Bioplastics: Beyond recycling

throw away story caught my attention. It was really, you know, just a few lines stating that Malaysia was sending back three thousand tons of illegally imported plastic waste to the UK, US, Australia, Japan, France and Canada. The Environment Minister of Maljia said Malaysia will no longer be a dumping ground of the world, and it seems other countries are following me suit. So Thailand, the Philippines, Indonesia are all sending back plastic waste to

all these places um and refusing to accept more. Now, what does make it into these countries often gets illegally incinerated or sits in the landfill, so only a small fraction gets recycled. So bioplastics, this seems what happened, or what well could happen when Western countries are forced to reckon with not being able to sweep their plastic under

the rug anymore. It's really coming from everywhere. Yeah, we've we've got materials everywhere, and the reality is that when you throw something away, there is always in a way. So whether that a way is us shipping it to different country, whether that away is it unfortunately ending up

in the ocean. So there have been a lot of there's been a lot of recent attention on social media and in the news about the Pacific guy or so if you've not heard of this, uh, this is a Texas size lump of floating plastic waste in the ocean.

And it's typically followed up with some sort of picture of something like a sea turtle that's wrestling with a single use plastic bag or a straw, and you know, it's it's this very confronting image of human waste going into what we consider, you know, pristine natural spaces that

are no longer pristine become because of it. So I think we can spend a lot of time talking about waste, but hopefully today what we're gonna do is really actually get much more into bioplastics and what some of the innovators are doing to create different materials both from different sources or can be ultimately because of how they're made

treated differently end of life bioplastics. There's just an existing small part of the market right now, but let's explore what the future could potentially hold on this and really what bioplastics are, because that's something that until I read this note, I wasn't clear on and I thought I was.

So if you want to read Bioplastics Primer Market Overview by Ihan Savut, you can find it on biennef dot com or biennfs mobile app by just searching for the title of the note, or on the Bloomberg terminal at b an ef go. If you're not a client, shoot us an email at sales dot BNF at Bloomberg dot net. And just a quick reminder that BENNF does not provide investment or strategy advice, and you can hear a full

disclaimer at the end of our show. So I'm Dana Perkins and I'm Mark Taylor and you're listening to Switch on the NF Client podcast. Joining us today is Dr Julia Atwood, who is our head of Advanced Materials here at b n EF. Welcome to the show, Julia, thanks for having me back. Guys, can you start us off today by by just telling us what bioplastics are? I mean, so we read the note, we think we get bioplastics. I read it twice. Okay, there you go. It's still

use this question. Okay. It's a complicated space, so it's totally understandable that you guys are needing to read it over. It's complicated because there is an entire world of plastics. So we're going to break it down into four types. There's the regular everyday plastics that you see all the time, and they're made from fossil fuels and they do not biodegrade. Then you have some very very special fossil fuel based plastics that do biodegrade. They're called PBS and p BAT.

They're a little weird. We're not going to talk about them too much. Then you have your bio based world of plastics. Plastics are just made up of carbon and hydrogen and a bunch of other additives. So really they can come from any source where you have those two things, and a lot of those are bio based, like old

biomass or sugarcane or corn. So within the plastics that are made from biosources, you have the ones that will biodegrade, and they are called substitutes, and these are brand new plastics. And then you have your bio based plastics that are called drop ins, and they are chemically identical from the standard polypropylene polyethylene that you would get from a fossil field. So they're called drop ins because you can just put them straight into your product, no different treatment required once

you get the material made. Now, my understanding of bioplastics when I heard the term was they were going to be this universe of things that we interact with that are both made from organic materials and biodegrade fairly quickly. Is there a ven diagram of these things or does everything sit in one of these two buckets that you

just described. There is a vend diagram, especially in terms what happens at the end of its life, because some plastics you can just put out in your compost heap and then they will disappear, and that's like the home composting space. But a lot of them, especially the ones like p l A that are used very commonly, they have to go into a special industrial compost. So you still need to send it off with your city recycling

so that it can go to a special facility. So do they want the people who are actually taking this and composting it or incinerating it and creating energy from it, whatever they're doing with it, do they want it because they get the byproduct at the end? Because I'm having these flashbacks to being a kid and having this you know, soda can and taking it in in California and getting five cents back and saying thinking, suddenly I'm rich because I have a bag of soda cans. Um. Are there

people on a much bigger, more industrial plastics exactly? No, But are there companies that are seeing this as a really great opportunity for them to collect a new type of waste induced something with it at the end, Well, that's a tough one because really bioplastics are a tiny, tiny fraction of the market there like one percent of the plastics market, and what we normally see for creating a new way stream and creating the business models around that is that you need to have like five to

