The global battery supply chain is being upended by a cascade of unpredictable events stemming from geopolitical upheaval. Batteries International discussed the subject with lead market veteran, Farid Ahmed.

The law of unexpected consequences reshapes global battery scrap flows

Edward Lorenz, a pioneer of chaos theory, often said, “A butterfly flapping its wings in Brazil can trigger a tornado in Texas.” Essentially, minor changes in a complex system can result in significant and unpredictable outcomes over time.

Welcome to the volatile and disrupted global market of secondary lead.

Farid Ahmed, CTO and CCO of Zero Carbon Technologies, explains a market where one disruption sparks another, creating ripple effects across continents. Literally from the US-Iran conflict to LME warehouses in Singapore, and then impacting the financials of US battery firms.

The Middle East conflict affects more than just oil, gas, and petrochemical supplies. “The immediate impact of closing the Strait of Hormuz was to block a key supply route for scrap batteries to India, a country constantly in need of scrap batteries for recycling to meet its lead demand,” says Ahmed.

“Before the disruption, India was extracting a vast amount of scrap batteries from Africa and the Middle East, much of it shipped through ports like Dubai. That supply chain has now been severed.”

With its usual sources cut off, India’s demand for scrap batteries has led to unusual new trade routes. “For instance, there has been a steady export of large refined lead stocks from LME warehouses in Singapore,” Ahmed notes.

However, the most notable change is India turning to North America. “To meet their scrap battery needs, Indian recyclers have been sourcing scrap from North America, especially the US,” he explains.

This poses a problem since exporting hazardous waste from an OECD country to a non-OECD country is prohibited.

Nonetheless, exceptions seem to have been granted, and the effects on the American market have been swift. “This has driven up scrap prices in the US, making it tougher for US recyclers who depend on competitive scrap prices,” Ahmed says.

US recyclers are already facing challenges because “demand is relatively weak as domestic battery manufacturers aren’t seeing the volumes they once did.”

This is due to a surge of imports. “Despite tariffs, they have been undercut by imports of white-label batteries,” he says.

Competition

“These are produced in countries like India, Vietnam, or Cambodia and can be priced very competitively. Some US battery makers even import small-run battery models to white-label them as their own, a practice that has become quite common recently.”

The outcome is a market flooded with inexpensive, often unbranded, replacement batteries. “This is hurting US smelters and battery manufacturers, impacting their profitability,” Ahmed says. “It is reducing demand for domestically made US batteries due to these low-cost imports.”

Ahmed, who has over 30 years of experience in the metals and battery sectors, recalls a similar trend during the pandemic. “During Covid, there was a rising demand for batteries,” he recalls. “And there was a huge need in the US for lead to produce those batteries.”

To fulfill that demand, he says, “US companies sourced a lot of low-quality lead from warehouses in Europe, where it had been sitting unused for years. Traders moved these stockpiles in bulk to the US after re-refining at European smelters. A significant amount of lead was also sourced from China for similar reasons.”

Looking ahead, Ahmed says the market could take various directions. “The US market will face difficulties unless something major changes,” he warns. “Lead prices aren’t expected to rise dramatically, so that’s not a concern. The key factors will be how scrap prices respond and how demand evolves.”

Ahmed highlights a geographic shift in refined lead demand. “Demand in China is weak, so they don’t require much refined lead. However, the rest of Southeast Asia, which manufactures many China-branded batteries in countries like Cambodia and Vietnam, is short on lead,” he explains.

This implies that “Australian lead production might be directed more towards Southeast Asia rather than the US, as shipping to the US is much farther.”

Since the US partly depends on Australian lead imports, US battery manufacturers will struggle to secure enough lead for production, and US recyclers will face challenges obtaining sufficient feedstock to compensate for this deficit.