Biodegradable Plastics – Are Costly Green Products Still Relevant During

an Economic Crisis?

W.F. KeeResearch AnalystTechnical InsightsMarch 10, 2009

2

Focus Points

Impact of Economic Crisis

Global Biodegradable Plastics Market

Industry Survey on Environmental Issues

Key Drivers for Growth

Existing and Emerging Applications

Strategic Recommendations

3

Impact of Crisis on the Global Chemicals and Materials Market

JapanAutomotive giants are hit hard by economic recession and resulting drop in global demand; this directly affects all dependent chemicals and materials markets

JapanAutomotive giants are hit hard by economic recession and resulting drop in global demand; this directly affects all dependent chemicals and materials markets

USA

Housing market collapse affected a wide range of chemicals and materials markets

Significant job losses in the industry and plant closures (Dow, BASF, Rohm & Haas and others)

Decline in consumer demand affects end-market pricing, which in turn led to volume reduction

USA

Housing market collapse affected a wide range of chemicals and materials markets

Significant job losses in the industry and plant closures (Dow, BASF, Rohm & Haas and others)

Decline in consumer demand affects end-market pricing, which in turn led to volume reduction

Europe

Decline in consumer demand resulted in scaling-down of production and redundancies across all industries.

Construction. automotive and real estate industries and the finance and banking sectors have already been hit, affecting the chemicals and materials markets

Europe

Decline in consumer demand resulted in scaling-down of production and redundancies across all industries.

Construction. automotive and real estate industries and the finance and banking sectors have already been hit, affecting the chemicals and materials markets

RussiaRussia is affected by the economic downturn but its strong position in oil and gas reserves suggest a quick comeback

RussiaRussia is affected by the economic downturn but its strong position in oil and gas reserves suggest a quick comeback

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Global Response: Massive Government Stimulus

China• Interest rate cuts • $586bn stimulus (infrastructure, rural)India• Interest rate cuts • $4bn stimulus package (infrastructure,

exports, textiles)

Global Response• Governments infusing capital into financial institutions• Globally coordinated interest rate cuts • IMF (International Monetary Fund) offers bridge loan to meet foreign exchange requirements• Discussions, coordinated efforts (G20 summit)

Brazil• Infrastructure development under PDP

(more than $64bn into country’s financial system)

USA• $787bn American Recovery

and Reinvestment Bill• $700bn bailout rapid interest

rate cuts• $23bn support for top three

auto companies; • Plan to create 2.5 million

jobs by 2011

UK: £250bn bailoutGermany: $700bn relief packageBelgium and Switzerland: Capital infusionECB: Interest rate cutsFrance: $50bn stimulus package

Japan:• Interest rate cuts• 447bn yen stimulus

package

South Korea:• Interest rate cuts and

efforts to keep currency stable

• $11bn stimulus package

Russia• Support for Russian

ruble• $20bn stimulus package

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What Will Catalyze the Turnaround for Chemicals and Materials?

• Green Chemicals and Materials – Biodegradable products, sustainably sourced chemicals, bioenabling chemicals and materials will drive growth in market segments from solar cell chemicals to bioplastics and from detergents to next generation biofuels

• Renewable Sourcing and Feedstock – The sourcing and utilization of renewable chemicals and materials can provide a competitive advantage to companies that suffer from price fluctuations in traditional feedstock

In spite of fiscal challenges, credit crunch and contraction of consumer markets, there are still a number of drivers creating growth opportunities in the global chemicals and materials markets.

Green Chemicals & Materials

Renewable Sourcing & Feedstock

Logistics and Supply Chain Acquisitions

E-commerce Geographic Regions

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Perceptions on Environmental Issues

Perceptions of Environmental/Green Issues

30%

30%

18%

12%

9%

1%

29%

23%

15%

12%

19%

2%

30%

34%

20%

12%

3%

1%

0% 10% 20% 30% 40%

Moral, ethical obligation

Critical to growth of company

Important to customers

Good public relations

Irrelevant

Don't know/care

Total Sample (N=593) CEOs (N=248) Other Organization Leaders (N=345)

Note: The Industry Survey on Environmental Issues was presented during Frost & Sullivan’s Growth, Innovation and Leadership (GIL) event in Sept, 2008

Q: How do you primarily view the current high profile of environmental/green issues?

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Investment in Green Policies / Strategies

Q: Over the next year, my company’s rate of investment in green policies/strategies will…?

Rate of Green Investment

(N=593)

67%

33%

0%

0% 20% 40% 60% 80%

Decrease

Remain Unchanged

Increase

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Drivers for Environmental Investment

Q: There are many drivers which contribute to a company making environmental investments, what are the main reasons driving your decision to “go green”?