ten of what you're selling being that. So before you have like a bio based polyethylene specified recycling stream, you need to sell a lot more of it. Most of the people who are buying these bioplastics are doing it for sustainability reasons, or because there are extended producer requirements legislations, or because there are extra taxes that they can escape by using a bio friendly plastic. So what's the political

momentum to get it to that five percent? Is it one of these things where everybody is really looking at this is a is a new industry and governments are wanting a plastic alternative or they kind of been different to it, or is it what we talked about in the intro? Is it? Is it the Philippines and Indonesia? And yeah, it's a combination of those things. I would say the policy is not as developed as it was for something like biofuels, where you had these blending requirements.

We're not seeing anything like that yet, partly because the environmental lobby is split between the people who want to encourage recycling and the people who want to encourage bioplastics. So where we do see governments getting behind this, it's typically where there's a big national champion and a lot of agriculture. And the country that is sticking in my head here is really Brazil. So brass Cam makes most

of the world's biopoly athlete. They're by far the dominant producer, and that's because there's just so much biomass in Brazil, so it's great for them, and then people who want to get off oil. So Japan has some legislation around it, but really the policy has focused much more on you have to have plastics with SAT recycled material in it, or we're going to tax you. That's what they're suggesting in the UK that there are a lot of ways

to deal with the waste issue. End of life. I mean, I think I was reading yesterday UM statistic that in two thifteen I'm sure the number is different now of plastic waste was just discarded and not actually dealt with. Now, whatever that actual number is for each individual locale, there's definitely a lot of stuff that needs to be dealt with end of life read I read yesterday the stat

now is only nine gets recycled. Yeah, that's because some people sometimes consider incinerating plastic as recycling it because it's being used for power. It is having another use, but it's not going back into anybody's supply chain. Okay, So that's the way to deal with that. End of life's a bit of a stretch, isn't It depends on what you want to incentivize. If you just do not want landfills,

at least you're getting something out of it. And the end of life is so tricky for bioplastics because we were talking about the methane earlier, and I mean, you guys will know methane is a much more potent greenhouse

gas than carbon dioxide. So there are people in the other eye of the lobby who say, yeah, but we're locking carbon away in plastic from a fossil fuel and it sits there in a landfill inert, doesn't do anything, doesn't release any carbon, whereas these biodegradable ones at the end of their life, Yeah, you took carbon out of the air, but you put it straight back up or you create this mething. And so the end of life

is something that people argue about a lot around bioplastics. Well, and let's talk a little bit about the traditional plastics that were used to dealing with and they sit in the landfill and presumably do nothing for a while unless they make their way into the ocean, and then we've

got a different thing on our hands. But it was the Plastics Industry Association I think you were saying, referred to the term biodegradable as being equivalent to the word yummy, because it doesn't actually mean much of anything because it has to do with what timeline we're looking at. Now. I'm not saying I agree or disagree with that definition of the word, as I think biodegradable actually does have a pretty good definition. But um, they do have a

point there. If these bioplastics make their way into your home compost or more importantly, into the oceans, what happens to them? Do we need these end of life cycle people to really be thinking about what we're going to do with them or does it really vary? It's really not just to throw it away and we're good type thing like you would think of a banana peel. Because so many plastics are used to contain food and that

means they're in contact with water. It often means they're in contact with heat and water and heat are kind of the things that you think about when something is degrading. So it's difficult for the producers because they want to make something that's easily biodegradable, but they have these mechanical and temperature requirements that they have to fulfill. So say p L A, which is the most common, one of the most common biodegradable plastics, if that ends up in

the ocean, it's actually pretty water resistant. It's probably going to sit there for a very long time. And by a very long time, you mean hundred years, five hundred years, a thousand years, probably the scale of years. Because in ideal conditions, the technical standard for being biodegradable is that nine of the carbon contained in that material has to have been released as carbon dioxide after a hundred and

eighty days. So there is a definition, there is, but it's a very it's a pretty loose one and it doesn't specify the conditions. Okay, so I'm thinking about where I've actually seen this stuff. So we're talking a bit about the end of life, but what about everybody who wants to make this stuff? So I'm thinking Christmas time, actually there was this vestas wind turbine made by Lego that my son really wanted from Santa Claus. You've raised

your children well, Dana. It was. It was really fun because finally what mommy does for a living was cool, um, and he asked for it from Santa of all people.

