Contrary to what many think, cotton production is not great for the environment. Being one of the most popular materials, cotton is used in nearly half of all textile production and is known as the most profitable non-food crop globally. However, conventionally-grown cotton has proven insufficient for the planet because of its high water consumption and pollution, soil degradation, greenhouse gas emissions, and harmful fertilisers and pesticides.
Because of the widespread impact of cotton production, textile companies worldwide have been searching for an alternative source for materials that are eco-friendly and sustainable.
Developments in sustainable technologies bloomed the creation of cellulose fibres to replace cotton. Cellulose fibres originated in 1855 and were known as rayon, which is produced with tree material and embedded with toxic chemicals that were dangerous to human health. However, far more environmentally friendly and sustainable solutions have replaced the generic rayon over time.
One group innovating the industry is bio-materials technology company Nanollose Ltd (ASX: NC6), which has developed eco-friendly processes to grow cellulose fibres from waste instead of plant material. Known as their ‘Plant-Free’ Cellulose Nullarbor Lyocell Fibre, the Company uses waste from the Indonesian coconut industry to source its raw materials. The Company’s lyocell fibre is finer than silk and is significantly stronger than conventional cotton and polyesters, making it potentially disruptive to the US$500 billion textile industry.
The eco-friendly choices for textile production caught the interest of one of the world’s largest fashion retailers, Inditex (Industria de Diseño Textil) (OTCPK: IDEXY). Inditex is a Spanish company that owns brands such as; Zara, Pull&Bear, Massimo Dutti, Bershka, Stradivarius, and Oysho. It sells into 215 markets through its online platform and has 6,600 stores in 96 markets.
The fashion retailer began adopting a new business strategy in 2006 where they aimed to source all of their materials from eco-friendly and sustainable sources. Enter Nanollose, who they have now entered into a binding memorandum of understanding (MOU) with. Under the MOU, Nanollose will supply Inditex with its plant and tree-free Nullarbor Lyocell Fibre, where the companies will work in collaboration to develop prototypes and products to see the commercialisation potential of the material.
Initial samples of the materials will be supplied to Inditex at no cost. If Inditex requires larger quantities, it will be provided at a price based on the percentage of microbial cellulose embedded in the fibre, where it will be supplied as either fibre, yarn or fabric. If prototyping proves to be progressing, both parties will likely extend their relationship where further research can be conducted.
As noted in Nanollose’s report that ended 31 March 2022, the Company achieved a major milestone by successfully completing its first pilot-scale spin of its Nullarbor Lyocell Fibre. The successful pilot spin (where they spin up yarn from a test material) demonstrated the technology’s capacity to be effectively integrated into existing factory settings to spin and produce the fibre at scale. Following the pilot spin, the Company sought potential offtake partners and collaborators, which is where they found Inditex.
For the quarter ended 31 March 2022, the Company highlighted a strong cash balance of $1.75 million, down from $2.15 million in the previous quarter, which provided Nanollose with the financial flexibility to advance its growth objectives.
NC6 shares have been tracking sideways since its peak of $0.23 in January 2021 on the back of a patent application announcement for its lyocell fibre. Throughout 2021, shares stabilised to around $0.10 and reached its lowest price of $0.079. Following today’s announcement, shares jumped nearly 8% to sit at $0.099 at the time of writing.
Trading Desk Assistant at Emerald Financial
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