Umicore and Rhodia announced to have jointly developed a recycling process for rare earth elements from Nickel Metal Hydride rechargeable batteries.
The process will be implemented as of late 2011 in Umicore’s new rechargeable battery recycling unit at the company’s Hoboken site in Belgium, and which represented a € 25m investment. The new recycling unit which is currently in test phase, serves as a demonstration plant for Umicore’s proprietary Ultra high Temperature battery recycling process.
After rare earth elements will be separated from the nickel and iron they will be processed into a high grade concentrate and shipped to Rhodia’s plant in La Rochelle (France), where they will be refined and formulated into rare earth materials.
Umicore claims that a typical NiMH battery contains some 7% of rare earth elements including cerium, lanthanum, neodymium and praseodymium, meaning roughly 1 gramme for a AAA battery, 60 grammes for a household power tool and 2kg for a hybrid electric vehicle battery.
Our View:
By teaming up with Rhodia Umicore has chosen a partner with proven capabilities in rare earth materials. Although NiMH rechargeable batteries currently represents a sizeable market, most of the future growth of rechargeable batteries use (and hence the recycling opportunity) will in our opinion come from Lithium Ion-based batteries, which typically contain only very few rare earth elements.
We remind that Umicore has hinted that an investment in a much larger scale recycling unit based on the proprietary technology would be considered once the demonstration unit is successfully started up.
Conclusion:
We believe the agreement with Rhodia is positive for investor sentiment around the new UHT recycling technology. However, we do not alter our earnings model at this stage, and stick to our BUY rating and € 43 target price.