Ecological Investigation of Waste Battery Recycling: Why Regular Military Forces Can't Do Small Workshops

"About 70% of the waste batteries in China have to be passed through from Xinxiang. No matter what you want, we can provide it as long as the price is suitable!" Wang Hua (pseudonym), the owner of a workshop in Muye District, Xinxiang City, Henan Province, told a reporter from the Shanghai Securities News who was secretly interviewed. According to him, during the peak period (during the rise in lithium carbonate prices in 2022), there were thousands of small workshops engaged in battery dismantling in the local area, and currently there are still hundreds, which can provide various products on the industrial chain.

"Small workshops" refer to small factories that do not have the qualifications for recycling and dismantling. They not only do not have environmental impact assessment certificates, but also do not have safety production permits and hazardous waste operation permits. Some small factories have not even registered as enterprises. According to recent interviews, this type of small workshop not only exists in Xinxiang, Henan, but also in Guangzhou, Shenzhen, Dongguan, Foshan, and other places in Guangdong. There are also a large number of small workshop style battery dismantling factories.

The black powder piled up in the small workshop warehouse

In recent years, China's lithium battery industry has been advancing rapidly. As a crucial part of green recycling, the wild growth of the battery recycling industry has caused headaches for all parties in the industry chain. "Most of the scrapped batteries flow to small workshops and the hierarchical utilization market that is in a regulatory blind spot. Regular recycling enterprises are basically unable to receive scrapped batteries, and a large amount of high-quality recycling capacity is idle," said Zeng Yuqun, Chairman of CATL.

The investigation by reporters found that compared with the regular army, small workshops have competitive advantages such as low costs, group warfare, and low entry barriers. However, there are many hidden dangers such as environmental protection and safety, which have led to the long-term existence of a distorted ecology in the field of waste battery recycling where "bad coins drive out good coins" and urgently need to be rectified and reshaped.

Industry insiders believe that with the recent significant fluctuations in lithium carbonate prices, the ecology of the waste battery recycling industry is undergoing drastic changes. We should seize this "window period" to accelerate rectification and promote sustainable and healthy development of the industry.

The secretive small workshop's "black powder" business

Where have all the discarded batteries gone?

"Within a 10 kilometer radius of Xinqi Street and Weiqi Road in Muye District, Xinxiang City, Henan Province, there are numerous small workshop style 'black powder' manufacturing enterprises in several villages." At the end of March this year, after searching for several days, the reporter suddenly received a text message. There was no more information, and the person who provided the clue appeared very cautious when the phone was called back but did not answer.

Starting from Zhengzhou, it takes about an hour by car to reach Muye District, Xinxiang City. On rural roads, the rapeseed flowers on the roadside are blooming vigorously, and electric or tricycles occasionally pass by, making outsiders and out of town vehicles particularly eye-catching.

Under the pretext of buying "black powder" (black powder containing metals such as nickel, cobalt, manganese, copper, aluminum, and lithium obtained through dismantling, crushing, screening, pyrolysis, and sorting of waste lithium-ion batteries), the reporter, as a trader, randomly knocked on the door of a villager. Just as they explained their intention, the other party immediately pointed the way for the reporter - a blue greenhouse a few hundred meters away, where there is a small factory.

From the roadside view, this small workshop is covered with an ordinary large iron shed on the outside, and the gate is very wide, or for the convenience of vehicles entering and exiting. But without someone pointing the way, outsiders would find it difficult to see that this is a small factory. There is still a small door left on the factory gate. When you knock on the door and enter, you can see several discarded battery packs scattered in the lobby at a glance.

"I don't powder, and now the price of lithium carbonate is falling every day. This market is not good for business." Mr. Luo, the boss, is very cautious. He told reporters that he mainly focuses on the secondary utilization of batteries.

Under the introduction of another small workshop owner, Luo Cheng (pseudonym), the reporter met Wang Hua, a local owner in Xinxiang who is doing a big business in the battery industry. Entering through a small door facing the street, passing through an alley, opening an iron gate, passing through a courtyard, and then opening another door, is Wang Hua's warehouse. The reporter saw that there were dozens of large woven bags stacked in the warehouse, which were filled with "black powder".

