The Electric: Why Going Small May Be How to Survive the Battery Downturn

Most of those recycling plants have become casualties of the West’s unexpectedly sluggish EV market. But Nth Cycle, a small Massachusetts recycling startup, has scored a $1.1 billion contract with metals trading giant Trafigura. Under the 10-year deal, signed earlier this month, Nth Cycle will supply Trafigura with nickel, cobalt and lithium from refineries to be built in South Carolina and the Netherlands.

Nth Cycle CEO Megan O’Connor said she is attempting to avoid the mistakes of early players by going small—the startup’s equipment processes a tenth of the volume of metals of typical recycling refineries, and uses much less energy.

O’Connor is raising a Series C round but declined to disclose how much she is seeking. Nth has raised $60 million in equity and grants since its launch in 2017, including a $44 million Series B round in 2023.

Nth is one of a small number of startups that have recently established revenue streams, while the rest of the industry struggles and bankruptcies rise. 

It’s also another example of the Western adoption of technology dominated by Chinese companies. Nth has developed a process that refines black mass, the gooey metallic amalgamation that results from recycling battery metals, into a substance called mixed hydroxide precipitate, or MHP, which most battery makers use to make electrodes.

Chinese-owned companies, many based in Indonesia, make most of the world’s MHP. Nth appears to be the first to do so in the U.S.

Other players in the recyling industry have either gone out of business or, for now at least, pivoted to other businesses. Canadian battery recycler Li-Cycle declared bankruptcy last year and was bought by metals trading giant Glencore.

Nevada-based battery recycler Redwood Materials, whose CEO is Tesla co-founder JB Straubel, last year pivoted to deploying its used EV batteries to supply power to AI data centers. In January, Redwood raised $425 million to fund a new division, Redwood Energy, to sell that data center power. Straubel said the new division could grow larger than Redwood’s recycling business.

Last week, Redwood and AI data center builder Crusoe announced a sixfold expansion of their joint data center deployment. Redwood’s second-life batteries will now power 24 of Crusoe’s modular data centers, up from four they deployed last year.

Nth, which prefers to call itself a refiner rather than a recycler, is focusing on the materials that go into batteries rather than the power they generate. It buys black mass from recyclers and focuses strictly on processing it into MHP. Chinese recycling companies build humongous plants, often located near gigantic mines that feed them with enormous volumes of ore, O’Connor told me.

The U.S. doesn’t have those giant mines, and it also doesn’t have China’s big EV market, which throws off tons of scrap as well as defective and spent batteries to recycle. U.S. junkyards have relatively few EVs.

Instead, Nth uses small modular processing equipment that it can build up at a site as demand for the MHP rises, she said.

As with much of the battery industry’s technology, Western companies invented MHP, but Chinese companies scaled it up commercially. Hans Eric Melin, managing director of Circular Energy Storage Research and Consulting, which researches battery recycling, said Nth’s advantage may be that it has figured out a way to make smaller-scale production work commercially.

In Nth’s case, its technology matters less than its economics. “What’s important is that you can do it at all at an attractive cost and that you have a business model through which you can access feedstock at an attractive price,” Melin said. 

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Noteworthy

In 2022, Honda and Sony announced Japan’s answer to the Chinese EV juggernaut. It was Afeela, a tech-led EV that would combine Honda’s manufacturing chops with Sony’s blockbuster gaming and film catalog, creating what some called a high-end home theater on wheels. Passengers would be able to compete on PlayStation or watch some of history’s most classic films. The two companies were supposed to release Afeela this year, but last week, they killed the car. It was largely a victim of Honda’s massive EV retrenchment—the carmaker expects to announce its first losing year in seven decades this week. The Afeela’s projected price—more than $90,000—may have helped dissuade the two partners from proceeding since competition at that level is strong, and the ultraluxury category makes up just 8.5% of EV sales.

Bonne Eggleston, a vice president at Tesla and head of its main battery-making division, said the company might be willing to license out a pioneering electrode processing method that significantly cuts manufacturing costs. After six years of work that many industry veterans thought would not succeed, Tesla has finally figured out how to manufacture dry cathodes at scale, dispensing with expensive and toxic solvents. Speaking at the International Battery Seminar in Florida last week, Eggleston said he was open to letting rivals have a shot at the technology.

Two years ago, a California motorcycle company began using a battery made by startup Enevate to power one of its bikes. For Enevate, it was a tremendous triumph: It was the first commercial EV anywhere to be powered by next-generation silicon-dominant anodes, which enable faster charging and greater driving range. Last week, we learned that this was not sufficient to keep Enevate alive during the current downturn. Unannounced, it laid off most of its workers. And founder Benjamin Park confirmed that the company is attempting to sell itself. He declined to provide further details.

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