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Battery-materials recycler Li-Cycle announced this morning that it's pausing construction of a giant production plant in Rochester, N.Y.

Why it matters: The site this year received a $375 million conditional loan commitment from the Department of Energy's Loan Programs Office.

Of note: The full value of the loan is contingent on Li-Cycle hitting certain milestones, and Li-Cycle hasn't yet met the  requirements to receive any of the potential $375 million, a DOE spokesperson tells Axios.

Driving the news: "Li-Cycle has recently experienced escalating construction costs," the Toronto-based company said in a press release.

"The Board of Directors has decided to pause construction work on the Rochester Hub, pending a review of the project, including an evaluation of the go-forward phasing of its scope and budget, including construction strategy."

Catch up fast: Battery recycling is a two-step process: companies shred batteries into raw materials black mass and aluminum. 

Any waste can then be sent to a hydrometallurgical plant to extract further raw materials.

Big picture: Li-Cycle was pursuing an ambitious "hub-and-spoke" model to integrate both steps. Its "spokes" in Alabama, Arizona and New York would shred the batteries, and its first "hub" in Rochester would process the waste material.

That hydrometallurgical hub is proving much more expensive to build. 

Initially expected to cost $175 million, it's on track to see its costs exceed $375 million. 

State of play: The construction challenges in Rochester add further disruption to an already rocky year for Li-Cycle.

Inflation and labor costs have shrunk the company's revenue and driven up costs as it's worked to supply electric vehicles, energy-storage companies and other battery consumers. 

Falling costs for mined raw materials have also temporarily dampened demand for recycled materials.

Of note: Even before this morning's announcement, Li-Cycle's stock price had lost half its value from this summer. 

The company's market capitalization has fallen below the cost of its assets.

What they're saying: "The costs have kept increasing, and the scope has increased to some extent – but the costs have increased even further," Hans Eric Melin, managing director of consulting firm Circular Energy Storage, tells Axios.

What we're watching: How quickly Li-Cycle is able to address the construction challenges — and whether that'll be fast enough for investors.

Li-Cycle pauses construction of Rochester plant

The plant received a $375M DOE conditional loan commitment.

Illustration of one hand pushing away another hand holding a battery.

Lithium batteries

Battery-materials recycler Li-Cycle announced this morning that it&#x27;s pausing construction of a giant production plant in Rochester, N.Y.Why it matters: The site this year received a <a class="gtmContentClick" data-vars-link-text="$375 million conditional loan commitment" data-vars-click-url="https://www.axios.com/pro/climate-deals/2023/02/27/battery-recycler-nets-375m-from-us-government" data-vars-content-id="332ae2e2-deb7-445e-b408-da5c2ac11b0b" data-vars-headline="Li-Cycle pauses construction of Rochester plant" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.axios.com/pro/climate-deals/2023/02/27/battery-recycler-nets-375m-from-us-government" target="_self">$375 million conditional loan commitment</a> from the Department of Energy&#x27;s Loan Programs Office.

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Li-Cycle pauses construction of Rochester plant

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