Category: Energy

By Natalie Grover

LONDON (Reuters) -Global oil benchmark Brent crude hovered above $94 a barrel on Monday, with investors focused on the prospect of a widening supply deficit in the fourth quarter after Saudi Arabia and Russia extended supply cuts.

Brent crude futures rose 52 cents to $94.45 a barrel by 1039 GMT while U.S. West Texas Intermediate crude futures were up 66 cents at $91.43.

Brent and WTI have climbed for three consecutive weeks to touch their highest since November and are on track for their biggest quarterly increases since Russia’s invasion of Ukraine in the first quarter of 2022.

“What’s striking is that this relentless oil price rally has taken place even amid concerns about lower demand from Europe and China as those economies grapple with a severe slowdown, which demonstrates just how tight the supply side of the equation has become,” said Marios Hadjikyriacos at broker XM.

China, considered the engine of oil demand growth, remains possibly the biggest risk because of its sluggish post-pandemic economic recovery.

However, a series of stimulus measures and a summer travel boom helped industrial output and consumer spending to rebound last month and Chinese refineries ramped up output, driven by strong export margins.

“Lack of protracted progress, nonetheless, will be viewed as a major setback on the demand side,” said Tamas Varga of oil broker PVM.

Eyes will also be on central banks this week, including an interest rate decision from the U.S. Federal Reserve and eagerly awaited economic data out of China.

There is growing consensus that peak interest rates are not far away as inflationary pressure, in general, has been successfully mitigated, PVM’s Varga said.

“Investors, however, remain puzzled over when central banks will start cutting them,” he said. “The high-for-longer mantra would ultimately have a negative impact on economic growth and would affect oil demand.”

Saudi Arabia and Russia this month extended supply cuts to the end of the year, but whether those cuts will extend into next year is uncertain.

“The question is, will the Saudis continue to maintain the deficit given the risk that higher prices must surely, at some point, stimulate US shale (oil output),” Investec analyst Callum Macpherson said.

(Reporting by Natalie Grover in London and Florence Tan and Sudarshan Varadhan in Singapore. Editing by David Goodman)

By Nichola Groom

(Reuters) – President Joe Biden’s goal to deploy 30,000 megawatts of offshore wind along U.S. coastlines this decade to fight climate change may be unattainable due to soaring costs and supply chain delays, according to forecasters and industry insiders.

The 2030 target, unveiled shortly after Biden took office, is central to Biden’s broader plan to decarbonize the U.S. economy by 2050. It is also crucial to targets of Northeast states hoping wind will help them move away from fossil fuel-fired electricity.

“It doesn’t mean that there can’t still be excellent progress towards this technology that’s going to do great things for our nation,” said Kris Ohleth, director of the Special Initiative on Offshore Wind, an independent organization that provides guidance and research to the industry.

“It’s just not going to be by that size by 2030. It’s pretty clear at this point.”

In recent months soaring materials costs, high interest rates and supply chain delays have led project developers including Orsted, Equinor, BP, Avangrid and Shell to cancel or seek to renegotiate power contracts for the first commercial-scale U.S. wind farms with operating start dates between 2025 and 2028.

Companies say they remain committed to the projects, which have a combined capacity of more than 6,000 megawatts. Yet delays have resulted from the need to strike new contracts and secure specialized equipment in demand all over the world.

“The U.S. will not reach the 30 GW by 2030 target,” Samantha Woodworth, North American wind analyst at Wood Mackenzie said in an email, citing “recent upheaval.” The energy research firm expects 21 GW of offshore wind along U.S. shores in 2030, breaking 30 GW by 2032.

Developers began raising doubts this summer.

“Thirty gigawatts is now unfortunately not something that the developers are really aspiring to,” Michael Brown, U.S. country manager for Ocean Winds, an offshore wind joint venture between France’s ENGIE and Portugal’s EDP Renovaveis, said at a Reuters Events conference in July. “We want to meet as high a gigawatt target as possible, but it’s not going to be possible to meet those 30 GW.”

Ocean Winds spokesperson Kelly Penot-Rousseau would not comment this week on Brown’s remarks. But in the two months since he spoke, the U.S. industry has suffered a string of additional blows.

Last month, an Ocean Winds-Shell project, SouthCoast Wind, agreed to pay $60 million to cancel contracts with Massachusetts utilities.

