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While the ability to turn agricultural waste, such as corn stalks, wheat straw and husks, or even sewage waste, into industrial chemical feedstock has long been achievable in the lab, full scale commercial production has been slow to progress.

While bioethanol sourced from corn, sugar beet or cane, potatoes, sunflowers, sorghum, fruit, and other biomass feedstocks have had greater success, the industry’s future is still uncertain due to these products uses as food or animal feed. By focusing on wheat straw waste, chemical industry ecologists and entrepreneurs are hoping to improve the economics by gaining free and easy access to chemical raw materials.

As the wheat stalks are inedible to animals, they are typically only used as livestock bedding or are left in fields in an attempt to return their nutrition to the soil.

As the scientific journal, Phys.org observes, “The development of new bio-refining technologies based on agricultural waste is seen as key to reducing Europe’s dependency on fossil-based products. According to a White Paper by the International Council on Clean Transportation, about 144 million tonnes of wheat residues accumulate each year in the EU.”

Part of this development is the EU-funded OPTISOCHEM project, which is making good progress in transforming waste straw into bio-isobutene (bio-IBN), a chemical feedstock that is a precursor to numerous other industrial chemical products.

The basic chemistry of the process involves converting wheat straw into hydrolysate which is then fermented into isobutene, which can be used to make a wide-range of industrial chemicals.

The enterprise leading the project, is called Global Bioenergies. Their website outlines the value in making a success of this method, stating that, “isobutene, one of the major building blocks of the petrochemicals industry, represents a market worth $25 billion and may one day address an additional market worth $400 billion.” Noting that already, “15 million tonnes are produced every year and are turned into plastics, rubbers and fuels.”

Now a key step on the road to success has been made, as Global Bioenergies has delivered the first sample of isobutene made from wheat straw to industrial chemicals giant INEOS for inspection.

As Jean-François Boideau, EMEA Commercial General Manager at project partner INEOS Oligomers, made clear in a recent press release, “To date, we have received several batches of bio-isobutene from Global Bioenergies for qualification purpose[s], and the quality is promising.”

Adding that, “During the next phase of the project, INEOS is ready to evaluate conversion of additional quantities of bio-isobutene into downstream products in order to assess the potential of this bio-based feedstock as a building block for end consumer applications.”

Encouraged by the results, Global Bioenergies is now focusing on increasing production to more industrial levels. As the company’s COO, Frederic Pâques, states, “We expect to produce several tons of bio-isobutene on this new non-conventional feedstock in the remaining periods of the project.”

The project has further been boosted by the April 2019 announcement of a €135m investment surge from the Bio-Based Industries Public-Private Partnerships (BBI JU). Their goals, as listed on the partnership’s website include:

• Increasing the yield of targeted bio-based product(s) by more than 20 percent compared to state-of-the-art processes.
• Reducing the production costs of bio-based products by 10-20%, compared to current market situation.
• Reducing energy consumption by more than 30% for bio-catalytic processes as compared to state-of-the-art production processes.
• Delivering savings, in terms of CO2 emissions per kg product by more than 20% for bio-catalytic as compared to state-of-the-art production methods.

And while these numbers may sound insignificant in a chemical industry that is dominated by fossil fuels, the ultimate rewards are well worth both the effort and the investment.

As analysis conducted by Bernard Chaud, Global Bioenergies’ director of industrial strategy, found, “If just 48 million of the 144 million tonnes of wheat straw waste produced in the EU annually was collected, it could produce 21 million tonnes of sugar that could feed 100 commercial biorefinery plants to produce a steady supply of biochemicals for use by different industries, including biofuels, and substitute the equivalent of 35 million barrels of fossil fuel per year.”

Furthermore, it would provide a boost to rural economies, as chemical plants would be located in the countryside near the fields where the feedstock is, bringing jobs to many of Europe’s poorest regions.

“It offers an additional revenue stream,” said Chaud in a recent interview with Phys.org. “(Farmers) will not only sell the grain, but also the straw.”

