Biodegradable plastics are poised for a new wave of opportunities
Globally, nearly 300 million tons of plastic waste are generated annually, with nearly 80% ending up in landfills or directly entering natural environments. Less than 10% of plastics are recycled, causing severe and irreversible damage to soil management and marine ecosystems.
With policies intensively implemented over the past two years, the market for biodegradable plastics has rapidly expanded. Companies have shown high enthusiasm for production expansion, successively announcing plans to increase existing capacity or build new facilities. Taking PBAT as an example, China's PBAT production capacity stood at 687,000 tons in early 2021, with planned capacity reaching 4.633 million tons. By the third quarter, 71 companies had announced PBAT deployment plans, driving total PBAT capacity—including long-term projects—to a surge of 18.861 million tons.
China's Largest PHA Production Line Commences Operations
At the start of 2022, construction began on a 130-acre PHA production line for Lanjing biodegradable plastics in Binhai County, Yancheng City, Jiangsu Province. This is currently China's largest PHA production line, with an annual capacity of 25,000 tons. Until now, all domestic PHA production lines have been at the thousand-ton level.
PHA, short for polyhydroxyalkanoate, is a novel material synthesized by natural microorganisms. It possesses properties comparable to traditional petrochemical plastics and can fully decompose into water and carbon dioxide in all natural environments. Additionally, PHA is produced through microbial fermentation using renewable carbon sources such as vegetable oils and sugars. Consequently, it relies minimally on fossil resources and generates no additional carbon emissions, aligning with China's dual carbon goals.
Founded in 2016 by Dr. Li Teng of Tsinghua University and Dr. Zhang Haoqian of Peking University, Blue Crystal Microbes has emerged as a leading enterprise in molecular and material innovation based on synthetic biology. On August 11, 2021, Beijing Blue Crystal Microorganism Technology Co., Ltd. (hereinafter referred to as “Blue Crystal Microorganism”) underwent business registration changes. Original shareholders including Shenzhen Lihe Huashi Investment Partnership (Limited Partnership) withdrew, while new shareholders such as Guangxi Tencent Venture Capital Co., Ltd. were added. This signifies Tencent's entry into this green and environmentally friendly industrial investment.
"Globally, nearly 300 million tons of plastic waste are generated annually, with nearly 80% ending up in landfills or directly entering natural environments. Less than 10% of plastics are recycled, causing severe irreversible damage to soil management and marine ecosystems. PHA offers superior performance and can biodegrade spontaneously in natural and marine environments.
“Customers estimate that for every ton of our PHA used to replace traditional petrochemical plastics, 2.09 tons of carbon dioxide emissions can be reduced,” “Currently used biodegradable materials include starch composites, PLA, PBAT, PBS, and PHA, with starch composites, PLA, and PBAT dominating the market. However, starch is a natural material with significant performance limitations and a very restricted application scope, valued primarily for its low cost. Industry development is now concentrated on synthetic materials like PLA and PBAT,” said Zhang Haoqian, Co-founder and CEO of Blue Crystal Microorganism. Among various biodegradable plastic technologies, PBAT and PHA exhibit comparable performance. To date, PBAT dominates the market primarily due to readily available raw materials and mature production techniques. PHA production remains significantly smaller-scale, resulting in much higher unit costs than PBAT.
Nevertheless, even at current premium prices, PHA serves specific market demands. “PHA's primary applications currently involve marine degradation and scenarios requiring high biomass content, with major clients centered around Fortune 500 companies. Marine degradation is currently achievable only through PHA, and there are specific requirements for this in the US, Europe, and Japan. In Japan, industry alliances like CLOMA have even been established for products like straws and disposable tableware. Examples of high bio-based content include potato chip packaging favored by PepsiCo, Nestlé packaging, and Shiseido's daily chemical packaging.”
The landscape may now be shifting. “Our industrial PHA production technology has systematically reduced manufacturing costs. At a 10,000-ton scale, PHA production costs will continue declining to match polylactic acid (PLA) levels. Currently, only two overseas companies can produce PHA at scale.”
Li Teng, Co-founder and President of Blue Crystal Microbes, stated in an interview with China Times, “Long-term, PHA/PLA/PBAT will coexist and complement each other. However, as PHA production scales up and costs significantly decrease, its market share is projected to far exceed that of PLA and PBAT.”
Strong demand drives the expansion of a vast industrial scale
Behind the plastic restrictions lies the market's massive demand for traditional plastic products. A report released by Qianzhan Industry Research Institute shows that China's plastic product output reached 81.84 million tons in 2019, accounting for approximately one-quarter of global plastic demand. Meanwhile, China's consumption of biodegradable plastics in 2019 was only 520,000 tons.
