General Market Commentary
The Bank of Canada cut its key interest rate on September 4, 2024, and it stays at 4.25 per cent. According to the Banks’s recently released consumer survey, perceptions of financial stress have improved and, given recent interest rate cuts and lower inflation, fewer consumers reported reducing their spending. However, consumers expect interest rates to remain elevated, which is affecting their spending decisions.
When it comes to spending on cleantech, the federal government’s support strategy includes directives to the Canada Infrastructure Bank to provide over $20 billion of strategic financing to the clean growth sector, and five “clean economy” investment tax credits (ITCs) to encourage the transition to a cleaner and greener economy. The Canada Revenue Agency (CRA) has set up a new web page to provide administrative guidance on these ITCs.
Hot Sector News
This month we’re putting the spotlight on EcoSynthetix Inc. (TSX: ECO), a renewable chemicals company that produces a portfolio of commercially proven bio-based products.
“We continue to earn validation for our product offering with two new wins during the quarter across multiple end markets. It’s also encouraging to see demand continue to build for our products, up 43% through the first half of 2024,” said Jeff MacDonald, CEO of EcoSynthetix, following second quarter results released for 2024. MacDonald was an honouree of the Clean50 awards in 2023. (Credits: EcoSynthetix)
The Burlington, Ont.-based company offers a range of sustainable engineered biopolymers that allow customers to reduce their use of harmful materials, such as formaldehyde and styrene-based chemicals. The company’s flagship products — DuraBind™, Surflock™, Bioform™ and EcoSphere® — are used to manufacture wood composites, personal care, paper, tissue and packaging products, and enable performance improvements, economic benefits and carbon footprint reduction.
SurfLock™ is a bio-based strength aid commercially available to increase fibre to fibre interaction in paper-based applications, such as paperboard, tissue, and pulp. (Credit: EcoSynthetix)
We engaged the management team to tell us more about recent announcements, industry issues and corporate plans for growth.
EcoSynthetix recently received a large follow-up trial order for its strength aid, SurfLock™, from a leading global pulp manufacturer — representing the largest volume of trial material ever shipped to one account in the company’s history. How did this come about?
This account is a top 10 global pulp and paper company. We’ve been working with them for more than a decade in the paper end market with our biopolymers as an ingredient in the coating of graphic paper. This new opportunity is at the front end of the pulp process. Our bio-based SurfLock™ is a strength aid that increases the mechanical strength in pulp. It can be used by manufacturers to improve their economics by increasing their use of lower cost virgin fibers, recycled fibers and low-cost fillers, reducing their use of retention aids and refining energy, and improving the runnability of the line with less breaks on the machine.
How are you planning to capitalize on this boost in business and experience continued growth?
The pulp end market is a large addressable market where our biopolymers deliver both performance and economics for manufacturers. But our technology addresses a range of applications including tissue, paperboard, paper, wood composites and personal care. We are already commercially engaged with global leaders in each of the pulp, wood composites and personal care end markets. Continuing to support these manufacturers as they roll out our biopolymers across more production lines and more SKUs puts us in a great position to drive growth.
What do you estimate to be the size of the engineered biopolymer market in Canada?
Canada is the world’s tenth leading producer of paper and paperboard, which is one of several key end markets for our engineered biopolymers. Canadian production capacity for paper and paperboard is estimated to be 9.2 million metric tons in 2024. The company estimates this to be an opportunity in excess $100 million for our biopolymers in Canada, and as a global player, greater than $1 billion worldwide.
How are industrial sustainability trends impacting the company’s potential?
Regulation for both safety and carbon footprint reduction helps steer change, but the biggest catalyst for change comes from industry players making meaningful commitments. For example, IKEA, a leading particleboard manufacturer and retailer, public goal is “to reduce the climate footprint of board production, IKEA is switching from fossil-based to bio-based glues. Today, 5% of the climate footprint of the total IKEA value chain is connected to the use of glue in board materials. With this change, the goal is to reduce fossil-based glue use by 40% and greenhouse gas emissions from glue by 30% by FY30.”
Our technology is ideally positioned to offer practical solutions, at scale, to support that type of change.
