Sustainability
Betting on bio-based products
If there is a light at the end of the long, winding tunnel of the petrochemical downcycle, it flickers green. Or at least, this is what every petrochemical player we interviewed for this edition seems to think. For every negative figure in the sales of olefins, aromatics, and other basic chemicals, there is a ray of hopeful growth in products with a green component. The bioplastic market has been growing at around 14% yearly, but it is poised to triple over the next five years, informs Townsend, a consultancy. For Braskem, the region’s biggest player, sales of products with a recycled content grew by 144% in 2022 versus the year before. For Eastman, sustainable materials have also seen double-digit growth recently. In the specialty space, Vantage noted a high demand for sustainable beauty and personal care items:
"Sustainability is a significant growth driver for beauty and personal care brands. With a backbone in natural oils and fats, our bio-based, natural platform is well-aligned to the evolving trend for natural products, or products that use sustainable raw materials and ingredients that been produced in a socially responsible way. For example, Vantage is the global leader in Jojoba oil, a naturally vegan protective wax that can be used in a wide variety of applications," said Juan Pablo Amado Orduz, VP Latam, Vantage Specialty Chemicals.
Sustainability is one steady growth driver across the board, and companies are reacting accordingly, investing dutifully in their “handprint” – a term I borrow from Evonik – to differentiate between a company’s footprint (impact of their assets) and handprint (impact of their products). In terms of their footprint, most local companies are at a diagnosis stage, with many companies producing their first sustainability reports, now a mainstay for most European chemical companies, and making the necessary updates to optimize production, which is the lowest hanging fruit in reducing both emissions, and costs, the latter being a potent motivator.
Meanwhile, the focus on handprint manifests in those next-generation products and technologies meant to support customers efforts to achieve their environmental objectives. This takes different forms for different companies, and it tends to be underpinned by big budgets. For Air Liquide, 40% of its capital allocations in new projects is tied to the energy transition, including carbon capture and utilization, renewable hydrogen, ammonia, and methanol. For Ineos, this focus is formalized under its new “Eco” line of post-consumer recycled (PCR) or bio-attributed high-performance styrenics. For Honeywell, a technology licensor, 60% of its R&D goes to solutions that address customers’ ESG. Unipar is to spend R1.4 billion by 2030 in sustainability projects.
The green opportunities pursued by Latam players can be divided in three main separate but related categories: producing green products (fuels, feedstocks, and chemicals) from a bio-based source; greenifying the production process by switching to renewables (which then also results in green products like green hydrogen, green caustic soda, etc.); and recycling, by making waste into a feedstock for new plastics which inherit that “green” component. At least in the first two categories, Latin America brings surprising advantages it is only just starting to take stock of. For the region might not have the most competitive natural gas or naphtha in the world, but it does have some of the cleanest energy mixes and an abundance of bio raw materials for green chemistry.
“South America is a green powerhouse, with the potential to become a global reference in renewable energy and sustainable production. This helps to extract value from green chains, such as biofuels and renewable raw materials from the Amazon.”
Manfredo Rübens, President South America, BASF
Bio-based
“When ethanol vessels coming from the northeast of Brazil were attacked by German vessels during the Second World War, Rhodia bought a coffee farm and turned it into a sugar cane farm, sugar becoming the raw material for our green chemistry up to this day,” said Daniela Manique, CEO of Latam & president global business Coatis at Solvay, the parent company of Rhodia.
Brazil’s history in sugar-based ethanol production is one of both resilience and opportunism. Today, the country is the second largest producer of ethanol, after the US, the two countries together accounting for 82% of the world’s product. While the US’s ethanol comes from corn, Brazil relies on its vast sugarcane plantations.
Besides sugar, Brazil is also the biggest producer of soy and one of the biggest suppliers of animal fat, both raw materials in the production of biodiesels. In the last decade, Brazil has quadrupled its biodiesel production to 6.8 million cubic meters in 2021. Also, Colombia, Guatemala, Honduras, Brazil and Ecuador are in the top 10 largest palm oil producers. A higher demand for animal fats, used cooking oils, and vegetable oils has been noted by terminal operators like Vopak, which has a dominant market share of 80% in heated capacity for bio-based feedstocks in Brazil. Analysts expect an annual growth of 10% CAGR in the biodiesel market (according to GrandView Research).
The region is understandably excited by the opportunities created in these new niches, but challenges abound. For example, regulations in the blending requirements for biofuels have been inconsistent and contradictory for refiners; Experts at Opis comment that regional governments have updated these requirements depending on fluctuations in the oil price, leaving farmers confused. Brazil, however, has been generally consistent in its policy, raising the country’s mandatory blend of biodiesel to 12% in April this year, up from 10%.
Moreover, the production of soybeans, which is the main feedstock for biofuels in Latam, is vulnerable to climate conditions. This year, the methanol market in Argentina, associated with the production of biodiesel, has suffered, said Martina Azcurra, executive manager chemicals at YPF Química: “A prolonged drought this year has severely affected soybean production. Adding to this the macroeconomic conditions in Argentina, biodiesel producers will not be profitable this year, which has pushed down methanol sales in the local market.”
As for the ethanol-to-ethylene-to-polyethylene value chain, the largest producer of bio-ethylene in the world, Braskem, has increased its production by 30%, from 200,000 t/y to 260,000 t/y, but this is still 10 times smaller than the equivalent world’s biggest petroleum-based ethylene plant, at around 2.5 million t/y capacity. But Braskem is keen to advance both the scale and value of its bio-based ethylene platform: First, it will almost double the production of bio-PE through a new plant in Thailand, as part of a JV with SCG Chemicals, one of the leading Thai petrochemical companies: “Sugar cane-based ethanol feedstock will be supplied from Brazil, with the possibility to eventually develop local value chains with ethanol from the Thai sugar cane industry to improve CO2 footprint even further,” Edison Terra, VP olefins and polyolefins South America at Braskem, told GBR.
Additionally, starting from its bio-ethanol technology, Braskem has made downstream advancements in more complex molecules like ethylene vinyl acetate copolymer, adopted by 60 footwear brands in the world, and it has launched Sustainea, a JV with Japanese player Sjitz, to produce bio monopropylene glycol (MPG) and monoethylene glycol (MEG), a raw material for polyethylene terephthalate (PET). Next, it has announced partnerships to produce carbon negative bio-based PP in the US.
“Considering the demand potential for bioplastics in light of both regulatory developments and consumer trends, these capacities are barely scratching the surface. The next question is therefore whether these targeted markets for bioplastics can sustain the premium – and for how long – as investments in recycled options start to come online, competing with bioplastics,” commented Barb Mitchell, managing director, Townsend Solutions.
The other constraint is, of course, cost. Bio-naphthas are significantly more expensive compared to their petroleum counterparts. The premium has to be covered by brand-owners, who pass it on to consumers. And finally, aggregating various sources of animal fat or vegetable oils and then transporting it to biorefineries around the world comes with its own carbon footprint, which needs to be weighed against the equivalent of producing from a fossil fuel source.