[SMM Analysis] South Korea Battery Giant Expands Recycling Business

On August 24, South Korean battery manufacturer SK On announced the signing of a memorandum of understanding (MOU) with domestic cathode material supplier Ecopro to establish a battery recycling ecosystem, along with a black mass supply contract.

I. Closed-Loop Supply Chain: The Circular Revolution from Black Mass to New Batteries

1. Core Partnership: SK On and Ecopro's Five-Year Agreement

· Black Mass Supply Mechanism: SK On's US subsidiary SK Battery America (SKBA) will supply approximately 200 mt of battery black mass (containing critical metals such as lithium, nickel, and cobalt) per month to South Korean cathode material producer Ecopro by 2029. Ecopro will process it into cathode material and return it to SKBA, forming a closed loop of "scrap → black mass → cathode material → new battery."

· Strategic Synergy: The two parties signed a 6,000 mt lithium hydroxide supply agreement just one month prior. Coupled with this recycling collaboration, SK On not only reduces reliance on Chinese lithium resources but also meets the localization requirements for subsidies under the US Inflation Reduction Act (IRA).

2. Circular Economy Model Upgrade

· Four-Step Closed Loop of "Production → Discharge → Recycling → Regeneration": By integrating battery manufacturing, scrap discharge, metal recovery, and material regeneration, SK On transforms spent batteries into "urban mines," lowering raw material extraction costs and environmental burdens.

· Geopolitical Risk Mitigation: The closed-loop model reduces dependence on imports of critical minerals like cobalt and nickel, particularly avoiding supply chain volatility risks from China while enhancing supply chain resilience.

II. Global Expansion: Dual Drivers of Policy and Market

1. Capacity Expansion and Order Backlog

· Capacity Target: Annual battery production capacity will reach 220 GWh (currently 85 GWh) by 2025 and exceed 500 GWh by 2030, supporting its backlog of 1,600 GWh (equivalent to demand for approximately 23 million electric vehicles).

· Recycling Market Outlook: The global lithium battery recycling market size is projected to grow from $2.3 billion in 2024 to $14.8 billion in 2034, with a 20% CAGR. SK On is simultaneously expanding recycling capacity to match front-end production demand.

Global lithium battery recycling capacity will reach 1.6 million mt by 2025, with the Asia-Pacific region, led by China, Japan, and South Korea, dominating. Experts predict the global lithium battery recycling market size will expand from $2.3 billion in 2024 to $14.8 billion in 2034, with a CAGR exceeding 20%.

SK On's aggressive expansion reflects an industry trend: battery competition has shifted from a capacity race to a "circular capability" contest. Giants like Panasonic and LG Energy Solution are also accelerating investments in recycling technology, while Chinese firms account for over 60% of global recycling capacity. In the future, companies combining large-scale manufacturing with closed-loop regeneration capabilities will dominate across policy, cost, and sustainability dimensions.