As the Bio-based Materials and Chemicals industry enters 2016, we looked back on 2015 to see the effects of sustained low oil prices and how the industry responded, and considered what lies on the horizon in the coming year as a result. Despite a full year of low oil prices dampening perception of the bio-based materials and chemicals (BBMC) industry, in reality the space was still quite active, with over 28 noteworthy commercialization announcements, more than $428 million in major fundraisers, four major facilities coming online, and more than 84,000 MT of new capacity announced. The product launches, admittedly front-loaded in the year, were largely driven by large corporations with 15 of the 28 products coming from these entities and ranging from chemical intermediates (e.g., BASF’s new bio-based polyol, #23 in the figure), to polymer resins (e.g., Evonik’s new VESTAMID® polymer, #25), to components for finished goods (e.g., Toray’s Ecodear laminate, #10).
Of course, low cost oil has added some harsh reality in the BBMC space, in addition to just the challenges of perception. This has been most heavily felt by the start-ups in the space. Cobalt, Vertichem and Optinol all met their demise, while delays in funding directly affected at least a few start-ups, such as Micromidas and Avantium, which are worrisome for the scale-up plans of both companies. Three of the four production facilities that came online this year were start-up-driven projects as they have little choice but to soldier on, but the underlying fundamentals aren’t strong in all cases. For example, the 50,000 MT of isobutene capacity announced by Cristal Union and Global Bioenergies is a gamble. Global Bioenergies previously claimed it could compete with $85/bbl for chemical applications (e.g. synthetic rubber and PMMA) without any green premium, a far cry from today’s oil prices that have oscillated around $30/bbl in recent days.
Going into 2016, large companies’ ability to weather the storm creates opportunity, subject to their executives having a requisite level of strategic vision. The current environment of low oil prices opens up a sea of opportunity to pick up IP and assets as start-up companies cash positions come under pressure. Take, for instance, DuPont’s acquisition of Dyadic’s C1 industrial enzyme technology platform for $75 million. Though the size of the deal was similar to other enzyme company acquisitions in recent years (except for Danisco), DuPont also picked up the cellulase enzyme technology that is licensed to DuPont’s competitor, Abengoa. Of course, with DuPont likely to be otherwise occupied by their “merger of equals” with Dow, others have a chance to act and position for the future, accordingly.
Between product launches, mergers and acquisitions, and financial strain, the bio-based industry is going through a period of realignment, with the top-tier companies set to either boost their standing or lose ground to competitors moving more swiftly. Clients are advised to evaluate their standing in the space, monitor the actions and strategies of competitors for myopia and other forms of executive ineptitude, and look for opportunities to pick up distressed IP in the year ahead.
By: Julia Allen