05 February 2007 00:00 [Source: ICB Americas]
Bio-based chemicals take a steadily increasing portion of the chemical market as environmental issues come to the fore
CLAY BOSWELL/NEW YORK
BIO-BASED CHEMICALS make up a relatively small portion of total chemical sales, but their contribution is increasing as steady advances in production technology bring prices down to levels more competitive with petrochemicals.
In recent years their viability has improved still further as the petrochemical chain yields to the unpredictably high price of oil.
Industrial biotech is booming. Whereas the field claimed 6,200 patents in 2000, by 2005 that number had risen to 22,300, according to consulting firm McKinsey & Company. By the same token, chemical products (including biofuels) relying on either bio-based feedstock, fermentation, enzymatic conversion or a combination thereof accounted for 5% of chemical sales in 2000. By 2005, that had risen to 7%, and McKinsey estimates that the proportion will climb to 10% by 2010.
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Jens Riese, principal at McKinsey & Company in Munich, says several companies are playing an especially prominent role in leading the way toward a bio-based chemical industry. "Novozymes and Genencor/Danisco continue to be the key players in the only 'pure industrial biotech' market, which is enzymes, but a number of companies are coming up, [including] Western biotech players such as Dyadic, enzyme players in Asia, as well as the large chemical [companies] - DSM, BASF, DuPont - which are increasing their activities in enzymes," he observes.
"DSM continues to be the chemical company with the highest sales from products, excluding ethanol, that rely on industrial biotech - more than €1.5b" ($1.9b), says Riese.
As part of its Vision 2010 strategy, DSM plans to strengthen its leadership position in several emerging business areas where it has a leadership position, including industrial, or "white," biotechnology. The company has established a formal white biotech "EBA" (emerging business area), led by Volkert Claassen, who was previously with Genencor.
DSM's portfolio of bio-based chemicals focuses on higher-value-added specialties, such as nutritional ingredients, fine chemicals and performance materials, although it has stated its interest in applying industrial biotech in base chemicals, as well.
"BP is entering the biotech scene and aspires to become one of the leaders - [and] not only in butanol," Riese observes. Biobutanol is one of the targets of a partnership with DuPont. "They are about to establish the first dedicated research institute for industrial biotech, which will host some of the leading academic groups in the field."
BP announced the initiative, called the Energy Biosciences Institute, last June. Over the next 10 years, the company will invest $500m in the EBI, which is to be attached to a major academic center in the US or UK.
"Cargill continues to be among the pioneers and shapers in a number of bio-based products," Riese continues, "from PLA [polylactic acid] through bio-based polyols and other bulk chemicals. Many of these have the potential to become multi-billion dollar businesses, and Cargill is well positioned in terms of IP and bio-refining expertise to capture the opportunities."
Cargill's PLA venture, NatureWorks, was begun in 1997, when the agriculture giant partnered with Dow to find a fermentative route to lactic acid that would yield a PLA competitive with other polyesters on the market. Dow left the JV in 2005. Cargill, which has invested over $700m in the business, is now the sole owner. The NatureWorks production facility, located in Blair, Neb., has a capacity of 140,000 tonnes/year of PLA, which is marketed as NatureWorks polymer and Ingeo fiber.
Since 2005, Cargill has also been marketing bio-based polyols derived from vegetable oils such as soybean. Branded as BiOH, the polyols are designed as alternatives to petroleum-based polyols used as raw materials in flexible foams. Cargill says the technology behind BiOH products can also be leveraged to replace petroleum-based polyols in other urethane applications.
"DuPont has made the biggest jump in this field, with the new plant for bio-based PDO [1,3-propanediol] for the Sorona polymer, and a major move in biofuels," says Riese.
DuPont first synthesized polyesters using PDO half a century ago. Although the fibers obtained were of a softness, resilience and dyeability ideal for fabrics, they were too expensive, owing to the cost of petrochemical PDO. A fermentative process developed with Genencor, however, has lowered the cost enough for the fiber to be competitive.
To commercialize the process, DuPont has partnered with Tate & Lyle, a sugar producer with a core competence in fermentation. The joint venture, DuPont Tate & Lyle Bio Products, made its first shipments of the fermentative product from their $100m, 45,000 tonne/year facility in Loudon, Tenn., in November. Some of this Bio-PDO, as it is trademarked, will go to the production of Sorona, either by DuPont or a partner, such as Zhangjiagang Glory Chemical Industry.
