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★Mark us as a preferred sourceEurope’s bottleneck in the battery circular economy is no longer technological. We can recover nickel, cobalt and lithium from lithium-ion traction batteries — the problem is that at today’s cost and price levels the operation loses money. Researchers at HHL Leipzig Graduate School of Management have now put numbers on where the value leaks out, and what is missing from the system: not another process, but a workable business model.
What the Leipzig team examined
The interim deliverable (D7.4), completed in May 2026, is part of SAFELOOP, a Horizon Europe project bringing together 15 institutions from 11 countries under the coordination of the University of Oulu. The project started in 2024, runs for 36 months and has an estimated budget of around €4.7 million. HHL leads the economic assessment; the working group is headed by Dr Dima Smirnov, with Prof. Dr Dr Kelvin Willoughby as institutional lead.
The researchers broke the lithium-ion value chain into four connected models: recycling, active material production, pack production, and the deployment phase in single-life and two-life scenarios. They also drew on the financial statements of ten real companies, eight expert interviews, and the project documentation of a German utility’s storage investment.
This is an interim report. It quantifies direct economic effects; indirect environmental externalities are due in the final version in May 2027.
A loss of €1.90 per kilogram
The modelled object is a 73 kWh, 328.5 kg NMC811 pack processed at a hydrometallurgical plant. At early-2026 commodity prices, the recovered materials sell for roughly €1,344 per pack. Nickel contributes the most (€569), followed by cobalt (€235), electrolyte (€198), copper (€135), graphite (€79) and lithium (€73). Steel, aluminium, manganese and plastics together barely reach fifty euros.
Costs, however, come to €1,967. The result is a €623 loss per pack, or €1.90 per kilogram. The authors stress that early-2026 metal prices were neither unusually high nor unusually low by historical standards. The loss is not a cyclical accident; it is how the current structure operates normally.
Switching technology would not fix it either. If hydrometallurgy were replaced by direct recycling, the affected plant variable and direct labour costs account for only 19–25% of total costs, so even substantial savings would move the overall picture only moderately. Some of the cited literature suggests direct recycling could even cost more, because of the labour-intensive teardown to electrode level.
The dangerous-goods surcharge dominates
A battery removed from a vehicle counts as dangerous goods, and that shows up brutally on the invoice. Drawing on nine studies, the researchers found that transporting lithium-ion batteries costs on average 16.3 times more than ordinary freight. In the model, logistics absorbs 19% of total costs — and that is the average case. For recalled or damaged packs the surcharge can be higher still.
On top of that, road and rail are more expensive per unit than inland waterways, a capacity Europe barely uses for this purpose today.
Disassembly is the other big line item
Removing the pack from the vehicle and breaking it down to cell level costs €482 in the model — a quarter of total costs. Today this is largely manual work, because packs were never designed to be taken apart. The report identifies it as the most promising area for improvement.
Uncertainty carries its own price tag. The researchers built a €393 “uncertainty penalty” into the model. It is not a conventional accounting cost but the monetised risk that material content, recovery rates and freight rates land on the unfavourable side of the estimate. That is €1.20 per kilogram a recycler must also overcome to be profitable with statistical confidence.
Pure-play recyclers fare worse
Real company data back the model up. Starting from a patent-based database of one hundred firms active in lithium-ion battery recycling, the researchers selected ten for detailed analysis. The picture is two-sided: six of the ten show average profitability of 1.99%, and all of them are diversified players spanning several value-chain activities. Firms focused almost exclusively on recycling are heavily loss-making. The report also points to the 2025 insolvency proceedings of Li-Cycle and Ascend Elements.
From 2031, regulation will feed into prices
The EU Batteries Regulation (2023/1542) sets mandatory minimum recycled content for new industrial, EV and SLI batteries from August 2031: 16% cobalt, 6% lithium, 6% nickel and 85% lead.
