The Future of Bio-Based Chemicals Depends on Feedstocks

The Future of Bio-based Chemicals Depends

on Feedstocks

Analyst Briefing

11th July 2013

2

Today's Presenters

Dr. Michael Mbogoro,

Consulting analyst

Frost & Sullivan

Dr. Brian Balmer,

Industry Principal

Frost & Sullivan

• Chemicals & Materials

• Company expert on shale gas and

alternative feedstocks

• Recent experience researching lignin as

an alternative feedstock

• 13 years' research experience at Frost

& Sullivan

• Company expert on renewable

feedstocks

• Contributor to the company's Mega

Trends vision

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Our Chemicals Market ApproachFocus on end-markets and mega trends

Functionality and

performance

Health and

wellness

Globalisation Low carbon economy

Construction

& Utilities

Food Drugs &

Cosmetics

Transportation

Source: Frost & Sullivan analysis

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A complex universe of factors influences demand for bio-based

chemicals

Bio-based

chemicals

Globalisation

F & P

H & W

Renewable

feedstock

Low

carbon

1st

Gen

AlgaeLignin

Four megatrends are the primary

drivers of change in the chemical industry.

All four are relevant to the growth in interest in bio-based chemicals.

Several factors can make a product "low-carbon" or sustainable, only

one of which is to use a bio-based feedstock.

In order to understand the scale of the opportunity, it is critical to understand the potential demand from end-users in each vertical market.

The source of feedstock is

an important consideration when planning the production of a bio-based chemical.

Downstream

sustainability


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Mega trendsInfluence on bio-based chemicals

Whilst the move to a low carbon economy remains the most important driver, demand drivers come

from all mega trends

Low Carbon Economy

50.1%

Functionality & Performance

31.8%

Health & Wellness

13.6%

Globalisation 4.5%

Bio-based Chemicals Market: Impact of Mega Trends (Global), 2013

Statistics show the results of a poll question asked during a live Analyst Briefing: "Which Mega trend is most driving use of bio-based chemicals?"


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What is Sustainability?

USE

Chemicals enabling

greater sustainability

in downstream end-

markets

Renewable

Recycled Recyclable

Biodegradable

46.4%

7.1%

3.6%

3.6%

39.3%

Statistics show the results of a poll question asked during a live Analyst Briefing: "Which aspect of Sustainability is most important for you and your business?"


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What is Renewability?Many different types of product make use of renewable feedstocks

Natural product

Natural extract /

derivative

Biomass

Bio

tech.

Chemical

transformation

FDC Construction &

Utilities

Transportation

Olive oil Wood Natural rubber

Cellulose ethers &

lignosulphonates

Biofungicides

Natural

fragrance

ingredients

Surfactants from

natural oilsPA 11

BioisopreneBio-based polyols

for PU insulation

Natural paint

binder resins

Car care

chemicals e.g.

carnauba wax &

limonene


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End UsersConnecting feedstock to end-user along the value chain

Feedstocks

Building blocks

Speciality chemicals

& materials

End-markets

Crops

14.3%

Other routes e.g. having crops produce target

chemicals directly

35.7%

28.6%

14.3%

7.1%

Statistics show the results of a poll question asked during a live Analyst Briefing: "Which step in the bio-based value chain do you think needs most optimization?"

Flexibility

Versatility


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FeedstocksHow do they compare?

Traditional oil & gas

Shale gas

Captured flare gas

Recyclate use

First generation bio-based

Plant cellulose

Plant lignin

Algae

Captured CO2

Level o

f In

no

vati

on

Sustainability Performance

Chemicals & Materials: Comparison of Feedstocks, Global, 2012


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Shale Gas

Supply

Demand

Competition from other

uses


feedstocks

Currently, global supply is largely limited to the

US where production technology is more mature.

Shale gas accounts for 32% of total natural gas

resources globally.

As technologies improve at the production

and processing (gas-to-liquids)

stages, shale gas is bound to penetrate

the chemical feedstocks market further at

the expense of crude oil.

As an abundant resource with a well

established value chain, shale gas has

the advantage when compared to many

bio-based alternatives.

Mainly from energy and transportation fuel.

90% of natural gas is currently used for heat

and power generation. In regions where gas is

cheap, such as North America, there is little

incentive to switch to alternative supplies.


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Cellulose Market Dynamics

Supply

Demand


uses


feedstocks

Global availability of cellulose exceeds any

potential demand from the chemical industry.

However, most is contained in lignocellulosic

materials.

Economics will be the primary determiners

of demand for cellulose as a feedstock for

chemical companies

The majority of uses being considered

for cellulose are as a second generation

feedstock in place of first generation

starches.

Cellulose derivatives are already commonly

used by chemical companies.

Supply of cellulose is sufficient for competition

between uses to be of minimal concern.


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Lignin Market Dynamics

Supply

Demand


uses


feedstocks

Potential supply exceeds current demand. Actual

supply could also increase thanks to new

separation technologies.

Current demand for lignin is mainly limited

to low value applications for

lignosulphonates.

Lignin as an alternative to aromatic

chemicals could become more important if

petrochemicals come more and more from

natural gas instead of crude oil, since

natural gas contains no BTX component.

Since lignin forms a very useful fuel for

paper mills, there is comparatively little

pressure to find alternative uses for it.


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Algae Market Dynamics

Supply

Demand


uses


feedstocks

Total global production of algae derivatives is, at

present, very limited. This creates a large mis-

match with potential demand.

Algae represents the feedstock that potential

users within the chemical industry are most

interested in.

However, commercialisation is very

dependent on process scale-ups, for which

large uncertainties remain.

Algae represents a potential route to the

same building blocks available from other

sources, including natural oils and sugars

Chemicals risk being caught in the middle

between two very different scales of development

in algae:

• Very high volume biofuel development based

on "green crude" from algae

• Very low volume development of essential

oils, especially fish oils, for food

applications, and extracts for cosmetics

applicationsSource: Frost & Sullivan analysis

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Carbon Dioxide Market Dynamics

Supply

Demand


uses


feedstocks

The volumes of CO2 that will potentially be

available from carbon sequestration investments

will far outweigh any potential demand for use as

a chemical feedstock.

CO2 is the least versatile of the feedstocks

considered here, but still has the potential for

some interesting niche applications.

The most likely markets for CO2 as a

chemical feedstock make use of its unique

chemistry, and therefore competition will be

mainly from existing end-products in target

markets.

CO2 supply is an essential component of the

algae industry and, for that reason, algae facilities

will tend to be sited near a source of CO2.


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ConclusionsSome feedstocks are in need of better supply; others would benefit more from application

development

Algae

LigninCellulose

CO2

Potential

Demand

Potential Supply

Sustainable Feedstocks Market: Summary of Supply versus

Demand Scenarios, World, 2013

Supply may not be able to meet

demand.

Strategy should be to find more

sources of supply.

Supply exceeds demand.

Strategy should be to find more

uses to stimulate demand.


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For Additional Information

Brian Balmer

Industry Principal

Performance Materials

(44) 1865 398634

[email protected]

Leonidas Dokos

European Research Director

Chemicals & Materials

(44) 1865 398685

[email protected]

Mark Hicks

Sales Manager, North America

Chemicals & Materials

(1) 210 247 2490

[email protected]

Chiara Carella

Head of Corporate Communications

Europe, Israel, Africa

+44 (0) 207 343 8314

[email protected]

Technology

The Future of Bio-Based Chemicals Depends on Feedstocks