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Project Overview

The profitability of the Australian sugar industry depends on a volatile world sugar price and an uncertain foreign exchange market. The industry faces rising input costs, increasingly variable climate, ever changing environmental regulation and changing global sugar consumption patterns. Current revenue diversity is limited whereby greater than 85% of revenue is sucrose based even though sucrose represents only 15wt% of billet cane. Revenue diversification is essential to the industry’s future and that value-adding to sugar-cane and manufacturing by-products is needed. SRA’s strategy (KFA6) is directed at this issue of diversification.

Industry stakeholders, SRA, government and universities are constantly approached to support research in value-adding opportunities. Not all research in value-added products will however lead to good commercial outcomes . SRA and its stakeholders need to be able to filter which pathways will most likely lead to valuable, sustainable market opportunities and so direct the limited industry RD&A funds to those most appropriate activities.

The results of this study will define a strategy context, based upon industry consultation, within which SRA can optimally target its limited RD&A resources targeting industry diversification and product value adding.

Participants

The following people and organisations will be directly involved in executing this project.

Sugar Research Australia ("SRA") was established in 2013 as a sugar-cane grower and miller owned company and the declared Industry Services Body for the Australian sugar-cane industry under the Sugar Research and Development Services Act 2013 (Cth). As the declared Industry Services Body, SRA is required to provide and manage RD&A activities, for the benefit of the sugar-cane industry and for the wider public good.

Eris O’Brien, Lazuli Consulting, is an experienced management consultant specialising in commercialisation and business development, primarily in the energy sector. He will lead the study. His specific expertise will be used to design and deliver the consultation process, develop the RD&A framework for value-add and diversification as well as techno-economic analysis. He will work with the others to value_add_and diversification as well as techno-economic analysis. He will work with the others to develop the appropriate strategies for SRA and the industry.

Tony Campbell, Lazuli Consulting, is an accomplished consultant specialising in energy and has a long history working on biomass related projects. He will deliver commercial market insight analysis to the study and will work with researchers to develop appropriate metrics to allow logical and transparent commercial assessment of strategies developed.

Mark Harrison is a Senior Research Fellow within the Centre for Tropical Crops and Biocommodities at QUT. He will play a key role in the primary research phase of the project, particularly the review of current technology pathways. Mark is a research scientist with over 15 years' experience in basic, applied, and commercial research. Further, he has over 5 years' experience in industrial biotechnology research as Team Leader - Biochemistry and Enzymology in the Syngenta Centre for Sugar-cane Biofuels Development at QUT. Mark is experienced in a diverse range of research areas including industrial chemistry, plant biology and biotechnology, protein science, animal feed, and biofuels.

Dr Dianne Glenn, the principal of Corelli Consulting, has provided technical, commercial and strategic advisory services to the life sciences and industrial biotechnology industry for the past 14 years. Dianne will assist to delineate relevant technologies, advances, opportunities and industry trends which will be cornerstone to the results of this study. She will be instrumental in bridging current state technology into forward looking commercial pathways.

The following organisations will also be referenced at various stages of this project:

  • Australian Sugar Milling Council ("ASMC")
  • Queensland Cane Growers Organisation Ltd ("Canegrowers")
  • Australian Cane Farmers Association ("ACFA")
  • Sugar Research Institute ("SRI")
  • Regional cane-growers and sugar milling groups

Motivation

The Australian sugar industry generates revenues of approximately A$2.5 billion annually. It is estimated that the industry directly employs 16,000 people across the growing, harvesting, milling and transport sectors. Nationally, sugar is the 2nd largest export crop after wheat and Queensland is the largest producing state delivering 95% of national sugar production.

Australia exports around 80% - 85% of all sugar produced and so the industry’s fortunes are at the behest of traditionally volatile sugar prices.

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Historical price charts ex Quandl ICE Sugar # 11 continuous contract

Translating this to the Australian sugar industry, we can derive that 2017 sugar based revenues have deteriorated overall by circa $292m (~14%) relative to 2011. The table shows, by region, the composition of that variance.

Data source : ASMC; Area = value of change area harvested; Yield = value of cane harvested per hectare; Sugar content compares sugar produced based on cane delivered; Price variance represents impact of US$ price differences, assuming constant FX rates; Forex represents value change because of variable AUDUSD

Northern A$MHerbert - Burdekin A$MMackay - Proserpine A$MSouther A$MNSW A$MIndustry A$M
Area60(45)(3)(0)1830
Yield175977024(1)365
CCS1032551062
Price(240)(497)(279)(146)(62)(1,223)
Forex931921085624474
Total97(220)(98)(61)(11)(292)

This price volatility is reason enough to explore diversification opportunities.

Remarkably, almost 90% of industry revenue generated is from sale of sucrose (~4.5Mt) which represents 13.5% (~33.5Mt) of total material harvested. Extracting value from resources other than basic sucrose has underwritten much academic effort and commercial examination exploring possible industry value add and diversification opportunities. Indeed, there are any number of diagrams which clearly present the various permutations, paths and opportunities.

