The Bioplastics Industry: Where It Is and Where It’s Going
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Even though it is likely to remain a niche, the bioplastics industry should see significant growth over the next five years. That’s due largely to two reasons.
The first is environmental. Bioplastics typically have two environmental benefits: a very low carbon footprint compared with traditional plastics, and most are biodegradable or compostable. Biodegradable/compostable plastics are not linked to an organic feedstock. There are bioplastics that are compostable yet are made from oil/gas and there are bioplastics made from organic feedstocks that are not biodegradable. While some critics have linked bioplastics to possible pollution from agricultural pesticides, the industry could grow twentyfold and still be a tiny fraction of the current bioethanol industry.
When biodegradables first came to market, it was unclear whether consumers valued their environmental benefits. But now, whether through legislation or consumer preferences, biodegradable plastics are very much in demand.
The second, less visible reason involves unique performance attributes. Every plastic, whether bioplastic or conventional, has specific properties and performance characteristics. In some applications, bioplastics simply perform better than conventional plastics. Bioplastics are now used heavily in 3D-printing applications, for example, as well as in specific high-value-added filtration applications. Ironically, they are also used in the oil and gas industry.
Trajectory of the Bioplastics Industry
Given that base of demand, the growth trajectory of the bioplastics industry is nevertheless difficult to project. That’s largely because the next phase of growth will require large capital investments that may not yield commensurate returns. Let me put that in perspective.
When I started at NatureWorks, my former company, in 2008, the entire annual production capacity of the biodegradable plastics industry was about 150,000 metric tons. Sales at that time were probably about 50,000 or 60,000 metric tons a year. By 2017, capacity was in the 500,000-ton range, and close to being sold out. Over the next five years, capacity could be in the million-ton range as sold-out producers try to meet demand.
But a few interrelated factors could limit the industry’s ultimate growth. To start, there is the uncertainty of how plastics — especially disposable plastics — will be treated in the future. To be sure, biodegradable plastics can have in important role in the market for the hundreds of millions of tons of plastics that are now disposed of each year. Yet more of the plastic currently disposed of may be recycled, incinerated, or simply banned altogether in the future, changing demand significantly.
The Bioplastics Supply Side
On the supply side, the cost of increasing capacity is very high. Building an efficient plant to produce 100,000 metric tons of biodegradable plastic can cost up to $750 million. An investment that size likely would be profitable if current pricing and demand continues, but too much new capacity coming online around the same time would lead to (temporary) oversupply and declines in prices and returns, especially if demand patterns change or if plastics are widely banned.
Carefully matching supply with the possibility of shifting demand, therefore, will be a challenge in coming years.
Bioplastics and Biodegradables
In the current biodegradable plastics market, where capacity is about 500,000 metric tons, about half of the market consists of polylactic acid, or PLA. The reason for this dominance is cost. PLA, which can be made from corn or cane sugar, is comparable in cost to similar traditional plastics such as PET and PS. It’s the main reason PLA is used in many disposable plastic applications, such as paper-coated cups, straws, plates, and cups. It is also used in many industrial applications, and it’s likely to remain the dominant bioplastic.
Other biodegradables, comparable to traditional plastics such as PE and PP, include polybutylene succinate (PBS), polybutylene adipate terephthalate, or PBAT, and polyhydroxyalkanoate, or PHA.
What sets these three plastics apart is their improved level of compostability (vs. PLA). If brought to an industrial composting site, all will decompose in 90 to 120 days. Under home composting conditions, PLA plastics will take longer to degrade and can therefore not be certified. And PHA is the only one that can degrade in water. However, PHA is also two to three times as expensive as PLA and more expensive than PBS and PBAT. Actually, the PBS and PBAT price falls between PLA and PHA.
PLA is dominated by NatureWorks, with 160,000-ton capacity. Total Corbion in Thailand has 75,000-ton capacity. PBS is dominated by PTP MCC in Thailand, with 30,000-ton capacity. BASF, which has plants in Germany and China, dominates PBAT. PHA has only one manufacturer in the U.S. currently, Danimer Scientific, which has capacity of between 10,000 and 20,000 tons. All these companies are sold out and have plans to increase capacity.
Like traditional plastics in the 1960s, bioplastics will grow significantly larger in coming years. But the high cost of entry and the possibility of shifting demand are likely to keep it a niche market.
About Marc Verbruggen
Marc Verbruggen is a professional with more than 20 years of business experience and extensive knowledge of the biodegradable polymers market. He currently works as a consultant in the broader bio-based industry. In the past he has served as President and CEO at NatureWorks, a leading provider and producer of plastics and fibers in the United States. During his time in the company, he turned NatureWorks from a small “green” start-up into a profitable, fast-growing bio-based business with a broad range of industrial and consumer applications. As CEO of NatureWorks, Marc was on the board of the Biotechnology Industry Organization, Industrial Section, and in this capacity testified before the U.S. Senate on how to help grow the U.S. bioplastics and green chemicals industry. He has also presented before members of the European Parliament.
This bioplastics industry article is adapted from the February 15, 2021, GLG Remote Roundtable “Bioplastics Industry: Growth Outlook and New Technologies.” If you would like access to this teleconference or would like to speak with bioplastics industry expert Hernando Lorenzo, or any of our more than 900,000 industry experts, contact us.