China Is Rewriting Its Lithium-Ion Recycling Rules. Enforcement Is the Easy Part.
Reading a fascinating report: Sustainable Battery Recycling Through Spatial and Technological Alignment, that ties into the latest news about China implementing new lithium-ion recycling policies.
As of April 1, 2026 China’s most stringent battery recycling rules to date went into effect.
Automakers and battery manufacturers are required to establish collection networks in every region where they sell products.
Batteries must stay with vehicles when scrapped.
A national traceability platform now tracks every battery from production through end-of-life.
Informal operators are effectively prohibited from handling end-of-life batteries.
Projections put LFP at 60% of available feedstock by 2030, but LFP has no cobalt or nickel to recover. China imports more than 95% of its cobalt, and 90% of its nickel. If NMC maintains any of its current market penetration, newer chemistries like Lithium Manganese Rich (LMR) start scaling, or LCO continues its dominance in consumer electronics, the import dependency problem China faces with those transition metals does not go away. Recycling must continue to move to the center of China’s security of supply strategy for battery materials.
One of the major hurdles these rules are trying to address is a spatial mismatch. China has high geographic concentrations of licensed recyclers located in the same provincial regions as the manufacturing plants, but that does not match where the EVs that need their traction batteries collected are. In the provinces generating the largest volumes of retired batteries, licensed recycling capacity is sparse.
That is where informal workshops move in. They skirt basic industry and environmental costs, which lets them outbid licensed facilities at the point of collection and intercept cells before they ever reach a licensed recycler.
I have talked about this problem for years, with my first article on it published in 2023:
What this new research does is put real numbers on it for the first time, across 364 cities, 300 recycling projects, and 24 battery chemistries, down to the city level.
Licensed recycling facilities are running at only 39% capacity nationally. Not because there is a shortage of feedstock, but because the batteries and the recyclers are in the wrong places relative to each other.
The new policies are focused on enforcement, which helps, but the research points to a solution for the larger problem. If you let batteries move freely across provincial lines to wherever licensed capacity actually exists, capacity utilization jumps by 67%. The scale of the mismatch shows up clearly at the provincial level.
Guangdong has the largest share of end-of-life batteries in the country at 14% of the national total and the highest GDP, but faces intense informal competition at the point of collection. Licensed capacity exists but informal operators are winning the price competition for feedstock.
Zhejiang and Jiangsu generate large volumes of retired batteries but have comparatively sparse licensed recycling projects, which produces high formal capacity utilization in the facilities that do exist combined with persistently high informal recovery.
Jiangxi, Hunan and Hubei sit on substantial formal treatment capacity but do not generate enough local battery volumes to keep facilities running. Even with cross-provincial transport those provinces struggle to hit 50% utilization.
What the research makes clear is that there is no single national fix. The right intervention depends on what kind of problem each province actually has.
High-volume coastal provinces need cross-regional routing and enough licensed capacity to compete with informal operators.
Central provinces sitting on excess capacity need to become consolidation hubs that pull in material from surrounding areas.
And everywhere informal operators dominate, the fix is a combination of registration requirements, penalties, and financial incentives that make joining the regulated system more attractive than staying outside it.
The US is repeating China’s early mistake of concentrating manufacturers and recyclers in the same locations rather than building a collection infrastructure where the end-of-life batteries actually are. The US does not have the informal workshop problem, but moving end-of-life cells from a salvage yard 2,000 miles to a processor is a collection and transportation problem that gets worse the larger the volume grows. A coherent national strategy has to account for where end-of-life batteries retire, and right now the US does not have one.
China is staring down a wave of material which started at 90,000 tonnes in 2020 and is expected to hit somewhere between 5.5 and 7 million tonnes by 2030. The US end-of-life wave keeps getting pushed back due to the longevity of lithium-ion, with EVs now looking at lasting not 8 to 10 but 12 to 15 years, but it will hit. When it does, a patchwork of state EPR rules with no federal framework connecting collection to processing means the US could arrive at that moment in worse shape than China, which at least has a national system it is actively trying to fix.
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DISCLAIMER: This article should not be construed as an offering of investment advice, nor should any statements (by the author or by other persons and/or entities that the author has included) in this article be taken as investment advice or recommendations of any investment strategy. The information in this article is for educational purposes only. The author did not receive compensation, from any of the companies and or persons mentioned to be included in the article.