摩根士丹利-全球-化工行业-全球化工业：生物革命-2019.10.21-34页 (2).pdf

FOUNDATIONMGlobal Chemicals|EuropeThe Bio RevolutionMorgan Stanley does and seeks to do business with companies covered in Morgan Stanley Research.As a result,investors should be aware that the firm may have a conflict of interest that could affect the objectivity of Morgan Stanley Research.Investors should consider Morgan Stanley Research as only a single factor in making their investment decision.For analyst certification and other important disclosures,refer to the Disclosure Section,located at the end of this report.Chemical companies are responding to the demand for greener products by transitioning from petrochemicals to biobased materials.Within the biosphere we believe biosurfactants offer a clear and attractive growth roadmap to a market we estimate could be worth$16.5bn by 2030.October 21,2019 04:14 AM GMTFOUNDATIONMGlobal ChemicalsThe Bio RevolutionThe chemicals supply chain is migrating back to biobased/renew-able raw materials to reduce the reliance on hydrocarbons and lower CO2,improve sustainability credentials and fulfil growing demand.Before the 1950s,chemicals were largely biobased(e.g.derived from sugar or animal/plant oils).By the 1970s,petchems had replaced 95%of markets previously held by biobased chemicals(Morris and Ahmed,1992)1.We now see a gravitation back to bio-chemicals as awareness of petrochemicals environmental impact is increasing amongst corporates,consumers and governments,fostering further encroachment in markets once dominated by fossil-based counterparts.The biochemical landscape is broad,diverse and growing,and its not just about bioplastics.Weve created a schematic describing what we call the chemical biosphere,comprised of eight biobased product groups(Exhibit 2).EU Chemical companies are committed to bio-routes(we map out the bio supply chain here)but challenges of higher production costs and scalability are still present for some products.Where much of previous debate and government interven-tion had revolved around bioplastics,they only make up 1%of the total plastic production and uptake has been slow and stilted.we therefore deep dive into biosurfactants as our area of pref-erence as penetration rates are above average and growing,end customers are demanding supply chain changes and are willing to pay for it.There is a pull to biosurfactant products driven particu-larly by the Personal Care industry(which consumes 18%of the sur-factant market)as consumers are increasingly aware of health effects of some products and are willing to absorb higher costs of production(a green premium)for formulations with seemingly less harmful health implications.We do not think this willingness is present in other parts of the sphere such as bioplastics,made evident by lower growth and penetration rates.Biosurfactant penetration rates set to increase,and not just in Personal Care end markets.We model out the surfactant market and forecast biosurfactant penetration rates to increase from 26%today to 39%,reaching a market value of$16.5bn by 2030.Biosurfactants have a high relevance to our coverage and we believe the growth in the midterm will be the fastest in personal care end markets(2018-30 CAGR of 8%).Furthermore,we think a similar 1 The Carbohydrate Economy:Making Chemicals and Industrial Materials from Plant Matter Paperback,1992trend in other end markets such as detergents,agriculture and food is likely to take place,increasing bio market share in the future.Other qualities of biosurfactants such as biodegradability could also play a key role in uptake given regulatory focus.Europe is a leader,and stands out.With 224 biorefineries in Europe alone(Exhibit 16),the drive towards biochemicals is being Europe-led from a production,consumer and government perspec-tive.The regions higher focus(vs US and Asia)on biobased initiatives such as the EU Biobased Industries Consortium,standardisation policy (ISO16128 classification of natural products),the EU Commissions committees and mandates for biobased products and the rise of clean labelling(Exhibit 21)has been followed by other regions,e.g.the USDAs Biopreferred Program.We think investors will want to take note as some EU names are geared into this theme,setting them up for sustainable,high return growth over the long run that can drive multiples higher.Biosurfactants have high relevance to our coverage and we highlight Evonik(Overweight)and Croda(Overweight)as well-placed to cap-ture potential growth in the biosurfactant market due to their com-mercial-scale biobased manufacturing capabilities and technology leadership in renewable chemistry processes(e.g.fermentation).A strong commitment to sustainable solutions as a key driver of future growth could be rewarded by ESG investors in years to come.FeedstockThe raw material in a chemical process.BiomassPlant or animal material.Biobased materials/biochemicalsProducts that have been partially or wholly synthetically derived from a biomass feedstock,having