The same week, Orsted warned it could see impairments of $2.3 billion on three U.S. projects and the industry largely failed to show up for a Biden administration sale of offshore wind leases in the Gulf of Mexico. White House spokesperson Michael Kikukawa said the administration “is using every legally available tool to advance American offshore wind opportunities and achieve the goal of 30 GW by 2030.” He noted industry investments have increased by $7.7 billion since Biden last year signed the Inflation Reduction Act, containing tax credits for clean energy.

Still, offshore wind developers including Orsted have said the IRA’s subsidies are insufficient for projects to thrive in the current environment, and are lobbying the administration for additional concessions.

STATESIDE SETBACK

Installing 30 GW of offshore wind by 2030, enough to power 10 million American homes, was an aggressive goal that sparked confidence in the market that the U.S. was serious about offshore wind after years of lagging Europe and Asia.

The nation currently has just two pilot-scale offshore wind farms capable of producing 42 megawatts of electricity.

In a U.S. Department of Energy report in 2022, just one of two independent forecasts predicted the U.S. would have at least 30 GW of offshore wind by 2030. In this year’s report, published last month, 2030 forecasts by market research firms 4C Offshore and BloombergNEF were ratcheted down to 26.6 GW and 23.3 GW, respectively.

Those levels lag installation forecasts for nations like China and the United Kingdom over the next decade, according to the DOE report.

DOE spokesperson Samah Shaiq said the 2030 goal “is still within striking distance” and the speed of development would depend on regulatory efficiency, availability of vessels and port infrastructure, grid planning and new turbine technology.

The administration is working on initiatives to address those issues, Shaiq added.

Northeastern states such as Massachusetts, New Jersey and New York need wind power to meet ambitious targets. New York, for example, has a goal to power its grid with 70% renewable energy by 2030.

“The real reason that the Biden administration could set 2030 objectives for offshore wind is because of the U.S. northeastern states,” said Doreen Harris, president of the New York State Energy Research and Development Authority (NYSERDA), which is implementing the state’s offshore wind mandate of 9 GW by 2035.

NYSERDA warned the state’s utility regulator last month that delays in deploying offshore wind could threaten that target and asked the New York State Department of Public Service to approve price increases to contracts with Equinor, BP and Orsted.

Massachusetts Department of Energy Resources Commissioner Elizabeth Mahony said she was confident in the future of offshore wind. The state has a target of procuring 5.6 GW of offshore wind contracts by 2027, with 2.8 GW in operation by 2030, according to the Executive Office of Energy and Environmental Affairs.A spokesperson for the New Jersey Board of Public Utilities said the state was moving forward with solicitations to reach the state’s goal of 11 GW of offshore wind by 2040.

Stephanie McClellan, executive director of the offshore wind advocacy group Turn Forward, said making sure the first fleet of projects succeeds was more important than a particular timeline.

“That’s where the attention needs to be placed,” she said. “Not what’s going to happen in 2030.”

(Reporting by Nichola Groom; Editing by David Gregorio)

By Marianna Parraga

HOUSTON (Reuters) – A U.S. judge in Delaware on Tuesday will set the procedure for an upcoming auction of shares in a parent of Venezuela-owned oil refiner Citgo Petroleum to satisfy more than $20 billion in claims by creditors.

Dozens of companies and bondholders have flocked to U.S. courts to press claims from asset expropriations in Venezuela and debt defaults, hoping to take a slice of the South American country’s most important foreign asset. The judge has proposed to launch the auction on Oct. 23 after six years of legal battle. The whole process is expected to be completed in a year.

Judge Leonard Stark in July gave priority to miner Crystallex International to cash proceeds from the proposed auction, while granting oil producer ConocoPhillips a position “near the front of the line.”

The court reviewed more than 60 briefs with proposals of how to organize the creditors and bondholders.

Citgo Petroleum operates the seventh largest U.S. refining network, with three refineries, terminals, pipelines and other facilities valued between $10 billion and $13 billion. But creditors that have resorted to U.S. courts are claiming some $23 billion.

This is the priority order and the participation criteria established by Stark:

CRYSTALLEX IS FIRST

Because Crystallex introduced its claim in Delaware six years ago, becoming the first creditor with an arbitration award against Venezuela to resort to a U.S. court, and is the only creditor that has completed all steps to seize property owned by PDVSA for eventual sale, the court has given it priority.

