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Nippon Recycle Center: Navigating the complex world of battery recycling

Interview - January 25, 2024

In this insightful interview with the CEO of Nippon Recycle Center, we explore the company's history, recycling methods, global partnerships, and the challenges and opportunities in the evolving battery recycling industry. The conversation sheds light on the complexities of recycling various battery types, including nickel-cadmium and lithium-ion, and highlights the company's dedication to environmental sustainability and contributing to a cleaner future.

KOICHI MASUDA, PRESIDENT OF NIPPON RECYCLING CENTER CO., LTD.
KOICHI MASUDA | PRESIDENT OF NIPPON RECYCLING CENTER CO., LTD.

If we could start by having a quick introduction to Nippon Recycle Center. What is your company’s core business, what are your key advantages, and what milestones do you believe have been crucial to the development of your company?

Our company actually operates under two names; Nippon Recycle Center Corporation and Fuyo Kinzoku. Both companies are related to the recycling of metal materials. Basically, the relationship is that Nippon Recycle Center is a total affiliate of Fuyo Kinzoku, meaning that Nippon Recycle Center is 100% owned by Fuyo Kinzoku. I am actually the CEO of both companies and Fuyo Kinzoku was founded by my grandfather. The second president, my father, was actually the founder of Nippon Recycle Center.

Fuyo Kinzoku is the oldest of the two companies, founded by my grandfather back in 1934, during the pre-WWII period. Our company started with a business relating to the recycling of rare metals and dealing with scrap because Japan, as you might know, has a scarcity of natural resources. Fuyo Kinzoku recycled rare metals obtained from scrap from various specialized companies (rare metal users such as iron works). Since our establishment, we have accumulated knowledge on the recycling of rare metals such as nickel, and it has continued to be a strong point for our companies.

Around 50 years ago nickel cadmium battery was introduced to Japan through the form of batteries, so we believed that our company became quite handy at the time. Those were good batteries, and even to this day they are used in various industries, however, the big downside is that recycling and disposing of these types of batteries tends to be very complex since they contain several different toxic materials including cadmium itself, a rare material that is not exactly environmentally friendly. You cannot throw these batteries away, so for that sake, there was a necessity for firms like ours. Manufacturing firms came to us because of the complexity of recycling and disposing of these types of batteries.

The whole industry reached a point where they were all questioning how to dissolve the hazardous materials from these nickel-cadmium batteries, and honestly, this idea has always been on the minds of recycling companies, back in the day my father was the one who introduced the technology that allows recycling firms to recycle these batteries. This technology remains to this day and is core for our business of removing rare metals and hazardous materials. After this what is left is just stainless steel or iron which can be reused and resold at a high price. Those rare metals that are separated can also be resold.

 

The utilization of rechargeable batteries has skyrocketed over the past 10 years and in fact, it is expected to continue to grow more than 10% year-on-year. Batteries are utilized across industries, in vehicles, electronics, home appliances, and many others. There are two big challenges however with the utilization of these batteries. Firstly, these devices rely on rare metals, and as such we are seeing a lot of supply chain bottlenecks with manufacturers unable to obtain the rare metals necessary. Secondly, there is the problem of battery circulation, with the recycling of these batteries being extremely difficult, and the disposal equally as complicated due to the toxicity of the chemical compositions. From your perspective what do you think should be the solution? What solutions can the industry design in order to solve these two very big challenges in both the supply and life cycle of these products?

We are living in a society right now that is ever-evolving with new methods and new technologies constantly springing up. Even with batteries, there are changes to the industry on an almost daily basis. Back in the day, the most applicable type of battery was the nickel-cadmium one that I mentioned, but these days lithium-ion is clearly the most prevalent. These lithium-ion batteries are bringing a new type of battery and a new type of energy to everyone across the world. This is seen all around us, including in EVs, but with this comes a new level of complexity with the battery structure itself. The recycling of these batteries is a must, and that is because no matter the energy source, it is inevitable there needs to be recycling solutions in order to ensure that the environment is protected. Those batteries will contain rare metals and the scarcity of these rare metals is a problem many companies are facing right now.

With an increase in applications for batteries comes an increase in demand for new batteries, and as long as the volume continues to increase so will the need for more efficient ways of recycling. We believe we have a bright future and we understand that recycling as an industry will be needed in the future.