had fossil-based feedstocks replaced by biomass ones.NaturalsIngredients obtained only from plants,animals,microbiological,or mineral origin(ISO16128 standard).We would further qualify naturals as chemicals that are wholly derived from nature by default (100%biobased,e.g.vanilla).SurfactantsSurface active agents are chemicals that reduce the surface tension between oil and water enabling both to either to mix or separate(such as detergents which remove grease from kitchenware).Surfactant molecules have a head and tail,with the tail being the connector between oil and water.DecarbonisationThe reduction of carbon intensity.GLOSSARYWe spoke to Akzo Nobel,BASF,Croda,Clariant,DSM,Evonik,Symrise,Solvay and Wacker.FOUNDATIONMMORGAN STANLEY&CO.INTERNATIONAL PLC+Navina RajanResearch Associate+44 20 7677-2784Navina.R Contributors MORGAN STANLEY&CO.INTERNATIONAL PLC+Charles L WebbEquity Analyst+44 20 7425-0234Charlie.WMORGAN STANLEY&CO.INTERNATIONAL PLC+Alexandra ThrumEquity Analyst+44 20 7425-8497Alexandra.TMORGAN STANLEY&CO.INTERNATIONAL PLC+Lisa H De NeveEquity Analyst+44 20 7677-0250Lisa.De.NMORGAN STANLEY&CO.INTERNATIONAL PLC+Jessica Alsford,CFAEquity Strategist+44 20 7425-8985Jessica.AMORGAN STANLEY&CO.LLCVincent AndrewsEquity Analyst+1 212 761-3293Vincent.AMORGAN STANLEY&CO.LLCNeel Kumar,CFAEquity Analyst+1 212 761-4573Neel.K+=Analysts employed by non-U.S.affiliates are not registered with FINRA,may not be associated persons of the member and may not be subject to NASD/NYSE restrictions on communications with a subject company,public appearances and trading securities held by a research analyst account.FOUNDATIONM4 Contents 5Renewable feedstocks are replacing petrochemical ones7Exec Summary:A New Story is Surfacing.11 The Chemical Biosphere-An Overview11Sizing the biosphere-varied and vast11Rising supply of and demand for biobased chemicals 12Bioplastics are still important for Chemicals12.but biosurfactants are better geared into whats happening now12Bio challenges are changing13Environmental impact of biobased products overall is open for debate 14 Biosurfactants-how to get to$16.5bn by 203015Regional pull,a shift to bio in Asia would propel growth15Producers16What will cause production to take off?17Company feedback and statements on biobased products 19The Chemical Biosphere-Regional Pull&Products 19Whos buying and selling bio?Regions.20 Whos selling bio?Products.21The Chemical Biosphere-Initiatives 23Appendix I:Surfactants-An Overview23What is a surfactant?23The surfactant market in charts25Appendix II:Feedstocks 27Valuation methodology&risksFOUNDATIONMMORGAN STANLEY RESEARCH5Source:Company websites,Morgan Stanley ResearchRenewable feedstocks are replacing petrochemical onesDecarbonisation and diversification.Unlike the petrochemicals,which are derived from just two feedstocks(natural gas and oil),biobased materials can be derived from a variety of feedstocks allowing for decarbonisation and diversification of raw materials.Weve looked across our coverage to explore the biochemical supply chain for various biobased products in company portfolios.FOUNDATIONM6 Companies are increasingly able to commercially produce a range of biobased materials(e.g.Arkema,Evonik,Croda),with significant research and development overcoming the complex chemistry involved in substituting petrochemical feedstocks with renewable ones.The EU and US Chemical companies biobased product offer-ings are listed in Exhibit 18 and Exhibit 19.We believe that biobased materials,rather than the trend for natu-rals,remains the more material development in EU Chemicals due to sector-wide relevance,company focus,initiatives(Regions,Products and Initiatives:whos doing Bio.)and the role of biobased products in decarbonisation.According to the USDA,biobased products displace around 300 million gallons of petroleum per year in the US alone,which put into context is the equivalent of taking 200,000 cars off the road.If we assume the biosphere grows at 5%each year,this would be equal to taking 3.2 million cars off the road in the US alone by 2030.Exhibit 1:Renewable raw material exposure(grey covered by MS).Of the below names,EU Chems employ an average of 25%renewable feedstocksCompany%of renewable raw materials Bio-based consortuim member Avantium 100%YSmurfit Kappa100%YCorbion98%YChristian Hansen95%NNovozymes95%YBorregaard92%YSymrise70%NCroda 61%NGivaudan52%NIFF50%NArkema 20%NClariant 19%YNeste16%YDSM 14%YCovestro8%NEvonik 8%YAkzo Nobel5%NBASF 5%YSolvay 3%NBraskem2.5%YDuPont-YSource:Company websites,Morgan Stanley ResearchClick HERE for exhibit commentary.FOUNDATIONMMORGAN STANLEY RESEARCH7Exhibit 2:The biosphere of chemicals,comprising 8 main areas Source:Morgan Stanley Research(1)Not just a bioplastics storyfocus on biosurfactants A key area of the renewable chemical supply chain has been over-looked:biosurfactants.Compared to bioplastics,which have previ-ously been the focus of research and regulation,biobased surfactants make up a more meaningful slice of their