In August 2018, Crystallex obtained an unconditional writ of attachment on its $1 billion outstanding claim, allowing it to pursue shares in Delaware-registered PDV Holding, one of the subsidiaries between Caracas-headquartered state oil company Petroleos de Venezuela and its Houston-based unit Citgo Petroleum.

Nine additional creditors collectively holding judgments of some $5 billion have tried to follow the same path, but have been prevented by U.S. sanctions on Venezuela. The court has given them conditional writs of attachment, while 11 other creditors seeking more than $14 billion have introduced motions to be recognized by the court as additional creditors.

AWARDS, WRITS IN HAND

Any additional creditors must have international arbitration awards linked to claims from asset expropriations, debt defaults or contract terminations in Venezuela.

Those awards must be filed at a U.S. court to receive judgments to enforce the claims. A creditor that obtains favorable final judgment holding a debtor liable for damages must then register it in Delaware or any other court where the debtor has property.

The creditor must then move for a writ of attachment. The date when the writ is requested will be used to set the priority order in the auction. The court will set a deadline for obtaining a writ before the auction. The writs are ultimately issued by the U.S. Marshals Service.

Besides Crystallex and ConocoPhillips, companies with writs of attachment in hand are Red Tree Investments, Siemens Energy, O-I European, Huntington Ingall Industries, ACL1 Investments, Rusoro Mining, two units of Koch Industries and Gold Reserve.

PAYMENT PRIORITY

Delaware law concerning the enforcement of money judgments generally requires that sale proceeds be distributed according to a “first in time, first in line” priority. In this case, the court is also taking into account the unique factors of the Venezuela case.

The court has so far determined that “Crystallex is first in line.” It also said the priority of any additional judgments will be based on the date on which a creditor moved for a writ of attachment, if ultimately granted.

For Conoco, the court gave the firm a position “near the front of the line” because it has participated in the litigation for years, provided valuable input and paid one third of transaction expenses. Conoco filed in 2019 for a writ of attachment, which was granted last year.

(Reporting by Marianna Parraga; Editing by Daniel Wallis and Leslie Adler)

By Emily Chow and Lewis Jackson

SINGAPORE/SYDNEY (Reuters) – Workers at Chevron’s liquefied natural gas (LNG) projects in Australia, which produce 5.1% of the world’s supply of the super-chilled fuel, went on strike on Friday after mediation talks ended without a deal.

WHAT’S NEXT?

Unions kicked off action with short work stoppages and bans on certain tasks, but plan to escalate to a total strike within two weeks if there is no deal.

Until next Wednesday, workers will stop work for up to 11 hours in several blocks per day and refuse to perform certain tasks, including working overtime. If there is still no deal by then, the unions will completely stop work for two weeks.

A week of negotiations run by a federal mediator ended on Friday without agreement, and no further talks are planned for now.

A union representative who declined to be named told Reuters on Friday the union remained available for talks but added: “we’ll be digging in for extensive [protected industrial] action.”

Chevron has said it would continue to take steps to maintain operations if any disruptions occur, without giving details.

WHAT WILL BE THE IMPACT ON PRICE AND OUTPUT?

Australia was the world’s largest LNG exporter last year, shipping out 80.9 million metric tons of the fuel in 2022 versus 79 million tons in 2021, according to the International Gas Union.

The bulk of LNG exports from Chevron’s Gorgon and Wheatstone facilities head to Japan, followed by South Korea, China and Taiwan.

“We expect an unscheduled outage will likely deliver some short-term spot price volatility, given we believe the global LNG market remains finely balanced,” said National Australia Bank (NAB) analyst Baden Moore.

“Duration of the outage will be critical.”

Based on preliminary calculations by data intelligence firm ICIS, the work stoppages through to Sept. 14 would see limited impact, with around 95,000 tons or one-and-a half cargoes worth of LNG output removed from the market.

    Escalations into a full-scale strike would see a wider-ranging impact on output.

HOW LONG WILL INDUSTRIAL ACTION LAST?

Several industry experts have downplayed the risk of a prolonged strike, pointing to short delays this week by the union in starting action, as well as the recent resolution of a similar impasse with LNG workers at Woodside Energy Group, as positive signs.

NAB’s Moore said that Woodside’s negotiations with the unions are likely to provide a useful benchmark to finalise terms for Chevron.

WHAT’S AT STAKE FOR LNG MARKETS?

A prolonged strike could disrupt exports and raise prices of LNG, which is used for electricity generation.

