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China’s Big Play in the Biopolymers Market
Government policies are expected to supercharge the biopolymers industry at a 49% compound annual growth rate between 2023 and 2026.
Staff
May 30, 2024
3 Min Read
Grindi/iStock via Getty Images
Already the world’s largest plastics producer, China is angling to be the biggest biopolymers producer in the years ahead, as well. According to a new report from Germany’s nova-Institut, the industry is expected to expand significantly from 765,631 tonnes in 2023 to 2.53 million tonnes in 2026, representing a compound annual growth rate of approximately 49%.
This projected growth is largely driven by government policies and is at odds with anticipated demand. Since 2020, the Chinese government has introduced a series of policies to boost the biodegradable plastics market, providing substantial resources and incentives to companies, according to the nova-Institut report. Private equity firms have followed the policy trend by investing in this sector. These factors have contributed to industry growth but have also led to structural overcapacity, said the Germany-based research organization.
Graph courtesy of nova-Institut.
Overcapacity of biodegradable polymers.
In 2023, the combined annual production capacity of PLA and PBAT was 1.5 million tonnes, while the actual production was only 260,000 tonnes. Furthermore, the combined annual production capacity of PLA and PBAT is projected to reach 3.6 million tonnes by 2025, representing an average CAGR of 65%, but the market size is expected to increase to only 2.5 million tonnes by 2025. This suggests overcapacity in the biodegradable plastics market, concluded nova-Institut.
Why is the Chinese government so gung-ho on biopolymers? Nova-institut cites two reasons: Its commitment to the carbon reduction goals outlined in the Paris Agreement and reducing its dependence on oil resources for national security reasons.
Alignment with ‘dual carbon target.’
In 2020, China announced a new target to peak carbon dioxide emissions before 2030 and achieve carbon neutrality by 2060, known as the “dual carbon target.” Current projections show that China's CO₂ emissions are likely to enter a structural decline in 2024.
China's petrochemical industry is heavily dependent on imported oil. Projections indicate that the average external dependence between 2020 and 2030 will reach 76%, making it imperative for the Chinese government to take strategic action, said nova-Institut.
The primary market drivers for China’s biopolymers industry.
The Chinese government considers the bio-based polymers industry as potentially supporting its “dual carbon” plan, which has led to the implementation of various incentives and regulations.
China's well-established chemical industry has formed a complete value chain, enabling innovative bio-based start-ups to find partners to industrialize their products.
The vast potential of the domestic market: By 2026, demand for bio-based plastics in China is expected to reach 2.53 million tonnes.
China has a relatively strong and active financing system, particularly in private equity (PE) and venture capital (VC). Although overall transactions in this sector weakened after 2020 because of the broader economic downturn in China, PE and VC remain active in emerging and strategic industries.
The 71-page report from nova-Institut provides an in-depth overview of key market trends, government policies, technological advances, companies active in the biopolymers sector, and growth opportunities. It can be purchased online via the nova-Institut website.
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