The automotive recycling industry is in a constant state of flux. Supply chain issues are affecting new car production, which in turn affects the used car parts industry, which in turn affects the recycling of automotive parts.
Troy Webber, chief executive officer of Chesterfield Auto Parts in Richmond, Virginia, said the biggest issue his company is facing right now is market volatility.
“It used to be that you could predict the market to some degree based on seasonal changes and annual market trends. That predictor has been gone for some years now,” Webber said. “The markets are being affected by global issues more than local and domestic factors like supply and demand.”
Political issues around the globe, worldwide shipping shortages and shifting policies in foreign governments are also making it more expensive to do business.
“When the price of scrap gets as high as it was earlier this year, we struggle to obtain cars. While we make more on the vehicles, the cost of goods increases as well,” Webber said. “This is because anyone with a tow truck can take vehicles directly to a scrap yard and make a lot of money.”
Chesterfield Auto Parts is a vehicle recycling business more than an auto parts business. The majority of the company’s revenue comes from recycling the cars, not selling their parts. The business makes money by moving vehicles through the process and generating scrap metal.
“The process is a well-oiled machine that needs vehicles to continue operating. If we don’t get new inventory, we can’t generate the scrap that we sell to buy more inventory,” Webber said. “We also operate at about a 60 to 90 day differential between when we buy the inventory and when we have realized all of its potential income. The vehicles we pay for today, may not generate a profit for three months. With the market as volatile as it has been, the price of a commodity could change a lot over the course of three months.”
The Converter Issue
One issue that continues to plague the automotive recycling industry is the continuing problem of catalytic converter theft. Unfortunately, catalytic converter theft affects auto recyclers because the catalytic converter is the most valuable commodity recyclers sell. In fact, sometimes the converter can be more valuable than the rest of all the scrap from the combined parts of the entire vehicle.
“As the price of converters increases, tow companies and individuals will remove the converter and sell it separately before they sell the car to an auto recycler,” Webber said. We must be extra vigilant not to buy a vehicle with the most valuable part missing, the catalytic converter. It also affects the pricing for us in order to be completive. For example, if we offer a customer $500 for a junk car, and they know they can sell just the catalytic converter for that much, it is a hard sell.”
It also makes an auto recyclers’ operation a huge target for thieves. When new cars come in, the team at Chesterfield Auto Parts, for example, ensure they are very tightly packed into the holding lot to make it difficult to get under the cars.
“We also make sure that every single converter is taken off the cars before they are made available to the public,” Webber said. The converters also are stored in tamper resistant containers in an alarmed warehouse with internal and external cameras for security.
“The most effective way of protecting the catalytic converts is to sell them fast. We don’t hold onto large quantities, we keep them moving,” Webber said. This is why some automotive recyclers, including Chesterfield, do not buy converters from anyone because it is dangerous and prone to fraud.
Recycling of EV Components
The topic of electric vehicles is frequently bandied about these days within the automotive recycling arena. Electric vehicles are beginning to have a significant impact on the recycling industry.
According to Ryan Melsert, chief executive officer of American Battery Technology Company, consumer interest and purchasing in EVs has risen dramatically. “EV global sales were up 113 percent in 2021 compared to 2020 sales, and more than 52 percent of global car buyers are interested in purchasing an EV. The demand for EVs is continuing to trend up with global sales of electric cars rising strongly in 2022, with two million sold in the first quarter, up 75 percent from the same period in 2021,” Melsert said.
The sharp increase in demand for EV vehicles means an increased demand for EV batteries and the battery metals that go into them. This is creating opportunities to innovate and challenges for battery recyclers.
“The batteries in the vehicles are dangerous, so that poses multiple hazards for auto recyclers,” Webber said. “When these vehicles come in, we have no way of knowing the condition of the high-voltage battery, especially when the vehicle is wrecked. The battery must be removed before processing.”
What’s more, there is very little commonality among manufacturers of electric vehicles, so it is hard to train employees on how to remove them. They also are large, heavy and cumbersome to handle and they are still dangerous after they have been removed, and must be stored individually, in a separate climate and moisture controlled environment.
“The worst part of it is that there are very few options to dispose of them,” Webber said. “And they also pose a very unique fire risk. There is only one way to extinguish a burning Li-ion battery and the extinguishers are hard to find and expensive. We have spent thousands of dollars on fire equipment, gloves, tools and facility improvements, just to be able to store the batteries. We have formed a special emergency response team that is trained on how to use the special extinguishers and how to fight the dangerous Li-ion fires.”