According to Wang Hua, he also has a powder making factory that has not started construction recently, and his inventory is not very high. If needed, he can quickly help organize the source of goods.

The investigation by reporters found that the vast majority of small workshops are not listed and have strong concealment. A very small number of enterprises hang the brand "XXX Battery Raw Material Factory". Bosses will declare in advance that "invoicing is not allowed" before the transaction.

Decomposing and reusing multiple risks

"Are you not afraid of any accidents while you are spreading powder here? What should we do if the battery explodes?" Leaving Wang Hua's warehouse, the reporter and Luo Cheng continued chatting along the way.

"Just be careful. There have also been accidents. There was a factory that exploded before, but people were fine. The batteries in a warehouse were gone," Luo Cheng said.

Lithium ion battery packs themselves have high energy, which may cause various safety issues such as short circuits, leakage, and may lead to fires or explosions. The reporter learned through undercover investigation that the production environment and equipment in small workshops are relatively simple, and the operation is often not standardized. There are safety risks such as explosions and fires when dismantling batteries.

Not only dismantling, lithium batteries themselves are dangerous goods, and storage and transportation also face significant risks, leading to fire accidents that are not uncommon. More concerning is the issue of environmental pollution, such as improper disassembly of waste lithium-ion batteries, which may cause heavy metal ion pollution such as nickel, cobalt, manganese, fluorine pollution, and organic matter pollution.

"We mainly focus on the first half of the disassembly here, and do not do wet (chemical decomposition). Environmental protection issues are relatively good." Luo Cheng is unwilling to discuss this topic further. Another small workshop owner in Xinxiang also said that the local management of this area (environmental protection) is not too strict.

Resource waste is also a major problem. Some legitimate recycling and dismantling enterprises can still recycle materials, and small workshops lack the ability to handle them and can only treat them as garbage, which is not conducive to recycling.

But Luo Cheng insists that he and his colleagues have classified various materials and sold them all, and have achieved the ultimate utilization of resources. Wang Hua revealed to reporters that "black powder" is mainly sold to several well-known domestic recycling and reuse enterprises, such as a leading enterprise in Jiangxi, which had a deep cooperation with him at one point.

This is consistent with what the reporter learned. It is understood that small workshops are unable to complete the entire recycling process, mainly for pre-treatment, and the extracted materials are mainly used by formal enterprises for subsequent utilization.

Compared to risks related to safety and environmental protection, another major risk may directly harm consumer interests.

In September 2022, the police in Zhangjiakou, Hebei Province, publicly announced a case of selling counterfeit registered trademark goods. Local police seized more than 150000 counterfeit "Nanfu" batteries at the scene of the destroyed battery manufacturing center, with a value of over 500000 yuan. According to investigation, the production site for fake batteries is located in Xinxiang, Henan, and one fake battery production site and one fake battery storage warehouse have been dismantled in Xinxiang. Seven suspects of manufacturing and selling fake "Nanfu" batteries have been successively arrested.

It is understood that the so-called secondary utilization in some small workshops refers to the selection or simple inspection of battery packs based on their appearance, and then the replacement of packaging before selling them. Downstream manufacturers include children's toy manufacturers, small appliance manufacturers, etc., such as the batteries in some handheld electric fans, which are often used in a cascade manner.

"We have all the batteries you need," Luo Cheng told reporters before leaving.

"The higher the price, the better." Regular troops cannot handle small workshops

Why can there be so many battery dismantling workshops gathered in Xinxiang? How did they get the used batteries?

"The main issue is the price. If you offer a high price, of course others will sell it to you." According to a local person engaged in dismantling waste batteries, after years of development, some small bosses in Xinxiang have established some recycling channels, and everyone is very "united" and has an advantage in seizing sources of goods. He gave an example that the boss of a certain Xinxiang found a batch of goods, which could cost tens of millions of yuan. It was very difficult for one person to obtain them, and everyone gathered together to quickly finalize the deal.

In fact, the battery industry in Xinxiang has a long history. In 1950, the first battery enterprise in Henan Province was established in Xinxiang. In 1956, the first state-owned secondary battery production enterprise in China, the 755th Factory, was also built in Xinxiang. This is one of the most diverse battery production bases in China, and was once one of the top ten battery export bases in the country. It is known as the "Huangpu Military Academy of China's power supply industry".

