Industry Market Trends
Bio-Based Materials Greener But Still Have to Compete on Price and Performance
January 14, 2013
intermediates, coatings, disposables, automotive materials and packaging.) Markets for plastics and polymers and adjacent segments are attractive targets for innovators in chemical products. Research firm IBISWorld estimates that plastic products were worth $779.8 billion in 2012 and will grow to $941.4 billion in 2017. Global Industry Analysts says the global coatings market should reach $107 billion by 2017. Pike Research predicts that the global packaging market will be worth $530 billion by 2014, with sustainable packaging representing $170 billion of that. And the Center for Automotive Research estimates that the U.S. automotive industry alone reached $370 billion in 2011, with "the majority of this value is in the automotive parts sector." Bio-based materials in their many forms have opportunities to enter all of these markets, at least in small ways. Once a material gets a foothold and begins to prove itself, perhaps in low-margin applications, it might be able to follow the disruptive-innovation model and work its way up into larger and more lucrative segments. "What's interesting," said Kalib Kersh, who leads the bio-based materials and chemicals practice at Lux Research Inc., "is that the story is shifting from bio being barely good enough to becoming an area of technology the larger chemical companies are going to have to look to just to meet demand. And if they don't use bio, they're going to at least be putting themselves at risk that another company is going to undercut them." Is Being Green Good Enough? Substituting plant-based materials for conventional petrochemicals does have potential for reducing companies' greenhouse gas (GHG) emissions, as well as the life-cycle environmental effects of their products. François de Bie, marketing director for bioplastics at Purac, which makes polylactic acid (PLA) for such applications as packaging and disposable cutlery, tells me, "The major trends supporting our bioplastics business are the drives towards a more sustainable economy and an economy that makes better use of available resources with less impact on the environment. " However, most experts I have spoken with say that green-cred isn't enough to help bio-based materials break into markets. One possible objection to bio-based materials is the food-versus-fuel criticism that arises over biofuels. In a world where many people struggle to find enough to eat, is it really fair to hog agricultural land and feedstocks just to make plastic? Some industry players argue that the food-versus-fuel argument doesn't really hold water in the case of biopolymers. Calling such criticisms "exaggerated," Purac's de Bie told me that "it requires just 100 square meters of agricultural land to sustainably meet the plastic demand of one person with a West European lifestyle. Even in densely-populated Europe, some 3,800 square meters of arable land is available per capita." Alif Saleh, vice president for sales and marketing at Myriant, agrees. Myriant manufactures a bio-based succinic acid for such applications as plastics and coatings and has bio-acrylic acid in its pipeline as well. Saleh pointed out that, "Ninety-five percent of the oil being produced in the world goes into transportation energy and heating. Only 5 percent goes into chemicals. So a relatively small component of oil output goes into chemicals. Even if you replaced all of the chemicals with renewables, it would make only a fairly small dent in terms of sugar feedstocks." A Bio-Based Hedge for Plastic Feedstocks? The more important driver for bio-materials is volatility in supply and pricing for petrochemicals. In recent years, petroleum prices have started to rise. Alan Berry, managing director for biochemical research at Novozymes, which is working with Cargill and BASF on development of bio-based acrylic acid for such applications as coatings and absorbent materials, said, "What keeps chemical company executives awake at night is security of supply for chemical building blocks -- not just pricing, but the potential for disruption in the petrochemical supply chain. What if geopolitical instability in some part of the world meant you couldn't get the building blocks you needed to make your plastics?" Monomers, polymers and compounds derived from plant feedstocks might provide a hedge against such supply constraints and price volatility. Purac's de Bie said, "PS [polystyrene] prices have not only shown a lot of volatility, but have, on average, increased significantly over recent years. Price volatility of bioplastics, on the other hand, has been significantly less than many oil-based plastics. The market price for PLA has been very stable over the past few years." Myriant's Saleh stated, "Customers want to make sure they have steady supply and steady price. You can't plan for the future with all this price volatility. You don't know when to put new plants online. With renewable chemicals, you take out some of the uncertainty, because the cost structure is more stable." In the End, It Comes Down to Economics. But You Knew That. In some cases, bio-based production can achieve efficiencies that aren't available for petrochemical production. Kersh, of Lux Research, insisted that some companies "are saying you can build one of these bio plants at half the scale of a naphtha cracker. We're talking about some profound things being possible that aren't really feasible in the area of petroleum. You can have a lot of flexibility with the biorefinery that's kind of unheard-of with the petroleum refinery." For example, "you might just be able to put different yeasts in the same fermenter and come out with different products." Regardless of environmental benefits of bio-materials or the need to seek out new sources of supply for the chemical industry, everyone I spoke with agrees that plant-based materials have to be able to compete on price and performance with conventional petrochemicals. Myriant's Saleh claimed adoption of biopolymers is "really about the age-old issue of price and performance." In some cases, such as polylactic acid (PLA), he tells me, "the price is down, but the performance is still not adequate." In other cases, such as PBS made from starch, "they have the performance for the customer but still have a price issue." Myriant is about to open its new plant in Louisiana, which makes succinic acid from sugarcane. Saleh believes Myriant has solved the price/performance problem: "The price of carbon from sugar is about half the cost of carbon from oil, so we have a significantly lower feedstock cost." In connection with PLA's performance, a spokesperson from Purac pointed out to me, on the other hand, that their high-heat PLA technology now reaches "performance levels comparable to existing PP, PS and ABS," giving it potential applications "in the automotive and consumer appliance industries." Kersh acknowledged that sustainability is a consideration in decisions around sourcing of biopolymers and other plant-based materials. "But what's really driving decision-making is the economics," he said. "If the economics don't work out, none of the other benefits are going to be appreciated." Saleh added, "Green is a very good tie-breaker, but if you can't compete on price and performance and quality, you're not going to be able to sell a green product." EDITOR'S NOTE: This article is the sixth and final part in a series on how bioplastics are being used throughout the manufacturing industry. You can read the rest of the series here:After spending several weeks examining the applications and markets for plant-based polymers and related materials, I think it's safe to say that this broad category of materials has potential environmental benefits. In spite of that, though, bioplastics, biopolymers and other plant-based materials still have to compete on the key criteria of performance and price. (See my recent articles on bio-based materials in the markets for
- Part 1: Bioplastics are Getting a Toehold in the Packaging Market.
- Part 2: Do Bioplastics Have a Place in Automotive Manufacturing.
- Part 3: Disposables a Natural for Bioplastics but Infrastructure Needed.
- Part 4: Coatings Market in a Natural for Bioplastics.
- Part 5: Bioplastics Can Find Diverse Applications in the World of Intermediates