Since environmental benefits and supply chain resilience are commonly assumed for circular economy strategies, this study tests this hypothesis in the context of lithium-ion battery recycling and cell manufacturing. Therefore, the use of recyclates from different cathode active materials and from different recycling routes, namely hydrometallurgy and direct recycling, in a subsequent cell production is modelled with the recyclate quotas prescribed by the amended European Battery Regulation and analysed using life cycle assessment methodology. This study concludes that both, negative and positive environmental impacts can be achieved by the usage of recyclates, depended on the cell technology and the recycling process chosen. Newly constructed lithium iron phosphate (LFP) cells using a share of 11.3% of recyclates, which are obtained from LFP cells by a hydrometallurgical process, achieve a deterioration in the ecology by 7.5% for the global warming potential (GWP) compared to LFP cells without any recyclate share at all. For the same recyclate quota scenario, hydrometallurgical recyclates from lithium nickel manganese cobalt oxide cells (NMC), on the other hand, achieve savings in GWP of up to 1.2%. Recyclates from direct recycling achieve savings in GWP for LPF and NMC of a maximum of 6.3% and 12.3%, by using a recyclate share of 20%. It can be seen that circular economy can raise large savings potentials ecologically, but can also have a contrary effect if not properly applied.