Drivers of Going Green

(N=400)

33%

38%

46%

50%

54%

59%

62%

69%

67%

61%

0% 20% 40% 60% 80%

Potential competitive advantage

Growth opportunity for company

Corporate social responsibility

Meeting customer expectations/requirements

New technology opportunities

Ability to enter new markets

Greener Image

Product development

Potential cost savings

Leverage existing markets

61%

Note: Multiple mention question. Only top ten responses shown.

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Poll 1

Q1: In this economic downturn, do you think we should continue to invest in green technologies even if the technology is more expensive?

A. Yes

B. No

Please respond A or B on the textbox of your screen.

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Key Drivers for the Biodegradable Plastics Industry

HighHighMediumImprovements in R&D – impact of biotechnology

MediumMediumLowEco-labeling

HighHighMediumIncreased demand from educated consumers

HighHighHighDrive for less dependence on oil

HighHighHighGreen procurement policies

HighHighHighRegulations – EU, Japan

HighHighHighTrend of going “green”

HighHighHighClimate change

8-12 years4-7 years1-3 yearsDriver

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Global Volume Forecast by Polymer Type

Global Volume Forecast by Polymer Type (2003 - 2013)

0

50

100

150

200

250

300

350

400

450

2003 2007 2010 2013

Year

Vo

lum

e (kt)

Others

PHA

Starch-based

PLA

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Volume Share by Polymer Type

2003

63.9%

27.3%

0.8%

8.0%

PLA Starch PHA Other

2010

43.3%

39.8%

11.2%

5.7%

PLA Starch PHA Other

2013

38.6%

38.2%

18.6%

4.7%

PLA Starch PHA Other

2007

51.8%39.4%

1.4%

7.4%

PLA Starch PHA Other

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Existing and Emerging Application Sectors

Existing and Existing and

Emerging Emerging

ApplicationsApplications

Agriculture -mulching film

Compostable Waste / Carrier Bags

Healthcare

Automotive

Electronics

Film and Rigid Packaging

Toys

Existing Application Sectors Emerging Application Sectors

Catering Products

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Key Players

Metabolix

Natureworks

Cereplast

Plantic

Rodenburg

Novamont

Player

Apparel, furnishings, carpets, plastic cards

Fiber and nonwovens, films, water bottles, catering products

PLA

Consumer goods - cosmetic packaging, razors, brushes, applicators, cell phones, pens and office supplies

Disposable cutlery, agricultural film

PHA

Hybrid resins for automotive, consumer electronics, toys, cosmetic packaging

Injection molding, thermoforming, extrusion coating and blow molding applications

Starch / PLA blend

Water flushable applications –water dispersible labels, health & hygiene

Rigid packaging, injection molding, flexible films, barrier resins

Starch

Plastic replacement, automotive, electronic packaging

Flower pots, agricultural filmsStarch

Injection molding, foams, thermoforming, extrusion, tire additive

Packaging film, agricultural applications, waste and shopping bags, catering

Starch

Emerging MarketsExisting MarketsPolymer

Type

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Application Roadmap

Present 20252015 2020

TIMELINE

Ap

plica

tio

n

Rigid and flexible plastic replacement

Toys

Electronic Applications

Automotive components

Medical Applications

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Poll 2

Q2: What application sectors would you like to have the option of using biodegradable plastics? (may choose more than one)

A. Food packaging

B. Carrier / waste bags

C. Disposable cutlery

D. Textiles

E. Toys

F. Electronic casings

G. Others

Please respond A/B/C/D/E/F or G on the textbox of your screen.

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Strategic Recommendations

Challenges Recommendations Implementation

Cost Competitiveness

Improve upon processing economicsDevelop more efficient technologiesMonitor new technological developments, especially biotechnology

Seek cheaper feedstockIntegrated processProcess optimizationGenetically modified bacterial strains

Improvement of Properties

Develop new and better technologiesImprove blending prospectsReinforcement using natural fibersConsider incorporating nanotechnology

Structural modification of polymersCross linkageDevelopment of biocomposites or nanocomposites

Indecision Regarding

Positioning of Products

Develop products that can act as “drop-in”replacementsIntroduce innovative products that open new markets

Sustainability as a branding toolInvestigate emerging markets

Environmental, Health and

Safety Issues

Carbon footprint assessmentProper disposal guidelinesCradle to cradle conceptEnsure proper ESH testing

Closed loop processLife cycle analysis, or similarLow energyEfficient green processes

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Your Feedback is Important to Us

•

• Growth Forecasts?

• Competitive Structure?

• Emerging Trends?

• Strategic Recommendations?

• Other?

Please inform us by taking our survey.

What would you like to see from Frost & Sullivan?

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For Additional Information

Steve LeeStrategic Account ManagerChemicals, Materials and Food, Asia Pacific(65) 6890 0914steve.lee@frost.com