Battery recycling sits at the heart of Europe’s circular economy ambition. It reduces dependence on imported critical raw materials. It lowers the environmental footprint of battery production. It keeps valuable resources inside the system. The policy direction is clear, the regulatory framework is strengthening, and the strategic need is urgent.
And yet, for many businesses operating in Europe today, battery recycling is simply not profitable.
This is not a minor detail. It is one of the central structural challenges facing the European battery sector — and one that the CIRCUBATT project is directly working to address.
Why Europe needs battery recycling now
Europe’s battery demand is growing fast. DNV’s Energy Transition Outlook forecasts that annual European battery demand will increase fivefold between 2023 and 2030. Electric vehicles are the main driver. EVs represented 14% of passenger vehicle sales in Europe in 2023. DNV projects that figure will exceed 70% by the end of this decade.
Batteries also play a growing role in grid-scale energy storage, helping integrate variable renewable sources like solar and wind. DNV forecasts battery demand for stationary storage will grow from around 3% of European high-capacity battery demand today to 10% by 2040.
This growth creates an enormous downstream challenge. Every battery produced today will eventually reach end of life. Europe needs the infrastructure, technology, and business models to handle that at scale — efficiently and profitably.
The recycling value chain: where the economics get difficult
To understand why recycling is often unprofitable, we need to look at where recycled materials sit in the battery value chain. Producing a finished battery cell involves multiple steps — from raw material extraction through refining, active material synthesis, electrode manufacturing, and cell assembly. Recycling a battery at end of life recovers materials at an early stage in that chain. The main outputs are metal salts such as nickel sulfate, cobalt sulfate, and lithium compounds — often called black mass after processing.
These are strategically important materials. They are difficult and costly to source from primary mining. That is precisely why recovering them matters for European supply security. But their market price reflects their position in the value chain. They are intermediate products, not finished goods. They command significantly lower prices than the battery cells they will eventually help produce.
On the cost side, the picture is equally challenging. DNV identifies four increasingly investment-intensive stages in the recycling process: collection and transport, dismantling, pre-treatment to produce black mass, and finally hydrometallurgical or pyrometallurgical processing to recover individual materials. Each stage carries significant costs — labour, energy, chemicals, and capital investment in specialised equipment.
The gap between those processing costs and the market value of the recovered outputs is where many business models break down.
Chemistry matters: LFP changes the equation
Battery chemistry is one of the most important variables in recycling economics — and chemistry is shifting in ways that make recycling harder, not easier.
Historically, the dominant battery chemistries in European EVs have been nickel- and cobalt-rich formulations such as NMC and NCA. These chemistries contain relatively high concentrations of valuable metals. Recyclers can typically recover over 90% of the cobalt and nickel, and these metals represent most of the recovered value.
Lithium iron phosphate batteries — LFP — tell a different story. DNV explains that LFP batteries contain much less valuable materials. They are cheaper to produce, but considerably less attractive for recycling. Black mass from LFP commands substantially lower market prices than black mass from NMC batteries. LFP has dominated the Chinese market for years. It is now rapidly gaining market share in Europe too. As a result, the average recyclable value per battery is declining even as total volumes grow.
This shift directly affects how batteries should be managed across their lifecycle — including which batteries are worth recycling immediately, and which are better candidates for second-life use first.
Scale is both the problem and the solution
A large part of the economics problem comes down to scale. Europe’s battery recycling industry is still in an early stage. Lower volumes mean higher costs per unit across every part of the process — transport, dismantling, and metallurgical treatment all cost more when you process less.
DNV highlights that most current recycling capacity sits next to battery manufacturing plants. The reason is pre-consumer production scrap — the waste batteries generate during manufacturing, which can reach up to 50% of output in a plant’s early weeks. This scrap is currently a larger and more predictable input than post-consumer end-of-life batteries. Manufacturing hubs are predominantly in Asia, so Asian players dominate battery recycling today. Europe exports a significant share of its black mass to Asia for processing, which limits the growth of domestic European capacity.
End-of-life EV batteries will start returning in larger volumes in the late 2030s. But building the recycling infrastructure to handle that volume requires investment decisions today. Current volumes do not yet justify them. This is a classic chicken-and-egg problem.
What CIRCUBATT’s analysis found
In CIRCUBATT’s Battery Talks video series, Dr. Michael Hess from Battronics — a Swiss technology company and CIRCUBATT consortium member specialising in AI-driven battery lifecycle management — described the scale of this profitability challenge directly.
According to Dr. Hess, Battronics analysed 144 battery recycling business models as part of their work within CIRCUBATT. Only around 20 proved profitable in the European context. That figure — from Battronics’ internal analysis within the project as described by Dr. Hess — shows just how narrow the viable path currently is. It also underlines why understanding exactly which configurations work is so important for the sector.
Follow the CIRCUBATT LinkedIn page to watch Dr. Hess explain this in his own words, as part of our ongoing Battery Talks expert video series.
What needs to change
The profitability gap is real. But it is not fixed. Several structural changes are already under way that should improve battery recycling economics in Europe over the coming years.
Stronger demand for secondary materials. The EU Batteries Regulation (EU 2023/1542) introduces minimum recycled content requirements for cobalt, lithium, lead, and nickel. As these requirements come into force, manufacturers will need to source secondary materials. This creates more stable and predictable demand — and strengthens the business case for recycling investment. DNV also notes that if manufacturers fail to meet recycled content quotas, a market premium for secondary materials could emerge, creating an additional incentive for recovery.
Lower processing costs through scale and technology. As volumes grow and recycling technology matures, the cost per unit will fall. Better automation, more energy-efficient processes, and improved pre-treatment methods will all help. Investment in European hydrometallurgical capacity — reducing dependence on Asian processing — is also a strategic priority.
Smarter end-of-life routing. Not every battery that reaches end of first life should go straight to recycling. Many retired EV batteries still hold significant capacity — often around 70–80%. These batteries suit second-life applications such as stationary energy storage. Routing these batteries to second life first extends their value, delays the recycling cost, and generates revenue that supports the overall circular system economics. Making this routing decision accurately and at scale is exactly where AI and digital tools play a critical role.
How CIRCUBATT is working to solve this
CIRCUBATT takes an integrated approach to this challenge. The project works across the full battery lifecycle — from sustainable battery design that makes batteries easier to dismantle and recycle, to AI-driven lifecycle management that extends battery life, to second-life strategies that maximise value before recycling, to improved processes that increase material recovery efficiency.
Battronics contributes the data and AI layer. The team uses real-time battery data and predictive models to determine the optimal end-of-life pathway for each battery. By routing batteries more intelligently between second life and recycling, the system cuts unnecessary processing costs and improves the overall economics of the circular value chain.
The goal is not only to make battery recycling environmentally sound — though that matters enormously. Some studies suggest recycling can cut CO2 emissions by 75–80% compared with producing virgin materials. The goal is also to make recycling work as a sustainable business, consistently, at European scale. Without viable business models, the circular battery economy stays an ambition rather than a reality.
About CIRCUBATT
CIRCUBATT is a Horizon Europe project (grant no. 101192383) developing integrated solutions for circular battery value chain innovation. The project covers the full battery lifecycle — from sustainable battery design and AI-enhanced lifecycle management to second-life applications and advanced recycling — with the goal of reducing Europe’s reliance on critical raw materials and advancing its circular economy transition. Learn more about how the EU Batteries Regulation is shaping this transition.