Interview of Meraldo Antonio (MA) with Lekhraj Ghai (LG):

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LG: Tell us about the current market scenario. What has been the impact of the plunge in the prices of crude oil on bio-based plastics?

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MA: In general, the bioplastics industry has yet to completely shed the association between bioplastics and inferior performance. This association is not entirely baseless—to date, most commonly used bioplastics, including polylactic acid (PLA) and starch plastics, still exhibit subpar performance characteristics compared to the petroleum plastics they are trying to replace. The poor mechanical performance coupled with the high price tags that bioplastics carry and the sluggishness of the implementation of laws that ban the use of non-degradable plastic bags is the reason the field of bioplastics has been stagnating. Last year, we saw that a couple of bioplastics companies, Cereplast and BIOP Biopolymer Technologies, were forced into bankruptcy. Although these bankruptcy cases are by no means representative of the entire bioplastics industry, they show that high costs, poor performance and lack of supporting infrastructure continue to be an impediment to the widespread adoption of bioplastics beyond several niche areas.

The plunge in crude oil prices has definitely exacerbated the challenges faced by the bioplastics industry. Against the backdrop of the cheap crude oil, the incentive to switch to bioplastics is lower than ever. Since the fall in crude oil prices occurred only fairly recently, any major impact on the bioplastics industry is yet to be seen. However, we expect that bioplastics companies will see depressed demand for their products till the oil price normalizes.

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LG: What kinds of bio-based materials can be developed to compete with C3- and C4-based petrochemicals, which are less affected by the crude oil price drop?

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MA: The bio-based materials that are less affected by the plummeting crude oil prices are those that we classify as "improvement chemicals". These are chemicals that (1) are not "drop-in" chemicals, i.e., they do not have any direct petroleum-based counterparts and (2) offer significant performance benefits compared to the chemicals they intend to substitute. Examples of such chemicals include biolubricants. Biolubricants offer better safety profiles and are much more environmentally friendly than petroleum-based lubricants. These parameters are of crucial importance to the users of lubricants, especially since lubricants are used in large quantities and, for some applications, a significant proportion of the used lubricants are in direct contact with the wider environment (e.g. soil and water). Owing to the added performance benefits they provide, these improved chemicals will be less affected by the fluctuation in crude oil prices.

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LG: Like bulk packaging, which sectors could see increasing application of bio-based materials?

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LG: What is the outlook for bio-based versions of commodity plastics like PE and PET?

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MA: The outlook for bio-based versions of PE and PET looks rather bleak at the moment. Bio-PE and bio-PET are the very examples of "drop-in bio-based chemicals," i.e., those bio-based chemicals that are 100% chemically equivalent to their petroleum-based counterparts. The plunge in crude oil prices has brought about a concomitant drop in the prices of commodity plastics such as PE and PET. Against the backdrop of the low commodity plastic prices, it is highly unlikely that the developers of bio-based PE and PET can put forth a compelling argument for switching to bio-based PE/PET.

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LG: How big is the global bioplastics market? Which companies are major players in the bioplastics arena?

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MA: The total global production capacity of bio-based polymers amounts to 2.1 million metric tonnes per annum. This translates to a market size of a single digit billion dollars. Today, the largest players in the bioplastics space include NatureWorks, Novamont, DuPont, BASF and Purac.

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LG: What factors determine the growth of the global bioplastics market? What are the challenges encountered?

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MA: The three principal factors that determine the growth of the bioplastics industry are technological maturity, market demand and government mandates. Technological maturity refers to the extent to which the bioplastics production technology is capable of bringing out new bioplastic products that are competitive in terms of both cost and performance. Bringing up an innovative product that offers both reasonable cost and improved performance remains a challenge for the bioplastics industry. Market demand relates to consumers' willingness to adopt bioplastics. In the past few decades, consumers have expressed increased interest in "green products," i.e., products that put less strain on the environment. This increasing environmental consciousness in turn affects consumers' purchasing preferences and drive the demand for bioplastics. In the field of bioplastics, government mandate plays a very crucial role. Legislations and policy changes around the globe are driving the market and innovation in bioplastics. For example, the 2002 Federal Farm Bill stipulated that federal agencies purchase bio-products over their petroleum-based counterparts if they are available and are equal in quality and price. Additionally, numerous municipalities in North America and Europe have passed laws banning the use of non-renewable plastic bags, thus forcing the conversion to bioplastics.

There are several hurdles in the commercialization of bioplastics. Today, the high cost of bioplastics remains the most significant adoption barrier. Currently, bioplastic resins sell at prices twice to ten times higher than their petroleum-based counterparts. Such a price profile allows only a small portion of potential customers to purchase bioplastics. Another problem is the widespread assumption that bioplastics exhibit poor performance. For example, in the case of food packaging, numerous bioplastic types are known to offer less than desirable barrier properties, thus shortening the possible shelf life of the food products. Furthermore, the development of infrastructure and processing facilities that support the adoption of bioplastics is still lagging. The lack of processing facilities creates an unwelcome problem for bioplastics adopters, who in addition to having to pay higher prices have to deal with incurring additional processing costs. This is in stark contrast to petroleum-based plastics, whose application in the industry is supported by the availability of robust processing and end-of-life infrastructure.

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LG: How is the global bioplastics market expect to fare in the coming years?

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MA: In terms of capacity, we foresee that the growth in the biopolymer space will plateau, with a CAGR of less than 5%. This low capacity growth can be attributed to the aforementioned challenges that the bioplastics industry is yet to confront. However, increased environmental consciousness among consumers will drive demand towards bioplastics. We have seen an increasing number of downstream brand owners, such as Heinz, Pepsi, Dell and P&G adopting bioplastics—a trend that is expected to continue in the coming years.

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LG: Any recent technological developments for the innovation of newer properties for bioplastics?

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MA: One interesting improved performance bioplastic is polyethylene furanoate (PEF). PEF is made by condensation polymerization between monoethylene glycol (MEG) and furandicarboxylic acid (FDCA). PEF is structurally similar to PET and is specifically designed to be a replacement for PET, especially for packaging applications. PEF outperforms PET mainly in barrier properties to oxygen and water. Preliminary data from Avantium, a startup focused on scaling and commercializing PEF, indicates that PEF exhibits oxygen barrier up to ten times better than PET and water barrier twice of that of PET. These impressive barrier properties render PEF a strong contender as a next-generation packaging material.

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LG: How promising is the bioplastics market in India, given the availability of abundant bio feedstock in the country?

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MA: Today, the bioplastics market in India is still in its infancy with only a handful of companies operating in this segment. Although bioplastics manufacturers can benefit from the easy availability of abundant feedstock in India, bioplastics production remains low because of the fact that there is little demand for bioplastics from the wider population. India still shows low awareness regarding bioplastics and the implications of its use on the environment.

Although this is bound to change, the change will be sluggish. Some Indian cities have banned the use of non-renewable plastic bags—including major cities such as Delhi, Mumbai and Karwar. However, the implementation of such laws is questionable at best, with numerous manufacturers continuing the production of the outlawed plastic bags with little action from the government.

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