Biopolymers: Has their time come?

Whether they are referred to as biopolymers, natural plastics, or agro-plastics, resins from sources of "new carbon," namely crops, grasses, and agricultural waste, are increasingly making the news. Skyrocketing energy costs have piqued most of this interest, but the increased performance characteristics of many of these new biopolymers, along with growing environmental and security concerns, have also played their part. For the average processor, commercial viability remains the key issue.

The issue of viability is not necessarily always clear cut; there are several variables including availability, cost, and performance requirements, which must be carefully considered

At the moment, the small number of biopolymer suppliers and their often-limited production capacities do create market limitations for processors who are interested in making the switch to natural plastics. However, according to many industry experts, these restraints are quickly dwindling. The U.S. Dept. of Energy, for example, is striving to convert 25% of chemical manufacturing to agriculturally based production by 2030. A lot can happen in 25 years, but many leading firms like Cargill, DuPont, and BASF are increasingly signing on to the idea of biopolymers.

While the science behind biopolymers is nothing new-Henry Ford initially used agricultural commodities like soybeans to produce plastic auto parts-the low cost of oil made this renewable feedstock the less attractive option. Fast forward to today''s $60/bbl oil prices and you have a decidedly different picture.

Metabolix is one of the companies banking on biopolymers'' bright prospects, and, having just recently been awarded the 2005 Presidential Green Chemistry Challenge Award for its progress in commercializing a broad family of natural plastics, the company has begun to attract a lot of industry attention. As Marcia Miller of Metabolix explains, the pricing benefits of natural plastics should only increase as biopolymer production naturally evolves from the initial stages of research and development and low-volume contract production to a more large-scale general production stage.

The experience of Cargill Dow supports Miller''s conclusion. Having developed and commercialized its polylactide biopolymer (PLA), trademarked NatureWorks, several years ago, Cargill Dow now produces 300,000 lb of pellets a day with a capacity to produce 300 million lb of PLA each year. When combined with rising resin prices, this growing efficiency has made many of its bioproducts price competitive.

Early on, customers like grocer Wild Oats Markets paid roughly 50% more for NatureWorks takeout containers, but now these bio-based containers cost about 5% less that traditional plastics. While not all of Cargill''s NatureWorks product lines have reached this level of cost competitiveness as yet, the price gap is closing.

Miller estimates that oil and gas prices have already surpassed the levels required to make biopolymers cost effective, but says many processors are waiting to see biopolymer prices of less than $1/lb before fully taking the plunge. This pricing milestone may soon be reached as Metabolix''s strategic alliances with financial powerhouses like British Petroleum (BP) and Archer Daniels Midland Company (ADM) allow it to shift into high-volume production.

However, pricing is only one of the reasons processors are beginning to look at biopolymers. The performance of these new resins, and their unique characteristics, also attracts customers. Companies like Metabolix produce a broad line of natural plastics whose properties range from rigid to highly elastic, making them suitable for films, fibers, adhesives, coatings, molded goods, and a variety of other applications. The durability and eco-friendly properties of these materials allow them to remain stable under strenuous conditions, yet still degrade quickly and easily in a variety of environmental settings.

While for the moment availability remains the key obstacle for interested processors, market forces are quickly lowering this hurdle. Companies like Metabolix hope to have reached full commercial capacity within the next five to 10 years and are already working to establish a global customer base. Because the biopolymer market has not yet reached its full commercial capacity, processors will benefit from establishing a close working relationship with potential suppliers.

Around the globe

Latin America Venezuela again made the news recently when a representative of the state-owned Petroquimica de Venezuela (Pequiven) announced that the government has agreed to expand plastics resins discounts by up to 25%.

Unlike past discounts, which were linked to volume, the current program will offer customers the same level of discount regardless of the volume of resin are ordered-an obvious boon for small and medium-sized processors. Discounts will be established for all the major resin groups and are expected to make Venezuelan resins the cheapest in the region.

This move comes on the heels of legislation that lifted the 15% sales tax and import duties for imported chemical equipment. All of these measures have been part of the National Plan for the Development of the Plastics Industry, a program aimed at promoting downstream energy industries.

Venezuela has the largest oil and gas reserves in South America, but has struggled with diversification of its oil-driven economy. Venezuela''s resin consumption is projected to reach 400,000 tons in 2005, increasing to around 800,000 tons by 2010; consumption in 2004 was 340,000 tons.