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Countless paths and opportunities...academic

Historical snapshot

History shows that the industry has grown significantly increasing from a revenue base of around A$500m in 1972 to it’s current turnover of A$2.5billion. Per ABARE, in 1973-74, area harvested was 226,000 hectares producing 2.4m tonnes of sugar sold at A$130/t. In 2016-17, area harvested was 372,000 hectares, from which 4.8m tonnes of sugar were produced and sold for A$514/tonne. Using these extremes, we can show that price has driven much of the industry revenue growth:

Source : ABARE
Unit1973-74016-17DeltaValue(A$m)
Base revenue 1973-74318
Area000 ha223372146205
Yieldtsugar/tcane10.8212.912.09101
PriceA$ / tonne1305143841,844
Total revenue 2016-172,468

Australia’s production volumes, by international standards, are small and comparatively, shrinking. Australia’s cane harvest has increased by about 15mt to a now 36.5mt over the 40 year period since 1978. In comparison, Thailand has increased its cane harvest by 42.2mt to around 106mt between 2007 and 2015. Moreover, Thailand has published ambitions to produce 180 mt of cane by 2026.

Industry structure

Area & regions

Areas where sugar-cane can be commercially produced are limited by climate, water resources and proximity to a processing mill. Most non-irrigated cane is grown within 50 km of the coastline. However the availability of irrigation water has encouraged production in drier environments and reduced variability of production in others. Major irrigation areas include the Burdekin River Irrigation Area and Mareeba Dimbulah Irrigation Area in Queensland.

Sugar production in each region is as summarised below.

Data source : ASMC statistics
RegionSugar (kt)% areaYield (t/ha)
Northern Qld88019.681.77
Herbert-Burdekin,Qld1,81940.6104.5
Mackay-Proserpine,Qld1,02122.872.1
Southern Qld53411.983.2
New South Wales2265.1120.7
Australia4,480100.088.4

Infrastructure

As the quality of cane deteriorates quickly from the time of harvest, proximity to sugar mills is an important cane value determinant. Today the Australian industry relies on 28 mills owned and operated by 11 milling groups. This milling ownership structure is relatively new with a number of transactions this decade transferring ownership from Australian based entities to the current major international milling and trading groups. At its most basic level, this change in ownership has brought a more international perspective to processing and marketing. The average milling rate is circa 430 tonnes per hour, operating 20 - to 22 weeks per annum.

The industry owns and operates circa 4,000 kms of cane railway, used to gather 90% of cane harvested. The balance of cane (mostly in NSW), relies on road transport. Per ASMC, the furthest run to a mill is 119km whereas the average distance hauled is between 13 and 35kms. There is about 250 diesel hydraulic locomotives, consuming up to 520 kW power to shuffle around 52,000 cane bins.

Sugar Terminal Limited (‘STL’) is listed on the National Stock Exchange of Australia (NSX : SUG) but ownership remains within the sugar industry. STL owns and operates 6 bulk commodity terminals in Queensland and handles over 90% of the raw sugar produced in Australia. STL also handles other commodities including molasses, wood pellets, gypsum and silica sands levering the A$350m investment in Queensland ports.

State of play

As previously discussed, the Australian sugar industry depends predominantly on sucrose based revenue. Other major revenue sources are electricity and a growing molasses market.

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Industry revenue pie

Electricity markets

Energy export volumes, since inception of the Mandatory Renewable Energy Target (‘MRET’), have grown at a CAGR of 7.7%. In 2017, the approximate value of energy exports was A$191M.

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Electricityrevenue pie

The industry operates circa 487MWe of generation capacity over 25 sites. A small number of large projects have contributed to this growth including Isis (25MWe), Condong & Broadwater (60MWe), Pioneer (68MWe) and most recently, Racecourse (48MWe). Presently, Tablelands is increasing its energy generation both in terms of scale (increasing from 7MWe to 24MWe) and operating duration (21 weeks to 40 weeks per annum).

Conceivably, substantially more projects would have been completed had the regulatory regime been more staid; frequent reviews and political debates about the size of the target undermined the fair value of energy and therefore project economics.

The scale of industry’s participation in the energy market as a revenue source is graphically shown below.

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Industry revenue electricty _market share

Molasses

The other material industry revenue source is molasses. The following chart shows export growth over recent years

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Industry revenue molasses

Approximately 600,000 tonnes was exported in 2017 realising A$75 million. Around 400,000 tonnes, indicatively valued at $50m, is therefore consumed domestically as bio-refinery feedstock or animal feed supplements. The Sarina bio-refinery, located in north Queensland, is operated by the Singapore company Wilmar and produces fuel ethanol from sugar and molasses. Based on an indicative yield estimate of 260 L ethanol per tonne of molasses and assuming Sarina operates at capacity of 60 ML per annum, the distillery might consume 230,000 tonnes of molasses per annum.

Domestic challenges

During a preliminary consultation process, a number of core issues were identified as industry diversification challenges including:

  • unfair competition based on international industry support mechanisms
  • comparative high capital costs and poor construction productivity
  • regulatory uncertainty
  • remoteness from end markets, logistics costs and complexity
  • social licence to operate
    • Great Barrier Reef
    • The public attribution of obesity to sugar consumption

Looking internationally...

Consumption

Per OECD-FA 2016-2025 outlook, average world per capita sugar consumption is expected increase 22.4 kg/cap to 23.8kg/cap. Developing nations are expected to account for circa 94% of that increase demand including Asia (60%, primarily Indonesia). The following chart shows expected import increases 2015-2017, presented as an indicator of in-country consumption:

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Production

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  • OECD-FAO notes indicate that whilst Brazil will maintain its industry dominance, in interim period the Brazillian industry will be financially challenged given existing US$ denominated debt levels. “... Taking into account the continued fiscal policy for fuels, depreciation of the currency, and assuming no weather shocks, [Bazil] production will return to previous high levels after 2021 and reach 42Mt...”
  • Currently an issue highlighted by Brazil, Thailand and Australia is the impact of sugar industry subsidies in Pakistan and, likely to follow, India. Per this article, freight subsidies to the tune of US$97 per export tonne will encourage a further 1.5mt export from Pakistan into an already over supplied market.