And one of the things they had pretty heavily advertised on the box was this bioplastic little the trees were made of bioplastics, and they're toying around with this idea of creating bioplastics, and who knows what that will end up doing too, Legos manufacturing I can't even begin to guess, given we've got mounds of Lego plastic in our house right now. Um. But what other companies you mentioned in the note that Coca Cola potentially has skin in the

game here, and I'm thinking this is an opportunity. But but for who on the demand side, Anybody who's close to the consumer is now under a lot of pressure to make their products more sustainable. They have come under a lot of fire for plastics in the oceans, for port labor practices in some cases, for you know, artisanal mining in Africa. So everybody has this at the front of their mind, and bioplastics are a nice way for them to keep a material that's incredibly important to the

consumer sector. Think about everything in your life it's made of plastics, while making it more sustainable. So Coca Cola was really the company that got the whole ball rolling on the bio pet side of things, because what the people making bioplastics desperately, desperately need is a champion. You have to have somebody raising their hand and saying I'm going to take fift your capacity before they will build

a plant. I think the other companies that are likely to get into it are people in the clothing sector, people making packaging, the brand owners people like Unilever, Procter and Gamble, Nike, and from clothing, you mean because of all the packaging that comes in it, or actually to make the clothing itself, because what is it, something like six the world Economic forms at six of all the

clothes that are manufactured have some sort of synthetic fiber. Yeah, there's a huge amount of signetic synthetic fibers out there. Not a lot of them are bio based at the moment um, but things like shoes, they're really interesting because they have a lot of different plastics in them. Um, and yeah, it's something that people are willing to spend quite a bit of money on. I know, my daddy's a big runner. He spends a ton of money on running shots. So it's a high value product and it's

consumer base is pretty conscious of these things. The interesting outlier for me though, is Forward. Either of you guys drive a Forward, not as much as I'd like, so Forward is actually using bioplastics quite a bit. They're starting to blend them into the interiors, into the other plastic parts that they have in their car. You know, stuff is a little away from the engine. So that's an industry that hasn't made as much of a move towards bioplastics.

But if Ford can kind of show them the way in terms of the supply chain and the design standards, then there are quite a few plastics and cars these days, and there's going to be more. Now, how about the other forms of packaging that I've been getting kind of some interest recently, well actually for a long time. So it what comes to mind from my standpoint is tetrapack, or how with all these plastic bag bands you're seeing

a lot of places. Uh, the alternative seems to be paper bags, which instantly have a much higher carbon footprint, are bioplastics. And I know it's really hard to kind of extrapolate this out, given there are only one percent of this plastics market right now. But do you foresee them potentially encroaching in on the plastics market or do you see them encroaching in on these alternative things materials

also biopackaging from paper or other things. If we want to give it another term, um, where do you see it really going or is it just gonna add additional capacity because I mean the world's going to go from seven billion to potentially ten or twelve billion people, and gosh,

we need, we want materials. I think the alternatives that we have right now, some of them, like paper bags, I think they're a bit of a band aid measure because while there are people who can make bioplast sticks, there isn't actually that much active capacity, So the people who are buying them are worried about security of supply. So I think when you see a plastic bag band a lot of these companies, their first instinct is, oh my god, let's switch to paper because everybody knows where

to get plastics, ready to get paper bags. Um, but the paper isn't as good a packaging material as plastics because you know, if your eggs break or your milk leaks, it starts to get really weak and then all of your oranges and bananas followed to the bottoms, So doesn't last as long. That's that's the thing. Plastics last forever. Yet, Um, those single used plastic bags, they can be used a couple of times, whereas a paper bag you get it

wet toast. Yeah, and you've hit on exactly. The problem is that utilization has a huge impact on the overall carbon footprint of something, because when you think about a reusable water bottle that has a much much lower urban footprint, even though you need more and higher performance materials to make the thing in the first place, if you can kill demand for a lot of other things, then that

gives you a big benefit in terms of carbon. So I might actually bypass that whole question and say I'm thinking, you know, cloth bags and getting everything delivered to your door in crates that you then put immediately into your fridge. Maybe the future, So on the performance end of things you reference in your research that they've cut kind of

different performance characteristics. Could you talk about some of the benefits that bioplastics actually provide as And I don't know which of the two categories of bioplastics, but but which of these two categories has kind of a superior value to it that a consumer or even that a manufacturer

may want in the market. The thing to remember is that the bio based plastics, so like biope biopet, it's exactly the same as So we're not going to notice the forens except I think I've interacted with some and they're slightly matt finish. Yeah, that's the only differences. The only avantage there for the substitution. This is the substitution is one right now, this is the drop in the drop in, so sorry, it's the only advantage there that