addressable market(20-30%according to Croda at August 2019 vs 1%bioplastic penetration as we wrote previously)and reach more price inelastic end markets(predominantly detergents and personal care prod-ucts),where there is an elevated focus on the health effects of chemi-cals.Biosurfactants also possess higher functionality,focussed investment from our coverage and high growth rates.Their special-ised nature and consumer-orientated end markets mean that corpo-rates possess more pricing power and in turn can boost profitability amidst higher costs of production by passing on costs to consumers who are willing to pay a green premium.Natural products are seen to have less carcinogenic,harmful properties so consumers are willing to pay more for positive health externalities over environ-mental ones,we think.We believe there are four factors driving the increase in demand for biosurfactants:i)demand for green products by the more chemi-cal-conscious consumer and more specialised products ii)technolog-ical advancement in knowledge and methods for commercial Exec Summary:A New Story is Surfacing.production;iii)increasing environmental awareness by the corporate and the consumer;iv)equal or better functionality than petchem ver-sions.There is also an industry shift into specialties and therefore bio-surfactants due to demand for increased functionality such as milder formulations in Personal Care and Detergent markets and bio-degradability in Industrial markets.Arkemas acquisition of specialty player Armaz and Nouryons recent surfactant capacity expansion(doubling capacity at Sweden plant including biodegradable surfac-tants for oil and gas)evidences this,with BASF also mentioning that it would be looking to expand specialty capacity(not necessarily biobased).We think an increase in consumer demand for seemingly more green,natural products and specialised functionality will be a main driver of the increased adoption of biosurfactants in household goods,industrial,PC,agricultural markets and potentially others(Exhibit 12).A rotation into biobased versions,driven by a customer pull to green products,further supported by a corporate desire to achieve sustainability goals and decarbonisation targets,could rep-resent a large opportunity for involved players.Out of the biosphere,we think biosurfactants are currently the most exciting area for Chemicals due to customer pull,scalability,market size and growth opportunities,while the level of investment already made by our coverage indicates that they share this view.Exhibit 3:2030 surfactant market:we estimate that biosurfactants could make up 39%of the total surfactant market by 2030(currently 20-30%,we assume 26%)Fabric Care,1%Personal Care,17%Detergents,16%Industrial,3%Petchem Surfactants,62%Source:IHS Data,Morgan Stanley forecasts(includes North America,LatAm,Europe,Japan and China marketsFOUNDATIONM8(2)Biosurfactants could be a$16.5bn market by 2030,we thinkOur analysis,which includes North America,Western Europe,LatAm,Japan and China(current market size of$28.7bn),suggests that by 2030,the biobased surfactant market could grow from$7.6bn cur-rently to$16.5bn(excluding regions such as India and the MEA,where growth may be higher).We think a main area of growth for biosurfactants is in the personal care market,and estimate that by 2030 the biosurfactant market for personal care alone could nearly double its current share of the total market,with companies like Clariant(not covered)noting that most of the growth in its personal care segment has been driven by biosurfactant products.Other potential applications(Exhibit 12)could extend into agro-chemicals and oils services.We look at the surfactant and biosurfac-tant market potential in more depth here:Biosurfactants-how to get to$16.5bn by 2030 and Appendix I:Surfactants-An Overview.(3)Who is set to benefit?Croda(Overweight)and Evonik(Overweight)have an edge.Biosurfactants can be derived from 1)biomass/plant oils 2)via fer-mentation using sugar/yeast.From an exposure perspective,it is diffi-cult to define the position of producers of biosurfactants due to the level of backward integration in production.Achieving economies of scale has been a key deterrent to biosurfactant production and growth in the past as downstream processing accounts for signifi-cant portion of production costs significantly higher than petchem versions.Commercialisation has also been limited due to complex technology to purify and recover molecules at a commercial scale,as well as optimise the fermentation process to increase yield and reduce manufacturing costs.Only a handful of players are doing bio-surfactants in a meaningful way,with few having the technology leadership longer term to overcome such barriers and capture poten-tial growth in the market.Given this,Evoniks expertise in fermentation and manufacturing capabilities on a commercial scale differentiate it from the market.The company is also geared into Rhamnolipids a type of biosurfac-tant made via fe