Two aspects need to be addressed in this discussion, the first of which is carbon emission reduction. The more batteries being used, the more hazardous materials that could be released into the environment. Recycling companies like ours will be the ones that will solve these problems, allowing people to reduce their carbon footprint. Another point is economic viability because at the end of the day, businesses are businesses and there is a need to make money. Everything that we are dealing with has an end goal of profitability, and it will make sense for companies to embed themselves into recycling processes.

CO2 emissions are monitored quite strictly by world governments, and those governments have targets to reach in terms of CO2 emission reductions. When we talk about recycling itself there are some slight disparities between what the government is aiming for and the actual figures that realistically can be achieved.

 

During past interviews, we’ve heard criticism of the lack of uniform regulation between local governments and manufacturers on how to properly dispose of batteries. Obviously, these interviews have been conducted with Japanese firms, but you can extrapolate this to the US, China, and even Europe to some extent. From your point of view, what do you think are the main steps that should be taken in order to create a better regulatory environment for the lifecycle of batteries?

I do share the same values as those interviewed by you in the past and I’ve actually prepared some answers for you ahead of time. I think the biggest issue relates to the outdated laws that are still in place to this day. The laws of Japan are not actually up to the scale of actual industry tendencies. This isn’t just a Japanese problem either, and I believe this can be found all across the world. The initiatives of governments on how to dispose of hazardous materials are aimed at reducing the overall amount of garbage being thrown away, but these initiatives were made a long time ago and have yet to be updated.

Japan has unique waste management when compared to the globe, and the definition of what exactly constitutes waste is huge. There are a lot of different waste management definitions, and it can become very confusing over who is buying the waste, who is recycling it, and who is reselling it. Essentially what we are seeing is waste becoming a commodity, and this kind of business dealings is quite unique to Japan. Only companies that have special permission from the government can take care of waste management, and there is a lot of red tape to get through in order to pass through all the stages of waste management. Every single stage needs a permit, and it is a really long process with no guarantees you will be granted permission. I think that this whole legislative process is acting as a bottleneck to the recycling industry.

It then becomes a balancing act, juggling how to extract profits from that process versus investing in new certifications or permissions. Additionally, with waste acting as a commodity these days the prices can fluctuate, meaning you need to pick and choose carefully the day in which purchases are made. It's just like the stock market, and we need to be speedy with our recycling processes in order to generate the most profit. The actual recycling costs themselves are fixed because at this point, we know how much it is going to cost us, but the metals themselves can contribute to profit or loss. You add this process to the legislative issues, and you have a very complex process overall not only on the legislative side, but also on the finance side too.

It gets even more problematic when you talk about national government versus local governments. Finding a region inside Japan that will allow us to operate a furnace for the recycling of lithium-ion batteries is very hard to come by. Local governments are concerned that this will have a negative impact on the local environment, so gaining permission to do so is a real challenge. The need to recycle these lithium-ion batteries is coming in daily because they are now used for so many applications. Unfortunately, speeding up and simply increasing our recycling volume is something we can’t do. Although the companies making these batteries are in a good position right now, it is adversely becoming a huge sore point for the recycling industry. The huge volume of lithium-ion batteries that need to be recycled is such a big issue right now, not just in Japan, but on a global scale.

 

You mentioned a plethora of issues; from the volatility of metal prices, managing local governments, managing national governments, and the recycling process itself. How do you achieve profitability despite all of these overbearing issues? Where does your competitiveness come from in such a complicated supply chain?

Although all recycling companies are facing these problems, I cannot speak on behalf of them as I only know how my companies face these issues. Our solution lies in our ability to obtain as much certification as possible, and we are currently the only company in Japan with a prequalified treatment facility certification for the recycling of waste rechargeable batteries under the Basel Convention, which exempts us from the cumbersome and time-consuming procedures for importing and recycling waste rechargeable batteries from overseas. I think that the key is being able to forecast what will be coming up in the years to come so that we can get ourselves ready and obtain the correct certification. These certifications not only allow us to recycle here in Japan but also deal with foreign companies that might open up new doors of opportunity for us. All of this allows us a step ahead of our competition, especially in the domestic market.

 

In many interviews with key industry players, we hear that finding local partners overseas and combining expertise has been crucial to unlocking international markets. This is especially important for Japanese companies since embracing international cooperation will allow them to remain competitive. Your firm is now different, having established a Korean joint venture (JV) in 1987. With this in mind, what role do partnerships play in your business model, and are you currently looking for new partners, particularly in overseas markets?

