What's Going On With Industrial Biotechnology? - by Esa Aittomäki

A map of the major chemical and fuel companies which are playing this bio-based game

The fastest growth in biobased chemicals will be seen in bioplastics

In Finland we have many companies which can add the value of production chains

In the 80's many biotechnologists said that biotechnology will make a breakthrough now. And now, in 2010's many sceptic people have asked me where the biotech breakthrough is. I have answered them that biotech breakthrough has not happened rapidly and revolutionarily; but big steps have been taken. For instance, in 80's we saw a rapid growth and development in the biomedicine sector. Several new hormone and antibodies production lines were built and started, many new small pharma companies were established which was then merged to larger companies in the end of 80's and now we can see big successful biopharma companies such as Amgen, Novo Nordisk, Pfizer, and Roche. Smaller companies disappeared but innovations are in production. And this development will continue; we will likely see new therapeutic methods such as gene therapy, stem cell production lines, etc. coming to common use in medical care. New enzymatic synthetic routes are in the development phase now and probably will replace many production routes which are now based on chemical synthesis.

But what happens in the chemical industry? Biotechnology is already large scale chemical production. Ethylene is the largest single chemical produced from crude oil; global volume is 130 million tons annually. The second largest chemical is ethanol and it is all produced biochemically, 90 million tons annually. 80% of ethylene goes to polymers. 80% of ethanol goes to fuels.

Drivers
Many big global brand owners are looking for sustainable raw materials and products. Coca-Cola and Danone have announced to replace fossil based PET (polyethylene terephthalic acid) plastic packages with 100 % renewable PEF (polyethylene furanoate) material. We will see an extremely rapid growth of PEF capacity. LEGO will move to renewable ABS plastics. BASF has announced to start the production of polyTHF (tetrahydrofuran) for renewable fibers. DuPont has launched Sorona renewable fiber made from corn based PTT (polytrimethylene terephthalate). Tire manufacturers such as Pirelli, Michelin and Nokia Tyres have disclosed the strategy to replace fossil based carbon black and butadiene to renewable ones. IKEA has announced to replace 100% of packaging materials by 2020 with renewable and recyclable materials. And many others are playing the same game.

We can outline a map of the major chemical and fuel companies which are playing this bio-based game, as you can see on the first picture on the left side.

The main driver is brand owners' image. Companies producing consumer goods put a lot of effort to improve the sustainability and recyclability of products. Some of the companies develop their own production technology but in recent years we have seen a lot of strategic partnerships, e.g. BASF/Genomatica, Coca-Cola/Virent, UPM/Renmatix and Stora Enso/Virdia.

Many companies have changed their strategy from fossil-based raw materials to renewable sources such as DSM - previous coal company and nowadays biotech company. They see that the availability of crude oil is limited in the future even it is now overproduced.

Major oil companies are looking for emerging technologies to produce renewable traffic fuels. Driving force is the mandatory blending of renewable fuels and to reduce the GHG emissions. These mandates do not compete with crude oil price. The challenge is to fulfil the sustainability criteria and one of them is to step out from the food chain. Corn based fuel ethanol will have a short story.

In the last decade we saw a real hype in algae oil production. Feasible production of fuel from algae is far beyond 2030. All the algae companies have changed their strategy to more valuable chemicals for food and cosmetic applications.

Global trends
If we forget the mandatory directives which steer business strategy of fuel production into not-always feasible direction we can look at the development in the chemical industry. The business development in this area is more market driven.

European Commission has forecasted that bio-based share of all chemical sales will rise from 12,3% in 2015 to 22% by 2020, with a compounded annual growth rate close to 20%.

US Department of Agriculture has forecasted in 2008 that bio-based chemicals share will rise from around 10% in 2015 to 22-28% by 2025. See the full report at http://www.usda.gov/oce/reports/energy/BiobasedReport2008.pdf

The fastest growth in biobased chemicals will be seen in bioplastics. European Bioplastics has forecasted that the production capacity will increase from today's 2 million tons to around 7 million tons by 2018. The biggest consumer sector of bioplastics is the packaging industry. See the full report at http://en.european-bioplastics.org/wp-content/uploads/2013/publications/EuBP_FactsFigures_bioplastics_2013.pdf

Production of bio-based chemicals encompasses chemical and biochemical routes from bio-based raw material. Intermediate chemicals play an important role in the production of bio-plastic. These are called platform chemicals. US DOE (Department of Energy) has listed the hottest platform chemicals which are important in the production chains:

Biofuels Digest issued a list of 30 hottest biochemical:

Many of those platform chemicals are fermentative products. And we shall keep in mind the bioplastics which will be produced directly from carbohydrates via fermentation: PHA/PHB which is one of the fastest growing renewable plastic.

Who will win the game? What happens in Finland?
Lux Research has evaluated that Europe lags behind this bio-based industry development.

The fact is that the cheapest raw materials are available in USA, Brazil and China. Players who are able to manage the whole value chain from raw material to end customers make the biggest profit. We have seen this within global oil companies. There are large American companies in biobased business such as Cargill and ADM (Archer Daniels Midland) who have an access to raw materials and both are active in Europe, too. In Brazil we have big companies which own the sugar cane fields.

The biggest growth of bioplastics will be seen in Asia, especially in China.

And what happens in Finland? The government has expressed their will to set up a biobased economy in Finland. What is that? Sorry to say but sometimes I get the feeling that this bioeconomy is to combust our forests to energy. Fortunately we still have large forest companies who are now investing to new products. But it is hard to find place for biotechnology. The Finnish biotech economy is very narrow, we have too few players. We have too cheap products. There are three 2G fuel ethanol plants in the planning phase. There is one pulp mill under construction and two in the planning phase. The risk of these investments is the price of main products, it is less than 1.000 €/ton and the price is very volatile.

We have in Finland many companies which can add the value of production chains. We have great ideas in Universities and R&D organizations. The key is to get the players together and change the ideas. And create the project and develop the process concept. This is the role of IBC Finland. (picture3)
 
We must add the value of the biorefinery products and especially value of by-products. Biotechnology can be one of the technologies to increase the value of end products. EU Commission has expressed that biotechnology is one of the four key-enabling technologies.

Most of the platform chemicals will cost around 2.000 €/t or more. Bioplastics can cost more than 5.000 €. But we need R&D activities for the process development in order to find new business and add the feasibility of production concepts.

Simultaneously the government reduces R&D funding from Tekes and Universities. What will remain? In the end we will have only old technologies to apply, combust wastes and wood chips. Is this spearhead enterprise?

But we can benefit from this situation; we are forced to go to European level, find collaborative partners there and get EU funding from bottomless pockets. We must be clever and competent enough to win this out-of-pocket game.