Bioplastics in Brazil: Beyond the Green Speech

Bioplastics as a Growth Strategy to the Brazilian Chemical Industry

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The Brazilian chemical industry is among the top ten industries globally, having a major goal to be positioned among the top five. Several initiatives are being presented and put into practice in Brazil, supported by Brazilian Association of the Chemical industry (ABIQUIM), through a program called "Pacto Nacional da Indústria Química" (National Pact for the Chemical Industry). One of the main goals of this program is to make Brazil a global leader in green chemistry.
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In this context, Bioplastics will represent a major growth strategy to the Brazilian chemical Industry. Bioplastics are still a nascent market in Brazil; mostly penetrating segments such as food packaging and agriculture films, through imports and pilot scale productions. However, large production scales are expected to give a new shape to this market in the country.

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An Incipient but Promising Market

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The current market for bioplastics in Brazil is composed mostly by the resins polylactic acid (PLA) - imported by Cargill and Cereplast, Starch-based (produced by the Brazilian company Biomater), and poly-3-hydroxybutyrate (PHB), produced by the Brazilian company PHB Industrial. This market generates about $4 million to $5 million in revenues.
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The level of awareness of using bioplastics in Brazil is still very low, and this poses a considerable challenge. Bioplastics are still considered a niche market, with cost and performance issues to be solved. Besides, the Brazilian consumers have the habit of reusing plastic bags as garbage bags. Supermarket chains are providing returnable bags or boxes, but there is a huge resistance from customers, especially because plastic bags are offered free-of-cost.

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On the other hand, Brazil has unique competitive advantages for the local bioplastics production. Brazil is the leading producer of sugarcane in the world, having the lowest production costs for this raw material. The constantly growing production of sugarcane in Brazil will drive the country's bioplastics production based on ethanol.
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The main applications for bioplastics in Brazil are the segments of food packaging (rigid and flexible) and agriculture films and disposals. In agriculture, disposables for accommodating seeds during planting are being used.
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Plastic handbags are also an important application for bioplastics in Brazil.

Expected Movements in the Industry

For 2015, large scale units are expected to be producing bioplastics in Brazil, such as Braskem bio-based polyethylene (200,000 MT per year) and Solvay bio-based PVC (120,000 MT per year). Braskem bioplastics plant will be the largest in the world. This substantial change in the market will result in a rapid growth in the bioplastics market in Brazil, which is expected to value more than $600.0 million by 2015.

Braskem is the largest petrochemical company in Latin America with revenues of more than $12 billion in 2009, and entered into bioplastics production in 2007, manufacturing a product called 'green polyethylene'. The project to produce 200,000 MT of bio-based PE is expected to be completed in the fourth quarter of 2010. The technology used for green PE manufacturing ethane, the raw material to make plastics, which can be manufactured by removing one water molecule (H2O) from sugarcane ethanol through dehydration process. In the end, the plastics produced have the same characteristics as conventional plastics derived from fossil feedstock, such as naphtha or natural gas.

Frost & Sullivan expects that bio-based and petrochemical plastics will coexist in the market. In the short to medium term, bioplastics are not considered a threat to petrochemicals, as its volumes will correspond to less than 5% of the total plastics' demand. While bioplastics will be focused on premium products, where biodegradability or compostability is an added value, conventional resins can focus on applications where low price is required or when improved technical performance (thermal and mechanical properties) is crucial.

Bioplastics's prices are expected to decrease by 20 to 25 percent in the next five years. This rate is highly influenced by the new capacity of bio-based PE that will come into the market in Brazil. Bioplastics are likely to be a fast growing market in Brazil, with production process rapidly dominated. On the other hand, petrochemical plastics' prices are expected to rise in the next years, following the growth in global demand and the increasing oil prices.

In the medium and long terms, bioplastics will have to identify applications where they can bring in genuine performance advantages over conventional plastics, rather than just being beneficial from the point of view of ending disposal. Promising applications for the future include: medical devices, construction (furniture), footwear and others. Nevertheless, the major applications continue to be food plastic packaging, agriculture, and consumer products.

Market Opportunities for Bioplastics in Brazil

Brazil represents a valuable opportunity to explore the production of plastics from renewable resources, as it has a competitive advantage over other countries regarding production costs.

The Brazilian production of bioethanol based on sugarcane is much more efficient than the U.S. production based on corn.

Competitive production scales and an increasing demand will be crucial to make bioplastics a growing and profitable market in the region. Legislation and government incentives, currently under development, are also considered important in this stage of the industry, leveraging small local companies.

Due to the price premium required for bioplastics over conventional plastics (30 to 70 percent higher), a major challenge to the market participants will be convincing new end users to use the products. As a result, the strategy of marketing and product positioning will be critical to the product's success in the market.

Success factors for the implementation of bio-based plastics

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