed material from 12 spokes. At the hubs, the recycled material, called black mass, would then be converted to battery-grade chemicals through the use of a non-thermal process that purifies the materials back into the stuff needed for future lithium-ion batteries.

For its entry into U.S. markets, Li-Cycle targeted a prime location for one of its future centralized hubs – Rochester, New York.

With development proceeding smoothly within the last year, climbing prices due to current inflation have created an unexpected stoppage that the company hopes to remedy through extensive reevaluation.

Near the end of October, however, Li-Cycle paused construction of the Rochester recycling hub pending the completion of a comprehensive review of its go-forward strategy for the project. The company says that due to recent escalating costs, the anticipated price tag to build this North American hub is expected to significantly exceed the previously determined budget of $560 million.

"In conjunction with the pause in the Rochester Hub project announced in late October, we have initiated a comprehensive review," said Li-Cycle President and CEO Ajay Kochhar. "We have performed an initial analysis of options for completion of the Rochester Hub, and we are taking steps to conserve cash."

Even with a $200 million investment from mining giant Glencore, the unforeseen cost escalation has ultimately outpaced development. To offset this hike, however, Li-Cycle is still endeavoring to accomplish the provisions required by the Department of Energy for its Advanced Technology Vehicles Manufacturing loan program – of which the federal agency conditionally committed a $375 million loan.

"Additionally, we remain actively engaged and continue to work closely with the DOE to satisfy conditions precedent for financial close for the $375 million loan commitment as we complete a comprehensive review of the go-forward strategy for the Rochester Hub," said Kochhar.

In addition to the conditions necessary for financial closing of the loan, Li-Cycle says it will need to meet additional conditions set prior to the first advance, including obtaining additional financing to fund the required base equity commitment.

The pause on the Rochester Hub gives the company what it hopes is the opportunity to better compartmentalize the project with the current timing and evolution of the battery recycling and EV markets and to further optimize construction and contracting strategies.

"Global EV production volumes and battery material demand continues to be underpinned by strong fundamentals," said the Li-Cycle CEO. "With favorable supply and demand dynamics driving the need for domestic sources of battery material, we continue to see significant benefits for Li-Cycle's Spoke & Hub network, and in particular, the market need for the Rochester Hub."

So far, Li-Cycle has determined that a phased approach may include the early production of an intermediate battery metal product, such as mixed hydroxide precipitate, to begin supplementing costs and improve overall project economics.

Performing an initial analysis and depending on the option selected, Li-Cycle has found that revised project costs are now expected to climb anywhere between $850 million and $1 billion.

The company adds that this range includes the cost of the process buildings and warehouse for the planned Rochester Hub of approximately $140 million. Ultimately, while the total project range is based solely upon this initial analysis, Li-Cycle expresses the number is subject to assumptions and is likely to change as it continues to complete its review work and determine options to pursue accordingly.