HHL modelled the consequences. Importantly, the 20% recycled content used in the report is the authors’ scenario assumption, not the legal figure. On that assumption, and if recyclers’ losses are passed one-to-one onto the regulated recycled metals, the modelled pack’s unit cost rises from €139.80/kWh to €148.35/kWh — a 6.12% increase.
The mechanism is straightforward: cathode materials are the dominant cost driver in cell production, so a loss embedded in recycled nickel, cobalt and lithium propagates directly into the finished product’s price.
A second life is worth 64% more — just not to those who pay for it
This is the report’s most interesting finding. The team modelled the full life cycle of a 90 kWh bus pack in two scenarios: mobility only, and mobility followed by refurbishment and stationary deployment in energy trading.
The two-life pathway delivers 64% more lifetime discounted cash flow, or €51 per kWh — €11,824 per pack instead of €7,228.
The distribution, however, is painfully asymmetric:
- the energy trader gains €38.60 per kWh,
- the e-mobility operator gains €16.99 per kWh,
- the battery owner (typically the producer) loses €1.19 per kWh,
- the recycler loses €3.33 per kWh.
In other words, the two actors who would have to bear the extra costs of circularity capture none of the circular premium. By the model’s arithmetic the producer would need a surplus of at least €8.55 per kWh to absorb the more expensive recycled input — instead it ends up slightly negative. This is the report’s central claim: the obstacle is not technical but distributional and organisational.
What energy traders expect from second-life batteries
The researchers used a real storage project at a German utility as a benchmark and interviewed eight experts (four German and two French energy companies, plus a battery engineering firm).
Expectations are demanding. The first-life LFP system offers 10,000 cycles, 89.4% round-trip efficiency, full depth of discharge and a 20-year design life with predictable guarantees. A second-life pack offers roughly 5,000 cycles, 0.8 depth of discharge, 80–90% efficiency, and a 5–10 year life that is hard to predict.
Recurring interview themes: limited practical market experience; decisions driven by return on investment and bankability; no investment without long-term warranties and standardisation; safety concerns that add fire-protection costs; and entrenched risk aversion favouring established vendors even when the numbers point elsewhere.
The authors conclude that second-life batteries must demonstrate three things: better levelised cost, transparent state-of-health data, and long-term operational warranties.
Thirty-four per cent: how much cheaper recycling could be
The report does not stop at diagnosis. It quantifies three intervention packages:
- Pre-treatment near collection points — if disassembly and shredding happen 125 km away instead of 250 km, the dangerous-goods leg halves, and the onward shredded fraction no longer counts as dangerous goods. That drops the second transport leg from €208 to €15. Conservatively, 10% savings.
- Design for disassembly plus automation — the literature suggests 44–85% reductions; assuming a conservative 60%, disassembly falls from €482 to €193. 15%.
- Standardisation and digitalisation — a controlled waste-battery type, long-term logistics contracts and reliable data collection would cut the uncertainty penalty from €393 to €216. 9%.
Together that is a 34% cost reduction, €668 per pack. It would turn the €1.90/kg loss into a 13-cent surplus. Not much — but here the difference between minus and plus is qualitative, not quantitative.
The missing actor in the circular battery chain
If the value accrues to vehicle and storage operators while the costs sit with producers and recyclers, then nobody has a commercial reason to invest in exactly what would make the system work. HHL argues that ordinary market negotiation will not resolve this, because the problem runs deeper: the expertise, business focus and financial motivations of existing players are partly misaligned with what circular operation requires.
Their proposal is a new type of actor, provisionally called BassetCo (battery asset company). It does not manufacture batteries, operate vehicles, trade electricity or recycle. It buys the pack from the producer, carries it on its own books, and manages it through both life phases under a leasing arrangement — so residual value between first and second life accrues to it, and costs and revenues can be redistributed.
Its incentives then point the right way automatically: it wants cheaper packs, it creates competition between producers, it wants to track state-of-health and material provenance, and it looks for cost-efficient recyclers. Market precedents exist: Weineng Wuhan Battery Asset Co., founded by NIO and CATL in 2020, and the UK’s Zenobē, which combines fleet electrification with second-life storage.