European gas prices have been volatile in recent weeks over the labor unrest in Australia and spiked as much as 14% after Friday’s news.

Volatility in global gas prices despite relatively high inventories across Asia and Europe underscores market sensitivity to potential disruptions, which has increased for most commodities after Russia’s invasion of Ukraine last year led to a spike in prices.

WHAT’S THE DISAGREEMENT?

The two sides are at odds over issues including pay, job security, rosters and rules around overtime and transfers between Chevron facilities.

The failure to reach a deal contrasts with Woodside, which averted strikes at its nearby Northwest Shelf LNG facility last month in a deal with the same unions. The agreement included higher salaries for workers, and made it harder for the company to hire contractors or change rosters.

The same union alliance also secured agreements last year with Shell and Inpex at their LNG facilities in Western Australia. The deal with Shell was preceded by prolonged strikes that ultimately cost the company about $1 billion in lost exports from its Prelude floating LNG site.

Chevron said the unions had demanded terms “above and beyond” others in the industry. The unions said pay demands were in line with agreements struck at Shell, Inpex and Woodside.

The union alliance has previously said it locked in base annual pay between A$265,000 and A$365,000 in its deal with Woodside.

(Reporting by Emily Chow, Lewis Jackson and Florence Tan; Editing by Tony Munroe and Miral Fahmy)

By Rachel More and Tom Käckenhoff

BERLIN (Reuters) – Thyssenkrupp Nucera laid out growth plans on Monday after reporting strong sales and operating income, as the company works to meet growing demand for the green hydrogen hailed as key to decarbonising the German economy.

“Another strong global workforce expansion is planned and necessary to achieve our growth targets,” Chief Executive Werner Ponikwar told reporters after presenting quarterly results.

The company, which Thyssenkrupp majority-owns after taking it public in a blockbuster market debut in July, also wants to expand production with new locations, including in India.

While in its infancy, so-called green hydrogen, which is produced using renewable energy, has been identified as a key energy source in the push towards a lower-carbon economy in Germany and other European Union countries.

Reporting its first financial results since going public, Nucera said earnings before interest and taxes (EBIT) rose 59% year-on-year to 7 million euros ($7.56 million) in the third quarter of its 2022/23 financial year.

Sales almost doubled to 187.5 million euros, driven mainly by its alkaline water electrolysis, where investors see potential for the business to scale up quickly.

Shares in Nucera rose by as much as 5% following the release of the results, before settling at around 4.2% higher by late morning.

The company confirmed its mid- and long-term targets, but warned that necessary spending on its growth strategy would weigh on its EBIT margin, which came in at 3.7% in the third quarter, down from 4.4% a year prior.

The company expects its EBIT margin to turn negative in the next quarter, but finance chief Arno Pfannschmidt said he still expected a positive result this financial year.

Nucera plans to forego a dividend for the foreseeable future, as outlined in its stock market prospectus.

“We want to invest all the funds we have available here in growth,” Pfannschmidt said.

($1 = 0.9258 euros)

(Writing by Rachel More; Editing by Alison Williams, Kirsti Knolle and Mike Harrison)

By Casey Hall and Albee Zhang

BEIJING (Reuters) -Chinese consumers stayed away from sea food stalls and rushed to stock up on salt following Beijing’s condemnation of Japan’s release on Thursday of treated radioactive water into the Pacific Ocean from the wrecked Fukushima nuclear plant.

During the past few weeks, China’s state media and government officials repeatedly criticized the plan, saying the Japanese government had not proved that the water discharged would be safe, emphasizing its danger to neighboring countries.

Hours after Japan went ahead with the release, China issued a blanket ban on all aquatic products from Japan.

At the Jiangyang Seafood Market in Shanghai’s Baoshan District, two vendors said that the market’s management toured stalls on Thursday afternoon and requested the removal of Japanese products.

Though Japanese seafood was no longer on sale, some vendors voiced concerns that customers would be put off all seafood, regardless of origin.

“I think it will influence people eating seafood a little, even if it’s not from Japan, there’s nothing we can do about that,” said a vendor surnamed Wang, who declined to give his first name for privacy reasons.

Prior to Thursday’s action by Japan “we had a lot of people coming here every day,” said Chen Yongyao, an employee at a frozen seafood store in Jiangyang.

Now, he said “it’s not busy at all, no one is buying.”

The scare has also impacted demand for salt.