In country trends & policies

In-country price support mechanisms are significant international price determinants:

  • Thailand : “ ... This domestic sugar premium ($US0.07 / lb) will be collected from sugar mills to fund the state-run Cane and Sugar Fund (CSF) which subsidizes cane growers when market prices of sugar-cane are lower than the intervention prices....”
  • Brazil : "... Brazilian sugar exports for MY 2018/19 are projected to drop significantly to 23.6 mmt, raw value, from 28.2 mmt in MY 2017/18. Despite the fact that Brazil remains competitive on the global sugar market, the projected world sugar surplus has affected sugar-ethanol mill intentions to produce sugar for exports..."
  • India : "... Assuming normal market conditions, sugar mills will be encouraged to use up surplus inventory, up to 6 MMT. With incentives, this surplus could be exported, as out-year sugar supply will be in excess of 31 percent over consumption and normal stock requirements (34.4 MMT)..."
  • Pakistan : "... freight subsidies to the tune of US$97 per export tonne will encourage a further 1.5mt export from Pakistan into an over supplied market..."

Resources Overview

This study is about diversification and value adding within the bounds of the current sugar industry. As working definitions then:

  • Diversification means to deliver additional and/or alternate products and services to market leveraging existing resources and capabilities.
  • Value adding refers to increasing marketable value of existing resources, products and/or services.

On this basis, understanding available resources is cornerstone.

The following table presents a summary mass balance:

Data sources incl. Re volumes : 1. https://www.bioenergyconsult.com/sugarcane-trash-biomass; 2. https://asmc.com.au/industry-overview/statistics/; 3. https://www.feedipedia.org/node/561; 4. http://www.sugartech.com/extraction/bagasseCV/index.php; 5. Tully Sugar Cogeneration report, 2009; 6. Clean Energy Regulator; Re pricing : 7. https://asmc.com.au/industry-overview/statistics/; Australian Energy Market Operator

CommodityUnitIndustry qty t / haIndustry value (A$M)Notes
On farm
Cane trashMt4.7012.5-1
Cane billetsMt33.3488.41,3562
TotalMt38.04100.91,356
At mill
Raw sugarMt4.4811.871,8162,7
MolassesMt1.012.631303
Mud & boiler ashMt2.025.34-5
Waste waterGL22.056.11-5
BagasseMt4.6712.4-4,5
In mill energyPJ49.25n/a-5
Export energyGJ6.37n/a1915,6,8
TotalMt88.42,137

Land

Description

Per AgriFutures , current and potential growing areas are as shown below.

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AgriFuture cane areas

Areas where sugar-cane can be commercially produced are limited by climate, water resources and proximity to a processing mill.

Optimum growing conditions for sugar-cane include warm, sunny and frost-free weather, well drained soil, and at least 1,500mm of rain or irrigation water a year. Fine, relatively cool weather immediately before harvesting retards plant growth and increases sugar content.

Around 80 percent of the crop is grown north of the tropic of Capricorn. Most non-irrigated cane is grown within 50 km of the coastline. However the availability of irrigation water has encouraged production in drier environments and reduced variability of production in others. Major irrigation areas include the Burdekin River Irrigation Area (QLD)) and Mareeba Dimbulah Irrigation Area(QLD) and the Ord Irrigation Area (WA).

Relevant metrics

In 2017, ASMC statistics identify 377,000 ha (2015 : 381,000 ha) harvest area nationally at an average cane yield of 88.44 t/ha (2015 : 91.35 /ha). Over the period 2007 to 2017, area harvested has ranged between 302,878 ha to 387,824 ha whilst yields have ranged from 76.37 to 98.26 t/ha. Area harvested is distributed as follows:

Data source : ASMC statistics
RegionArea (000 ha)% areaYield (t/ha)
Northern Qld88019.681.77
Herbert-Burdekin,Qld1,81940.6104.5
Mackay-Proserpine,Qld1,02122.872.1
Southern Qld53411.983.2
New South Wales2265.1120.7
Australia4,480100.088.4

Threats, opportunities, risks

  • [Threat] Competition crops including forestry which displace cane. Each mill requires minimum process tonnages to defray substantial fixed operating costs incurred to operate the mill.
  • [Opportunity] Fallow cropping. Complementary crops using fallow land may also provide an opportunity for cane farmers to diversify their income streams.
  • [Opportunity] Yield (cane and CCS). More recently yields and CCS measurements are at or near historical targets. Indeed, it is cane yields and CCS achievements which deliver Australian growers a competitive advantage relative to other major producing countries including Brazil and Thailand.
  • [Threat] Great Barrier Reef. Sugar cane is grown principally along the north Australia coastline adjacent to the Great barrier Reef. Sediment and nutrient run off from rural areas is the subject of extensive research, monitoring and preservation efforts to protect the reef.