Your question actually relates to the history of our company, so in order to answer both the first question and this one I will continue to tell you more about Nippon Recycle Center’s history.

There was a transition that occurred between generations when my father took over the company from my grandfather. My grandfather was the one who established Fuyo Kinzoku, which in essence is a trading company. There was a necessity to not only buy and resell rare metals but also a necessity to recycle them. This is the thinking of my father, so he established the Nippon Recycle Center, and with that, he introduced equipment such as furnaces that allow us to recycle these metals. This equipment allowed us to level up our recycling capabilities and was a key milestone for our company, transforming us from a trader to a waste recycling center company.

Currently, end-of-life batteries occupy 60% of our business, and that covers all different types of batteries including nickel-cadmium and lithium-ion. 40% of our business is associated with industrial scrap, and that scrap comes from battery manufacturing companies. We go there and actually buy the scrap before it becomes an actual battery, so considering its share it is a big business for us.

In 1987 was our first joint venture with the Korean Metal Recycling Company and then in 1988 we opened our factory in Korea. This JV was almost crucial because of the fluctuations with the JPY. At that time it was very hard to sustain a business, so a vital crossroads came to us on whether to continue our business in Japan or not. This is why we decided to create our JV with the Korean Metal Recycling company. It was profitable and the labor costs were lower as were the energy costs. It allowed us to stay afloat during really turbulent times.

Time always flows, however, and you cannot stop that. Throughout the 10 years of our partnership, there were ups and downs, but one significant low we couldn’t avoid was the arduous process of obtaining batteries in Japan, shipping them to Korea, recycling them, and then shipping them back. As complicated as this sounds, add on top of that a layer of complicated international regulations from both Korea and Japan, two countries both known for strict government regulations. As the laws became more strict in Korea, our ability to sustain a healthy business also diminished. After 10 years we decided that we should probably build new furnaces in Japan while leaving the old furnaces in Korea. where we reassembled them and relaunched our business. At that time the main equipment we used was a vacuum electric furnace, with other types of equipment coming afterwards.

To answer your question, we do see a necessity to cooperate with foreign companies, and many nations around the world now have problems with end-of-life batteries. Although batteries are produced around the world, there are in fact some countries that do not have recycling solutions. We have those solutions here in Japan, so for a company like ours, it is almost a win-win situation. Although it isn’t in large quantities, we do buy from Taiwan, Hong Kong, the US, Australia, and parts of New Zealand. We bring them to Japan where we can recycle and resell them.

We’ve even gained some traction in Europe, since to us, partnerships with end-of-life battery procuring companies are important to sustaining our business model. Inevitably there are countries in Europe that don’t have their own recycling solutions for batteries and therefore approach us.

It is much easier for us to deal with nickel-cadmium batteries and Nickel-Metal Hydride batteries, but with lithium-ion batteries, the need and volume are growing almost daily. There however, restrictions in place regarding the export of lithium-ion batteries that are end-of-life, so that does dampen our expectations for this niche for the time being. This is why we’ve tended to stick to nickel-cadmium batteries and Nickel-Metal Hydride battery recycling for international procurement.

The core thing people think about in terms of nickel-cadmium batteries is that they are old and outdated. They are not new and there aren’t that many companies making them anymore. Obviously, this is true in consumer products where lithium-ion batteries are the most popular, but there is still a growing need in industrial applications. We as a company do not resign ourselves to collectivism, and see ourselves as sharks rather than sheep. We’ve carved out a good niche for ourselves in the recycling of nickel-cadmium batteries, and until the market says otherwise, we are still looking at this market very optimistically.

 

Could you elaborate for us on the differentiating points of nickel-cadmium batteries, especially when compared to more popular battery types such as lithium-ion batteries?

I think in terms of our advantages as a company, our extraction methods are just greater, especially in terms of separating the cadmium. Most companies separate cadmium as an oxide compound, but we extract cadmium in metal form. This allows for more pure and cleaner cadmium to be extracted. This allows our firm to stand out from all the other recycling companies.

Low costs should also be a thing we discuss here, but unfortunately, I cannot reveal all of our technologies to you because some of them are trade secrets. Let’s just say that we are cheaper in comparison to our competition. This allows us to be more profitable and have better relations with our client base.

