Coating Resins on Bio-based Raw Materials Reality or Distant Future? Tosko Misev, Dirk Stanssens DSM Resins bv, DSM Innovation Center

Introduction Since existence of human beings, people have always used paints to express themselves Early paints based on natural products were of inferior quality Non-natural products were introduced to improve properties alkyds, acrylics, polyurethanes, polyesters, epoxies, amino resins Now we see a reverse movement Oil reserves are limited and have a long cycle time (100 mln years) Natural renewable resources are abundantly available with cycle time of 1 year White biotechnology is developing with increasing speed

What is white (industrial) biotechnology? Industrial applications Market penetration Biofeedstock Replacement of fossil feedstock by sugar and biomass Pharma (red) biotech Bioprocesses Use of natures toolbox for industrial processes (e.g., enzymes,bacteria) White Biotech Ag (green) biotech Bioproducts Current and new bio based products (e.g., fuel, materials) Bioremediation Use of biological processes for environ mental cleanup (e.g., waste water, oil pests) Today Time Source: McKinsey

White (industrial) biotechnology Biotechnology: The use of nature’s toolbox for industrial processes Feedstock Bioprocess (cells / enzymes) Products White biotechnology is the modern use and application of biotechnology for the sustainable production of biochemicals, biomaterials and biofuels from renewable resources, using living cells and/or their enzymes. This results generally in cleaner processes with minimum waste generation and energy use. It can be differentiated from pharmaceutical (red) biotechnology or agricultural (green) biotechnology. “Red” biotechnology is confined to the healthcare sector, whereas “green” biotechnology is applied to the agro-food sector. White biotechnology is a subject which is rapidly gaining priority on the agendas of those in industry, politics, academia and NGOs. Why? Because white biotechnology offers enormous opportunities, not just for the economy, but equally to our environment and to our society. White biotechnology is mainly based on fermentation technology and biocatalysis. In a contained environment, genetically modified or non-GM micro-organisms (e.g. yeast, fungi and bacteria) or cell lines from animal or human origin, are cultivated in closed bioreactors to produce a variety of products. Likewise enzymes, which are derived from these (micro-) organisms, are applied to catalyze a conversion in order to generate the desired products. It is important to note that although the biochemical conversion might be performed by genetically modified micro-organisms the products in itself are non-GMO chemicals, biomaterials or biofuels, since the products simply do not contain any genes. Activities and opportunities in the field of white biotechnology are rapidly growing due to recent breakthroughs in genomics, molecular genetics, metabolic engineering, and catalysis. Promises are becoming reality and living cells can now be used as tiny micro-factories, which can be optimized with respect to productivity, safety and minimal environmental load. Fermentable sugars Specialties Materials Base chemicals Fuel

Basic feedstock price developments Over the last 10 years oil and sugar prices have followed quite opposite trends CAGR 9,1% Year Price CAGR -3,4% Crude oil price Raw sugar price (*) 0% 50% 100% 150% 200% 250% 1994 95 96 97 98 99 2000 01 02 03 04 Feedstock prices are expected to decrease further on with the conversion of wood and agricultural waste into fermentable sugar

Existing raw materials of petrochemical origin Resin Raw Materials Existing raw materials of petrochemical origin

Mineral oil - Natural gas Iso-or –n-butyraldehyde Polycondensation Resins Mineral oil - Natural gas Reformate Propylene Methanol Ethanol Propylene Iso-or –n-butyraldehyde Formaldehyde Acetaldehyde Allyl Chloride o,m,p-xylene Epichlorohydrine Phthalic acids Neopentyl Glycol Trimethylol Propane Pentaerytritol Glycerol 500 kT 200 kT 150 kT Polyesters Alkyds 1800 kT

Polymerization Resins Mineral oil - Natural gas Propylene Alcohols Acetone Benzene Ethylene Methanol Acetone cyanhydrine Acetic acid Acrolein HCN Ethylbenzene H2SO4 Acrylic acid Methacrylic esters Acrylic esters Styrene Vinyl acetate Acrylics, Styrene/Acrylics and Vinyl Acetate Copolymers 3200 kT

Upcoming bio-based building blocks

Biomass (straw, switchgrass) Citric acid, Oleochemicals Building Blocks Through White Biotechnology Sugar crops Oil crops Biomass (straw, switchgrass) 20 billion $ Pharma intermediates Amino acids, Vitamins Citric acid, Oleochemicals Flavors, fragrances Enzymes Biological Feedstock Biotechnological and/or Conventional Processes Industrial Products Fermentation Bio-catalysis 1 billion $ Polylactic acid Glycols Ethylene Acrylic acid Bio-fuel Biomaterials Nutritional Ingredients Specialty Chemicals Commodity Chemicals