Useful references

Cane trash (~ 12.5 t/ha)

Historically, pre harvesting, cane fields were burnt to reduce the amount of vegetation matter gathered during harvest. Today, most cane is harvested green and the residual cane trash is returned to the field for its inherent agronomic values, viz : nutrient recycling; soil conservation; soil health and moisture retention.

Around the world, a portion of the cane trash is collected for sale to feed mills, while freshly cut green tops are sometimes collected for farm animals. In most cases, however, the residues are burned or left in the fields to decompose. Cane trash, consisting of sugar cane tops and leaves can potentially be converted into around 1kWhe/kg.

It would seem that the challenge to otherwise valorise cane trash is finding the pinch point between agronomic value and alternative use taking into account gathering logistics.

  • In NSW, as part of a broader co-generation initiative, a mill un-economically gathered and processed whole of cane leaving minimal trash.
  • A number of Brazilian studies have explored at length the value of trash removed. The consensus from those studies is that retention of at least 7 tonne per hectare of dry straw would retain most of the attainable agronomic benefits of any blanket retention
  • Whole cane processing has been trialed and process management explored in a number of QUT studies.

Relevant metrics

Per Cleantech Solutions "... Leaves and tops represent around 25-30% of the sugar-cane plant and during cane harvesting, part of it is left on the ground and the rest goes with the stalk to the sugar factory. For each tonne of sugar cane stalks, 140 kg of dry residues can be recovered. This potential is only slightly lower than the bagasse yield itself and therefore the biomass potential can, theoretically, be almost doubled by using green harvesting ...". Further per BioenergyConsult, cane trash produced is typically 10 - 15 t per hectare.

Some derivative metrics therefore:

Useful references

Cane billets (~ 88.4 t/ha)

Description

The ‘chopped cane’ harvester is a machine that combines the task of harvesting and cleaning sugar-cane crops. The ‘chopped cane’ harvester performs the basic functions of gathering and topping cane, severing stalks at ground level, feeding cane through a chopper system where it is cut into billets and delivering chopped cane directly into infield transporters. Depending on the cane harvesting requirements the machine may perform the additional functions of removing as much dirt, leaf and trash as possible from the cane supply(RIRDC,2012)

Date source:RIRDC,07/2012
ProductEM (%)Bulk density(t/m3)
Burnt cane6380
Green cane12340
Whole cane25200
Shredded trash & cane25240

Threats, opportunities, risks

  • [Opportunity] Significant sucrose losses has been attributed to harvesting. One study identified sucrose losses as: cleaning (6-9%), choppers (4%), base cutters (2%) and gathering system.

Useful references

Mill mud; boiler ash (~ 5.3 t/ha)

Description

Sugar-cane press mud is the residue of the filtration of sugar-cane juice. It contains soil from the sugar-cane that enters our mills, sugars and bagasse particles and lime, which is used in the clarification process.

The clarification process separates the juice into a clear juice that rises to the top and goes for manufacture, and a mud that collects at the bottom. The mud is then filtered to separate the suspended matter, which includes insoluble salts and fine bagasse.

Ash is the material that remains after the combustion of fuel (largely bagasse) in our mill boilers.

These beneficial by-products are combined and distributed over farms as an organic soil conditioner and an important source of plant nutrient. However, the continued application of mill mud at high rates, without appropriate recognition of its nutrient content, the soil condition, crop nutrient requirements, slope of the land, or proximity of application sites to environmentally sensitive areas has raised a number of concerns in recent years, including over fertilization, heavy‐metal contamination, leaching, and off-site impacts from drainage to waterways.

Relevant metrics

The volume of mill mud generated is depends on a number of factors. Harvest conditions and methods are significant drivers of soil content gathered with cane billets. Qureshi et.al suggest sugar mills generate from 0.02 to 0.06 tonnes of mud for each tonne of cane crushed

Useful references

Waste water (~ 58.4 t/ha)

Bagasse (~ 12.4 t/ha)

Bagasse is the pulp left over after juice has been extracted from sugar-cane, sugar beets, sorghum stalk, or agave. Basically, once the juice has been squeezed from stems, leaves, or fruits, the mills are left with a mixture of fibrous plant debris similar to wood pulp. Not surprisingly, countries that produce a lot of sugar are the main sources of bagasse. Brazil creates over 100 million tons a year, and other sugar-exporting countries like Vietnam, India, China, and Thailand are also heavy producers.

Australia’s sugar industry has used bagasse to meet its electricity and heat requirements for over 100 years. Indeed, bagasse historically was the bane of the milling industry encouraging the industry to consume energy inefficiently in order to dispose of all bagasse produced. Today, in-mill bagasse fired boilers and generators produce energy which can be exported to the broader electricity network. In 2017, the industry exported approximately 1,720 GWhe of electricity representing approximately 3% of Queensland total electricity generation for that year. Nonetheless, it is likely that there is legacy energy inefficiency within Australian sugar mills.

Approximately 250–280 kg of bagasse is generated from processing each ton of sugar-cane which roughly yielded 54 million tons of bagasse annually. Characterisation of bagasse and cane trash is as presented below.

AttributeDry leavesGreen leaves TopsBagasse
Moisture (%)13.567.782.350.2
Ash (%)3.93.74.32.2
Fixed carbon (%)11.615.716.418.0
Volatile matter (%)84.580.679.379.9
HHV (MJ/kg,dry)17.417.416.418.1

Molasses (~ 0.4 t/ha)

Description

Molasses is the thick syrupy residue left over after the sucrose has been removed from the clarified sugar juice (syrup). The ‘C’ molasses (final or blackstrap molasses) is used for alcohol fermentation, as a stock feed supplement and as a fertiliser for cane fields (Sreenivasan et al. 1987; Sansoucy et al. 1988; Mackintosh 2000).

