Table of Contents

• Key takeaways
• Regulations
• Funding
• Product Updates
• Partnerships
• M&A
• Notable disruptors
• Appendices

Key takeaways

• EU passed new sustainable packaging laws: The EU is targeting a ban on single-use plastic and is implementing strict criteria to ensure that all packaging is recyclable by 2030. The regulation will benefit circular packaging solutions companies, with anticipated demand from sectors like consumer goods, foodservice, and ecommerce.

• Circular materials funding picked up (+3x QoQ) to USD 1.6 billion: The spike was driven by two large debt rounds (~55% of total funding) by e-waste recycler Umicore (~USD 531.5 million to support operations) and bio-based industrials company NatureWorks (USD 350 million to establish a biomanufacturing facility in Thailand). Around 15% of total rounds were earmarked for overseas facility expansions, particularly in Asia (e.g., Syre, NatureWorks, Bcomp).

• Product launches spanned applications in bioplastics, textiles, and packaging: The majority of launches in Q2 were observed within the bio-based materials segment (11 out of 19). NatureWorks, which raised funding to establish a bioprocessing facility in Thailand, also unveiled for film packaging applications. Other highlights included ’s launch of what it claims to be the industry’s first bio-based, fully compostable packet and bio-based leather manufacturer commercializing its product.
• Battery recycling activity continued to slow down: Only two battery-recycling launches were observed this quarter (cf. four on average per quarter in 2023), including battery recycler launching its inaugural processing plant. We believe activity is likely to pick up in the latter part of the year and beyond, considering the number of battery recyclers (such as Lithion Technologies and Nth Cycle) that began constructing new facilities in 2023.

• Collaborations were at their joint-highest level in three years: Around 33% of these were sales partnerships indicating a healthy share of commercial activity during the quarter. The activity also featured cross-border partnerships focusing on Asia across the circular plastics, battery materials, and textile recycling segments, echoing the trend we observed in funding. Brand collaborations with large-scale manufacturers such as Cadillac, Jack & Jones, Kraft-Heinz, Coty Paris, and Daimler were also notable. 

• Four acquisitions by recycled materials incumbents: All acquisitions were aimed at expanding capacity and footprint in new geographies, recycled plastics (Integra Plastics and Circulus), recycled industrial materials (Angelo's Recycled Materials), and recycled metals (Refrattari Trezzi). Additionally, recycled textiles startup Renewcell underwent a PE acquisition, following its bankruptcy announcement earlier in 2024.

• Asian expansions picked up steam: Funding rounds to establish overseas facilities by bioplastic manufacturer NatureWorks and bio-based fiber company Bcomp were notable. Additionally, partnerships focused on Asia included Metso working to establish a recycling facility in India and textile recycling players Ambercycle and Circ partnering with Asian apparel manufacturers to incorporate their products. We see this aligning with aspirations of economic hotspots like India and the ASEAN to establish a circular economy to curb the impacts of carbon emissions and pollution.
• More regulatory tailwinds: The new EU packaging law is likely to drive innovation and collaboration in bio-based packaging and bioplastics through 2025 and beyond. The EU also plans to introduce at least 16 new pieces of legislation to tackle textile waste by 2028, considering the waste implications of the rapid rise of fast fashion. This is likely to put circular textile solutions in the spotlight. H&M Group’s launch of Syre to hyperscale textile-to-textile polyester recycling and Circ’s CircReady partnerships with manufacturers to incorporate its circular textiles into their production are some examples.

Regulations: EU passes new sustainable packaging laws

Analyst Take: The EU implemented legislation around packaging recycling, targeting a ban on single-use plastic and implementing strict criteria to ensure that all packaging is recyclable by 2030. The regulation will be positive for companies developing circular packaging solutions, with anticipated demand from sectors such as consumer goods, foodservice, and ecommerce. Other regions may also follow the precedent set by the EU. For instance, even the US is yet to introduce a national-level sustainable packaging direction, apart from a few city- and state-level laws.

