- Carbonxt is a cleantech company witnessing favourable tailwinds amidst efforts to maintain compliance with air and water emission requirements.
- Increasing demand along with projected higher margin for activated carbon products appears to be in line with the Company’s consistent progress.
- Carbonxt’s world-class R&D team has developed a new pellet technology, Hydrestor, to remove phosphorous from waterways and wastewater.
Carbonxt Group Limited (ASX:CG1) has been aggressively advancing the development and manufacturing of its activated carbon products, including activated carbon pellets and powdered activated carbon solutions.
Designed to remove harmful environmental pollutants and maintain compliance with air and water emission requirements, Carbonxt’s environmental technologies address a broad range of industrial applications and sectors. Meanwhile, the ecologically driven trends in the United States, where Carbonxt runs primary operations, prove to be a shot in the arm for the Company.
With this backdrop, let us explore the key factors favouring Carbonxt’s journey in the activated carbon space.
US Government Policies focused on climate change/changing settings
The US policy environment supports the cleantech industry, significantly driven by the Biden administration’s strong support of green policies focused on investments in the clean energy space.
The current US Government is also in the process of reviewing rules made by the former administration, which weakened environmental legislation.
Carbonxt expects these policies to provide further business opportunities.
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In addition to the current policy measures, strong demand for US-made pellets from the Company’s current and prospective customers enhances prospects for its activated carbon products, manufactured in the US.
Several firms are also looking for local suppliers to ensure consistent purchase prices.
Growing demand for pellets
The financial year 2022 started with high demand for both the pellet and powdered activated carbon segments.
Subsequent to FY21, the Company secured a significant contract from a Midwest utility (an existing customer) for additional activated carbon pellets. This higher volume is projected to run at least throughout the upcoming fiscal year.
The higher natural gas prices, together with a hot summer supporting coal electricity generation, have resulted in increased orders from the utility sector for activated carbon products. Moreover, the recovery process amid COVID-19 has induced an overall higher industrial demand for cleantech products.
Notably, booming demand from several prominent industry players for powdered activated carbon products is anticipated to have a positive impact on revenue in the next fiscal year.
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Expansion of production capacity
Pellet production has commenced at the Arden Hills facility, where Carbonxt’s top-notch research & development team earlier worked together with a large industrial customer to develop pellets tailored to meet their specification, quality, and economic requirements.
The Company expects to boost sales of customised pellets through the extensive sales pipeline and developed market channels of customers.
The Company recently inked a three-year agreement with an investment group for activated carbon pellet supply. The group is building a Kentucky-based specialty activated carbon plant, anticipated to be fully operational in the second half of FY22.
It would allow the Company to annually produce 11,000 tons of industrial activated carbon pellets, enabling it to target the market without any further capital contribution requirements.
Research & Development/New Technologies
Carbonxt has been committed towards higher margin activated carbon pellets and technologies, which position the Company well to capitalise on its R&D and manufacturing capabilities along with commercial relationships.
The Company continues to tick off significant milestones on the research & development front, developing Hydrestor, a new pellet technology to remove phosphorous from waterways and wastewater.
Supply chain consolidation and plant divestments signal raw material shortages within the activated carbon space. As a result, it is anticipated to put an upward pressure on pricing.
Carbonxt, leveraging several driving factors, is committed to improving its competitive position to take advantage of a pricing environment supporting higher margins.
CG1 stock was trading 2% higher to AU$0.255 on 27 September 2021 (AEST 02:35 PM).