Renewcell’s bankruptcy was a shock to circular fashion. Now, the textile recycler is getting a second chance

When textile recycling company Renewcell opened its commercial factory in 2022, it was a landmark moment for circularity and sustainable fashion. That facility, housed in a paper mill in Sweden, was the first industrial-scale textile-to-textile recycling plant in the world. 



Then, less than two years later, Renewcell declared bankruptcy, citing low demand. It seemed like a death knell for textile innovation, and for efforts to curb the fashion industry’s immense waste. 



Now, Renewcell is back. The company has been acquired by private equity firm Altor and rebranded as Circulose—the same name as its product, a pulp made entirely from textile waste that can then be turned into viscose, lyocell, and other cellulose-based fibers. Traditionally, cellulose fabrics are made from cotton, oil, or wood; Circulose pulp, which can be spun into yarn or woven into fabric, is instead made from worn-out jeans, cotton scraps, and other textile waste. 



[Photo: Renewcell]



With this acquisition, Circulose now gets a second chance to change the fashion industry and push forward the concept of recycled fabrics. Canopy, a nonprofit that helped revive Circulose, says the company has learned lessons in the months since its February 2024 bankruptcy that will better allow it to scale and to compete with entrenched supply chains. 



[Photo: Renewcell]



Why Renewcell went bankrupt



Before Renewcell launched its commercial plant, it had already tested its product with a number of notable brands. H&M made a dress from Circulose using a blend of 50% recycled jeans and 50% wood from sustainably managed forests. Levi’s partnered with Renewcell to turn old denim into a new line of its classic 501 jeans. Companies like Inditex (which owns Zara) and H&M Group said they would buy tons of Circulose, which aligned with their own pledges to use more recycled or next-generation materials.



But scaling up to commercial production was a different challenge. It meant coordinating with all aspects of the supply chain, from fiber spinners to dyers to fabric buyers. Some letters of intent never turned into orders, and because of that supply chain complexity, Renewcell wasn’t able to fulfill other orders on time. When it declared bankruptcy, the company said demand for its product was lower than expected, which impacted its ability to raise enough long-term funding to continue operating. 



That bankruptcy was “a really sobering moment” for those in the fashion industry, from brands to supply chain partners, says Nicole Rycroft, executive director of Canopy, which supports innovations that prevent deforestation. According to one estimate, more than 200 million trees are cut down each year to be turned into textiles. 



Though there was interest from fashion companies for innovative, recycled materials, “demand and time were our main challenges,” Magnus Lundmark, Circulose CEO (and former COO at Renewcell), says in an email. “We had many developments in place with brands, but our runway ran out.”



When it came to demand, some purchases fell through, and price was also a deterrent: fibers made with Circulose could cost almost a third more than viscose-made wood pulp. Then there was the fact that Renewcell struggled to fulfill the purchases it did have because of complexities with the fashion industry’s supply chain, which affected its profits. It then reduced the amount of Circulose it produced to preserve cash, which led to challenges in securing more funding from shareholders and lenders to continue operating.



Their cash on hand didn’t match the time needed to really integrate Circulose “into a very complex, very long supply chain,” Rycroft says. The fashion industry has spent more than 100 years optimizing its supply chain for certain materials, she adds, and for a “take-make-waste” model, in which resources are taken from the earth, made into products, and then sent to landfill (as opposed to a circular model).



Renewcell worked fine with capsule collections and small-scale brand products, but going to commercial scale required larger orders, which weren’t coming in, and which the company would have most likely struggled to fulfill anyway. Rycroft says some fiber producers that Renewcell sold its Circulose pulp to needed six weeks to adjust their production lines for the product, but others needed months. “They have to adjust the running speed of their machine slightly and the way that they handle the new material. The dying recipe has to be slightly different,” she says. 



Eventually, Renewcell issued a profit warning over slow sales. Inditex then said it would buy 2,000 tons of viscose made with Circulose that was already available—but still, it took several months to get that material through the supply chain and to Inditex’s commercial team. That highlighted the issues around what it took to actually integrate the material into the production process. “It’s a complexity that I think everybody actually found surprising,” Rycroft says.



[Photo: Renewcell]



How Circulose got revived 



Renewcell’s bankruptcy was an “all hands on deck moment,” Rycroft says, for Canopy and its partners. Canopy rallied the brands it was connected to, and within three weeks, secured 30 letters of intent from brands to purchase Circulose. That was shared with potential Renewcell buyers to show that there was some stabilization to this market.



[Photo: Renewcell]



But just showing demand wasn’t enough. The issues with Renewcell were embedded in the complex fashion supply chain. Fixing things meant getting brands aligned on exactly what materials they would be purchasing. Previously, Renewcell was doing small batches of customized blends: the 50% Circulose blend used for the H&M dress, or the combined 16% Circulose pulp used in Levi’s 501s (the rest of the jeans were 24% wood pulp and 60% organic cotton). 



Constantly switching to different batches of material added even more complexity. To get to an economy of scale on pricing and quality, Rycroft says, that supply chain needed to be streamlined. The brands that sent letters of intent to purchase Circulose, including Mango, Zalando, and more, agreed to one cohesive product: a 30% blend, which, she says, will allow the supply chain to ramp up. 



Going forward, Circulose will continue to streamline the yarn and fabric blends it offers, Lundmark says. “It will help to get Circulose to market quicker if there are few options and we do not rely on each brand to individually create unique materials.”



“One of the lessons I think we collectively learned from the experience with Renewcell is that this kind of simplification and streamlining in the early stages is going to be valuable—not just for Circulose and the second chance that we get with them, but for all the other innovators that are not that far behind” Rycroft says. 



It’s not clear exactly when Circulose’s commercial plant will be up and running again, but Rycroft says there’s interest for that to happen “as soon as possible.” The new owners of Circulose have just recently finalized the paperwork, and Lundmark says that a formal business strategy will be finalized “in the coming months. In the meantime, the company is rebuilding its team and working to sell the existing supply of Circulose pulp.



“Once we have successfully moved through the inventory, our plan is to restart the factory in Sundsvall and continue to produce based on demand,” he adds. Canopy is also working with its brand partners to turn those letters of intent to buy Circulose into actual purchase orders, now that there’s a legal entity in place for the company. 



Though it’s only been months since that bankruptcy, Rycroft says the supply chain is now smart, wiser, and “better primed for what is actually needed to ensure innovative materials can scale.”