While the business model may sound simple, the practicalities of breaking down cellulose isn’t easy. As discussed in earlier SPOTCHEMI articles, numerous breakthroughs have been made in developing enzymes that are more efficient or resilient, but despite the low-cost raw materials, lowering costs remains an ongoing project.

As the environmental journal, Earth Island, reports “Over the past decade, the National Renewable Energy Laboratory [NREL] has brought down the cost of cellulosic ethanol from about $10 a gallon to $2.15 a gallon, primarily by bioengineering better enzymes.”

Employing cheaper enzymes with cheaper chemical feedstock will make for a more profitable bio-chemical industry.

But while profitability is at the heart of all chemical businesses, removing dependency on fossil fuels must also remain a goal, and one that remains in sight. As the BBI JU websites states, today’s bio-based chemical products are, “… comparable and/or superior to fossil-based products in terms of price, performance, availability, and environmental benefits. … [And] will on average reduce CO₂ emissions by at least 50 percent compared to their fossil alternatives.”

Photo credit: Freeimages

The world is ever changing, and nowhere more so than in the chemicals industry. Technological developments, new products and processes, new regulations, and even new companies, the chemical industry of the future will be a very different place.

As SAP CEO Bill McDermott, noted at the recent SAPPHIRE NOW conference, “the pace of change has never been faster – and it will never be this slow again.”

A big influence on the changing face of the chemical industry is the sphere of mergers and acquisitions. Where once stood ICI, Allied Chemical, AkzoNobel, and AGFA, now stand Corteva, Nouryon, and Covestro.

With these changes influencing chemical company strategy, much time and energy is spent by experts predicting future mergers and acquisitions. Given that every year the value of chemical industry mergers is more than $200 billion then it is time and energy well spent.

So, what do chemical industry analysts foresee for 2019?

Deloitte’s 2019 Global Chemical Industry Mergers and Acquisitions Outlook, observes that there were lower trading volumes, “… by private equity investors in 2017 compared with the 2015-2016 period. While this volume continued to decline in 2018, the value of these transactions increased significantly due to the Nouryon deal [when the Carlyle Group and GIC bought out AkzoNobel].” As a result, Delloitte predicts that, “private equity will continue to play a role in the M&A market in 2019. If valuations remain high, private equity will continue to team with other bidders, perform roll-ups, or make bolt-on acquisitions.”

This outcome is a point highlighted by chemical industry consultants at EY, who state in their report of Dec 2018, that “The growing sway of private capital is creating new possibilities for deals. Activists and private equity (PE) groups have raised record amounts of dry powder, which means greater competition for outright acquisitions. As a result, we expect to see more innovative financing partnerships between private investment groups and businesses in the year ahead, especially around divestitures. It also will mean more large deals. 2018 has seen the most deals in the US$5 billion and US$10 billion range on record. As the market corrects and PE firms seek to deploy their capital, we anticipate seeing this trend continue.

The belief in this trend is based on the research they conducted, which found that 74% of American executives see the US M&A market improving. Additionally, 51% of executives expect to pursue acquisitions over the next year.

This expectant surge of activity is perhaps in part to offset the slightly quieter 2018 which many chemical industry sectors experienced.

One such slower sector in 2018, was in agrichemicals, where Deloitte reports that, “M&A activity in the sector was driven largely by portfolio reshuffling as a result of the mega-deals of previous years. This meant smaller, more precise moves, such as product line divestitures.” Adding that, “Trade disputes, particularly between the US and China, have had a negative impact on agricultural commodity prices.”

This leaves Deloitte to predict that, “With these challenges facing the sector, M&A activity in 2019 will likely continue to target smaller, more focused portfolio rebalancing. Mega-deals of the size we saw in 2015 and 2016 are unlikely. Activity in 2019 and beyond may skew toward fertilizers rather than agricultural chemicals, where significant rebalancing and consolidation is approaching the endgame.”