Relevant metrics

Estimated molasses yield per 100 tonne of fresh cane 3 to 7 tonnes of molasses. At 3 tonne molasses per 100 tonne of cane crushed, indicatively, the industry currently produces approximately 1 million tonnes of molasses per annum valued at ~ A$130M. Molasses produced is either exported, consumed as feedstock for the Sarina distillery or sold as an animal feed supplement.

As per the chart below, approximately 600 ktonnes was exported in 2017 realising A$75 million is 2017.

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Industry revenue molasses

In mill energy : steam & electricity (~ 10.9(eq.) t/ha)

Description

Australian sugar mills are energy self sufficent. Requisite energy is generated using conventional biomass fired boilers to deliver both process steam powering mill trains and shredders as well as low pressure steam for evaporators, and steam to drive turbo generators producing electrical energy. Most mills export electrical energy to the national electricity market (‘NEM’) whilst export of steam is by and large limited to refining operations.

Collectively, mills combust circa 4.7M tonnes of bagasse (dry) per annum in boilers notionally delivering around 56PJ of energy.

By default, the balance of energy (~ 50PJ) generated is consumed in-mill. In-mill energy is predominantly thermal energy, transported as steam, and the balance electrical energy. Of course, each mill’s energy consumption, volume and composition, will be different. Moreover, noting that the industry historically operated energy inefficiently to dispose of otherwise worthless bagasse, there are many examples and publications identifying opportunity to significantly improve and valorise energy efficiency within the industry.

In a published co-generation study, the base case steam on cane (‘SOC’) modelled was 49.5% and surplus energy, represented by exports, was 10MWe. Derivative cases considered in this study indicated electricity export capacity increases to 36MWe assuming different boiler configurations, boiler operating parameters and SOC assumptions but constant bagasse volume. In another presentation, Pioneer sugar mill increased it electricity generation capacity by an additional 58MWe delivering a net additional export 44MWe and reducing SOC from 52% to 40%.

If, for a moment, we could overlook the technical and commercial realities of in-mill change, a simplistic extrapolation of the above would suggest the industry could increase export capacity at least 3 fold plus. Indeed, the industry capacity of around 480MWe distributed regionally throughout Queensland and NSW might conceivably increase to say 1 GWe which would be instrumental in delivering decentralised and geographically spread renewable energy generation capability.

However, the practical reality is that milling is currently limited to 6 months operation only; the historical regulatory uncertainty did not and does not underwrite the requisite long term investment required; nor is the imminent dismantling of the MRET helpful; and the significant growth in wind and solar generation have discounted significantly any renewable energy premium and made grid stability and injection more complex and expensive.

Useful references

Export energy : electricity (~ 1.5(eq.) t/ha)

Description

In 1996, the Federal government implemented the Mandatory Renewable Energy Target (‘MRET’) which attached a premium value to renewable electrical energy delivered by generators to the NEM above defined baselines. Based on a search of public registers, in 2017, sugar industry participants registered approximately 1,260,000 MRET eligible renewable energy certificates. Taking into account a total of 510GWh industry baseline, industry exports to the NEM were 1,770 GWh (~ 6.4PJ) representing circa 5% of the MRET target and, for perspective, approximately 3.1% of Queensland total generation for that calendar year. An indicative value of these export to the industry is circa A$191M.

Historical export values is shown below:

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Electricityrevenue pie

Useful references

Market

Sugarcane Hydrolysis Products

The juice and residues from sugarcane processing have the potential to generate products other than sucrose that are inherently valuable: xylose (C5), glucose (C6), and lignin predominately, as well as microcrystalline cellulose and hemicellulose. The indicative value of these hydrolysis products are listed in Table 1.

Table 1: Lignocellulosic breakdown products: indicative value; Price is dependent on the purity or grade of the product. Sources: online catalogs1.

Hydrolysis product
Value US$/tonne
High purity xylose$4,500 to $20,000 (1)
Microcrystalline cellulose (MCC)$3000 to $4,000 (2)
High purity glucose$400-600 (powder);$450-790 (liquid glucose) (3)
Lignin$1700-1860 to as high as
$6,500 (4)

Lignin can be burned to meet the energy requirement of the biorefinery and/or valorized to make fuels (ethanol, biodiesel, aviation fuel) and industrial chemicals 2, 3. The global lignin market is expected to reach US$6.2 billion by 2022, based on the high market potential for lignin as a key intermediate to manufacturing carbon fibres, phenol, BTX and vanillin. Production of lignin exceeded 1.1 million tons in 2013 and was dominated by manufacturing in Europe and North America (over 35% of global demand volume each). Increasing R&D for development of lignin use in untapped applications is anticipated to provide new opportunities in biomaterials and biobased chemicals for market growth 4, although applications for lignin as a feedstock for the manufacture of other industrial products is determined by the purity and integrity of the lignin.

Biomanufacturing

The opportunity for biobased manufacture based on renewable feedstocks continues to expand to include a widening array of biomaterials, chemicals, fuels, and solvents, of application within global industries from automotive and aviation through agriculture and pharmaceuticals to food, beverages and cosmetics.

