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Loop Industries: Pay No Attention to the Man Behind the Curtain

Image: Creative Touch/Adobe Stock recycling symbol in magician's hands
Loop Industries’ claim that its rPET is infinitely recyclable without losing any of its properties sounded too good to be true. And you know what they say about that!

Last week’s report from Hindenburg Research that called into question the credibility of Loop Industries’ technology drew a whopping response from the industry. Many expressed that they always thought Loop Industries’ novel method of depolymerization of post-consumer PET from oceans, rivers, landfills, and other environments into 100% food-grade, virgin-like material sounded too good to be true. And you know what they say about that!

In other words, rather than adding a percentage of recycled material to virgin PET, Loop PET would be 100% recycled material, which Loop notes in its various information pieces is “infinitely recyclable” without losing any of its properties.

I spent a good part of Saturday morning doing my due diligence, and I found out more than I ever thought possible. For example, there’s an interesting case study from Chemstations titled, “From Laboratory Garage to Global Success.” The case study described Loop as a “small but spirited tech company” that had “invented a way to make top-quality PET plastic resin from waste PET plastic and polyester without making any more new plastic.”

Chemstations (Houston, TX) has computer modeling software, Chemcad 7, that its website says is “an integrated suite of intuitive chemical process simulation software that fits into the chemical engineering workflow and supercharges an engineer’s efficiency.”

“From its infancy, Loop Industries knew it had a winning concept,” said the Chemstations’ case study. “Growing that revolutionary technology into a business success would take partnering with a process simulation software provider that was equally as insightful. In 2016, Loop reached out to Chemstations.”

The Chemcad 7 simulation software would be helpful as Loop “was developing its pilot plant and looking at different chemical processes to revolutionize sustainable plastics,” said the Chemstations case study. Loop also needed the “ability to scale their process simulation software to meet Loop’s needs as it grew. . . . Loop chose Chemstations due to its modular customization, easy integration, flexible licensing, expert technical support, and affordability,” said the case study.

According to Chemstations, “in July of 2019, Loop used the operating settings based on the Chemcad CC-Batch module simulation results to run the three different distillation stages of Methanol Recovery, Water Removal, and MEG Purification” [Loop’s Generation II process]. “Based on the successful pilot results, Loop created initial documentation around its technology that confirmed its viability to the market. In addition, because Loop had a CC-Steady State license, their users could try the specific additional functionalities such as CC-Batch and CC-Therm to see if the capabilities met their needs before making a purchase.

“Throughout its growth, Loop’s relationship with Chemstations has grown. While Loop Industries started with one product, Chemcad-Steady State, which allowed them to simulate processes from lab scale to full scale, today Loop relies on the full Chemcad-Suite of products to tackle their toughest process models,” concluded the case study.

Now I have to ask: Was Loop’s entire “revolutionary” recycling process all done with computer modeling?

An environmental entrepreneur

Another article appearing in Forbes (July 24, 2018) noted that Loop Industries was making headlines for its novel depolymerization method. Loop was also making big promises. But while the company was making headlines and promises, was it actually making any virgin-like PET from post-consumer waste at the company’s pilot plant in Montreal? That seems to be the question people are starting to ask.

In the Forbes article, Daniel Solomita, the founder and CEO of Loop Industries, described himself as an “environmental entrepreneur” who began by finding a way to depolymerize and recycle 40 million pounds of nylon 66 carpet fibers, which a company had put into a South Carolina landfill in the 1960s. He then went to work “on the ground to recover, clean, and recycle these nylon 66 carpet fibers.” At that point Solomita became interested in recycling other materials.

While Solomita was working in his “garage” in Quebec, an immigrant, Dr. Essaddam, who Solomita described as a “quirky ‘mad scientist’” from Tunisia, appeared at his door along with his two sons. “[They] came to my house with a bundle of chemicals and beakers. In my garage, they showed me the process and began to tinker. They had discovered how to depolymerize PET, to deconstruct it to monomers,” he told Forbes.

Amazing! From out of nowhere, this Dr. Essaddam shows up with his two sons, Adel and Fares, who, according to their profiles and Hindenburg Research, have no polymer chemistry background, along with a “bundle of chemicals and beakers” and voilà — depolymerization of PET! How simple is that? I’ll bet Dow, DuPont, Eastman, and other big chemicals and resin companies wished they had known all these years just how easy this really was. Imagine all the money these global companies have spent on polymer engineers and chemists, huge R&D laboratories, only to find out it just takes a “bundle of chemicals and beakers.” Oh, and don’t forget the Chemcad 7 computer modeling software the company obtained in 2019.

