Second Generation Feedstocks some comparative considerations

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Augustus Hutchinson
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2014 by Dr Sarah Hickingbottom LMC International

1 Second Generation Feedstocks some comparative considerations Presentation to BIO World Congress 2014 by Dr Sarah Hickingbottom LMC International Philadelphia, 13 th May 2014 LMC International,

LMC International we develop unique, independent research in agricultural commodities, biofuels, foods & industrial materials as well as their end-use markets For well over 30 years LMC has delivered

2 LMC International we develop unique, independent research in agricultural commodities, biofuels, foods & industrial materials as well as their end-use markets For well over 30 years LMC has delivered in-depth, specialist analysis to leading international companies & organisations Our research covers a wide range of industry sectors: Bio-based Chemicals Grains Coffee Sugar & Sweeteners Feed Ingredients Food ingredients Oleochemicals & Glycerine Biofuels & Biomass Oils & Oilseeds Cocoa Starch & Fermentation Sugars Rubber & Tyres Recognized by many of the world s major companies as experts, LMC provides business with strategic insights unavailable elsewhere LMC International,

3 A brief bio-based chemical overview LMC International,

4 A myriad of bio-based chemicals can be derived from carbohydrate or cellulosic feedstocks via C5/C6 sugar intermediates Acrylic acid ECH PDO GBL PP EPDM PLA Lactic acid 3-HP Glycerine PG 1,4-BDO PBS THF Ethylene PVC C3 n-butanol SA MA Ethanol C2 C4 iso-butanol PE MEG Carbohydrates Butadiene iso-butene PET PTA Xylitol Polyisobutene Sorbitol C6 PHA C5 Itaconic acid Isosorbide 2,5-FCDA Adipic acid Furfural Polyitaconic acid THF Isoprene PEF Nylon 6,6 Levulinic acid Polyisoprene LMC International,

5 Succinic acid (SA) exemplifies new opportunities: high petro-costs limit market size, but, at scale, the bio-based SA demand could reach several million tonnes if the bio-derived molecule has a O lower price point O O THF O NH 2-Pyrrolidone O N CH 3 -Butyrolactone O OH HO O Succinic acid HO OH 1,4-Butanediol O H 2 N NH 2 O Succindiamide H 2 N NH 2 1,2-Diaminobutane N-Methyl-2-pyrrolidone NC CN O H 3 CO OCH 3 O Dibasic ester Succinonitrile LMC International,

6 Selected players operating/building commercial scale bio-based chemical plants, their primary target molecules, feedstocks & capacities Bio-based chemical Company Feedstock Capacity (tonnes) Lactic acid, derivatives & B&G, Galactic, NatureWorks, Purac, Corn, sugar, molasses 570,000 PLA Synbra Ethylene / polyethylene Braskem, Dow & Mitsui Sugarcane ethanol 550,000 Epichlorohydrin Wilmar -Yihai Kerry Group, Jiangsu Glycerine 390,000 Yangnong, Solvay, Vinythai Methanol BioMCN Glycerine 200,000 Propylene glycol Oleon/BASF, ADM Glycerine, sorbitol 120,000 1,3-Propanediol DuPont Tate & Lyle, Metabolic Explorer, Corn glucose, glycerine 92,400 Zhangjianang Glory Biomaterial Succinic acid BioAmber, Myriant, Reverdia, Succinity Carbohydrate 68,360 Isobutanol Gevo Corn 55,000 Farnesene Amyris Sugarcane 40,000 Fatty acids, fatty alcohols, REG Life Sciences (LS9) Corn, sugarcane, glycerine 34,000 FAME & chemicals Butanol Butamax Advanced Biofuels Corn, sugarcane 30,000 LMC International,

7 Once the bio-based sector establishes itself, economics will govern which products are successful & which fail feedstocks especially Feedstock requirements will prove key to long term profitability: Choice of feedstock (or, indeed, feedstock flexibility) Choice of feedstock entry point along its value chain Choice of feedstock sourcing strategies, e.g. farmer vs. trader or origin vs. destination LMC International,

8 Summary of logistics governing 1 st & 2 nd gen. feedstocks & where in value chain is the most attractive to enter from a chemical player POV Sugarcane Sugar beet Are there raw material logistical constraints? Perishable process at origin Perishable process at origin Is a co-product off-take market needed or not? Corn None Yes Wheat None Yes Barley None Yes Which is the 'most attractive feedstock' in the value chain? Is this 'most attractive feedstock' preferable at origin or destination? No Molasses & raw sugar Origin No Molasses Origin Native starch & glucose syrups Native starch & glucose syrups Native starch & glucose syrups Glucose at processing origin; native starch is either Glucose at processing origin; native starch is either Glucose at processing origin; native starch is either Glucose at origin; native starch is either Sugars at processing Cassava Perishable: process Native starch & No at origin glucose syrups Biomass woody None (once pelletised) No C5/ C6 sugars & ethanol origin; ethanol is either Low density, high bulk: C5/ C6 sugars & Sugars at processing Biomass residues No process at origin ethanol origin; ethanol is either Oilseeds None Yes Vegetable oil Either Palm FFB Perishable: process at origin No Vegetable oil Either Glycerine None (though crude contains ~ 20% water) No Glycerine Either LMC International,

9 So, why switch to second generation? Drivers include: land use; food vs. non-food; feedstock diversification; green issues; consumer wants; biofuel experiences; & government policies Million hectares LMC International,

