Bio-chemical supply chain development business models ... · PDF fileBio-chemical supply chain...
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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
Transcript of Bio-chemical supply chain development business models ... · PDF fileBio-chemical supply chain...
Bio-chemical supply chain development – business models,
strategies and policy impacts
David Sparling and Erin CheneyChair in Agri-Food Innovation and Regulation
SPAA Workshop
January 12, 2011
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
Objectives - Understand
• Market opportunities along the entire bio-chemical 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
The opportunity for bio-based plastics is huge - but largely unrealized
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World plastics consumption
2007
Max. technical substitution
potential of bio-based plastics
World bio-based plastics
capacity in 2007
World bio-based plastics
capacity in 2020
Potential capacity of bio-based plastics on technical basis
Capacity of bio-based plastics (including plastics and fibres)
Synthetic fibres
Plastics (including thermosets and thermoplastics)
240Mt
0.36Mt
3.45Mt
268Mt
Source: Shen, L., Haufe, J, Patel, M. Product overview and market projection of emerging bio-based plastics PRO-BIP 2009
Projected world-wide capacity of bio-based plastics* (based on company announcements made before March 2009)
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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
0280
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16.6
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It’s not just about plastics
Bio-based polymers
Petro-based polymers
Bio-based plastics
Bio-based non-plastics
Source: Shen, L., Haufe, J, Patel, M. Product overview and market projection of emerging bio-based plastics PRO-BIP 2009
*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
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1%
37%
33%
29%
Worldwide production of emerging bio-based plastics (0.36 Mt) by region (2007)
South America
Europe
USA
Asia-Pacific
18%
27%24%
12%19%
Projected capacity by 2020 (3.46 Mt) by region
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
Production will be more global
Chemicals
Consumer
BIOECONOMY
Policy
Oil
Energy
AGRI-ECONOMY
ECONOMY ENVIRONMENT
MaterialsEnergy
Technology
Biomass source
Market
Policy
Solvents
Polyols
Plasticizers
Plastics
Composites
Incentives
RegulationsCSRDemand
Fuel
Heat
ENERGY
TECHNOLOGY
PERSPECTIVES
Scenarios &
Strategies
to 2050
Non-renewable energy (NREU) use comparisons (NREU = fossil + nuclear energy)
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Eth
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PLA
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GJ/t
Monomers and polymers by Industrial Biotechnology from
maize starch
Natural polymers
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copo...No
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nerg
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GJ/t
Monomers and polymers by Industrial Biotechnology from
maize starch
Natural polymers
Patel, M. et al.: BREW study
http://www.chem.uu.nl/brew/BREW_Final_Report_September_2006.pdf
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)
Biochemical supply chain
Biomass production,
preprocessing& storage
Crushing, refining, milling
ProcessingSecondary processing, formulating
End product assembly
Input suppliers: Pioneer HiBredMonsanto
Input suppliers: DSM, Novozymes
Input suppliers: PolyOne, BASF, Segetis, Dow
Agricultural producers, elevators, forestry mills, municipal waste facility
Corn Products International (CPI/Casco), Cargill, ADM, Bungee, Tembec, IGPC
Cargill, Dow, DSM, DuPont, Danisco, Lorama, Metabolix, Azule, Segetis, Gevo, BioAmber, Elevance
CG Tower, Schwartz Chemicals, Woodbridge Group, Carpenter Foam, Lanxess
Magna, Ford, GM, Sealy, Wal-Mart, Ingeo,
Examples of chain members
NGOs:Ontario BioAuto CouncilSustainable Chemistry AllianceBioIndustrial CentreSoy 20/20Grain Farmers of Ontario, OFACanadian Plastics Industry AssociationChemistry Industry Association of Canada Ontario Agri-Food TechnologiesBIOTECanada
Universities/Research Organizations:University of GuelphNational Research Council – BRINRC – Magna CentreUniversity of Toronto
University of WaterlooTrent UniversityUWO-Fraunhofer: International Composite Research CentreAAFC – ABIP - ABIN
Some preliminary findings & observations
Corn, wheat (sugar), lignocellulose (NG),
municipal waste
Levulinic acid
[single entity – China]
SegetisGreenField Ethanol
[De-icer]
BioAmber
[Succinic acid]
Lanxess
[Bio-rubber]
PolyOne
GEVO
[Iso-butanol]
Optimum Colour
(Compounder)
Maxtech
Molders
Home HardwareTier 2 supplier
OEM
Tire manufacturers (85%)
Chewing gum
Observation #1: Supply chains are international with
some missing links in CanadaMissing link
New economy bio-based
Old economy bio-shift
Switchgrass (fibre) Corn, wheat, ligno-cellulose (NG)
Corn, wheat, ligno-cellulose (NG)
Value
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)
Why do companies enter bio-chemical markets?
• Varies depending on the level of the chain
• Bio-focused firms enter to build a new bio-based 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
ICIS Petrochemical Index (IPEX)
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Copyright © 2010 Reed Business Information Limited
November 2010: 279.75
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).
November 2001: 103.89
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pe
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eCBOT weekly corn futures (USD)
November 2001 $93.80
November 2010 $259.60
Relationships are critical - Case study: BioAmber
Poly Butylene Succinate
De-icer
Sugar/HFCS + CO2
Bio-succinic acid Current production from France plant
Derivatives
Food service coffee lids, cups, dishes, cutlery, cosmetic pkg, etc.
Wholesale, retail
Highway, runway, aircraft de-icing solutions
Government procurement, airport authority
Build upon recent acquisition of Sinoven
Strategic alliance in NA with GreenField
Market projected to grow from 3KT/yr to 50KT/yr
MarketStrategic alliance with Mitsui for Asia distribution
R&D alliance with NRC for feedstock screening, process improvements
Projected prod’nof 10-M gallons per year
DuPont Licensing
Agreement
Market
CO2 and biomass as feedstock give advantage for carbon tax
Cargill Exclusivity Agreement
Observation #2: Examples of Canadian R&D excellence
Biocomposite work from UG enters the
market
Composite development,
processing
Agronomics
Switchgrass
Polyol formulation mastered by Ontario firm & new seed trait based on UG breeding
Formulation, processing
R&D for high oleic oil profile + low linolenic
soybean
Bio-succinic acid manufacturer partners
with NRC
Next generation production;
development and scale up of fermentation
process
corn
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 in auto (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)
15 y
ears
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
• 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
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
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
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
Thank you
Dave Sparling
The Chair of Agri-Food Innovation and Regulation is supported by the Agricultural Adaptation Council
