The battery recycling sector is witnessing a divergence: massive infrastructure build-out in China versus tightening feedstock markets. This week saw the launch of multiple large-scale recycling projects in Sichuan and Shandong, adding hundreds of thousands of tons of processing capacity. Simultaneously, black mass prices for both LFP and ternary batteries have shifted from decline to increase. This article examines the rising cost of recycling feedstock, the correlation with cobalt and lithium salt volatility, and the implications for processor margins.
The race to secure a closed-loop battery supply chain has intensified, marked by a flurry of large-scale infrastructure announcements in China. In the past week alone, major projects—including a 70,000 mt/year facility by Zigong Tongfarong and a 400,000 mt/year cathode material project in the Leshan High-tech Zone—have initiated environmental assessments or construction. This aggressive capacity expansion signals that major industrial players are positioning for a future where "urban mining" rivals primary extraction.
However, this rapid build-out of midstream capacity is colliding with short-term feedstock tightness, driving a rebound in black mass pricing. After weeks of decline, the price per lithium point for Lithium Iron Phosphate (LFP) black mass has stabilized and begun to tick upward, tracking volatility in lithium carbonate futures. More notably, payables for ternary black mass (containing nickel and cobalt) have risen, with recovery rate coefficients for nickel and cobalt climbing to 75.5–77%.
This price strength is being driven by the "pincer" movement of rising metal costs and inventory restocking. Cobalt sulphate prices have edged higher, exacerbated by low inventories among recyclers who exhausted older stock and were forced into the spot market. This cost pressure is being transmitted directly to black mass payables. Upstream recyclers, observing the potential for a bottoming out in lithium prices and the strategic tightening of cobalt, have become reluctant to sell cheap feedstock, creating a seller's market despite the broader industry's skepticism about EV demand growth rates.
The disconnect is stark: capacity is growing exponentially, but the volume of end-of-life batteries is growing linearly. This structural overcapacity in the recycling segment suggests that while volume will increase, margins for recyclers will remain under pressure due to fierce competition for feedstock. The "recycling wars" are shifting from a battle for technology to a battle for access to scrap.
Meanwhile, North American exploration continues to try to fill the primary supply gap. Junior miners like Azimut and Brunswick Exploration are aggressively defining hard-rock lithium assets in Quebec, aiming to provide the primary units that the recycling loop cannot yet fully replace. The juxtaposition of China’s downstream recycling dominance and Western upstream exploration highlights the continuing bifurcation of the global battery supply chain.
Sentiment: Bullish (Black Mass Payables) / Neutral (Margins)
Reasoning: Feedstock prices (black mass) are likely to remain firm or rise further as new recycling capacity comes online and competes for limited scrap material. However, this is bearish for recycler margins, as they will be squeezed between high feedstock costs and volatile spot prices for the resulting salts (lithium/cobalt). The "easy money" in recycling is gone; scale and feedstock access are now the only differentiators.