"His grandfather is a battery maker, and his father is also a battery maker. In his generation, he still has to rely on batteries," a local villager introduced his partner during a chat.

Why can't a legitimate enterprise just do small workshops for recycling, dismantling, and reusing waste batteries?

"From the perspective of recycling, we really don't have them daring to bid." The relevant person in charge of a whitelist dismantling company in South China told reporters that compared to regular enterprises, small workshops have almost no environmental protection investment and do not need to pay taxes. Family workshops also significantly reduce labor costs.

It is understood that due to the lack of unified standards for lithium batteries, the structure of battery packs varies among different manufacturers and vehicle models. Although a group of leading enterprises have made technological breakthroughs in intelligent disassembly, their comprehensive advantages are not obvious, and manual disassembly is still the main method of operation.

At the same time, small workshops have almost no environmental investment, and investment in fixed assets, production costs, and other aspects is very low. This has also led to the proliferation of small workshops, some of which even buy a crusher at home and complete the processing in their own yard.

The dismantling of waste batteries is not only concentrated in Xinxiang, Henan. The reporter learned from interviews that there are also a large number of "workshop style" battery dismantling factories in Guangzhou, Shenzhen, Dongguan, Foshan and other places in Guangdong.

According to the Energy Storage Application Branch of the China Chemical and Physical Power Industry Association, less than 25% of retired batteries are currently flowing to whitelisted enterprises, and 75% of their business is being digested by "small workshops" and enterprises that have not yet entered the whitelist. According to statistics from Gaogong Lithium Battery, only 20% to 30% of retired power batteries are recycled through formal channels.

"Eliminate the good and preserve the bad"

Ecology urgently needs to be changed

The ecology of "bad currency driving out good currency" urgently needs to be changed. During this year's National People's Congress and Chinese People's Political Consultative Conference, how to rectify the chaos in the battery recycling industry has become a hot topic of concern for representatives and members of the new energy industry.

Liu Jingyu, Chairman of Zhongchuangxin Aviation, suggested a top-level plan for the battery recycling system, led by power battery enterprises, to develop battery recycling routes from the source of product design and establish an efficient battery recycling system; Develop standard specifications for the recycling process to ensure that recycling is low-carbon, environmentally friendly, efficient, and has economic value; Priority should be given to supporting power battery enterprises with the ability to manage big data throughout the entire life cycle of power batteries, and mastering low energy consumption and zero pollution material regeneration technology for industrial layout.

Liu Changlai, Chairman of Camel Corporation, conducted research and found that the current recycling channels for power batteries in China are not standardized. A large number of retired power batteries have flowed into informal recycling channels in the form of "higher priced ones", resulting in distorted phenomena such as unsaturated production capacity of formal enterprises and market competition where "bad coins drive out good ones".

Zhang Tianren, Chairman of Tianneng Holdings, mentioned that the current competitive landscape in the domestic power battery recycling industry still presents a "small, scattered, and chaotic" situation. The industry development faces problems such as difficult management of battery flow, chaotic battery recycling prices, and disorderly expansion of unqualified small workshops.

One background that the leaders of leading enterprises in the battery industry chain collectively call for is that China has entered the first peak period of power battery retirement. According to the average lifespan of power batteries ranging from 5 to 6 years, the first batch of commercial new energy vehicle power batteries will begin to retire in the past two years. The theoretical recovery of retired power batteries is expected to exceed 300000 tons in 2023, and it is expected to reach 500000 tons by 2025. According to the 2022 China Lithium Battery Industry Development Index, the number of retired power batteries has significantly increased since 2021. The total number of retired power batteries in 2022 is 345GWh (277000 tons), and it is expected that the number of retired power batteries will reach millions of tons annually after 2025.

The government has also been continuously promoting standardized recycling and utilization. At the "Authoritative Departmental Opening" series of themed press conferences held by the State Council Information Office on March 1st, Vice Minister of Industry and Information Technology, Xin Guobin, proposed to improve the recycling and utilization system, strengthen key technologies such as intelligent dismantling, and enhance the recycling and utilization level of power batteries.