Statistics indicate that biodegradable plastics have a penetration rate of just 0.62% in China, significantly lower than the global average of nearly 3%. Guosen Securities estimates that four key sectors—disposable tableware, single-use plastic bags, agricultural plastic film, and packaging materials—collectively represent a potential demand space of approximately 10.19 million tons.
Under the guidelines set by the “Opinions on Further Strengthening the Control of Plastic Pollution,” significant progress in plastic restriction must be achieved by 2025. Huaxi Securities indicates that assuming a 30% substitution rate for biodegradable plastics, demand for biodegradable plastics could reach 3.32 million tons.
Policy Support Massive Production Launch
With policies intensively implemented over the past two years, the market for biodegradable plastics has suddenly opened up. Companies are highly enthusiastic about expanding production, successively rolling out capacity expansion plans or new initiatives.
On January 19, 2020, the National Development and Reform Commission (NDRC) and the Ministry of Ecology and Environment (MEE) issued the “Opinions on Further Strengthening the Control of Plastic Pollution.” This marked a renewed push to tackle plastic pollution since the 2008 plastic restriction order, outlining target milestones for the 2020-2025 period.
Subsequently, on July 10, nine departments including the NDRC and the Ministry of Ecology and Environment jointly released the “Notice on Solidly Advancing Plastic Pollution Control Work.” It requires cities at the prefecture level and above to prohibit the use of non-degradable plastic bags in urban areas—including shopping malls, supermarkets, pharmacies, and various catering activities—starting January 1, 2021. This officially escalates the national “plastic restriction order.”
In fact, this is not the first time a plastic pollution control plan has been proposed. On December 24, 2020, the Beijing Municipal Plastic Pollution Control Action Plan (2020-2025)—dubbed the “strictest plastic restriction order”—was released, focusing on key industries like catering and wholesale/retail to intensify plastic reduction efforts.
On October 11, 2021, the Beijing Municipal Development and Reform Commission announced that under the newly released Version 2.0 of the Green Technology Innovation Support Policy, the city has identified nine key green technology innovation directions for development in the carbon peak and carbon neutrality sectors. These include wind power, hydrogen energy, new energy vehicles, low-power semiconductors and communications, photovoltaics, carbon capture, utilization, and storage (CCUS), near-zero energy buildings, resource recycling, and low-carbon home appliances. Regarding the highly scrutinized plastic pollution control, Beijing will also enhance scientific and technological R&D in the plastics sector, intensify efforts to tackle key core technologies for biodegradable plastics and promote the commercialization of research outcomes, support the implementation of relevant innovations, and increase the promotion of plastic pollution control technologies and products.
Following the introduction of national-level plastic restriction and ban policies, local governments across the country have actively responded by successively issuing their own “plastic bans.”
The 14th Five-Year Plan Action Plan has reignited market interest in the biodegradable plastics industry. Mainstream institutions focus on accelerating demand release, anticipating that intensified policy measures will sustain supply shortages in the short term amid rapidly rising demand. Huachuang Securities predicts that under this supply-demand imbalance, biodegradable plastic prices will remain more than double those of traditional plastics.
As nationwide plastic restriction and ban initiatives advance across all levels, market demand for biodegradable plastics has surged. Numerous enterprises have announced production launches and capacity expansions to boost biodegradable material output. Taking PBAT as an example, China's PBAT capacity stood at 687,000 tons in early 2021, with planned capacity reaching 4.633 million tons. By the third quarter, 71 companies had announced PBAT deployment plans, with current construction capacity—including long-term projects—skyrocketing to 18.861 million tons. For PLA, based on capacity construction plans, 560,000 tons of new capacity will be added in 2021-2022. Combined with extensive long-term polylactic acid capacity plans, PLA's current construction capacity has increased to 4.516 million tons/year as of October 22.
Domestic enterprises have mastered PBAT mass production technology and are initiating large-scale capacity expansion. Statistics indicate China has nearly 8 million tons of planned PBAT project capacity. In 2021-2022, over 2 million tons of PBAT capacity is expected to come online from more than ten projects, including Huafeng Group, Hubei Yihua, Hengli Yulin, Kingfa Science & Technology, Wanhua Chemical, Donghua Tianye, Jindan Technology, Yangmei Pingding, Zhejiang Changhong, Daon Co., Shandong Ruifeng, Sanfangxiang, Tongde Chemical, and Inner Mongolia Huaheng.
Recently, biodegradable plastic stocks have shown unusual movements. For example, on January 10, Wangzi New Materials hit the daily limit up. Analysis: Hot stocks in packaging printing, biodegradable plastics, and wireless charging concepts.
This article is for educational purposes only and does not constitute any investment advice.
