Is this the new frontier for ASX lithium shares?

It’s expected recycling of components used in batteries and electric vehicles will help keep EV production sustainable, according to the plans of overseas manufacturers.

Recycling is expected to ramp up once the production of new battery technologies reaches a critical mass, allowing enough components to be reused.

This could mean ASX lithium shares like Pilbara Minerals Ltd (ASX: PLS) and Argosy Minerals Limited (ASX: AGY) — and others with significant production volumes — may enjoy additional tailwinds as recycled materials keep production lines churning.

Some lithium shares, such as the world’s largest lithium producer Albermarle Corporation (NYSE: ALB), based in the US, are already planning to recycle components on Australian soil.

Recycling boom for lithium shares

Albemarle is planning a purpose-built 25,000-tonne production train exclusively for recycling materials from used batteries at its Kemerton lithium plant in Western Australia, as reported by the Australian Financial Review.

Recycling will also allow lithium shares like Albemarle to keep up with soaring demand. Albemarle CEO Kent Masters said the company cannot deliver products fast enough to keep up with its order book:

Every conversation I have with either battery or OEM [original equipment manufacturer] customers, they’re always asking, ‘when can I have more, and where can I get it? And they’re pounding the table around that, and we’re trying to respond to that.

Glencore PLC, a multinational commodities behemoth, has also invested heavily in the future recycling of lithium-ion batteries. The company has invested $US 200 million in Li-Cycle Holdings, a lithium-ion recycler. It’s made a joint venture agreement with Britishvolt to build a battery recycling plant in England, BusinessDay reported.

Recycling might not only fit with the green ethos of reducing emissions but could also become a necessity. Albermarle believes we’re just starting to see the wave of demand for lithium and EVs slowly build before the crest hits the market later this decade, as reported by The Australian.

Zero-carbon lithium creates further scarcity

Albermarle believes that lithium carbonate prices are expected to remain high with companies competing for limited supply. Adding to the scarcity is that governments may be likely to favour, or even impose, zero-carbon lithium extraction processes in a bid to reach emissions targets.

This, in turn, may increase the valuations of some ASX lithium shares such as Vulcan Energy Resources Ltd (ASX: VUL). The company is aiming to use environmentally-friendly geothermal extraction methods to produce lithium. It could see Vulcan’s product trading at a ‘green premium’ in the future.

The post Is this the new frontier for ASX lithium shares? appeared first on The Motley Fool Australia.

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Motley Fool contributor Matthew Farley has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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