Market outlook: Bioplastics growth set to rise

Demand for bioplastics is set to increase, but the industry needs to establish a strong market pull to realise the potential for the new capacities that are coming on stream

Global demand for bio-based and biodegradable plastics is expected to rise by 19%/year to 960,000 tonnes by 2017, according to a recent study by The Freedonia Group.

Bio-industry players are beginning to realise that stimulating market pull, rather than technology push, should be the current focus Copyright: Alamy

According to Freedonia analyst Kent Furst, “Robust growth in demand is expected in virtually all geographic markets,” driven by consumer preferences for sustainable materials, the increased adoption of bioplastics by plastic processors and compounders, and new product developments which expand the range of applications for bioplastics. However, despite the rapid rise in demand, bioplastics are still expected to account for less than 1% of the overall plastic resin market in 2022.

Furst found that: “The success of the bioplastics industry will ultimately depend on price and performance considerations, and large scale conversion to bioplastics will not occur until price parity with conventional plastic resins is achieved.” Starch-based resins and polylactic acid (PLA) will remain the leading bioplastic products through 2017, combining to account for over 60% of demand. For starch-based resins, advances will be bolstered by increased regulation of conventional plastic products, particularly plastic bags.

PLA demand will benefit from the development of resins and compounds with enhanced performance attributes, suitable for more durable applications such as fibres, automotive parts and electronic components.

The most rapid gains in demand, however, are expected for bio-based commodity resins such as polyethylene (PE) and polypropylene (PP), which are just beginning to enter the commercial market.

Western Europe was the largest regional consumer of bioplastics in 2012, accounting for over half of global demand. The region will see strong gains through 2017 as well, bolstered by added regulations and incentives which favour bioplastics over conventional resins. North America will also register strong advances, with demand in the region expected to more than double, driven by rising consumption of PLA and bio-based commodity resins.

As bio-based polymers and chemicals begin to be available in larger volumes as technology transitions from development to commercialisation, market pull rather than technology push is going to play a more important role in developing the demand.

Players are beginning to realise this and the recent European Forum for Industrial Biotechnology and the Bio-Based Economy (EFIB 2013) in Brussels used one of its panel sessions to address the topic of market pull and explore current consumer attitudes towards bio-based materials.

One of the topics considered was the evaluation process that end-user companies implement to determine which products to replace and what regulatory environment they need to support them.

Babette Pettersen, chief commercial officer at BioAmber, says the session was most relevant, with end users such as car maker Audi and Procter & Gamble taking part in the discussion. “The bio-based technologies are playing out right now and pilot plants are being scaled up to commercial capacities – requiring hundreds of millions of dollars in investment. This is the so-called ‘valley of death’ for technology start-ups, which they have to traverse to become successful producers. It’s the Audis and P&Gs of this world that will pull demand through.”

Pettersen adds that there will be a lot of work needed in the value chain and this will need a strong market pull. “We need to find whether our customers and our customers’ customers do have a need and interest and we need to play a role to pull things along the chain.”

The good news, says Pettersen, is that there is growing market evidence that bio-based chemicals, and BioAmber’s succinic acid specifically, enable performance and differentiation, as well as improved sustainability in a broad range of applications, from automotive parts to personal care ingredients. Even so, she adds, BioAmber still needs to work hard to catalyse the connections across multiple levels of the value chain, well beyond direct customers.

One area of use for bio-based materials that is a hot topic today is the automotive industry, although uptake is still in its relatively early stages. Car makers such as Audi, Ford and Toyota have taken steps to replace conventional materials with more sustainable bio-based products.

Hagen Siefert, head of technical department for advanced materials, life cycle assessment and renewable energies at Audi, and a speaker on the EFIP market pull panel, believes that bio-based materials have even greater potential for the next generation of cars and argues that “today a big percentage of conventional materials could be replaced by bio-based materials.” However, he does recognise there are a number of challenges at various stages in the supply chain. One is the time it takes to integrate new technologies into the complex system of a car; another is meeting quality standards and also delivering sufficient material over a number of years. Cost is also another inevitable stumbling block, says Siefert. “The costs of bio-based materials must be competitive to conventional mostly fossil-based materials.”