We also observed several new product launches and collaborations to introduce solutions that would ensure compliance with these regulations during the quarter, including Sulapac’s reusable “bio-cup” for foodservice and Carbios’ launch of a recycled PET bottle for shower oil.

• The EU adopted new laws around sustainable packaging in April 2024. Key points from the legislation that have implications for the circular materials space include 
  • A ban on single-use plastics from January 1, 2030 
  • All packaging (except for lightweight wood, cork, textile, rubber, ceramic, porcelain, and wax) to be recyclable by fulfilling strict criteria by 2029
  • Offering consumers reuse and refill options, including reusable packaging being used in foodservice applications.

Funding: An upswing supported by debt rounds and overseas facility expansions

Analyst Take: The recycled electronic waste segment continued to generate the most funds (~47% of the total raised), but there was a notable uptick in funding across bio-based industrial materials and the other recycled materials segment led by several large rounds (from Natureworks, CIRCTEC, and Spectro Alloys). Debt accounted for ~55% of total funds raised during the quarter, led by large rounds from Umicore (~USD 531.5 million) and NatureWorks (USD 350 million). Several rounds (~15% of the total rounds) were earmarked for overseas facility expansions including textile recycler Syre, bioplastic manufacturer NatureWorks, and bio-based fiber company Bcomp, which announced plans to expand into Asia.

• Circular materials companies raised USD 1.6 billion in (disclosed) funding across 34 rounds in Q2 2024 (+3x QoQ and +2x YoY). This was on par with the average funding observed across the preceding 12 quarters. Two debt financing rounds raised by material science and recycling company Umicore (~USD 531.5 million) and biopolymer startup NatureWorks (USD 350 million) collectively accounted for ~55% of the funding raised.

• The e-waste segment continued to generate the most funds, amounting to USD 759 million across 12 rounds, corresponding to ~47% of the total funding (+3x QoQ and +1.3x YoY). Activity in Q2 2024 was led by Umicore’s ~USD 531.5 million debt funding round and Cyclib’s ~USD 59.1 million Series A round. 
  • Umicore intends to use the proceeds for a July 2024 refinancing and other corporate purposes. Furthermore, it plans to finance its 2030 RISE strategy, which includes several ESG initiatives. 
  • Conversely, Cylib intends to use the new funds to bolster its proprietary hydrometallurgical recycling technology to an industrial scale and expand its team of experts for future growth and development. 
  • Princeton NuEnergy’s USD 30 million Series A round was also notable, with proceeds being directed toward the construction of its first standalone, full-scale direct battery recycling advanced manufacturing facility.

• This was the first time since Q2 2022 that the e-waste segment accounted for less than 50% of total Circular Materials funding. This was due to the impact on the funding mix by bio-based industrials startup NatureWorks’ USD 350 million debt funding round, as well as two significant venture funding rounds by recycling startups CIRCTEC and Syre for a combined USD 263 million.

• The “other” recycled materials segment funding picked up, led by investments to develop large-scale recycling plants. The segment contributed ~15% of Circular Materials funding, amounting to USD 247 million across six rounds—notably CIRCTEC’s ~USD 162.5 million venture round to establish what it claims will be Europe's largest tire pyrolysis recycling facility in the Netherlands. Recycled textile disruptor Syre also raised USD 100 million to begin construction on its blueprint plant in the US and establish two giga-scale textile-to-textile recycling plants in Vietnam and Iberia.

• Bio-based Materials funding showed a resurgence, led by the bio-based industrials segment, where companies raised funding to support capacity expansions and open new facilities. The segment raised USD 425 million (~97% of Bio-based Materials funding and ~26% of total funding). The amount raised corresponds to a 12x QoQ and 33x YoY increase. 
  • This was led by NatureWorks' USD 350 million debt funding round financed by Krungthai Bank, Thailand's third-largest bank. The loan, which is the bank’s largest, will support the construction of the company’s new Ingeo PLA manufacturing facility in Thailand and underscores Thailand’s aspirations to emerge as a global leader in bioeconomy. 
  • Incidentally, Switzerland-based natural fiber solutions company Bcomp also raised USD 40 million in a Series C round to facilitate the company's expansion into new markets in Asia and North America.