How do you think current policy and financial incentives will help or hinder the market?
A great deal of the policy and financial incentives to drive lower carbon solutions are focused on energy. While there is certainly a lot to be gained from clean energy, it’s not the only path to a lower carbon future. Changing to lower carbon ingredients and materials can have a significant impact on carbon footprint. And while our solutions are competitive, there is always an upfront cost to change. Similar incentives to those which support the change to renewable energy solutions would help drive change.
Innovating new materials can take years of time and investment in R&D. In Canada, our current R&D investment tax credits favour larger companies already earning significant profits. To level the playing field and drive change through new innovation, we’d like to see the same incentives that are afforded to CCPC [Canadian-controlled private corporation] entities and larger, highly profitable organizations.
What are your company goals for the next few years and how are you setting yourselves apart from the competition?
We’re engaged with the right customers and prospects to grow sales to more than $100 million annually. That’s the internal goal we’ve set for ourselves. Our technology is already unique in the market, offering a combination of comparable or better performance than traditional petroleum-based binders at a similar cost with a reduced carbon footprint. Our solutions are commercial and competitive in all of our markets and we are constantly innovating to improve performance and reduce cost in use.
What is your value proposition for prospective investors and shareholders?
Unlike many interesting cleantech ideas, our technology is already industrially scaled at competitive cost with capacity to deliver more than $100 million in sales today. We have a strong balance sheet to see change from petroleum to our bio-based polymers through to success. We are operating cash positive with a team of people who have built and run successful Canadian enterprises.
Any other thoughts you’d like to share with our readers in the environment sector?
Major corporations are taking steps to drive real change in their carbon footprints, but those solutions need to perform, at cost and scale. They are looking to partner and invest with companies who have formed partnerships with global leaders committed to environmental change and where the performance, cost and scale of their solutions can deliver. We believe we have solutions like this for multiple end markets with committed partners.
Stocks to Watch
Here is a list of Canadian cleantech stocks that we are monitoring for this column. This list of public companies is by no means complete, and we are open to suggestions from our advisors and readers.
Name | Symbol | Price in $CDN (September 16/24) |
Price in $CDN (October 15/24) |
% Change |
Algonquin Power & Utilities Corp. | AQN | $750 | $6.89 | -8.13% |
Anaergia Inc. | ANRG | $0.61 | $0.95 | +55.74% |
Ballard Power Systems Inc. | BLDP | $2.26 | $2.32 | +2.65% |
*BIOREM Inc. | BRM | $2.48 | $2.62 | +5.65% |
Boralex Inc. | BLX | $34.71 | $34.52 | +0.55% |
*CHAR Technologies Limited | YES | $0.28 | $0.23 | -17.86% |
Electrovaya Inc. | ELVA | $2.96 | $3.14 | +6.08% |
Engine No 1 (Transform ETF) | NETZ | $86.98 | $94.37 | +8.50% |
EverGen Infrastructure Corp. | EVGN | $2.07 | $2.12 | +2.42% |
Greenlane Renewables Inc. | GRN | $0.075 | $0.070 | -6.67% |
Li-Cycle Holdings Corp | LICY | $2.74 | $3.20 | +16.79% |
Loop Energy | LPEN | $0.04 | $0.04 | 0% |
Northland Power Inc. | NPI | $22.71 | $21.33 | -6.08% |
*Thermal Energy International Inc. | TMG | $0.24 | $0.21 | -12.50% |
TransAlta Renewables Inc. | RNW | $12.48 | $12.48 | 0% |
UGE International Ltd. | UGE | $2.04 | $2.00 | -1.96% |
Westport Fuel Systems Inc. | WPRT | $6.69 | $5.99 | -10.46% |
Zinc8 Energy Solutions Inc.
(Abound Energy) |
ZAIR | $0.10 | $0.090 | -10.00% |
*The authors of this column own equity. It is not meant to be an endorsement, but simply a statement of this fact.
James Sbrolla is a veteran of the financial and environmental industries.
Connie Vitello is editor of Environment Journal.
Featured image credit: Getty Images