Many industrial groups, corporations and governments, including the US, the EU and Brazil, have conducted detailed scoping studies to identify sets of bioproduct targets for future manufacture in a new prospective industry sector. Those targets have been prioritised as consistent with patterns of consumption in domestic industries, as an import replacement, and to build or reinforce export from high value specialty molecules, platform chemicals, and aviation fuels. Local consumption of by-products are also factored into the economics, especially transport fuels and enriched animal feeds.

This target-setting often considers the volume and nature of feedstock available (sugar, starch, cellulose) and the resultant product value. Indeed, within the array of bioproducts there is a relationship between the volume of global demand and product value, such that value is often inversely proportionate to volume (Figure). In this way, those agricultural industries looking to value-add crops or crop residues and diversify revenues may consider which of those biobased options have the potential to deliver the highest value rather than the highest volume (commodity products).

Figure: Biomanufacturing: indicative relationship between product value and volume of production

Corelli Consulting

Source: Corelli Consulting.

Biomaterials derived from agricultural feedstocks include phenolic formaldehyde resins, the second largest resin class in global use, as well as carbon fiber, polymer modifiers, adhesives and resins, derived from lignin or cellulosic residues such as bagasse and wood residues. The global volume for the phenol-formaldehyde resins market is expected to reach 16 million tonnes by 2016 valued at US$10.8 billion, with a compound annual growth rate of 12% and is expected to reach US$16 billion by 2022. For other biomaterials, lignin represents a potential low-cost carbon source suitable for displacing synthetic polymers such as polyacrylonitrile (PAN) in the production of carbon fibre. The carbon fibre market is expected to grow strongly at ~10% pa until 2020, with 89,000 tonnes pa generating revenues over US$3.3 billion. The market for carbon fibre is driven largely by the aerospace and defence, construction, wind turbine, and sports and leisure industries. A major producer of lignin-based biomaterials is Norway's Borregaard LignoTech (1 million tpa of lignosuphonates). Borregaard manufactures lignin-based products for battery applications and as agrochemicals (sales of A$360 million in 2016) and specialty cellulose products including cellulose ethers, cellulose acetate (revenues of A$264.7 million in 2016) 5.

Biobased chemicals include bulk commodity (~100,000 tpa), platform, and small volume specialty molecules (1000 tpa or kg quantities). Platform chemicals are often smaller chemical structures that serve as intermediates for the manufacture of many chemical families. Platform molecules within the value chain from an agricultural feedstock include ethanol, succinate and ethyl acetate. US-based Greenyug and its subsidiary Prairie Catalytic are establishing a facility to manufacture high-grade ethyl acetate from ethanol at 50,000 tonnes per year. The facility is co-located adjacent to the Archer-Daniels-Midland Company ethanol production facility, which in turn is co-located with a corn mill in Nebraska. Ethyl acetate is a specialty solvent used in a variety of industrial and consumer product applications in paint, coating, printing ink and other industries, including coating formulations such as epoxies, urethanes, cellulosics, acrylics and vinyls and increasing used in packaging, food and beverage and fragrance and flavour industries., or as the intermediate in the manufacture of polymers, resins, food and pharmaceuticals, among other products. Biobased ethyl acetate is a drop-in replacement, i.e. chemically identical to the conventional product. The global ethyl acetate market is ~1-1.5 million tonne pa valued at US$1-2 billion. The strongest growth market for ethyl acetate is in Asia Pacific.

Enzymes and specialty sugars are examples of high value, specialist products that are exclusively manufactured by bio-based processes from renewable feedstocks (Figure 1). The global enzyme market is a substantial industry generating sales of over US$5 billion in 2016, and anticipated to exceed 400,000 tons pa by 2024. Enzymes have found uses across the commercial spectrum, with major industrial applications in the food and beverage, personal care and cosmetics, nutraceuticals, detergents, textiles and fabrics, animal feeds, biofuels, pulp and paper, and wastewater industries. The sugar alcohol, xylitol, is the first rare sugar to have established a global market, with applications in the food industry as a sugar substitute and as an inexpensive starting material for the production of other rare sugars. Xylitol was one of the promising biobased specialty chemical targets identified by the US DoE in 2004 and 2010 6, 7 and is manufactured from cellulosic sugars. The global market for xylitol is expected to reach 242,000 tonnes, valued at just above US$1 billion, by 2020 8, with the value of xylitol estimated at ~US$4,100/tonne.

Global bioplastics production capacity is set to increase from ~1.7 million tonnes in 2014 to ~7.8 million tonnes by 2019, with biobased polyethylene (PE) and biobased polyethylene terephthalate (PET) as the main drivers of this growth 9. The global bioplastic market is projected to grow from US$17 billion this year to almost US$44 billion pa by 2022 10. Biobased plastics from renewable feedstocks may either be drop-in replacements for petrochemical-based plastics such as PE or PET, or new molecules such as polylactic acid PLA or polyhydroxyalkanoates PHA.

In 2009, the Coca-Cola Company launched its PlantBottle™ technology and subsequently licensed the technology to other major companies such as food manufacturer H.J. Heinz as well as the Ford Motor Company. Green PET bottles were initially made up of 30% plant-based material, but CocaCola’s goal is to produce a PlantBottle™ that is completely bio-based to replace around 60% of all of Coca-Cola’s packaging 11. The action by Coca-Cola sends a strong signal to the market, raising the bar for other manufacturers and providing a substantial opportunity to the bio-manufacturing sector: Coca-Cola alone retails more than 690 billion drinks per year globally 12.