Asia The government of Bangladesh recently announced its plans to develop a new industrial park devoted to the production of plastics raw materials aimed at supporting its fast-growing plastics industries. In fiscal 2003-2004, exports of plastic goods, ranging from packaging products to furniture and parts, increased by more than 80% over the previous year. According to Commerce Minister Altaf Hossain Chowdhury, Bangladesh is now home to at least 2988 plastics processing companies, employing about 150,00 workers.

Rising raw material prices and China''s slowing growth are being blamed for the sharp fall of stock prices of many of its listed plastics molding companies on the Singapore Exchange. Plastics molding companies like Meiban Group, Hi-P Intl, Fu Yu Corp, and First Engineering have all experienced recent double-digit corrections. In a June 13 edition of The Edge Singapore, stock analyst Jonathan Koh, of UOB KayHian, said plastics molding companies, "which are transforming into vertically integrated electronic manufacturing services providers," will be better able to survive this tightening market.

During the first four months of 2005, the Malaysian government has approved 14 new and three expansion projects for its plastic products manufacturing sectors. The majority of funding for these new projects, roughly 78%, will be supplied by domestic sources. The Malaysian plastics industry comprises about 3% of the nation''s GDP and 10% of the country''s total manufacturing output. In the opening four months of 2005, plastic product exports rose another 13.9%, while total first-quarter plastics production jumped 10%.

According to statistics released by the China Plastics Processing Industry Assn (CPPIA), in terms of output, China is now the world''s second-largest producer. This new ranking follows an increase in China''s 2004 plastic products production, which rose 11.98% to 18.47 million tons; and its 22.8% jump in plastic product exports to 10.8 million tons. China''s Light Industry Information Center (CLIIC) reports that in 2004 there were 9473 large-scale plastics companies in China, up 11% from 2003, generating a total output valued at US$45.9 billion.

Industry sources in Australia are claiming that the cost of benchmark virgin plastics used in Australian manufacturing rose 57% in 2004 to the all-time high of more than AU$2000/ton. These same sources believe that while plastics prices have recently stabilized, they will again rise during the fourth quarter when Chinese manufacturers begin to stockpile supplies. This scenario may be further complicated if the value of the Australian dollar continues to fall, in effect raising the cost of plastics imports.

North America In June, Gros Plastics Recruiters and Mid-America Plastics Partners (MAPP) released findings from their first-of-its-kind hiring trend survey of the plastics and packaging industry. The survey looked at topics such as overall hiring patterns, hourly vs. salary hiring, bonuses, and turnover. Executive Director of MAPP, Troy Nix, says the new survey will provide processors with the necessary information to help them "benchmark their hiring and compensation strategies."

Among the survey''s highlights:

43% of responding companies stated that total employment grew in 2004 compared to 2003.

24% of respondents stated they are increasing the ratio of hourly employees to salaried employees in 2005.

72% of managers stated that they plan to give bonuses this year.

23% of the respondents polled believed that the trend in employee turnover is increasing.

An official with the American Plastics Council (APC) is reported to have claimed that the dramatic layoffs planned by General Motors probably won''t have a significant impact on the plastics industry, reasoning that only a small portion of the plastics used by U.S. automobile manufacturers is directly produced by the automotive manufacturers themselves. APC''s automotive VP suggested that the real focus should be on whether total U.S. automotive production is shrinking.

Attempts are again being made to ban the use of plastic pipe in commercial developments in New York. Similar legislation was vetoed by New York Governor George Pataki in 2004 after heavy lobbying by business and industry groups concerned about the additional costs associated with metal pipes. Prior to the governor''s veto, New York had been one of only two states to ban the use of plastic pipes. The bill, A.7566/S. 5046, does not specifically explain whether ongoing projects would be exempt from this legislation.

Europe Thousands of European plastics producers are being asked to join in on a costs benchmarking survey, which is part of a new program called Reduced Energy Consumption in Plastics Engineering (RECIPE), which hopes to develop an "energy manager''s toolkit" and a cost-of-ownership model for plastics processing equipment. It''s believed that a 10% reduction in energy consumption among European plastics processors would result in a 3 million tons/yr reduction in carbon dioxide emissions. There are currently more than 27,000 plastics processing companies in the EU, employing roughly 1 million workers.

Agostino von Hassell [email protected], and Mark Bella [email protected], of the Repton Group LLC (New York).