American Battery Technology Company chief executive officer Ryan Melsert and the team at ABTC designed an integrated battery recycling system based on a strategic de-manufacturing approach. Instead of utilizing brute force methods common today, where batteries are placed in high temperature furnaces (smelting), or in shredding or grinding systems, they’ve instead developed a “de-manufacturing” process to extract metals and recover materials from spent batteries.
“Our recycling process utilizes an automated deconstruction process combined with a targeted hydrometallurgical, non-smelting, process that deconstructs battery packs to modules, modules to cells, cells to subcell components, and then sorting and separating those subcell components in a strategic fashion,” Melsert said.
Equally important as recovering battery metals from spent batteries is ensuring that these recycled metals can perform as good as metals extracted from raw, primary resources.
As Melsert explained, performance validation of recycled lithium-ion battery metals is underway. One example of a collaborative validation project is a project being funded by the United States Advanced Battery Consortium LLC (USABC), in collaboration with the U.S. Department of Energy (DOE), for the commercial demonstration of the American Battery Technology Company’s integrated lithium-ion battery recycling system and production of battery cathode grade metal products, the synthesis of high energy density active cathode material from these recycled battery metals by cathode producer and lithium-ion battery recycler BASF, and then the fabrication of large format automotive battery cells from these recycled materials and the testing of these cells against otherwise identical cells made from virgin sourced metals by cell technology developer C4V.
“The program’s focus is to demonstrate that battery grade metals can be manufactured from recycled materials at lower cost, lower environmental impact, and with higher domestic US sourced content than conventional virgin sourced metals,” Melsert said. “Commercially prevalent processes will then be used to synthesize high energy density active cathode material from these recycled metals, and then large format automotive battery cells will be manufactured from these recycled materials and tested to validate that these cells achieve the same performance metrics as otherwise identical cells manufactured from conventional virgin sourced metals.”
A Solid Future
Challenges aside, experts agree that the auto recycling industry is very strong. As Webber explains, automotive recycling is a major component of the economy, and they keep the wheels of industry turning.
“A large portion of new metal is made from recycled metal, which makes us vital to the circular manufacturing economy. In addition, the auto industry is about to start making up for lost sales during the pandemic by cranking out new inventory, which will put a lot more cars into the scrap stream for us to recycle,” Webber said. “So, demand for our products will stay high or increase and the supply of scrap cars will become more available. Metal prices may fall, which will decrease returns, but also lessens the cost of goods.”
With the demand for copper going through the roof, and availability of new copper staying level, Webber expects the automotive recycling industry is going to see a shift in the next few years.
“More and more cars will have copper wire rich electric motors, and less and less cars will have engines with catalytic converters,” Webber said. “Cars will continue to change (just like they have for the past 75 years) but we will continue to change as well. In the 1970s when Chrysler came out with the 7 year, 70,000 mile warranty, everyone said, “That’s the end of junkyards.” Twenty years ago, when cars started running by OBD sensors and computers, everyone said, “That’s the end of junkyards,” but here we are! When my kids are in the business 20 years from now, I predict most of the cars will have high voltage batteries and the copper wire will be the most valuable commodity in the cars. I am excited to see what challenges they will face and how they will deal with it.”
Melsert also pointed out that there is strong support to grow the automotive recycling market as quickly as possible. In the U.S., the federal government is investing in the development of technologies that unlock our domestic sources of critical minerals.
“The Bipartisan Infrastructure Law has committed $3 billion for battery minerals and refined materials manufacturing, and the Defense Production Act has been authorized to support the production and processing of minerals and materials used for large capacity batteries,” Melsert said.
That said, securing and maturing a sustainable, domestic battery metals supply chain is critical for fulfilling the potential that EVs can provide including consumer demands, economic viability, and environmental benefits.
“Less than one percent of the global manufacturing capacity of each of the primary battery metals (lithium, nickel, cobalt, and manganese) is currently within the U.S.,” Melsert said. “The largest EV battery manufacturers are located in Asia with more than 80 percent of all battery cell manufacturing occurring in China. With growing consumer demand combined with governmental support, private investments and environmental imperatives, we have the opportunity, the imperative, and the responsibility to work collectively to support this transition to a lower-carbon infrastructure.
Published in the July 2022 Edition