The state-run National Salt Industry Group, the world’s biggest common salt maker, urged people not to panic buy in a statement issued late of Thursday, reassuring consumers that it was ramping up production and the shortfall would be temporary.

Supermarket shelves were emptied of salt and online sales platforms were sold out in some places, including Beijing and Shanghai, as people rushed to stock up.

According to an data published by Chinese media outlet Jiemian, 6.73 million orders for salt were placed on the e-commerce platform JD.com since Aug.22.

Salt was also a hot commodity in China in 2011 following the initial Fukushima nuclear disaster. Aside from the concerns about the potential contamination of sea salt, there is also widespread belief in China that iodized salt can help protect against radiation poisoning.

Shanghai shopper Wang Kaiyun, 56, said she knew many people who believed salt protects against radiation poisoning, but she was in the supermarket to stock up before it ran out.

“I saw all of the videos online showing no salt in the supermarkets,” she said. “I thought I should buy it now in case I need salt for cooking in the near future.”

Japan has criticized China for spreading “scientifically unfounded claims” and maintains the water release is safe, noting that the International Atomic Energy Agency (IAEA) has also concluded that the impact it would have on people and the environment was “negligible.”

(Reporting by Casey Hall, Xihao Jiang, Albee Zhang and Brenda Goh; Editing by Simon Cameron-Moore)

(Reuters) -U.S. natural gas producer Chesapeake Energy said on Monday it would sell its remaining Eagle Ford assets to SilverBow Resources for $700 million, completing its exit from the south Texas basin.

The company’s asset sales in the basin has generated total proceeds of more than $3.5 billion, including Monday’s deal.

Chesapeake said last year it viewed the Eagle Ford acreage as no longer core to its strategy and would focus on the gas-rich Marcellus and Haynesville shale formations.

It had sold parts of its operations in Eagle Ford to WildFire Energy for $1.43 billion in January and some positions to chemical maker INEOS for $1.4 billion the following month.

The Oklahoma City-based energy producer also faced pressure from activist investment firm Kimmeridge Energy Management, which has urged a shift toward solely natural gas production.

Chesapeake has agreed to offload about 42,000 net acres and about 540 wells of its Eagle Ford asset located in Dimmit and Webb counties, along with related property, plant and equipment.

Average net daily production from these properties was about 29,000 barrels of oil equivalent (boe) during the second quarter.

SilverBow said the deal, expected to close by the end of this year, would make it the largest public pure-play Eagle Ford operator and would immediately add to key financial and operating metrics.

The deal consists of a $650 million upfront cash payment due at closing and an additional $50 million deferred cash payment 12 months after close.

Chesapeake is also eligible to receive up to $50 million in additional contingent cash based on future commodity prices.

(Reporting by Arunima Kumar in Bengaluru; Editing by Sriraj Kalluvila)

By Natalie Grover and Alex Lawler

LONDON (Reuters) -OPEC+ supply cuts could erode oil inventories in the rest of this year, potentially driving prices even higher, before economic headwinds limit global demand growth in 2024, the International Energy Agency (IEA) said on Friday.

Tighter supply driven by oil output cuts from OPEC and its allies, together known as OPEC+, and rising global demand have underpinned a rally in oil prices, with Brent crude hitting highs of over $88 a barrel on Thursday, the highest since January.

The IEA said if OPEC+ current targets are maintained, oil inventories could draw by 2.2 million barrels per day (bpd) in the third quarter and 1.2 million bpd in the fourth, “with a risk of driving prices still higher”.

“Deepening OPEC+ supply cuts have collided with improved macroeconomic sentiment and all-time high world oil demand,” the Paris-based energy watchdog said in its monthly oil market report.

The Organization of the Petroleum Exporting Countries (OPEC) and its allies began limiting supplies in late 2022 to bolster the market and in June extended supply curbs into 2024.

The IEA said that in July, global oil supply plunged by 910,000 bpd in part due to a sharp reduction in Saudi output. But Russian oil exports held steady at around 7.3 million bpd in July, the IEA said.

Next year, demand growth is forecast to slow sharply to 1 million bpd, the IEA said, citing lackluster macroeconomic conditions, a post-pandemic recovery running out of steam and the burgeoning use of electric vehicles.

“With the post-pandemic rebound largely completed and as multiple headwinds challenge the OECD’s outlook, oil consumption gains slow markedly,” the IEA said, referring to Organization for Economic Co-operation and Development nations.

