Bio-chemical supply chain development business models, strategies and policy impacts

Transcription

1 Bio-chemical supply chain development business models, strategies and policy impacts David Sparling and Erin Cheney Chair in Agri-Food Innovation and Regulation SPAA Workshop January 12, 2011

2 Project SPAA project with Bodo Steiner OMAFRA /University of Guelph Research Program in partnership with Richard Ivey School of Business Lead Investigators: David Sparling, Ivey Chair Agri-Food Innovation & Policy, and John Cranfield, University of Guelph Project: Identifying successful business models, strategies and policies for promoting the Canadian bioeconomy Semi-structured interviews, secondary research, needs assessment, policy recommendations To be completed June 2011

3 Objectives - Understand Market opportunities along the entire biochemical chain State of the industry and how it is evolving Challenges at the different levels Role of agriculture in bio-chemical chains Impact of policy and policy needs

4 The opportunity for bio-based plastics is huge - but largely unrealized 268Mt World plastics consumption Mt Max. technical substitution potential of biobased plastics 0.36Mt World biobased plastics capacity in Mt World biobased plastics capacity in 2020 Potential capacity of biobased plastics on technical basis Capacity of bio-based plastics (including plastics and fibres) Synthetic fibres Plastics (including thermosets and thermoplastics) Source: Shen, L., Haufe, J, Patel, M. Product overview and market projection of emerging bio-based plastics PRO-BIP 2009

5 Capacity (million tonnes per year) Projected world-wide capacity of bio-based plastics* (based on company announcements made before March 2009) Other Bio-based monomers PHA Bio-based Ethylene PLA Starch plastics * Does not include cellulosics Source: Shen, L., Haufe, J, Patel, M. Product overview and market projection of emerging bio-based plastics PRO-BIP 2009

6 It s not just about plastics * Bio-based polymers Petro-based polymers Bio-based plastics Bio-based non-plastics *Worldwide total of bio-based polymers (20Mt) comprised of: 0.36 Mt emerging bio-based plastics (2007 value), 4 Mt of cellulosics, Approx. 15 Mt of non-food, non-fuel and non-plastic starch products, Approx. 1 Mt alkyd resins Source: Shen, L., Haufe, J, Patel, M. Product overview and market projection of emerging bio-based plastics PRO-BIP 2009

7 Production will be more global Worldwide production of emerging bio-based plastics (0.36 Mt) by region (2007) 29% 1% 33% 37% South America Europe USA Asia-Pacific 12% Projected capacity by 2020 (3.46 Mt) by region 19% 24% 18% 27% South America Europe USA Asia-Pacific Unspecified Source: Shen, L., Haufe, J, Patel, M. Product overview and market projection of emerging bio-based plastics PRO-BIP 2009

8 ECONOMY ENVIRONMENT Energy Consumer Policy AGRI-ECONOMY Oil Demand CSR Incentives Regulations Biomass source Technology BIOECONOMY Market Policy Chemicals Solvents Energy Fuel Materials Plastics Polyols Heat Composites Plasticizers

9 Non-renewable energy use in GJ/t Non-renewable energy (NREU) use comparisons (NREU = fossil + nuclear energy) ENERGY TECHNOLOGY 80 PERSPECTIVES Scenarios 20 & Strategies to Pchem Caprolactam Pchem Caprolactam BioCaprolactam FUTURE BioCaprolactam FUTURE Pchem HDPE Pchem HDPE BioPHA TODAY BioPHA TODAY BioPHA FUTURE BioPHA FUTURE Pchem Ethylene Pchem Ethylene BioEthylene TODAY BioEthylene TODAY BioEthylene FUTURE BioEthylene FUTURE Pchem PET Pchem PET BioPLA TODAY BioPLA TODAY Monomers and polymers by Industrial Biotechnology from maize starch BioPLA FUTURE BioPLA FUTURE Pchem PTT Pchem PTT BioPTT TODAY BioPTT TODAY BioPTT FUTURE BioPTT FUTURE PchemPolyolefins PchemPolyolefins Natural polymers Starch polymers with 0%-60% copo... Starch polymers with 0%-60% copo... Patel, M. et al.: BREW study

10 Canadian chemicals market (2002) Chemicals used by the chemical industry as inputs ($22.8 billion) Chemicals used as inputs by all Canadian industry ($67.6 billion) with those used by other industries showing Total use ($80 billion) with the final demand showing Source: Statistics Canada (2002), Input-Output Tables use and Final Demand Matrixes (preliminary) from Towards a technology roadmap for Canadian forest biorefineries (2006)

11 Biochemical supply chain Input suppliers: Pioneer HiBred Monsanto Input suppliers: DSM, Novozymes Input suppliers: PolyOne, BASF, Segetis, Dow NGOs: Ontario BioAuto Council Sustainable Chemistry Alliance BioIndustrial Centre Soy 20/20 Grain Farmers of Ontario, OFA Canadian Plastics Industry Association Chemistry Industry Association of Canada Ontario Agri-Food Technologies BIOTECanada Biomass production, preprocessing& storage Agricultural producers, elevators, forestry mills, municipal waste facility Crushing, refining, milling Corn Products International (CPI/Casco), Cargill, ADM, Bungee, Tembec, IGPC Processing Examples of chain members Cargill, Dow, DSM, DuPont, Danisco, Lorama, Metabolix, Azule, Segetis, Gevo, BioAmber, Elevance Secondary processing, formulating CG Tower, Schwartz Chemicals, Woodbridge Group, Carpenter Foam, Lanxess End product assembly Magna, Ford, GM, Sealy, Wal-Mart, Ingeo, Universities/Research Organizations: University of Guelph National Research Council BRI NRC Magna Centre University of Toronto University of Waterloo Trent University UWO-Fraunhofer: International Composite Research Centre AAFC ABIP - ABIN