Siefert suggests that both industry and policy makers must play a part in boosting the use of bio-based parts. In terms of policy makers, the whole life cycle of the product needs to be focused on, as opposed to solely the end-use phase.

Pettersen adds that although commercial plants are coming online in the bio-based sector, several key challenges remain, mainly the scarcity of capital to fund late stage scale-up and commercialisation. “Venture capital and private equity have pulled back, public markets have closed and governments are not there to bridge the gap, except for a few countries like Canada and Malaysia.

“Governments need to step up and provide loans and other forms of funding assistance to help attract investment in commercial-scale projects that have proven they can economically convert agriculture into value-added products, reduce harmful emissions and create manufacturing jobs, especially in Europe.”

BioAmber’s commercial-scale bio-succinic acid unit being built in Canada has received strong support and funding from the Canadian government and agencies including the Sustainable Development Technology Centre (SDTC), the Ontario Ministry Of Economic Development & Trade and the Federal Economic Development Agency for Southern Ontario, “which is very important to us,” she says.

The 30,000 tonne/year unit, being built at the Bio-Industrial Centre, in Sarnia, Ontario, is on track for mechanical completion in the fourth quarter of next year.

BIO-TIC PROJECT WILL IDENTIFY HURDLES IN EUROPE

THE EU bio-industry has recently embarked on a three-year project, known as BIO-TIC, designed to es- tablish an overview of the barriers to innovation in biotechnology in Europe and identify solutions by which the uptake of industrial bio- tech can be stimulated in the region.

It is investigating five business cases:

• Non drop-in bio-based polymers (PLA, PHA)
• Chemical building blocks (platform chemicals)
• Bioethanol (second generation from waste) and bio-based jet fuels
• Biosurfactants
• CO2 as a bio-based feedstock (fos- sil CO2)

BIO-TIC has just released draft roadmaps outlining market potential, technological bottlenecks and non-technical barriers, developed through a preliminary literature review.

This year and next, it is holding a series of eight workshops aimed at validating these roadmaps and identi- fying barriers to deployment of indus- trial biotechnology and what can be done to overcome them, as well as whether there any particular factors which make the EU a favourable place to establish or grow the industry. The results of these workshops will be incorporated into the draft roadmaps and will be supplemented with the results of one-on-one interviews.

The updated roadmaps will then be discussed in a series of five business case workshops, planned for 2014. They will be updated fol- lowing these workshops, refined through further consultation and finalised by July 2015.

Overall, the draft roadmap con- cludes that the market is being hampered by a wide range of differ- ent factors, ranging from economic to regulatory issues. There are a few large players dominating the market which makes it difficult for new (and smaller) players to enter.

In addition, market and technolo- gies are not yet 100% ready for large scale production of bio-based chemi- cals, and the “regulation volatility and complexity” in Europe does not help.

The current financial and econom- ic situation is delaying large invest- ments, and there is a lack of venture capital for investments. There is a need for scale-up financing, partner- ing and investment security.

Although there is new capacity coming onstream in the next few years, investments take a long time to come to fruition and the market is not there yet, so bio-based products will have to compete with fossil- based products. A greater range of end use applications need to be de- veloped. Customers do not neces- sarily understand the term “green” nor do they want to pay a premium for green products despite their higher production costs.

Policy frameworks can do much to promote the development of bio- based chemical building blocks, but they must be internationally coordi- nated to ensure that they have max- imum benefit for all stakeholders.

In many leading countries, current policies tend to be an afterthought of biofuels subsidies, implemented before the different value proposi- tion offered by “bio-based non-fuel” products had begun to emerge.