Key takeaways

• Circular Materials funding slowed to USD 1.2 billion (-25% QoQ and -72%YoY) as a result of fewer large funding rounds and moderation in the number of rounds observed. Nearly all of the funding was earmarked for facility expansion and product development. Debt funding accounted for 59%, with bio-based packaging company Stora Enso’s ~USD 472.7 million round and Indorama Ventures’ USD 200 million loan from the International Finance Corporation (IFC) to establish large-scale plastic recycling plants in Asia.

• Collaborations reached their highest in three years, maintaining a strong momentum from mid-2023. Product development partnerships were at the forefront (~67% of total partnerships), while the bio-based industrials and bio-based packaging segments comprised most collaborations (~32%). Highlights included Braskem’s first commercial sale of pyrolysis oil and Carbios licensing its PET bio-recycling technology.
• Notable incursions to the US market included joint ventures (JVs) from Indian battery recycler Lohum Cleantech and German bio-based packaging company PAPACKS. 

• Product launches focused on bio-based materials (~61% of total product updates), including Lignin Industries commercializing its novel bioplastic product. Several incumbents committed to incorporating circular materials into their products, including BASF switching to bio-based Ethyl Acrylate (EA) from Q4 2024 and The LEGO Group committing to use circular inputs for its bricks. We believe the shift is driven by regulatory pressures around recycling and the economic potential that circular chemicals offer as sustainable solutions are increasingly valued by the market.
• Battery recycling activity showed signs of recovery and was focused on establishing recycling facilities. Highlights included ERI, which opened its first battery recycling plant, and ProtechLiB, which developed a compact container-sized recycling plant for automotive batteries. 

• Three incumbent-led acquisitions in the recycling space focused on technology integration and expanding geographic presence. The targets ranged from construction material recycling (Mark Desmedt) to plastic recycling (APK AG) and e-waste recycling (Telecycle).

• California passed a landmark textile recycling law to ensure producers are accountable for textiles recycling. The bill is set to come into effect on January 1, 2030. The State also signed a bill to ensure EV battery manufacturers are responsible for managing end-of-life processes, but was later vetoed by the Governor of California on October 1, 2024.

• Geopolitical uncertainty may be a near-term dampener: Rising tensions in the MENA region and looming US presidential elections may lead to a brief slowdown in activities in the Circular Materials space. As outlined in our Insights on industries affected by a Republican or Democratic presidency, sustainability rollbacks may be likely in the former case, while the latter will be more beneficial to a greener, sustainable future from a policy perspective. Nevertheless, we believe battery materials will still be a winning industry, as onshoring the battery minerals supply chain is treated as a matter of national importance, as US trade policy focuses on minimizing its reliance on Chinese exports. The US Department of Energy allocated USD 3 billion in funding for battery recycling, and startups like Princeton NuEnergy and Electra Battery Materials will likely emerge winners regardless of political outcomes.
• Incumbents are ramping up efforts to advance circularity efforts amid regulatory pressures: Our Circular Materials Quarterly Insight for Q2 2024 highlighted the role that regulatory tailwinds can play in advancing circular materials. Notably, this quarter, the State of California moved to introduce legislation to establish producer accountability for textiles and EV batteries. We believe these regulations are pushing apex-level advocacy bodies and leading industry participants to advance circular solutions. Examples include EuRIC Textiles for textile recycling in Europe and Ford Motor and United Auto Workers voicing support for California state legislature to have battery manufacturers accountable for EV battery recycling, as well as global chemical manufacturer BASF committing to exclusively offer bio-based EA from Q4 2024.