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Your client, ReLiCycle, must choose which recycling stream to prioritize next year. The exhibit lists, for each stream: % of pipeline, % eligible feedstock, yield, risk, average price and cost per ton of input, and scale (kt/year).
Assume risk multipliers for expected eligible volume: Low = 0.95, Med = 0.80, High = 0.60.
Expected annual gross margin dollars ≈ (Price − Cost) × Scale × % eligible × Yield × Risk multiplier.
Which single stream delivers the highest expected annual gross margin dollars, and what is the first action you would take to secure that opportunity?
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Your answer:
📋 Solution:
Shortlist first (by margin × scale):
EV packs ($950/t, 150 kt, Med), Manufacturing scrap ($700/t, 120 kt, Low), Stationary storage ($750/t, 90 kt, Med). Others are smaller or penalized by High risk/low margin.
Math (expected eligible tons = scale × %eligible × yield × risk):
- EV packs: 150k × 0.72 × 0.88 × 0.80 ≈ 76k t → × $950 ≈ $72M.
- Mfg. scrap: 120k × 0.95 × 0.95 × 0.95 ≈ 103k t → × $700 ≈ $72M (slightly lower).
- Stationary storage: 90k × 0.80 × 0.88 × 0.80 ≈ 51k t → × $750 ≈ $38M.
Answer: EV packs delivers the highest expected annual gross margin (~$72M), edging out manufacturing scrap by a small margin.
First action: Secure exclusive feedstock commitments with 1–2 major automakers/dismantlers (simple LOI with volume bands and price floors) to lock supply before competitors do.