10 Woody biomass: supply & source LMC International,

11 USDA biomass supply forecast illustrates the US s biofuel & bio-based chemical biomass potential base case & high yield scenarios out to ,400 Base case 1,400 High yield case Million dry tonnes 1,200 1, Million dry tonnes 1,200 1, Energy Crops Forest resources currently used Corn Stover Other agricultural biomass Ag resources currently used Forest biomass potential LMC International,

12 There are a number of cost components to consider, e.g. the delivered cost of clean chips comprises stumpage (the fee paid to the forest owner), harvesting, transport, chipping & bark loss Bark Loss Chipping Cost Stumpage Transport Harvesting LMC International,

13 Agricultural residues: supply & source LMC International,

14 By 2030, under the high yield scenario, US corn stover supply could reach as high as 245 million dry tonnes a strong potential feedstock supply 1,400 35% Million dry tonnes 1,200 1, % 25% 20% 15% 10% 5% Corn stover share of biomass % Forest biomass potential Other agricultural biomass Forest resources currently used Corn stover share Ag resources currently used Corn Stover Energy Crops LMC International,

15 Potential biomass supply from crop residues in 2011 & 2020 (million tonnes dry matter) Million tonnes dry matter US EU Canada South America Indonesia Malaysia West Africa LMC International,

16 Bagasse s use in electricity generation (either for internal use or to supply the grid) will underpin price points & supply volumes mills are willing to offer potential cellulosic sugar producers US$/MWh Spot Electricity Price Biomass Electricity Auction Price LMC International,

17 Cellulosic ethanol: driving second generation progress LMC International,

18 Global cellulosic ethanol capacity is projected to expand to 1.6 billion litres by 2016 with North America accounting for ~60% of this growth billion litres of cellulosic ethanol Asia Europe North America Oceania South America LMC International,

19 Cellulosic ethanol production costs, for a US stand-alone hydrolysis plant, are projected to fall by ~30% between largely based on cheaper enzymes US$ real 2013/litre ethanol Biomass Enzymes Other Cash Costs Depreciation Note: Based on a fixed price for delivered biomass of $65 per bone dry tonne LMC International,

20 Cellulosic ethanol demand will be driven initially by policy this will limit market demand unless discretionary blending proves profitable US demand is driven by the Renewable Fuels Standard (RFS2). However, a shortage of cellulosic ethanol resulted in cuts to their mandate & it may need cutting again Once mandates are cut, a political question is created over their re-introduction Stagnating gasoline consumption in the US has created a ceiling for E10 volumes compounded by the failure of E-15 The proposed EU cap on food-based biofuels funnels the market towards second generation biofuels, however this cap has not been made official & the proposal has no specific cellulosic requirement LMC International,

21 Implications for the bio-based chemical sector as the cellulosic ethanol industry commercialises: Initial capacity is based primarily on hydrolysis potentially creating cellulosic sugar volumes which can be diverted towards chemicals, players may find this attractive given: Cellulosic ethanol requires a subsidy to compete against gasoline, hence its future is insecure as political support weakens in the US & EU in contrast with chemicals Bio-based chemicals should add value as compared to fuel Globally, current data suggests the most promising feedstocks are US corn stover & Brazilian bagasse LMC International,

22 Cellulosic sugars: supply chain & cost profile comparison LMC International,

23 Comparing 1 st & 2 nd generation fermentable sugar production cost profiles reveals differences, e.g. lignin affords energy self-sufficiency to 2 nd gen. Starch glucose production cost profile (corn wet milling) C5/C6 biomass sugars production cost profile (corn stover - enzyme hydrolysis) Energy 8% Labour 6% Other 5% Enzymes 23% Raw Material Cost 34% Capital 14% Net Raw Material 67% Labour 10% Capital 33% LMC International,

24 Vertical integration in the cellulosic sugar supply chain offers advantages especially while the merchant market develops partnerships & joint ventures are alternative options Biomass Biomass Biomass C5/C6 sugars C5/C6 sugars C5/C6 sugars Bio based products Bio based products Bio based products End users End users End users LMC International,

25 Companies active in the development of second generation cellulosic sugars include: SucreSource LMC International,

26 Thank you for your kind attention LMC International,

27 LMC carries out bespoke consulting projects for bio-based chemical, fuel & material players as well as producing offthe-shelf reports, including: 2 nd Generation Bio-based Feedstocks how viable are they? Oleochemical Report 2014 Ethanol Market Report Feedstocks for Bio-based Chemicals which will be competitive? Global Crop Outlook 2014 Global Markets for Starch Products Carbohydrate Outlook: Prices & Processing Costs Global Sugar Outlook Oil Palm Report: Indonesia & Malaysia 2014 Oilseeds & Oils Report 2014 Investment Opportunities in South East Asian Agriculture LMC International,

28 Oxford 4 th Floor, Clarendon House 52 Cornmarket Street Oxford OX1 3HJ UK T F info@lmc.co.uk New York 1841 Broadway New York, NY USA T +1 (212) F +1 (212) info@lmc-ny.com Kuala Lumpur B-03-19, Empire Soho Empire Subang Jalan SS16/1, SS Subang Jaya Selangor Darul Ehsan Malaysia T info@lmc-kl.com Singapore 16 Collyer Quay #21-00 Singapore Singapore Tel: info@lmc-sg.com LMC International, 2014 All rights reserved This presentation and its contents are to be held confidential by the client, and are not to be disclosed, in whole or in part, in any manner, to a third party without the prior written consent of LMC International. While LMC has endeavoured to ensure the accuracy of the data, estimates and forecasts contained in this presentation, any decisions based on them (including those involving investment and planning) are at the client s own risk. LMC International can accept no liability regarding information analysis and forecasts contained in this presentation. LMC International,

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