The IEA’s demand growth forecast is down by 150,000 bpd from last month and contrasts with that of OPEC, which on Thursday maintained its forecast that oil demand will rise by a much stronger 2.25 million bpd in 2024.

“The global economic outlook remains challenging in the face of soaring interest rates and tighter bank credit, squeezing businesses that are already having to cope with sluggish manufacturing and trade,” the IEA said.

For 2023, the IEA and OPEC are less far apart.

The IEA expects demand to expand by 2.2 million bpd in 2023, buoyed by summer air travel, increased oil use in power generation and surging Chinese petrochemical activity. OPEC sees a rise of 2.44 million bpd.

Demand is forecast to average 102.2 million bpd this year, the IEA said, with China accounting for more than 70% of growth, despite concerns about the economic health of the world’s top oil importer.

(Reporting by Natalie Grover and Alex Lawler in London; editing by Alex Lawler, Jason Neely and David Evans)

By Alex Lawler

LONDON (Reuters) -Oil hit new peaks on Wednesday with Brent crude touching the highest since April as tighter supply owing to Saudi and Russian output cuts offset concerns over slow demand from China and a report showing rising U.S. crude inventories.

Top exporter Saudi Arabia last week extended its voluntary production cut of 1 million barrels per day for another month to include September, and Russia said it would cut oil exports by 300,000 bpd in September.

“The latest recovery is mainly driven by the pledge of major producers, like Saudi Arabia and Russia, to keep supply subdued for another month,” said Charalampos Pissouros, senior investment analyst at broker XM.

Brent crude was 54 cents, or 0.6%, higher at $86.71 by 1110 GMT having touched $87.09, the highest since April 13. U.S. West Texas Intermediate (WTI) crude gained 51 cents, or 0.6%, to $83.43. The U.S. benchmark touched $83.91, the highest since November 2022.

Crude posted its sixth consecutive weekly gain last week helped by a reduction in OPEC+ supplies and hopes of stimulus boosting oil demand recovery in China.

“There is no doubt that there is plenty of momentum here,” said Naeem Aslam, chief investment officer at Avatrade. “The clear trend seems to be skewed to the upside.”

On Tuesday, Saudi Arabia’s cabinet said that it reaffirms its support for precautionary measures by the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, to stabilise the market, state media reported.

Some bearish pressure came from American Petroleum Institute (API) figures on Tuesday, which according to market sources showed U.S. crude stocks rose by 4.1 million barrels last week, although gasoline and distillate inventories fell.

Official U.S. Energy Information Administration inventory figures are out at 1430 GMT.

On Tuesday, oil also came under pressure from Chinese data showing crude oil imports in July fell 18.8% from the previous month to their lowest daily rate since January, although they were up 17% from a year earlier.

(Additional reporting by Yuka Obayashi in Tokyo and Andrew Hayley in Beijing; editing by Bernadette Baum, Kirsten Donovan)

By Nick Carey, Paul Lienert and Victoria Waldersee

POOLE, England (Reuters) – A little-publicized clause in the U.S. Inflation Reduction Act has companies scrambling to recycle electric vehicle batteries in North America, putting the region at the forefront of a global race to undermine China’s dominance of the field.

The IRA includes a clause that automatically qualifies EV battery materials recycled in the U.S. as American-made for subsidies, regardless of their origin. That is important because it qualifies automakers using U.S.-recycled battery materials for EV production incentives.

Reuters interviewed more than a dozen industry officials and experts who say that is kicking off a U.S. factory building boom, encouraging automakers to research more recyclable batteries, and could eventually make it harder for buyers in developing countries to buy old used EVs.

China handles virtually all EV battery recycling in a global market projected to grow from $11 billion in 2022 to $18 billion by 2028, according to research firm EMR. As more EVs are introduced and age out of the vehicle fleet, that business will grow.

The minerals in those batteries – primarily lithium, cobalt and nickel – are worth on average between 1,000 euros ($1,123) to 2,000 euros per car, BMW sustainability chief Thomas Becker told Reuters.

Those materials could be in short supply within a few years as automakers boost EV production, but “can be recycled infinity times and not lose their power,” said Louie Diaz, vice president at Canadian battery recycling firm Li-Cycle, which received a $375 million U.S government loan for a New York plant slated to open later this year. That funding helped bring forward the investment decision for the plant, Diaz said.

