PÖYRY POINT OF VIEW BLOG / 12 May 2015
Supply and demand are changing the world of bio-based chemicals
The bio-based chemical and polymer industry is a complex field with numerous technologies and routes from feedstocks to chemicals and end-use applications. Along with the complex nature of the industry there is a lack of understanding of what drives demand and the added value of bio-based components. All of these factors have traditionally made predicting change incredibly difficult, even for the most experienced analysts.
In our recent BioSight report we decided to simplify the sector into four basic chemicals platforms according to their feedstocks. The platforms are sugar, oil, lignin and gas which form the basis of the extremely broad spectrum of end-uses including automotive, electronics and packaging. Using the platform concept we went on to analyse supply and demand factors which will affect the sector in the coming decade.
We anticipate the European market will invest effort in supplying lignin.
Supply has traditionally been the main focus for analysis; however, changes continue to happen across the platforms. Firstly we found that whilst oil and fat is the most mature supply platform, sensibilities around sustainability mean continuing stable supply is uncertain. In contrast, we anticipate the European market will invest effort in supplying lignin. The reason being that lignin is a market enabler for lignocellulose sugars and therefore has potential for significant growth.
In a pioneering move for the sector we supplemented our supply side research with a deeper investigation into what affects demand.
We found that demand is playing an ever increasing role within the bio-based chemical industry. Demand depends on various factors including greenhouse gas savings, cost-competitiveness and application development. Recently the role of brand owners has increased in importance, with leading consumer brands now setting specific targets for introducing bio-based plastics to their products. Considering these announcements we expect the trend of brand owner targets to expand into more and more companies by 2025.
On a macro level these changes to supply and demand will affect the various geographical hubs that dominate the biochemicals industry. The key question is whether in the next 10 years, Europe can continue to rely on a technological advantage, given production growth in Asia and competition from North America and Brazil.
Increased clarity about the building blocks of the bio-based chemical industry and developing a deeper understanding of demand-side pressures have helped remove some of the traditional complexity associated with the sector. Having greater visibility and an appreciation of the entire industry will help investors and companies active in the sector, from forest and agricultural industries, the chemical industry, end-users and brand owners, R&D organisations, as well as government agencies.
For further information visit the Biosight page at www.poyry.com/biosight