Li-Cycle bankruptcy strikes another blow to Canada's EV value chain

What happened: Li-Cycle filed for bankruptcy after failing to secure the capital needed to keep its battery recycling business going.

The company needed to raise $262.7 million to unlock the next advance from its $475 million loan from the US Dept of Energy. 

The tech: Li-Cycle’s model processed end-of-life lithium-ion batteries at regional “spoke” plants, where they were shredded into black mass, a mix of various materials. 

The black mass was then refined into battery-grade lithium, nickel and cobalt at central Hubs like its planned Rochester plant, where it could then re-enter the supply chain. 

Challenges: Li-Cycle was a Canadian anchor in the emerging battery ecosystem, with plants in North America, Asia, and Europe, but ran into a number of challenges over the past two years:

• Costs to build their Hub processing plant in Rochester, NY increased rapidly and significantly, leading to stalled construction and lawsuits from contractors

• Spoke plants couldn’t turn a profit due to feedstock prices and lower prices for commodities like nickel and cobalt

Why it matters: Li-Cycle’s collapse could shake investor confidence in the EV space just as Canada is moving to build out domestic capacity. And Li-Cycle isn’t the only one struggling in the EV value chain:

• Northvolt went bankrupt, leaving the future of its Quebec plant up in the air

• Lion Electric also filed for bankruptcy (but will return with a new ownership group and narrower focus on electric buses)

• Honda is pausing a massive $15B EV project in Ontario, following cancellations and pauses from Ford, Umicore and E-One Moli

Add in new US tariffs, shifting government policy, competition from Chinese car makers, and uncertain consumer demand, and it’s a pivotal period for the EV sector. 

Yes, but: Momentum hasn’t stalled everywhere and some players are adapting and advancing:

• Cyclic Materials recently raised an oversubscribed Series B to expand rare earth recycling

• Volkswagen-backed PowerCo is pushing ahead with its $7B Ontario gigafactory

• Winnipeg’s NFI Group continues to grow electric bus production

• Neo Battery Materials and others are building out battery material refineries and production plants in Ontario

The bottom line: Building out this new industry will require time - and some failures along the way. But with EV sales climbing ~20% annually and the IEA forecasting those numbers to start suppressing oil demand, the long-term trend is intact.

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