In 2024, the American Lung Association released the “State of the Air 2024” report, which mentioned some major concerns about air quality. Four out of every ten people in the United States live in areas plagued by unhealthy air pollution. Another report says that at least 60% (70 million) of Americans rely on water systems contaminated with toxic PFAS (Per- and poly-fluoroalkyl substances), or “forever chemicals,” at levels that require reporting to the Environmental Protection Agency.
Escalating concerns about air and water pollution have spurred the development of innovative solutions. Activated Carbon Pellets (AC Pellets) are one product that falls under such solutions. The global demand for effective pollution control measures has significantly boosted the market for AC Pellets. Projections indicate that the Activated Carbon Market is set to reach a value of USD 8.4 billion by 2030. The Compound Annual Growth Rate (CAGR) from 2023 to 2030 will be 9.8%.
Figure 1: Global Forecast of the Activated Carbon Market from 2023 to 2030.
Carbonxt Group Limited (ASX: CG1) (“Carbonxt” or “the Company”) is a cleantech Company based in Florida, United States. It develops specialised Activated Carbon products to capture industrial pollutants. The Company produces Powdered Activated Carbon (PAC) and Activated Carbon (AC) pellets for industrial air and water purification. On May 28th, 2024, Carbonxt Group announced that Wisconsin Public Service (Carbonxt’s largest customer) has agreed to a binding purchase order for AC Pellets valued at $4.3 million. Payment is expected within seven days from the release of the announcement, with delivery of Activated Carbon (AC) Pellets scheduled over the next six months.
Long-Term Partnership with WPS
Recently, WPS publicly affirmed that the Weston Power Plant (‘Weston’) will remain operational until 2032. Carbonxt has a long-term partnership with Wisconsin Public Services as the sole supplier of AC pellets at Weston Power Plant.
AC Pellet Usage in ReACT Emissions Control Systems by WPS
Wisconsin Public Service will utilise Carbonxt’s proprietary AC Pellet product in its ReACT (regenerative activated coke technology) emissions control systems. This integrated multi-pollutant approach targets Nitrogen Oxides (NOx), Sulfur Oxides (SOx), and mercury (Hg) emissions from coal-fired plants.
How Carbonxt Will Use the Sales Deal Funds
Funds from the WPS sale contract will support the ongoing construction and commissioning of Carbonxt’s flagship Activated Carbon production facility in Kentucky. The facility is scheduled for launch in the September quarter and aims to expand production capacity and address the growing demand for AC products in the US market.
Activated Carbon Price Outlook and Carbonxt’s Profit Margins
With Activated Carbon product prices remaining strong above USD 4,000/tonne in the US market, the Kentucky plant is expected to achieve gross profit margins of 45% at prices of USD 3,500/tonne. Carbonxt is also advancing product testing and negotiations with potential clients, and it is poised to capitalise on market demand.
Mr Warren Murphy, Managing Director of Carbonxt, said “We are pleased to confirm this forward sales contract, which further consolidates the strong commercial partnership between CG1 and WPS – our largest US partner. The up-front payment terms of the deal are a reflection of the confidence WPS has in our product, along with the ongoing demand for best-in-class activated carbon products. The contract will provide Carbonxt with a material boost to net operating cashflows at an important juncture in our stated development strategy, with major growth upside through the forthcoming commissioning and manufacturing launch of the flagship AC production facility in Kentucky.”
About Carbonxt Group Limited and Its Products
Carbonxt Group Limited is a significant player in the global drive to reduce environmental pollutants through innovative activated carbon solutions for air and water filtration. Carbonxt specialises in providing high-quality oxidising, non-brominated activated carbons for various applications. The products are non-corrosive and ensure maximum efficiency.
Carbonxt Group Limited’s Position in the US Market
- Carbonxt currently focuses on air phase applications, estimating an addressable market of around USD 290 million in the US, holding a 4% market share. A new facility in Kentucky is being established. The company aims to expand its scope into water treatment. The liquid phase market presents a significantly more significant opportunity.
- The EPA has increased regulations regarding per- and poly-fluoroalkyl substances (PFAS), also known as “forever chemicals,” due to their carcinogenic and health-threatening properties. The new regulation suggests a significant expansion of the market scope, with utilities granted a five-year compliance window. The Company focuses on granular activated carbon, a primary treatment method for PFAS.
- A good sign is that the EPA estimates annual compliance costs for water utilities range from USD 772 million to USD 1.2 billion. On the other hand, industry experts, such as the American Water Works Association/Black & Veatch, have projected even higher costs.
Figure 2: Carbonxt’s Current and Future Market Share in the Activated Carbon Market in the US
Carbonxt’s Progresses at Different Facilities Capacity
Progresses in Black Birch
The Black Birch capacity specialises in powdered activated carbon (PAC). It has achieved a record revenue of AUD 6.5 million in the past year, marking a 16% increase over the previous corresponding period (PCP). The Company is exploring avenues to enhance Black Birch’s capacity, considering substantial customer demand, and has recently been shortlisted for two major bids. This indicates successful expansion into new markets.
Updates on Arden Hills
Although Arden Hills’s revenue decreased from last year, WPS has committed to purchasing 1,200 tonnes of pellets, amounting to AUD 4.3 million, with delivery expected by the end of the calendar year.
Opportunities in JV with Kentucky Carbon Processing
Carbonxt’s joint venture with Kentucky Carbon Processing (KCP) aims to facilitate expansion into high-margin markets. They plan to utilise the Inez Power Activated Carbon Plant to produce pelletized and granular activated carbon from coal-based sources. Reclaiming a 12-acre site, the facility expects production commencement in the upcoming quarters, with potential expansion options. Carbonxt’s initial share in the venture is 35.5%, rising to 50.0% post-investment milestones.
Market Outlook
As of May 28th, 2024, the share price of Carbonxt Group traded at AUD 0.084, with a 52-week range of AUD 0.049 to AUD 0.120. The Company’s market capitalisation was AUD 29.56 million, with the share issued by Carbonxt Group Limited was 324.92 million as of the same date.
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