Key takeaways

• Circular materials industries had a progressive quarter, with higher funding (USD 3 billion) and continued product launches and service collaborations. While most of the activities centered around e-waste and plastic recycling, bio-based packaging, textile, and industrial materials also saw notable initiatives.

• Although no major regulation policies were in place for the industry during the quarter, the Senate Bill 5144 was proposed to boost recycling rates and create a statewide stewardship program requiring battery producers to fund and participate in battery collection and recycling. 

• There were 19 product updates during the quarter (an increase from just two in Q4 2022). These updates featured the launch of bio-based materials, such as plant-based nylon, and bio-based packaging, which demonstrate the growing acceptance of sustainable materials across industries such as fashion, packaging, and automobiles. Notably, startups Li-Cycle, Nth Cycle, and Electra conducted successful trials to recover lithium from end-of-life batteries during the quarter. 

• This quarter saw an increase in partnerships to 34 (compared with 22 in the previous quarter). Notable partnerships included product/technology developments to jointly develop sustainable products using bio-based inputs (i.e., bio-based plastic and coatings), along with service collaborations to recycle electronic and plastic waste into value-added products.

• We observed four acquisitions during the quarter (vs. two in Q4 2022). These acquisitions were primarily driven by the idea of consolidating expertise to advance recycling technologies. 

• One notable acquisition involved Australian startup Recharge offering a rescue takeover bid to Britishvolt, a British battery recycler and manufacturer, in response to the latter’s bankruptcy announcement. Despite having raised USD 2.3 billion in 2022, the company filed for administration, citing a lack of equity investments for R&D as the reason for bankruptcy. 

• 17 companies raised a total of USD 3 billion in disclosed funding during the quarter (+91.2% QoQ and flat YoY); Redwood Materials alone secured a significant USD 2 billion loan financing from the Department of Energy (DOE). Other notable funding rounds were Li-Cycle’s USD 375 million conditional loan financing (also from the DOE), Nexus Circular’s USD 150 million equity financing, and Danimer Scientific’s USD 130 million loan financing. The average deal size also almost doubled YoY and tripled QoQ to USD 144.1 million. 

• The short- to medium-term outlook for the industry is positive, as bio-based products continue to penetrate the market, with prominent players in the apparel, cosmetics, and automobiles industries embracing circular materials for various applications. Further, players in the industry are actively setting up recycling facilities, particularly for plastic and e-waste recycling. They aim to increase capacity and achieve commercial-scale operations by late 2023 or early 2024. Specifically, the rising EV demand and lithium supply concerns are driving the need to recycle lithium and establish a circular battery supply chain. It is reasonable to say that investors find the sector attractive,  which is evident as disruptors continue to secure funding for expansion possibilities.