China's Bio-Chem to Harvest Plastics From Corn
Date: 24-Apr-06
Country: CHINA
Author: Nao Nakanishi and Niu Shuping
The company, based in China's top corn-producing province, plans to start a 200,000-tonne per year polyol factory in September, encouraged by a successful pilot using its technology to chemically process corn starch into about 20 kinds of plastics, including textiles, said co-Chairman Xu Zhouwen.
"If all goes well, we'll have something to show and we can attract more investors," Xu told Reuters in an interview at a sprawling corn processing plant.
"Polyol has huge potential in the future," said the former engineer, referring to the alcohol that contains many hydroxyl groups and is used to make polyurethane products and other chemicals.
Global Bio-Chem, the listed arm of Changchun Dacheng Industry Group and valued at US$1.4 billion, processes about 3 million tonnes of corn a year into starch and various products such as corn sweeteners, modified starch or food additives.
It competes in China's corn starch market against Singapore-listed China Sun Bio-Chem Technology Group Co. Ltd. and Archer Daniels Midland Co.
The government of Jilin, where about 20 million tonnes of corn is harvested annually, is promoting this kind of corn processing as a major development, hoping it will pad the incomes of about 15 million farmers in the northeastern province.
Xu said Jilin's government was urging Bio-Chem to boost capacity at the polyol facility to as much as 3.2 million tonnes a year, which could save 25 million tonnes of crude oil -- equivalent to the annual production of Daqing Oilfield, China's biggest well in neighbouring Heilongjiang province.
While it takes 8 tonnes of crude oil to make 1 tonne of polyol, only 1.76 tonnes of corn are needed to make the same amount of polyol, he said.
The production costs for corn-based polyol are around 4,000 yuan a tonne, but the average ex-factory price is as high as 10,000 yuan (around US$1,250). In contrast, crude oil prices are near a record US$74 a barrel.
"Energy resources are running out. We have developed the technology to replace crude oil for production of chemical products," Xu said.
ETHANOL, CORN SWEETENERS
Xu said his firm would consider the government's request to expand only after ensuring things went well with the new plant. He said this would require expanding corn processing facilities to about 5 million tonnes, though supply should not be a problem.
Jilin is also home to the world's single largest fuel ethanol plant. Asked if Bio-Chem would consider building a fuel ethanol plant, Xu said: "No. Production costs for ethanol are too high."
He estimated it would cost about 4,000 yuan to process 1 tonne of ethanol from corn, while ex-factory prices of the fuel -- blended into all petrol in Jilin -- are around 3,600 yuan.
Xu said ethanol producers were only making money because they receive subsidies of about 1,700 yuan a tonne.
However, Xu said Bio-Chem was building a corn sweetener plant with annual capacity of 400,000 tonnes that should start in June, adding to existing sweetener capacity of 500,000 tonnes a year.
"There's a deficit in sugar supply and we expect this to persist for 2-3 years," he said, adding the plant would produce solid sweetener that is easier to transport.
Farmers had reduced the acreage under sugar beet by 70 percent in Jilin in recent years because of low sugar prices.
But world, and Chinese, sugar prices hit record highs in February, prompting consumers to switch to cheaper corn sweeteners such as high fructose syrup (HFC).
Xu said Bio-Chem was working with agribusiness giant Cargill Inc., which has a plant for HFC -- used in soft drinks such as Coca-Cola -- in Shanghai, and may build an ethanol plant with Cargill in the United States.
Bio-Chem shares have risen by more than a third so far this year, beating a 13.6 percent gain on the main Hang Seng index, but are still 31 percent below their mid-2004 high.
The stock trades at 13.6 times forecast 20