you're not using oil to make it. Yes, and for some of them it's not even that they're totally oil free. So biopet, for example, is only bio based, so there's still quite a lot of oil in there. There are bio routes, but they're not commercially mature. So yeah, I mean the people who are making the packaging and using these materials. They see it as a benefit that they

don't have to change their process at all. But on the other hand, the reason why the substitutes, so these are the new things like p l A and p h A, the reason why they can have better properties is because you're designing a brand new material, and so you can use additives or different processing methods to give you stuff that you didn't have before, so like better temperature resistance or better formability, or it can just be stronger and stiffer um or if you want them matt finish,

you can have Matt initially a Christmas tree. So there are plastics engineers out there saying let's make packaging all kinds of different things, because we might just be able to make some more interesting stuff. Yeah, exactly, when you're saying, just what is a bioplastic, red flags went up in that seems like there's some dark secrets here. So land use water use food competition. Can you comment on that at all. Let me start with the food competition thing.

They've started by using foods like corn and sugar and soybeans because that's the easiest thing to make it from. You know, it's a pretty rich source of the oils that they need. But there are a ton of startups out there who are working on second, third, fourth generation feedstocks like potato peel waste and carrot waste, all the stuff you don't want to use. I get a magazine that comes in a potato peel waiste sac. It's a children's magazine, but all saying, I'm imagining brown burlap coming

through the hill plot. We do a dress water and land use in the note. So we have a chart where we're looking at the cradle to gate carbon footprint and comparing it to Patrick chemicals, and we have like a line and it's basically anything below this line is better for the environment. We take into account water and

land using carbon footprint, but it's extremely lucation dependent. If you were growing all of your bioplastics feedstocks in a greenhouse on the middle of a rock face in Newfoundland, then that's not interfering with your food supply um or if you're using the waste stuff like the second and third generation feedstocks, then that's a positive as well. It's better than burning it. I've put about people locating these like in Wyoming near or excuse me, Idaho, where all

the potatoes are or in Maine or something like that. Yeah, it makes sense, there's that to consider. We still see most bioplastics being below the line, so better than the petro chemical alternatives. But then it really depends on what happens to it at the end of its life. Now, quick moment for definitions. You said cradle to gate. I read it a couple of times in the note and thought, surely this is a type of she means cradle to grave because I've heard that time before. But what gate

are you going? I am wrong, You're going up to the factory gate. Okay, so they see there, I suppose from the supplier's point of view, that's when their responsibility ends. They have made this thing in the most responsible way possible. They've used a biofeed stock, They've powered their plant using wind and solar. That's like all they can do. They hand it over to the supply, delivered the little plastic pellets.

Deliver the pellets, and then it's like your move, guys, um, and then it's up to the brand owner of the person making the packaging to a make it so that it's easy to recycle or to compost. So make it thin, make it out of one material and then be get the consumers to treat it properly at the end. So what do you think it's going to take to give this industry a real inject the injection that it needs to be more than one person in. What's going to get it to five of total materials? And where does

that opportunity kind of come from? Yeah, it comes from a big international champion saying you just need several Cokes, like you need an Amazon, Yeah, and you need one person per bioplastic almost, so you need someone who's going to say I'm all biope, I'm all bio p a um. Because Coke can run its segment of the biopet market right now. But the only thing that's going to get it beyond there is all of these big international companies

saying oil is not interesting to us anymore. You're starting to see those kinds of moves with Apple around aluminum, so that's they're big things. They want to make the Iphonet of aluminum. So they want recycled or green aluminium. Yeah, they don't use very many plastics, but they've committed to

everything being recyclable or renewable. So once they get through their aluminium supply chain companies like that are going to start looking at plastics and they're going to say, okay, do I go recycled or do I go bioplastics, And those two aren't mutually exclusive. I mean a lot of people would say the gold standard is to have a bio based renewable feedstock biope say that you then recycle

at the end of its life. So then so long as your power in your manufacturing with clean energy, no patrick chemicals involved, and low energy because recycling is typically less energy intensive. So Part one was on the market opportunity of the market overview, and there's a part two coming on that, right, Yes, there is a part two.

Part two looks into each of the different plastics in detail, so it talks about who are the major producers, what are the technical challenges, how are they made, how are their costs going to change, which is pretty important in something that we actually haven't talked about today. And then there's also going to be a couple of case studies. Julia, thanks for joining. Thanks so much, guys, this is fun. Bloombergin e f is a service provided by Bloomberg Finance

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