LanzaTech, INVISTA aim for waste-CO2-to-chemicals in new pact

The Spandex, Lycra kings aim to make product from those invidious, insidious, nefarious greenhouse gases.

Addressing the anarchy of petroleum pricing.

Partnering with the advanced bioeconomy’s #2 Hot company.

What’s not to like except waiting until 2018 for products for markets?

In Kansas, INVISTA and LanzaTech signed a research and development agreement focused on the development of gas-fermentation process technology for the production of industrial chemicals from carbon dioxide and hydrogen gas (CO2 and H2) feedstocks.

According to the agreement, INVISTA and LanzaTech will collaborate on projects to develop gas-fermentation technologies to convert CO2/H2 feedstocks into a range of industrial chemicals using proprietary INVISTA host organisms and metabolic pathways. If successful, the first commercialization of this technology is expected as early as 2018.

The INVISTA perspective

INVISTA believes “biotechnology has the potential to significantly improve the cost and availability of several chemicals and raw materials that are used to produce its current products. It views gas fermentation as a key enabling technology that will allow the use of potentially advantaged gas feedstocks—such as waste industrial gases including carbon dioxide.”

“This new agreement builds on INVISTA’s existing collaborations with LanzaTech,” said Warren Primeaux, president of INVISTA Intermediates. “It will provide INVISTA increased access to LanzaTech’s world-class gas-fermentation process technology and help accelerate the commercialization of a number of exciting bio-derived processes currently under development at INVISTA’s bioscience laboratory in Wilton, United Kingdom.”

INVISTA is known primarily for nylon, spandex and polyester used to produce clothing, carpet, car parts and more, under brands such as Lycra, Coolmax, Cordura, Stainmaster, and Antron.

The LanzaTech perspective

If you’ll recall, INVISTA and LanzaTech signed a collaborative agreement in August 2012 to investigate gas fermentation as a route to butadiene, for INVISTA’s use in the production of nylon. At that time, it was based on carbon monoxide as a feedstock — essentially, extending the processes and organism that had already been proven out BaoSteel and Shougang for ethanol, into the world of butadiene.

“This new collaboration further extends the original relationship with LanzaTech for work on process development of INVISTA processes using a CO2/H2 feedstock, based on INVISTA proprietary hosts and metabolic pathways,” the partners say.

So, for the time being, think nylon intermediates chemicals — and butadiene is another possibility down the line, one among many.

De-risking feedstock prices

Last week in the Digest, we looked in depth at risk, more from a financial perspective — how can companies de-risk their technologies to attract affordable debt and equity.

One key strategy — close collaboration with a known strategic downstream partner who can provide financing for development, in some cases provide manufacturing capacity, and marketable offtake agreements.

Here is no exception. As LanzaTech CEO Jennifer Holmgren told the Digest, “Invista has a big synthetic biology capability as well and they have been working on gas fermentation with a different organism then ours.  But of course, the secret sauce isn’t just the organism, it’s the bioreactor and the ability to use that bioreactor to effectively feed insoluble gases to the organism.  By coupling their knowledge and our knowledge we expect to be able to quickly commercialize direct CO2 to chemicals.”

And here’s one more type of activity aimed squarely at risk: addressing feedstock price volatility.

You see, though biobased technologies offer an alternative to petroleum feedstock volatility — as well as green attributes and occasionally advantaged production geographies or cost structures — bio has its own feedstock price volatility issues.

As Holmgren further explained to us:

“I think this is also exciting as it shows increasing interest around the production of fuels and chemicals from feedstocks which are not commodities.  I’ve always believed that’s the neatest part of what we do.  Gases aren’t going to be traded, you just can’t move them effectively.  That means that you won’t have the ups and downs of commodity feedstock pricing.  Dampening that effect will pay long term dividends when it comes to planning in the chemicals sector.

“I find it interesting that today’s supply chain is so effective that buyers sometimes participate in the planning of the product portfolio at consumer good companies…  What raw materials can I buy cheaply and therefore what product should we be making this year.  That sophistication while critical adds a limitation which the use of non commodity feedstocks will lift.  You can dream the dream in design and not be limited by raw materials.  It also removes a layer of complexity and uncertainty in planning.

Looking at chemical intermediate pricing

Take butadiene as an example. According to Deutsche Bank in this graphic, we see butadiene prices for SE Asia all over the map in the April 2011 to April 2013 period — 24 months where we didn’t have any catastrophic financial events like the global financial crisis to blame.

Yet, the price of the intermediate fluctuated between roughly $1500 and $4500 per metric ton — with seven periods where the price changed more than $500 per metric ton in a period of 90 days or less.

$500 per metric ton — framed in terms of gallons for those more used to the volatility of fuel prices at the pump, that’s a shift of around $1.66 per gallon in a few weeks — happening on a rough average of every three months.

Imagine this as a scenario, as your price at the pump for gasoline.

$6.00 per gallon in April 2011, $9.00 by August, down to $3.50 by December, back up to $8.00 by April, dropping to $4.00 in June, sliding down to $3.00 by December before jumping to $4.50 again by March.

You’d call it fuel pricing anarchy — yet, that is the rollercoaster that butadiene has been on. Imaging planning your production schedule — and your customer pricing around that kind of volatility. After all, INVISTA is making products like Lycra — sold ultimately to consumers for swimwear, sleepwear and workout clothing, among other applications.

Pricing anarchy — it’s the kind of thing that spooks investors and lenders, wary of the impact that raw material price volatility has on demand, and average selling price.

Where industrial biotechnology must itself ride the volatility rollercoaster — think corn and cane sugars — the financing can be daunting. Where industrial biotechnology taps captive feedstocks that are tough to move and creates intermediates for companies with long-established product lines and markets — well, that’s the other side of the coin, and far more financeable.