Conventional Processes What can we count on ? Sugar crops Biological Feedstock Oil crops Sugars Basic raw materials Vegetable oils Polyols Polyacids Monomers Biotechnological and/or Conventional Processes Polyols Fatty Acids Polyesters Alkyd Resins Polyurethanes Epoxy Resins Acrylic resins Polyurethanes Alkyd Resins Polyamides Epoxy Esters Coating Resins

Use: Alkyd resins, Polyesters What we already use Vegetable oils: Renewable Non toxic Biodegradable Full environmental acceptance Use: Alkyd resins Glycerol: Renewable Non toxic Biodegradable Full environmental acceptance Use: Alkyd resins, Polyesters

What is already available in the market Soyol™ “biobased” polyols: OH functionality: 2 – 3 Molecular weight: 1000-2000 Uses: Seating foam furniture Foam insulation Carpet backing Shoe soles Roof coatings. Effects: Cost less than the petroleum polyols they replace. Plant based, annually renewable resources. Reduce demand and dependence on limited petroleum reserves.

What we can expect to come ?

One of the top 12 chemicals from biomass What we expect to come HO OH O Succinic Acid: C4H6O4 One of the top 12 chemicals from biomass Potential use: Diacid for polyesters Diacid for alkyds Intermediate for manufacturing of: Maleic acid (polyesters) Butanediol (polyesters) Diaminobutane (polyamides) Adipic acid (polyesters, polyamides)

Interrelation between the most relevant 1,4-bifunctional C4 building blocks. The reactions from left to right require reduction (so the reverse require oxidation), whereas the ring-closures are dehydratation reactions. HOOC - CH=CH COOH CH 2 OH HOCH Fumaric / Maleic acid Succinic 4 Hydroxybutanoic 1,4 Butanediol anhydride gamma Butyrolactone Tetrahydrofuran O =O O= =O

Commercial quantities: 2008/2009 Commercial quantities: 2007 What we expect to come Isosorbide: C6H10O4 Via dehydration of sorbitol OH O Difunctional polyol for: Polyesters Polycarbonates Polyamides Polyurethanes Plasticizers Commercial quantities: 2008/2009 Itaconic Acid: C5H6O4 Via fungal fermentation of glucose HO OH O CH2 Potential use: Polymerization monomer (Meth)acrylic esters alternative Hydrogels for superabsorption Commercial quantities: 2007 3-Hydroxy Propionic Acid: C3H6O2 Feedstock for: Acrylonitrile Acrylic Acid Acrylamide HO OH O Technically feasible, but not yet cost effective

Polycondensation resins Polymerization resins Summary of existing and potential opportunities Acids: Fatty acids Succinic acid Maleic acid Fumaric acid Adipic acid Polyols: Glycerol Sorbitol Isosorbide Butane diol Monomers: Itaconic acid & esters Acrylic acid & esters Acrylonitrile Acrylamide Polycondensation resins Alkyd resins Polyesters Polyurethanes Polymerization resins Acrylic resins Alternatives to acrylic resins

Can the prices go even further down? Energy crops: Miscanthus -1 years growth without replanting! 20 tons/acre? (www.bical.net) 10-30 tons/acre (www.aces.uiuc.edu/DSI/MASGC.pdf)

Turning South Dakota into… Biomass Will Make a Difference Turning South Dakota into… …a member of OPEC?! Today Tomorrow Thousand barrels/day Farm acres 44 Million 44 Million Saudi Arabia 9,400 5 15 Iran 3,900 Tons/acre South Dakota 3,429 Gallons/ton 25 80 Kuwait 2,600 Thousand barrels/day 857 3,429 Venezuela 2,500 UAE 2,500 Nigeria 2,200 Iraq 1,700 Libya 1,650 Algeria 1,380 Indonesia 925 Qatar 800 Source: Ceres Company Presentation

Biomass Will Make a Difference The chemical industry is working hard to use ligno-cellulose as a feedstock Ligno cellulose is much more available than e.g. crops. A whole plant can be used. Use of land not suitable for food or feed ( prairies-USA, pampas-Argentina) No competition between making chemicals and supplying food. Selection and\or genetically modified plants that grow very fast. Environmentally friendly cultivation; plants that do not need fertilizers The next step: bio-refinery Switch-grass cultivation Extraction of valuable products (proteins) Chemical building blocks Rest for Bio-fuel The biomass as a feedstock will further reduce the prices of the chemicals

Not yet but will be soon Conclusion Sugars Vegetable oils Mineral Oil USD/barrel USD/kg Oil reserves are limited, not renewable. Oil price still volatile and has tripled in the past five years Sugars/vegetable oils: Costs decreased with a tendency to stabilize. Further progress in white biotechnology offers solutions based on even cheaper biomass feedstock Coating Resins on Bio-based Raw Materials: Reality or Distant Future? Not yet but will be soon