Adhesives Magazine

Renewable Chemicals Market to Reach $76.8 Billion by 2017

October 13, 2011

The global renewable chemicals market is expected to reach $76.8 billion by 2017, according to a new report by Global Industry Analysts Inc. Sustained increase in crude oil prices and the need for new energy sources from eco-friendly feedstocks are predicted to rekindle investors’ interest and lead to improvements in capital spending and commercial deployment of bio-based technologies in worldwide markets. In addition, proposed amendments to certain government programs and loan guarantees will support commercial-scale projects and advance the renewable chemicals sector.

The world is moving beyond opportunities presented by fossil fuels into a realm characterized by emerging renewable energy technologies. With fossil fuels causing irreparable damage to the fragile ecosystem, the transition toward renewable energies offers immense opportunities. A fundamental driver in the push to incorporate renewable chemicals is the industry’s excessive dependence on crude oil. Rising energy resource depletion and advances in renewable technologies mean today’s renewable sources play a much larger role, and even a major decline in petrochemical prices will not subdue the impetus already generated.

The use of renewable raw materials in the production of chemicals, such as plant-based sources, enzymes, vegetable oils, fatty acids and microorganisms, is also attracting interest due to its potential in reducing the chemical industry’s much debated and resented impact on human health and environment. Most players in the market are primarily university spinouts and agricultural companies. The future impact of renewable chemicals on the traditional chemicals industry is expected to be great; this current scenario is forecast to change as traditional chemical giants eye the potential in this space with more than a passing interest. In other words, growing opportunities in the renewable chemicals space will witness an influx of newer players, especially large conventional chemical companies.

The world market for renewable chemicals rebounded in 2010, following a temporary slide in growth in 2009, and is expected to witness a robust double-digit growth in the ensuing years. Concerns for reducing greenhouse gas emissions and efforts for reducing dependence on petroleum feedstock have helped the market post gains during the recession period. This is primarily because these factors represent ideologies for a sustainable future, the business case of which extends beyond the temporary weakness in economic climate. The industry has withstood the slowdown in venture capital investment activity, patent activities, other funding and access to capital issues, declines in purchases of expensive renewable chemicals-based products, and deferred investments in renewable chemicals manufacturing.

Government support and intervention is expected to grow stronger in the upcoming years given the waxing urgency of replacing petroleum-based materials and the need to artificially support bio-based chemicals, which have long been cost disadvantaged, through government subsidies and incentives. Given the government’s role in helping startup renewable chemical companies achieve the first level of economies of scale and cost competitiveness, opportunities are forecast to continue to emerge despite the prevailing economic situation, given most governments’ continued and dedicated role in stimulating investments through appropriate pilot plant programs.

Growth in the next few years is expected to be driven by a continuous rise in oil/petroleum prices, need for environmentally friendly feedstocks, new technology development-induced cost reduction of bio-based chemicals, toxic chemical restrictions (legislated, lobbied/debated, proposed and planned) and growing consumer awareness and acceptance, which remains critical to the final switch to green chemicals. Optimism prevailing over the industry’s ability to develop new innovative green chemicals that enable easy substitution with lower transition costs is forecast to benefit the market. In addition, the development of drop-in renewable chemicals as chemical intermediaries, which can be directly used in existing chemical formulations/products, is expected to fuel market revenues in the immediate short-term, while in the longer term, next-generation novel chemicals will emerge to drive growth.

For more information, visit www.strategyr.com.