Another portion of the Bio-PDO will be used to produce a new line of DuPont polyols to be called Cerenol. These polyols have multiple applications. For example, Hytrel, a popular DuPont thermoplastic polyester, has a polyether component traditionally supplied by a petrochemical polyol. By the end of 2007, DuPont will instead use a Cerenol to manufacture Hytrel. DuPont also plans to use the new polyols as additives in performance coatings.
In both cases, the new polyol is not only renewable, it offers performance as good or better than the material it replaces, says Michael Saltzberg, global business director of biospecialties, DuPont Bio-based Materials. "Basically the goal of our renewably source materials initiative is to give people the same value in use that they have today - in other words, the same or better performance, with all the advantages of renewable resources."
A "green premium" - that is, value intrinsic to renewable sourcing - of no more than 5-10% does exist for some materials, Saltzberg says, but generally it is not decisive. "We've seen a lot of people try to come out with lower-performing materials and/or more expensive material. Frankly, we don't think that's going to work."
With the price of oil above $55, however, the green label may increasingly equate to persuasive economic virtues, as well.
"If we continue to be in a world of high, volatile oil prices, there's going to be more and more pull for these renewably sourced ingredients, no question," Saltzberg observes.
The picture is complicated by the tremendous interest surrounding biofuels, which threaten to overshadow bio-based chemicals.
"We have seen a very steep increase in the R&D spent on bio-based energy and materials with the rise of the oil price," says Riese. "However, there is also competition between different fields. The fact that the world has jumped so heavily on biofuels is on the one hand good news for biomaterials/chemicals, as it increases the overall awareness [among] investors, senior management, big industrials as partners, and accelerates the development of some basic technology. There can also be synergies in biorefineries that produce ethanol and other, higher-value-added products on the side. On the other hand, I know that many companies have also diverted spend away from chemicals/materials to biofuels."
DuPont, for its part, is committed to the whole broad area of bio-based materials, says Saltzberg. "We haven't had any trouble getting the resources we need." He describes a diverse pipeline of both commodity and specialty products. "It's going to be important for us to make our base materials business greener, but we also have a tradition of bringing out science-based products with a lot of knowledge content to them, and that's where a lot of the margin's going to come from."
There are many options for ambitious producers. In August 2004, for example, the US Department of Energy's Biomass Program issued a report, "Top Value Added Chemicals From Biomass," identifying the 12 most promising building-block chemicals that can be produced from sugars by biological or chemical conversions. The 12 building blocks can be further converted to numerous high-value, bio-based chemicals or materials. In a bio-based economy, such building blocks would perform a function akin to the secondary commodities of the petrochemical chain - chemicals such as methanol, propylene, butadiene, cumene, etc.
Cargill has been developing one of these building blocks, 3-hydroxypropionic acid (3-HP), in collaboration with Codexis and Pacific Northwest National Laboratory. The work encompasses not only a fermentative route to 3-HP, but also catalysts for its downstream conversion to six derivatives: poly(hydroxypropionate) PDO acrylamide malonic acid acrylic acid and ethyl 3-ethoxypropionate (EEP). Such projects will be key to transforming the chemical industry.
"There's obviously a number of people who have taken a different strategy, that are backward-integrating to cheap hydrocarbon sources," DuPont's Saltzberg observes. "I also think that new players will emerge that are basic in the feedstock, like the Cargills and ADMs of the world. They may emerge as chemical/material suppliers. It's difficult to say where things are going, but we're big believers, as evidenced by how much we've been investing in this, that the world needs to go this way. It's just a matter of time."
How much time is anyone's guess. "It is possible to replace petchems," McKinsey's Riese says. "We have worked with several chemical and technology companies on opportunities that only require an oil price of $40 - assuming the technology works one day - to have a better cost position than petchems."
But the years of development represent a major investment, he notes, also, Technology companies often need an industrial partner, while chemical companies that already produce need to look at growth. "It is much easier to build a next plant using new technology, than to justify the shut-down of an old plant," says Riese. "It is a long way from the lab to a large-scale refinery."
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