JB Straubel, CEO of Redwood Materials, which was awarded a $2 billion U.S. government loan in February to build out a battery material recycling and remanufacturing complex in Nevada, said the IRA treats recycled battery materials as locally “urban mined,” or materials recovered from scrap rather than obtained from mining.

That has encouraged U.S. companies to move faster on recycling efforts than their counterparts in the European Union, which has focused instead on mandates, including minimum amounts of recycled materials in future EV batteries.

Recycling firms Ascend Elements, Li-Cycle and others are planning European plants in the next few years, but access to funding and the made-in-America incentive means several U.S. plants are already being built.

“What it (the IRA) does is change the demand equation for battery materials,” said Mike O’Kronley, CEO of Ascend Elements, which already has one recycling plant open in Georgia and has received nearly $500 million in Energy Department grants under the infrastructure law for a plant in Kentucky slated to open in late 2023. “We need to keep those valuable materials… so we can put them right back into EVs.”

The race is on to build “closed-loop supply chains” where recycled minerals are put into locally produced new batteries, said Christian Marston, chief technology officer at Altilium Metals, which is building a plant in Bulgaria and plans one in the UK by 2026.

“Everybody wants to control their own supply chain and nobody wants to be reliant on the Chinese,” he said.

However, China still leads the race, announcing tougher standards and increased research support for recyclers last month. After passage last year of the U.S. Inflation Reduction Act, Chinese officials described the legislation as “anti-globalization” and accused the U.S. of “unilateral bullying.”

RAPID GROWTH

Globally, there are at least 80 companies involved in EV recycling, with more than 50 startups attracting at least $2.7 billion, virtally all in the last six years, from corporate investors including automakers, battery makers and mining giants like Glencore, according to PitchBook.com data.

The volume of EV batteries available for recycling should grow over tenfold by 2030, said consultant Circular Energy Storage. Around 11.3 Gigawatt hours (GWh) of batteries reached end of life in 2022, and that should rise to 138 GWh by 2030 – equivalent to roughly 1.5 million EVs – CES said.

Electric vehicle batteries can last for 10 years or more.

Some industry officials anticipate rapid growth means 40% of battery materials used in new EVs could come from recycled stocks by 2040.

There is little existing U.S. recycling capacity today, and virtually none in Europe.

At a facility in Poole in southern England, car breaker Charles Trent Ltd has built two lines where workers deconstruct wrecked or old vehicles to recycle everything. It has built special containers for EV batteries, which are sold for research or used by retrofitters electrifying fossil-fuel cars, partly because there is nowhere to recycle them.

In Europe, EV batteries are currently shredded into “black mass” that is shipped to China for recycling.

‘LOSE NOTHING’

The race is on to squeeze the best price out of that black mass.

“The one who gets the highest yield at the lowest cost … will win this game,” said Bruno Thompson, CEO of Cambridge, England-based startup The Battery Recycling Company, which plans its first plant in 2024.

Dallas, Texas-based Ecobat, which shreds batteries in Europe and the U.S. for recycling elsewhere, has improved its recovery process so around 70% of battery-cell lithium is available for recycling, said chief commercial officer Thea Soule.

Eventually, Soule said, yields should reach levels close to 90% to 100%.

Getting better yields matters because the EU will mandate minimum amounts of recycled lithium, cobalt and nickel in EV batteries within eight years. The EU will also impose tough conditions on recycling outside Europe.

Those conditions will effectively keep recycling local, said Kurt Vandeputte, senior vice president at Belgian materials firm Umicore.

There are also industry concerns about finding old EVs for recycling. Today, anywhere up to 30% of Europe’s old fossil-fuel cars disappear overseas – to new owners in developing countries or for scrap. Some automakers are trying to figure out how to keep tabs on those EVs.

Nissan has turned to leasing EVs in Japan to maintain control of batteries, while Chinese EV maker Nio leases batteries to customers to retain ownership.

Keeping those minerals in Europe would cut off a cheaper source of transportation for developing countries.

BMW’s sustainability chief Becker said the value of battery materials will hopefully make recycling more attractive than selling vehicles abroad, but Europe must focus on ensuring those EV batteries do not slip away.

“We’ve got to make sure we lose nothing,” Becker said.

($1 = 0.8902 euros)

(Reporting By Nick Carey in Poole, England, Paul Lienert in Detroit and Victoria Waldersee in Berlin, editing by Ben Klayman and Claudia Parsons)