Biodegradable plastics include PHAs and PLA, both made from sugars or starch. PHAs are produced in Italy as biodegradable microbeads for cosmetics and personal care markets to stem the tide of petrochemical microplastic entering the food chain 13. PLA is the highest yielding bioplastic from sugar: 1 kg PLA can be manufactured per 1.6 kg sugar compared with PET (1kg per 5kg sugar) 14. The global PLA market was valued at ~US$700 million in 2017, and it is anticipated to reach US$2 billion by 2023 and growing rapidly (20%). In terms of volume, the market is expanding from 286 kilo tonnes in 2017 to 830 kilo tonnes by 2023. The largest and first manufacturer of PLA was Cargill Dow (NatureWorks®) at a 140,000-ton per year manufacturing facility, co-located with field corn mills, in Nebraska, US. Other major players in PLA are BASF, Corbion, Mitsubishi Chemical, DowDuPont, Eastman Chemicals, and Bayer 15.

Energy and fuels are often fundamental to the economic viability of many value-adding scenarios in the sugarcane industry. Cogenerated electricity is already well established within many operations, and the efficiency of cogen production and export depends on boiler efficiency. São Martinho is a major sugarcane participant in Brazil producing 327,000 KWh of cogen contributing R$75.7 million (A$26 million) or 10% of total revenues in the first quarter of this year 16. The fuel ethanol industry build by the Brazilian government since 1975 now underpins the next stage of bioproducts valueadding, in which ethanol derived from sugar is a platform molecule for the manufacture of ethylene- and urethane-based products (PE, PEG; polyurethane foams and resins respectively) as well as solvents.

Global consumption of jet fuel is around 933 million litres per day, with the US responsible for the largest share (37%) of that volume. Bio-based aviation fuel from renewable feedstocks has already enabled more than 130,000 commercial flights by Qantas, Virgin, British Airways, United, Cathay and others 17. The US Department of Defense (DOD) is the single largest consumer of petroleum in that country, spending almost US$17 billion on fuel in 2011. The US Air Force and Navy account for most (85%) of the DOD’s fuel consumption and both forces are collaborating in developing advanced alternative fuel. The US Navy’s marine diesel fuel is blended with 10% advanced alternative fuels made from beef tallow: first bulk purchases cost US$0.54 per litre (US2.05/gallon) for the blended product, very competitive with US petroleum-based fuels 18. Provision of biojet fuel in the Pacific is a strategic concern for the US Navy’s Green Fleet 19 and a potential opportunity for Australia.

Densified biomass

Another value-adding opportunity for the agricultural sector is the production of densified pellets as renewable energy feedstocks derived from compressed biomass such as bagasse, sawdust or other ground woody or cellulosic biomass. Densified pellets have two major applications 20, 21: energy generation in coal power plants and residential heating in stoves and boilers.

Over the past 10 years, the production of wood pellets alone has increased in response to rising global demand for renewable energy. Global production is expected to grow to 45 million tons/year by 2020, while the global demand is expected to increase to 59 million tons/year, indicating an addressable gap in market supply 20-22. The European Union has become the principal market for biomass pellets with 94% growth in the last decade, and prices up to €250/t 22.

Japan and South Korea are the main pellet consumers in Asia based on the growing development of large-scale power markets in East Asia, and both nations have introduced sustainability certification schemes for wood pellets. China has reported a consumption target of 30 million tonnes of biomass pellets by 2020 to replace 15 million tonnes of coal, as part of its five-year plan for biomass development. It is uncertain how much of China’s demand could be sourced domestically, suggesting a regional export opportunity for Australia.

Currently, Australia has only two domestic companies with a business in the production of wood pellets for the export market: Altus Renewables Limited (capacity of 100,000 tonnes pa) and Western Australia's Plantation Energy (250,000 tonnes pa capacity).

Market pull for bio-based chemicals and plastics

Forces are already in place within the consumer market that are driving the uptake of biobased and sustainable products as preferred replacements to manufactured goods, previously sourced from petrochemical feedstocks. The nature of the consumer goods is significantly broad, encompassing the food and beverage packaging industry (Nestlé Waters, Carlsberg, Tetrapak) through to furniture and car manufacture.

This corporate landscape is largely shaped by the demands of a consumer market increasingly alert to issues of renewable materials and global warming, although to some measure there is a growing corporate awareness, particularly among chemical manufacturers, that sustainable feedstocks are essential to their future commercial viability.

This changing landscape for both bio-based and recycled materials for new manufacture is illustrated by such international corporations as Target, Unilever, Lego, Ikea, Coca-Cola, Danone and Suntory. Furthermore, industry associations such as the Sustainable Packaging Initiative and the Natur’ALL Bottle Alliance have attracted major international manufacturers such as Coca Cola, Danone, and Nestlé Waters, corporations that are aligning their in-house strategy into an industry initiative.

Evidence of the changing consumer landscape and the rise of bio-manufacturing among major consumer brands is represented in Table.

Table: Bio-manufacturing within consumer brands: Indicative announcements for 2018; Source: Corelli Consulting.