• Debt funding amounting to USD 883 million accounted for 55% of total funds. This was driven by a combined USD 882 million raised by NatureWorks and Umicore, alongside a smaller USD 1.7 million round from recycled plastic prosthetic startup Circleg. The funds raised by startups Circleg and NatureWorks will support expansion into new territories, with the latter establishing a major facility in Thailand. The company is a subsidiary of Thai state-owned chemical company PTT MCC Biochem and global food conglomerate Cargill. The scale of the company’s parents are likely to have provided an avenue to debt funding from Thailand's third-largest bank. 

• We observed a single growth-stage funding round this quarter, similar to the previous two quarters. This was a USD 40 million round by natural fiber solutions startup Bcomp to extend its production capacity and expand into new markets in Asia and North America. We also observed an increase in early (+2x QoQ) and seed (+30% QoQ) funding, where companies earmarked funds to support product development, establish facilities, expand capacities, and seek out partnerships. Notable rounds included a ~USD 67 million round by plastic recycling startup Samsara Eco to expand its enzymatic recycling capabilities and Princeton NuEnergy raising USD 30 million to construct its first standalone, full-scale direct battery recycling advanced manufacturing facility.

Product updates: Bio-based Materials launches pick up while battery recycling slowdown continues 

Analyst Take: Circular Materials product launches were geared toward a range of applications from bioplastics, textiles, packaging, and battery metals recycling. Battery recycler Lithion Technologies and bio-based leather manufacturer Beyond Leather Materials commercialized their products. The majority of launches in Q2 were observed within the bio-based materials space. NatureWorks, which raised funding to establish a bioprocessing facility in Thailand, also unveiled bio-based compounds for film packaging applications. Another highlight was Kari-Out’s launch of what it claims is the industry’s first bio-based, fully compostable packet for single-serve condiments in foodservice applications. Activity in the battery recycling space continued to slow down, with just two launches this quarter (cf. four on average per quarter in 2023). As highlighted in our Q1 2024 report, we believe activity is likely to pick up in the latter part of 2024 and beyond, considering the number of battery recyclers who began constructing new facilities in 2023.

• We observed 19 product updates in Q2 2024 (vs. 20 in Q1 2024). Most product launches focused on bio-based industrial materials (5), bio-based packaging materials (3), and recycled textiles (3). Incumbent (10) and startup (9) activity were fairly evenly split.

• Bio-based industrial material launches spanned a wide range of applications: Highlights included Adsorbi launching its inaugural bio-based air pollution prevention solution and Ensinger’s launch of its bio-based plastic line derived from wood processing waste streams.

• Bio-based packaging innovations targeted foodservice applications: Kari-Out’s launch of what it claims is the industry’s first bio-based, fully compostable packet was a highlight, while Nestlé unveiled a bio-based edible fork in India for its Maggi cup noodles range.

• Commercialization of Beyond Leather’s bio-based leather product: Danish startup Beyond Leather Materials commenced full-scale production of its bio-based leather, Leap, in Germany. The development marks a significant milestone for Beyond Leather Materials, which has been developing its product since 2017. The company is also exploring partnerships to incorporate Leap into new products following its shift from the R&D phase to a fully functional B2B supplier, adding a subsequent collaboration with Veshin Factory in June 2024.

• Finished clothing and fabrics made using a percentage of recycled fibers: Fristads launched a sweatshirt incorporating 15% of fibers recycled from used Fristads clothing and Camira revamped its recycled textile offering to incorporate an increased 25% recycled polyester content.

• Recycled electronics activity focused on battery recycling solutions: BASF launched a prototype of its metal refinery for battery recycling in Germany to fine-tune its process and Lithion Technologies commercialized its technology with the launch of its first plant in Montreal.