We still try to preserve the traditional and conventional methods of recycling nickel-cadmium batteries that my father introduced to the company back in the day. Of course, throughout the years there have been slight modifications, but we still try to preserve as much as we can. It works well, it is unique, and it has served the company for many years now.

 

You mentioned before the importance of the supply side in terms of end-of-life batteries from international markets. The interesting thing about Japan is that it is next to China and South Korea, two of the largest battery makers in the world. From the perspective of your international purchasing operations, what particular markets are you looking to have further expansion into?

Everywhere, even beyond Korea and China. This isn’t arrogant, but I truly believe that we are the best company in the world when it comes to nickel-cadmium recycling and processing. We have quite an outstanding company. That puts us in a good position with customers eventually coming to us for solutions.

Actually, we cannot obtain batteries from China and Korea because they have local laws that restrict exports to Japan. Anywhere else on the planet, however, would be a target for the future.

 

Obviously, cadmium is a highly toxic metal and the recycling process is a very complex operation. This poses a big problem for transportation, and when you are transporting these end-of-life batteries there is a huge risk of leakage. We know that when you get the batteries from Japan the transportation problems are mitigated, but when you outsource elsewhere, how do you resolve this logistic bottleneck and ensure the safe transportation of these inflammable, hazardous, and toxic batteries?

There are logistics and procurement regulations that do not allow for cargo to be shipped if it is not properly stored. It means that insulation treatment should be applied to the battery terminals. Pure cadmium itself cannot leak, so I would say that cadmium itself is more or less safe for transportation. Batteries on the other hand have proven to leak after many years of storage, but the logistics companies take care of meeting regulations and ensuring the safe transportation of these batteries.

 

We see in the utilization of hybrids and EVs that there are different chemical compositions. The Chinese are very good at producing lithium iron phosphate batteries (LFP) while the Koreans have really focused on lithium nickel manganese cobalt oxide batteries (NMC). These different compositions require different processes. Firstly, from the perspective of a recycler, which of these two compositions would you personally recommend for the safe development of the automotive field? Secondly, considering the difficulties and the growing scale of lithium-ion batteries, can you tell us a bit more about the services you offer to automotive-related companies? Can you run us through how you are working with automakers to create a more reliable and environmental supply chain?

In order to determine the most suitable recycling method, we first need to assess the expected raw materials resulting from the recycling process. These raw materials will dictate the recycling approach we employ. From our perspective, there isn't a significant difference in the recycling process between LFP and NMC batteries. While there may be technological distinctions, the recoverable raw materials are quite similar.

However, the discrepancy arises in the metal value of the recycled black mass between NMC and LFP batteries. Currently, recycling black mass from NMC batteries appears more attractive and profitable due to the presence of valuable metals such as nickel, cobalt, and copper, all of which command high market prices. In contrast, black mass from LFP batteries primarily contains lithium and copper, with fewer high-value metals to recover.

From a cost perspective, the recycling process is relatively similar between LFP and NMC batteries because both types ultimately progress to the black mass stage. Currently, we aren't receiving many requests for LFP recycling, so the future remains uncertain.

It's important to note that this entire process involves a complex ecosystem that brings together various stakeholders. At present, our involvement in LFP recycling isn't particularly viable in terms of volume and profitability. We'll continue to monitor the market to determine how this landscape evolves.

 

Is there a personal goal or dream you would like to achieve as the president of your company before you hand the baton onto the next generation of Nippon Recycle Center executives?

My children are still quite young, with my youngest being twins. It is hard to forecast what will happen if and when they take over. That day will be far into the future, and I’m not sure if on that day the inheritance of my company will move to my children or not.

Recycling by definition is something that aims to help society, decreasing the burden on the environment of harmful waste disposal. As a principle, it helps society and improves everyone's lifestyles. I would like to continue this idea but also grow it. As a company, we want to utilize our best features to contribute to the maximum degree possible. In order to implement this philosophy in reality however is something that is hard to do. Contribution is a subjective term, and actions cannot necessarily be quantified. There are always going to be new needs and new approaches because life itself is always changing. It comes down to how our company can transform and catch up to the changes in the industry. The strongest creatures in history were the dinosaurs, and even they weren’t protected from the meteors that fell from the sky. Extinction came. Mankind likewise is facing a lot of problems. Humans remain because we are able to sustain the earth, so contributing to that is of the utmost importance.

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