CompanyBio based productFeedstock
Total and CorbionPoly-lactic acid (PLA) for motor vehicle constructionSugarcane (Thailand)
LEGOLEGO pieces made from plantbased polyethyleneSugarcane (Brazil)
Danone, Nestlé WatersBio-based PET bottlesLignocellulose
Allbirds and BraskemResin for shoe constructionSugarcane (Brazil)
Carlsberg and EcoXpacFibre containersWood fibres
Reebok, DuPont Tate & LyleSusterra propanediol for shoe constructionCorn
Suntory and AnnellotechPolyester, polyethylene terephthalate (PET),
polystyrenes, polycarbonates,
nylons and polyurethanes
Non-food biomass
IKEA and NestePolypropylene (PP) and
polyethylene (PE) plastics
Waste & residue raw materials, eg used cooking & v egetable oils

Danone

Danone is a European-based dairy product corporation that owns beverage and yoghurt companies such as Activia, Actimel, Danio, Evian, Volvic, Nutrilon/Aptamil, Nutricia Danone. The company has a commercial footprint in over 130 markets, generating sales of €21.9 billion (A$35.7 billion) in 2016. Along with another 40 leaders in the food industry, Danone has a global strategy to reconsider plastics manufacture: recently Danone and Nestlé Waters announced the formation of a NaturalALL Bottle Alliance accompanied by an investment in a beverage packaging made of biobased PET, from renewable feedstocks.

Suntory

As has Danone, Suntory has recently announced a significant investment in innovative technology to produce a biobased PET beverage bottle for global distribution. Since 2012, Suntory’s has had a strategic commitment to sustainable business practices with an investment in the biobased PET bottle initiative with the technology company Anellotech. Suntory has invested more than US$25 million in Anellotech’s Bio-TCat™ technology to date: the Bio-TCat™ process produces aromatic chemicals (benzene, toluene and xylenes (BTX)) from lignocellulosic biomass for use in plastics manufacture (polyester, nylon, polycarbonate, polystyrene), or for renewable transport fuels 23.

Case studies

Corn

The US corn industry generates revenues as a food (sweet corn) and as an animal feed (field corn). Industry grower associations have actively assisted the diversification of applications for field corn: to generate revenue streams as a feedstock for fuel ethanol production as well as for biobased plastic PLA.

NatureWorks is the first and still one of the largest lactic-acid plants in the world, used to manufacture the biodegradable industrial bioplastic polylactic acid PLA. This bioplastic can be made from a number of sugar or starch-based agricultural crops. NatureWorks was initially formed as the joint venture of Cargill and Dow Chemical Co (1997) and now is a JV between Cargill and Japan’s Teijin Ltd (2007). The NatureWorks PLA plant in Nebraska produces 140,000 tonnes per year 24. The PLA production plants are located next to a corn wet mill where the starch in corn kernels is converted into glucose used as the raw material for the lactic acid fermentation process. Co-location of PLA manufacture with the production of the corn feedstock within one of the largest corn producing states sets up an efficient integrated production operation.

The global PLA market is anticipated to reach 830 kilo tonnes valued at US$2.1 billion by 2023. Key factors driving the rapid market growth include favourable government policies promoting bioplastics and increasing consumer demand for bio-plastic packaging.


Sugar

The Brazilian sugar industry is an example of a diversification and value adding in agriculture. Both specialty and bulk commodity products are produced from either sugarcane or ethanol made from sugarcane; these have contributed to Brazil becoming a leading global producer of biobased chemicals. A national survey in 2014 identified a target group of biobased specialty compounds for industrial development leveraging sugarcane feedstocks: for use as cosmetics, agrochemicals, feed additives, aromas, flavours and fragrances, solvents and carbon fibre 25. The São Martinho Group is one of Brazil’s largest producers of sugar and ethanol. The company purchases, cultivates, harvests and crushes sugarcane as the feedstock for both sugar and ethanol operations. Sao Martinho has a well-diversified agri-business, producing annually, in addition to crystal sugar and ethanol 26:

  • Electricity: exported from its co-generation plant;
  • RNA: a specialty nucleic acid for the pharmaceutical and food industries;
  • Yeast: a protein and vitamin source used in animal feed;
  • Fusel oil and amyl alcohol: used in heavy industry manufacture; and
  • Fertilisers.

The company understands the value of sugar as a feedstock to make high value chemicals. In April 2010, São Martinho partnered with US-based Amyris Biotechnologies for the construction of a chemical plant to produce the speciality chemical farnesene, a platform molecule used to make families of other chemicals including flavour and fragrance compounds, vitamins and lubricants. Amyris recently sold its Brazilian factory and IP for speciality products to DSM for US$58 million: vitamin E is one of DSM’s biggest revenue earners, and producing farnesene from sugarcane allows DSM to be the lowest-cost global vitamin E producer.

Ethylene is a basic organic chemical serving as an ingredient for a basket of other commodity chemical products. With global production exceeding 140 million tonnes per year and growing actively, ethylene is by far the largest bulk chemical used for the production of around half of all plastics. Bio-ethylene is produced from ethanol, and Brazil provides a favourable environment for the production of bio-ethylene from sugarcane. Bio-ethanol has been economically produced in Brazil as a transportation fuel since 1975: inexpensive sugarcane and large scale bio-ethanol production and experience as the world’s second largest producer has made Brazilian bio-ethylene cost competitive. Brazil’s national chemical company Braskem has manufactured green ethylene since 2010 as “I’m Green™” polyethylene at 200,000 tonnes pa, making the company a global leader in drop-in bioplastics 27.

References

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