An update to Hindenburg’s report that appeared a day later in a Roth Capital Partners newsletter claimed that the “short report misses or misconstrues key facts from SEC filings” and takes “direct aim at Loop’s technology, questioning its authenticity based on two former employees, one of whom questions whether the technology even exists.” Roth insists that “based on our own due diligence with CPG [Consumer Products Groups], investors, and in particular Indorama, we question these claims.”

The most “obvious” is the fact that “multi-national manufacturing companies would likely perform copious amounts of diligence prior to entering into agreements around JVs. . . . Further, it is our understanding CPGs also ran extensive testing protocols on material to validate the process for specifications in addition to track and test material tracers coming through the process.”

Loop is correct in stating that large global companies perform extensive audits on companies seeking to be suppliers, and that process can take several months, even up to a year, to complete. I have written both to PepsiCo and to Coca-Cola, asking them about the “extensive testing” performed on materials supplied by Loop, and how engineers from these two global beverage makers worked with Loop engineers to validate Loop’s process and the results.

Coca-Cola replied that “in 2018, we established a framework with Loop Industries Inc. for authorized bottlers to purchase recycled PET. It is one of the many technology partners we have engaged with to ensure we have a diversified mix of potential solutions supporting our World Without Waste goals — including the use of 50% recycled materials in bottles and cans by 2030,” said the Coca-Cola spokesperson. "We are making concrete progress against this goal with 18 markets and growing, offering beverages in 100% recycled plastic around the world. Norway and the Netherlands began utilizing 100% rPET across their portfolio this month. We know there’s more to do and we continue to evaluate several solutions to accelerate commercialization of technologies that allow us to make new bottles out of old bottles.”

COVID delays plant commissioning

Loop claims to be retrofitting the Indorama recycling facility in Spartanburg with its proprietary technology, and takes issue with Hindenburg’s claim that nothing has been done in the two years since the JV with Indorama was initiated. Loop questions the two comments in e-mails — “the project is being finalized” and “right now, we don’t have any production” — saying that these are “innocuous quotes misconstrued to support the [Hindenburg report’s] assertions.”

Loop claims that the retrofit of the Indorama Spartanburg facility is ongoing with Loop providing engineering updates and time frame for commissioning including extensions due to an increase in the size of the facility and then COVID. In Loop’s most recent 10-Q (filed Oct. 7, 2020) the company indicated it has contributed $1.5 million in total to the JV. An initial estimate for production to begin was 2020, which obviously won’t happen. Loop says it has noted in its own published documents that “commissioning of the plant was likely a 2023 event after delays attributable to COVID.”

Loop, which bills itself as a technology developer and licenser of its technology, next clarifies the partnerships between Loop, Indorama, and Chemtex/Invista, which, Loop says, was misrepresented in the Hindenburg report. Indorama is a manufacturer of PET with “significant global manufacturing infrastructure, which uses different technologies for production. Loop’s depolymerization technology takes PET back to the monomer level, in particular MET and DMT, which Indorama’s Spartanburg facility uses in their polymerization process.”

Invista owns polymerization technology, which “incorporates monoethylene glycol (MEG) and dimethyl terephthalate (DMT) monomers into PET and licenses this technology; Chemtex is the exclusive engineering firm for Invista technologies, designing the equipment process for the polymerization. Indorama is a manufacturer and a potential purveyor of the equipment.”

To clarify Loop’s relationship with Thyssenkrupp, Loop’s rebuttal, which the company says is supported by SEC filings, notes that Worley, an integrated engineering, procurement, and construction (EPC) provider, has essentially replaced Thyssenkrupp because of a change in vendors, and not, as the Hindenburg report states, on “indefinite hold due to the Indorama partnership going silent. It is our understanding project financing becomes more easily available with an integrated EPC contractor involved in large projects,” said Loop’s rebuttal. “Secondly, Loop’s shift to Invista’s technology, which we believe is geared more toward DMT/MEG processing, appears to have reduced capital outlays (1Q F2021 10-Q) and Worley appears to have more experience in this area.”

