As global efforts accelerate towards low-carbon transportation, power batteries from new energy vehicles (NEVs) have become critical resources, presenting both opportunities and environmental challenges. These batteries contain significant quantities of critical metals—such as nickel, cobalt, and lithium—that are crucial for the energy transition but face substantial supply risks. Megacities like Shanghai, leaders in NEV adoption, increasingly serve as significant reservoirs of these valuable materials. Maximizing the recovery of these metals from retired NEV batteries is therefore essential for enhancing resource security, minimizing environmental impacts, and promoting urban sustainability. This study employs a dynamic material flow model to estimate the demand and retirement volumes of critical metals in NEV power batteries in Shanghai from 2014 to 2050. Rather than assessing specific recycling technologies, this research evaluates the broader strategic, environmental, and economic benefits of recycling. Key findings include the following: (1) Annual peak demand for critical metals will range from approximately 0.3 to 34 thousand tons, with domestic cobalt production expected to be inadequate beyond 2029 under high-intensity adoption scenarios. (2) By 2050, the volume of discarded critical metals will surpass the demand for newly mined resources, reaching annual volumes of up to 29 thousand tons. The cumulative recoverable quantities from 2014 to 2050 are projected to range between 0.7 and 227 thousand tons for nickel, 2 and 43 thousand tons for cobalt, and 0.6 and 24 thousand tons for lithium. (3) Recycling these critical metals significantly reduces dependency on primary extraction, lowers greenhouse gas emissions, prevents secondary pollution, and ensures economic sustainability. The study concludes with targeted policy recommendations to facilitate efficient and large-scale recovery of critical metals from NEV batteries in Shanghai. Harnessing this urban resource stream can reinforce China’s strategic metal supply chain and support the city’s sustainable, circular, and low-carbon development goals.