Similarly, slow activity was seen in the commodity chemical segment, where, “As measured by volume, deal activity … dropped 10 percent in 2018 from 2017, when volumes had reached their highest level since 2010.”

This has been blamed on the Chinese government’s new restrictions on outbound capital as well as the general slowing down of the Chinese economy.

Another area experiencing a period of reduced deals was the sector for intermediates and specialty chemicals, where, “M&A deal volumes … declined for the second year in a row.” That said, “Despite the decrease in deal volumes, deal value in the sector increased to levels not seen since 2014. This, thanks in part, to five transactions exceeding US$1 billion in value, including Carlyle Group and GIC’s US$12.5-billion acquisition of AkzoNobel’s specialty chemicals business, Nouryon, and IFF’s US$7.1 billion acquisition of Frutarom Industries.”

2018 was also a quiet year in the industrial gas sector, with the exception of the two large deals that emerged from the Praxair/Linde merger.

In general, despite the reduced activity in a number of sectors in 2018, and economic uncertainty on a global level (trade tensions, Brexit, slower Chinese economy, rising interest rates), Deloitte still predicts that 2019 will see a, “… robust market for M&A in the global chemical industry.” Particularly as, “The past demonstrates that M&A in the chemical industry can flourish, even in uncertain times.”

These are sentiments supported by consultants at NetatWork, who in their assessment of the 2019 Trends in the Chemical Industry, state that “Merger and acquisition activity in the U.S. is growing rapidly. With companies spending more as they see increased cash levels, M&A is still the primary focus of those funds. Moreover, this is expected to continue.”

The consultants at EY concur, although with caution, asserting that, “We expect a robust mergers and acquisitions environment in 2019, but remain cognizant of increased global tension. From the rise of tariffs and protectionism to evolving international alliances, the shifting geopolitical chessboard is affecting how US companies define their strategic priorities, both near and long term.”

But while mergers and acquisitions have for so long been the catalyst of change in the chemical industry. Maybe this too will change in the coming years. Digitalization, globalization, and technology breakthroughs such a nanotech, are changing the world order, and this may well result in an end to the ‘economies of scale’ thinking of bigger is better, instead flexibility may become key.

As strategic consultants at PWC note, “The chemical industry may finally be approaching a tipping point, prodded by accelerating technology advances, which are shaping customer purchases and needs, some chemicals companies have begun to rethink their growth strategies, finally moving away from cost-cutting and retrenchment, toward more nimble, coherent, and aggressive business models.”

All change, please, all change.

Photo credit: Deloitte, Imaa, M&ACritique, Wbscd, SPOTCHEMI, FiberMarine, & Corporateeurope

The skills gap is growing, as the latest figures for manufacturing jobs show that there is plenty of work but not enough trained workers. With the chemicals industry growing faster than other manufacturing sectors the lack of a skilled workforce will hit chemical production harder than others.

There has been a lot of talk about how changes in production will hurt employment levels. But while many fear that Industry 4.0, with its increased use of robotics, advanced computing, AI, and the Internet of Things will cause major job losses, history tells us otherwise. For throughout the previous revolutions (19^th century England, Henry Ford production line, & Japanese automation), whenever industrialisation has advanced more jobs have been created than lost, despite the scaremongering Luddites.

Instead, the problem lies in a lack of trained workers in the job market. An issue highlighted in the latest Skills Gap in Manufacturing report, published by Deloitte, which states that, “the skills gap may leave an estimated 2.4 million positions unfilled between 2018 and 2028, with a potential economic impact of $2.5 trillion. Further, the study shows that the positions relating to digital talent, skilled production, and operational managers may be three times as difficult to fill in the next three years.”

There are three main challenges facing chemical industry employers.

1. Lack of Interest in Manufacturing

An earlier 2015 report (also by industry consultants at Deloitte in cooperation with the Manufacturing Institute) found that interest in a career in manufacturing among school leavers was lower than ever before.

In the study, respondents aged 19 to 33 gave their opinions on work in the manufacturing sector where many stated they thought employment there would be dirty, inflexible, and dangerous. As a result, millennials prefer the idea of working in industries, such as technology, healthcare, and finance.