12 Some preliminary findings & observations

13 Observation #1: Supply chains are international with some missing links in Canada OEM Missing link New economy bio-based Old economy bio-shift Tier 2 supplier Home Hardware PolyOne Molders Tire manufacturers (85%) Chewing gum Segetis Maxtech GreenField Ethanol [De-icer] Lanxess [Bio-rubber] Value Levulinic acid [single entity China] Optimum Colour (Compounder) BioAmber [Succinic acid] GEVO [Iso-butanol] Corn, wheat (sugar), lignocellulose (NG), municipal waste Switchgrass (fibre) Corn, wheat, lignocellulose (NG) Corn, wheat, lignocellulose (NG)

14 Role of Agriculture Primarily a supplier of inputs End products often identical Inputs are interchangeable Between grains With other sources of starch With oil Key to higher value differentiated end products environmental impact (oil), end product characteristics (oil, other inputs)

15 Why do companies enter bio-chemical markets? Varies depending on the level of the chain Bio-focused firms enter to build a new biobased idea into a successful business Chemical firms oil replacement for cost, assurance of supply and environmental impact Chemical consumers responding to customer/consumer demand for sustainable products. Same product with new properties

16 IPEX Index (Jan 1993=100) ICIS Petrochemical Index (IPEX) November 2010: November 2001: Copyright 2010 Reed Business Information Limited Jan-93 Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 ICIS Index (IPEX) prices 12 essential petrochemical grades in the US, western Europe and the northeast Asian markets; weighted by regional nameplate capacity to generate a monthly index value. The IPEX product basket comprises ethylene, propylene, benzene, toluene, paraxylene, styrene, methanol, butadiene, polyvinyl chloride (PVC), polyethylene (PE), polypropylene (PP) and polystyrene (PS).

17 USD per metric tonne CBOT weekly corn futures (USD) November 2001 $93.80 November 2010 $

18 Relationships are critical - Case study: BioAmber R&D alliance with NRC for feedstock screening, process improvements Sugar/HFCS + CO 2 CO 2 and biomass as feedstock give advantage for carbon tax Cargill Exclusivity Agreement DuPont Licensing Agreement Bio-succinic acid Current production from France plant Market Strategic alliance with Mitsui for Asia distribution Build upon recent acquisition of Sinoven Poly Butylene Succinate Derivatives De-icer Strategic alliance in NA with GreenField Market projected to grow from 3KT/yr to 50KT/yr Food service coffee lids, cups, dishes, cutlery, cosmetic pkg, etc. Highway, runway, aircraft de-icing solutions Projected prod n of 10-M gallons per year Wholesale, retail Market Government procurement, airport authority

19 Observation #2: Examples of Canadian R&D excellence Biocomposite work from UG enters the market Composite development, processing Agronomics Polyol formulation mastered by Ontario firm & new seed trait based on UG breeding Formulation, processing R&D for high oleic oil profile + low linolenic Bio-succinic acid manufacturer partners with NRC Next generation production; development and scale up of fermentation process Switchgrass soybean corn

20 15 years Observation #3: Knowledge creation has lengthy and expensive timeline Ford (23 vehicles), stadium seating, office furniture, mattresses Woodbridge Foam commercializes BioFoam (2007) Woodbridge Foam gains exclusive rights for use inauto (2004) Cargill commercializes technology in BioH polyol based on U Pittsburgh technology R&D efforts focused on soy-based PU foams at Woodbridge (1995- present) R&D work into soy-based polyol (University of Pittsburgh, patent filed 1998)

21 Impact of policy Relatively little impact on bio-chemicals correlates to low policy focus Adoption lags due in part to a lack of a price on carbon Support for innovation organizations is increasing activity early for results Firms are not focused on policy or driven by policy

22 Located in Sarnia chemical cluster Makes investments in close to market green chemical technologies Funding minimal - $5M over 5 years mostly committed already Board industry with some university/local commercialization expertise

23 Observations #4: Current government funding programs are misaligned with industry needs or just plain missing Looking the wrong way?: Strong focus on fuel (first and second generation) with little willingness to expand target of existing funds to capture more valuable bio-based chemicals, plastics Risk averse: Funds target R&D with little focus on higher risk scaled production Smoke and mirrors: Internal reassignment of budgets with zero allocation to industry-led R&D

24 Summary Opportunity for farming, forestry, chemical industries, providing sustainable alternatives to manufacturers Long time to commercialization need $ for R&D directed at industry as well as public sector Do not need to build new value chain but foundational infrastructure for new technologies in required Heroic efforts required: policies, incentives for industry, and focus International collaborations will be needed: Canada open for business

25 Continuing the research Following the companies and the investments challenges and strategies Where is the value and who captures it? Can agriculture play a larger role? Strategies and players? Long term impact of policy and of green chemistries business and environmental

26 Thank you Dave Sparling The Chair of Agri-Food Innovation and Regulation is supported by the Agricultural Adaptation Council