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Li-Cycle pauses construction of Rochester plant

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

Illustration: Gabriella Turrisi/Axios

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.

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