2. Lack of Manufacturing Skills

With fewer young people interested in a career in manufacturing, the skills needed to work in this sector are becoming less and less sought after. As a result, there is a trend away from STEM (science, technology, engineering, mathematics) subjects that is making it increasingly difficult for employers in the chemical industry to find suitably qualified employees.

Furthermore, the chemical market’s rapid increase in demand for specialty chemicals means that raw material production is likely to get more technical, as production plants become ever larger and more complex.

3. Skilled Baby Boomers Retiring

Further adding to the skills gap challenge in the chemical industry is the rate of retiring chemical workers, each removing his skills and experience from the talent pool. For as the popularity of work in the manufacturing sector has waned over the past few decades, the chemical industry has been left with an aging population.

As a recent report by Digitalist Magazine, notes, “The average age of the chemical employee currently sits around 45.3 years old – older than all other industries except agriculture, transportation and utilities, and public administration. The industry is currently grappling with knowledge loss as sizeable portions of this population begin to retire in the coming few years.

While there is little evidence of this skilled workforce being replaced at a sufficient rate by younger generations. For example, while DataUSA (an American research body co-funded by Deloitte) notes that there is slight growth in the number of chemistry graduates (up 0.45% in 2016 to 21,821), a large number of these students are from overseas. As a report by the National Foundation for American Policy states, “International students make up the large majority of full-time students in many graduate science- and engineering-related programs, and their numbers have been rising much faster than the number of domestic students.”

Most notably, 57% of full-time chemistry courses in the USA were filled by international students.

America is not alone in its skills gap, as the fall in demand for chemistry as a study topic is a growing trend throughout the West. For example, in the UK, the Royal Society of Chemistry reports that, “In 2017, 26,945 students applied to university to study chemistry, … down 8.5 per cent on 2016 and down 13.4 per cent on 2015.” At the same time, the number of applicants accepted on chemistry courses also fell, “… down 4.9 per cent on 2016 and down 9 per cent on 2015.”

As a result, many universities are closing their chemistry departments completely. Laboratory equipment and chemical supplies are expensive and can be seen as an expendable overhead for a dwindling number of students. Conversely, humanities can be taught online, while maintaining a mathematics department only requires a piece of chalk.

But a falling interest in chemistry is not a global phenomenon.

According to a report on Chemical Education in China by the Chinese Department of Higher Education in cooperation with Beijing’s Curriculum and Teaching Materials Research Institute, the education system has been increasing its focus on chemistry since the 1980s.

While similar to many western education systems, in that Chinese school children have the option to stop studying chemistry around age 13, there is still plenty of interest in the subject.

As the report states, “There are at present about one hundred thousand ordinary secondary schools in China with 60 million students and near two hundred thousand chemistry teachers. Among the 1054 universities and colleges more than 300 have set up chemistry [as a] speciality.”

Adding that, of the 2 million students in adult higher education, “… one eighth of them learn chemistry courses. [Plus] Chinese Radio and TV University and Satellite TV Education offer chemistry lessons every week.”

Given the exceptional growth of Chinese chemical production and its predicted expansion, it seems that the West could learn a lot from China’s efforts to avoid a skills gap. Despite the trend for western chemical companies to set up production in the Far East, China is increasingly taking its domestic chemical requirements into its own hands. While chemical industry research, both academic and commercial, is increasingly being led by Chinese chemists.

In fact, while chemical industry chiefs are right to worry about a skills gap in the chemical industry, it is perhaps only a regional problem.

This website is supported by SPOTCHEMI, an online community of chemical industry professionals. Through the company’s website, raw material manufacturers, suppliers, and traders keep up to date on news, price fluctuations, and market trends. The website also offers a product sourcing service, product promotion tool, and provides a general platform for networking among like-minded chemical professionals.

Photo credit: CardiffUniversity, Digitalist Magazine, StraitsTimes, History & Manufacturingstories