As a supplementary revenue stream, the report also examines avoided-emissions carbon credits. Based on verified data from Luxembourg’s Circu Li-ion, refurbishing a 73 kWh pack would generate roughly three credits; at €25 per credit that is €75 per pack, or 23 cents per kilogram. Meaningful, but not enough to cover the loss on its own.
NMC or LFP: Europe’s strategic dilemma
The report also addresses whether Europe — having invested predominantly in NMC infrastructure — should pivot to the cheaper, safer LFP chemistry spreading worldwide.
The argument against LFP comes from circularity itself: because LFP contains no nickel or cobalt, revenue from recovered materials is 50–60% lower, while recycling costs do not fall materially. The authors compare the two waste streams to two mines with similar processing costs, one of which simply has a poorer ore grade. On that basis they argue cautiously for staying with an NMC-focused strategy.
What the report does not claim
The limitations deserve equal attention. These are interim results covering direct economics only, and different chapters work with packs of different capacity (73, 75 and 90 kWh) because they began as separate studies by different researchers. A large share of the inputs comes from secondary-source samples, so the uncertainty ranges reflect the spread of current knowledge rather than the precision of any one plant’s operations. The authors themselves say the results are most useful for identifying bottlenecks and formulating business-model hypotheses.
Several practical lessons still stand out. Geographic proximity is itself a major cost factor in battery waste handling — even small pre-treatment capacity near a collection point creates value by shortening the dangerous-goods leg. Pure-play recycling business models are not stable internationally either; diversified operators spanning several value-chain activities are the ones staying afloat. And the EU recycled-content requirement will make itself felt through prices from 2031, which both manufacturers and waste operators would do well to prepare for in good time.
Frequently Asked Questions About the Battery Circular Economy
Why does battery recycling lose money today?
Because the market value of recovered materials does not cover the cost of the process. In HHL’s model, the materials in a 73 kWh NMC811 pack are worth around €1,344 while total costs reach €1,967 — a loss of €1.90 per kilogram. The dominant items are not the chemical process itself but transport, disassembly and uncertainty about the input material.
How much more expensive is transporting lithium-ion batteries?
Drawing on nine studies, HHL found that lithium-ion batteries carry a transport surcharge averaging 16.3 times ordinary freight rates, because they are classified as dangerous goods. In the model, logistics absorbs 19% of total recycling costs. For recalled or damaged packs the surcharge can be higher still.
What does the EU Batteries Regulation require from 2031?
Regulation (EU) 2023/1542 sets mandatory minimum recycled content for new industrial, EV and SLI batteries from August 2031: 16% cobalt, 6% lithium, 6% nickel and 85% lead. The 20% figure used in the HHL report is a modelling assumption, not the legal threshold.
How much more is a battery worth with a second life?
The model shows that a 90 kWh bus pack following a two-life pathway — vehicle use, then stationary energy trading — generates 64% more lifetime value, or €51 per kWh. The gain accrues to the energy trader and the vehicle operator, however, not to the producer or the recycler.
How much cheaper could recycling become?
The report estimates a combined 34% cost reduction from three measures: pre-treatment close to collection points contributes 10%, design for disassembly with automation 15%, and standardisation with digitalisation 9%. Together these would turn the €1.90 per kilogram loss into a 13-cent surplus.
What is BassetCo?
It is the working name for a new type of market actor proposed by the HHL researchers. It does not manufacture, operate or recycle: it buys the battery pack, holds it as its own asset, and manages it across both life phases under a leasing model. Residual value then accrues to it, allowing costs and revenues to be distributed more fairly among participants.
Source: SAFELOOP D7.4 Interim Deliverable — Cost-performance assessment and circular business models, HHL Leipzig Graduate School of Management, May 2026. The project is supported by the European Union’s Horizon Europe programme (Grant Agreement No. 101147342). HHL press release, 27 August 2026.