Chemical or advanced recycling of polymers has been under experimentation for a number of years, as continued attempts are made to actively address the problem of plastic waste in the environment. Low recycling numbers have a lot to do with the complexities involved in all types of recycling, including mechanical recycling, but recycling continues to have challenges, particularly chemical recycling. PET is one of the most highly recycled polymers and the demand for rPET appears to remain strong, which could be the reason so many companies continue to develop various methods of recycling this material.

According to an academic paper written by Timmy Thiounn and Rhett C. Smith in the Journal of Polymer Science in April of this year, “not all plastics can be as easily recycled as others.” In 2015, they note, about 18% of PET (SPI Code 1) was recycled. “Efficient recycling of PET has reached the most advanced stage of maturity among the common plastics, and a variety of methods have proven utility on a large scale,” they write in the article, “Advances and approaches for chemical recycling of plastic waste.” There have been instances where a PET undergoes primary and secondary recycling, that is, the recycling of plastic bottles. “However, a significant remaining problem with recycling of PET is that the mechanical properties of the non-virgin material are greatly reduced with each reuse.”

That scientific pronouncement, which anyone who works with recycling knows to be the case, goes against the statements made in Loop’s press releases and promotional information: “Loop’s patented low-energy technology enables waste plastic to be recycled an infinite number of times, with no degradation in quality.”

Thiounn and Smith continue to explain: “PET can undergo pyrolysis to yield its precursor monomers, TA, and EG,” which testing has proven. “Despite such promising advances, the pyrolysis of PET is seldom used as a method to depolymerize PET to its monomeric units on an industrial scale because pyrolysis generally leads to other liquid and gaseous side-products, reducing process efficiency and necessitating costly separation steps."

Thiounn and Smith point to another chemical process — hydrolysis — that “has shown great promise for the depolymerization of PET into its monomeric units.” There are three different types of hydrolysis — acidic, alkaline, or neutral — each of which has advantages and drawbacks. Two other methods are methanolysis, in which “methanol reacts with PET at high temperatures and pressures in the presence of a catalyst” to form DMT and EG, and aminolysis, “an area that has not been widely exploited, likely because this process requires an amine (which is often toxic or expensive) to depolymerize PET, yielding diamides of TA.

“Glycolysis of PET is an area that has been widely studied,” write Thiounn and Smith. “This is a very versatile process due to the various potential applications of the products obtained. In this process, PET is depolymerized by glycols to form monomers, oligomers, and/or polyols, which can then be used for different applications.”

It can be readily seen that depolymerization of PET is not the problem — it can be done and various methods are being tried by polymer engineers everywhere in an attempt to capture the value of PET through optimal recycling processes. As also can be seen by reading Thiounn and Smith’s paper, it’s not easy and each process has its challenges and complexities.

Are promises being kept?

I’ve often said that it’s not easy being green. As more anti-plastic activists hit back at the industry for its lack of recycling, even calling all of recycling a “scam” and “fraud,” it becomes increasingly evident there may be more truth in those terms than we in the industry would care to admit. Over the years that I’ve written about plastic recycling, there seems to be a common thread: Press releases tout “revolutionary” technologies with great fanfare that promise to turn filthy PET waste from oceans, rivers, and landfills into pure, 100% virgin-like, food-grade PET. More press releases follow about investors climbing on board, big money pouring into these advanced recycling startups, JVs with big multi-national companies and big promises to help them solve their sustainability challenges and meet their goals.

And then, crickets. I try to find out what’s been happening. Are promises being kept? Are the JV partners achieving their goals? How many tons of waste plastic are they gathering up and turning into other material? A few respond — they have viable processes and a supply chain that enables them to get the feedstock they need. Many, however, seem to vanish into thin air.

It’s no wonder that the research paper, “Deception by the Numbers,” from Greenpeace made such a big splash. In reviewing that paper and the list of the many recycling firms throughout the United States, I found that Greenpeace’s evaluation wasn’t far off the mark. I even added a few that Greenpeace probably didn’t know about.

Ultimately, there’s a lot of things you can do in your garage besides park a vehicle. Many mold makers and molders started their companies in their garages, and it always makes for a good success story. But developing a complex advanced chemical recycling process for plastic waste with magical results? Maybe not so much.

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