Partnerships: Activity peaks, supported by recycled plastics, textiles, and bio-based materials

Analyst Take: We observed an uptick in product and service collaborations across our coverage in Q2 2024, matching the peak activity levels seen in Q3 2023. Around 33% of these were sales partnerships, indicating a healthy share of commercial activity during the quarter. We also observed cross-border partnerships focusing on Asia in the circular plastics (Carbios), battery materials (Volvo), and textile recycling (Circ) segments, echoing a trend we observed in funding. Q2 also featured several brand collaborations with large-scale manufacturers, with highlights including Cadillac for bio-based leather interiors, Jack & Jones for bio-based apparel, Kraft-Heinz for bioplastic food packaging, Coty Paris for bio-based cosmetic packaging, and Daimler for EV battery recycling.

Circular Materials (Q2 2024): Startup and incumbent partnerships

• We observed 54 partnerships across our Circular Materials coverage in Q2 2024, compared with 47 in Q1 2024 (+15% QoQ). It was incidentally on par with Q3 2023 for the highest number of quarterly activities observed across the preceding 12 quarters.

• Similar to Q1 2024, most partnerships were focused on recycled plastics (~26%), followed by recycled e-waste (~19%), recycled textiles (~15%), and bio-based packaging (~11%).

• Partnerships to develop circular feedstocks and packaging: Collaborations extended across recyclers, material science, and chemical companies to establish facilities to transform plastic waste into circular materials, such as Loop Industries, which aims to establish a recycled polyester feedstock facility in India, and Freepoint Eco-Systems to recycle plastic waste into pyrolysis oil feedstock. Notable partnerships for packaging applications included Carbios’ launch of a recycled PET bottle for shower oil and Dow partnering to launch a circular ecommerce packaging solution.

• Collaborations focused on battery recycling solutions. Startups and established players in the e-waste recycling space focused on developing battery recycling solutions and re-incorporating battery materials into the supply chain. Metso partnered to establish a recycling facility in India for Hindalco Industries, while Redwood Materials partnered to process ~10,000 tons of scrap annually into new battery components. Notable collaborations to recycle other forms of e-waste included Solarcycle’s partnership to process end-of-life solar panels and Cyclic Materials’ partnership to supply mixed rare earth oxide recovered from magnets.

• Product development and sales partnerships to integrate recycled textiles into the supply chain: Partnerships featured startups collaborating with brands, including Aquafil partnering with Maserati to produce seat inserts using its recycled nylon Econyl. Notable partnerships with apparel manufacturers included Ambercycle signing an offtake agreement to supply ~4,000 tons of its recycled polyester material "cycora" and Circ launching its CircReady program to work with a consortium of manufacturers and material science companies to replace their virgin inputs with Circ’s recycled products.

• Bio-based collaborations focused mostly on packaging solutions: Collaborations focused mainly on foodservice and cosmetics. These included Sulapac introducing bio-based “eco-cups” at Burger King and Rax restaurants in Sweden and Knoll developing a bio-based clamshell packaging solution using its Ecoform Molded Pulp. Incidentally, NatureWorks, which raised a large funding round this quarter to construct a bio-manufacturing plant in Thailand also unveiled two new PHA-based compounds for flexible packaging applications.

• Beyond packaging, Neste partnered to produce bio-based chemicals in Japan, and MycoWorks partnered to develop a mycelium based leather for Cadillac’s interiors, while Spinnova partnered to develop a t-shirt made from its eponymous wood-based fibers, organic cotton, and elastane.

M&As: Incumbent acquisitions lead activity

Analyst Take: We observed four key acquisitions in Q2 2024 (cf. one in Q1 2024). All acquisitions were made by incumbents in the recycled materials space to expand their recycling capacities and footprint. The target companies operated across recycled plastics (Integra Plastics and Circulus), recycled industrial materials (Angelo's Recycled Materials), and recycled metals (Refrattari Trezzi). GFL Environmental’s acquisition of Angelo's Recycled Materials is noteworthy, as it is part of GFL’s ongoing debt deleveraging campaign while seeking to build investor confidence.

New circular material startups added in Q1 2024

Summary of new startups added in Q2 2024

Appendix

Appendix 1: Summary of funding rounds in Q2 2024

Appendix 2: Summary of product updates in Q2 2024

Appendix 3: Summary of partnerships in Q2 2024