BASF sees limitations for green chemistry
The world's largest chemicals company regards renewables as mainly niche products. Justin Pugsley reports
The idea that the chemicals industry will one day mainly rely on renewable feedstocks to replace fossil fuel-based ones is not physically workable, said Kurt Bock, chairman & CEO of BASF at a roundtable for journalists that was held in London on 5 September.
"I think there will be niches for green chemistry, such as making baby diapers from renewable feedstocks, which is a good marketing point for consumers," said Bock. "But I doubt renewables will ever become the main feedstock for the chemicals industry."
Bock explained that using only renewables would simply take up too much land to produce the necessary material. There is potential for using Brazilian sugar cane and fibres, but elsewhere it is often too tied to agricultural subsidies, which he does not believe to be sustainable in the long term. There is an ongoing debate in the US over the morality of turning over large tracks of agricultural land previously used for food crops for growing corn for ethanol production for fuel for cars.
"Also, the chemicals industry is highly efficient at using oil and gas feedstocks. Absolutely nothing is wasted," said Bock. This is in stark contrast to when oil and gas-derived products are used as a fuel in combustion engines for vehicles, where a large proportion of the energy is lost through heat and other factors.
Nonetheless, BASF is involved in researching green chemistry. For instance, last month it formed a joint venture with Denmark-based biotechnology firm Novozymes and US agribusiness giant Cargill to produce bio-based acrylic acid.
In terms of the more mainstream segments of the business BASF remains confident, particularly for the prospects of the automotive sector, its single biggest customer market. The company currently spends €200 million/year on R&D related to the automotive sector and last year notched up sales of €9.5 billion to the industry.
Bock - Renewables cannot supply all chemical needs
"Each car has on average €850 of chemistry inside it and by 2020 we see that rising to €900," said Wayne Smith, a member of the BASF board of directors. Plastic composites are about half the weight of steel and the chemicals industry could chop up to 150 kg off the weight of a car over the next ten to 15 years. "This is a trend that is being driven by sustainability and the need to make cars lighter either to lower fuel consumption and emission reductions or, if they're electric, to run further on batteries."
The need to reduce CO2 emissions is down to regulatory measures, with the EU's being the toughest. However, emerging markets, such as China, are also adopting targets to reduce emissions. Chinese automotive manufacturers are not just seeking the cheapest possible means, though cost is a factor; they want to adopt high-tech solutions quickly. In addition, the push for better air quality in countries such as China supports demand for emission catalysts to purify exhaust fumes. "This is a booming business," said Smith.
Beyond more intensity of plastics usage, BASF also sees the automotive market growing. It estimates that in the 30 years to 2007, before the financial crisis erupted, the compound annual growth rate in car production was 3%. Over the next ten years it expects the pace of production to accelerate to around 5% due to wealthier consumers appearing in emerging markets and ageing cars being replaced in mature economies. The US has the highest penetration of cars at 965/1,000 people. In Germany that falls to 603, Japan 537, but 149 in Brazil and just 61 in China and 23 in India, which to the car industry suggests huge growth potential.
Within the automotive arena, BASF has identified electromobility as a key segment. One of the biggest challenges for electric cars is maximising the power to weight ratio of batteries. "You need more powerful batteries," said Smith. "And that challenge is down to chemistry."
BASF is now trying to get a technological lead on the industry by developing fourth generation - they are now at their second generation - lithium-ion batteries. To this end, it acquired in the Ovonic Battery and Novolyte Technologies in the US and purchased Merck KGaA's electrolyte activities. It has also entered a number of technology licensing agreements with small specialist firms. Smith expects this market to be €5 billion by 2020, with BASF taking a 10% share.
BASF developed the Forevision concept car with Daimler
Success in supplying the automotive industry, according to Bock, is down to deeper collaboration with OEMs and helping them develop solutions. "It's not just about producing the cheapest molecules, but coming up with solutions and concepts," he said. "And that is why size and breadth of portfolio is important."
Automotive firms, Bock added, are increasingly relying on the R&D efforts and expertise of their suppliers. OEMs across many industries are looking for exclusive R&D partnerships with their main suppliers as a way to drive innovation. This trend also represents an opportunity for suppliers to add value and become involved in the design of new products at the earliest of stages and reap big benefits if they then go on to succeed in the market.
It is for this reason that BASF's management seems relatively unconcerned over new Middle East-based competition. Becoming an embedded supplier means it is relatively harder for new entrants to make headway.
This growing closeness is throwing up some unique collaborations. For instance, BASF recently developed a concept car called i-flow with Korea's Hyundai Motor. The i-flow is designed to showcase the potential for greater fuel efficiency and reduced environmental impact through the use of lightweight construction materials, some of which are made from renewable feedstocks.
An earlier concept car was developed with Daimler called Forevision to demonstrate a path towards much lower emissions. In addition to using lightweight plastic materials it also incorporated transparent solar cells and energy-saving LEDs.
Another unusual venture involves BASF actually painting the cars on behalf of an automotive manufacturer in its own paint shop. "Painting a car involves different layers of coatings relating to different functionalities," said Smith. "This is a unique business model and is rare in the industry."
From Online Issue: October 2012