🏭 The Column: May 31, 2024

Good morning. If you happen to have worked for or with Fulcrum, and you have any juicy details you’d like to share with me, my inbox is always open.

Things Happened:

Fulcrum Bioenergy’s demise

Chatter about Fulcrum began in 2008 when the company promised that they’d be converting garbage into fuels by 2010. After a decade of fundraising efforts, which gradually became easier as the demand for sustainable aviation fuel (SAF) picked up, Fulcrum actually managed to build their first site by December 2022. I was pretty optimistic at the time: so long as one airline is able to start flying planes with SAF by 2030, the other airlines should actually stick to their sustainability goals, which means you’ll probably have demand for the SAF you produce. But that’s just hypothetical market risk. Technical risk, which is impossible to evaluate, still remained, and it turns out that making SAF from garbage is very hard to do at scale. The company dealt with the unexpected creation of nitric acid upon start up (which damaged equipment), and later the creation of “a thick cement-like material” that built up throughout the plant’s gasification system (it was apparently 10 feet thick at some points). Since then they’ve defaulted on bonds, laid off their entire staff, and halted all operations (included their website). It’s a nice reminder that geometric scaling is a double-edged sword: yes, thermochemical processes are much more cost effective at scale, but scaling is hard, and only those who can scale will have a chance at survival. [LINK]

DuPont is splitting up

Following the Dow DuPont merger (2017) and de-merger (2019), DuPont has been selling its “commodity” businesses (like the $11 billion sale of its mobility and materials business to Celanese, and the sale of its polyacetyl business) and leaning into specialties (like the acquisition of Laird’s electronic materials business, and the acquisition of Spectrum Plastics). This is pretty typical: specialty chemical companies grow by finding more tangentially related specialties, and then they shed the businesses that end up with abnormally high or low margins (so long as that business has a buyer or it can stand on its own). In the high margin case, the shedding happens because that business unit’s ability to grow will be impeded by the other businesses, simply because investors seeking high margin businesses can’t invest without simultaneously investing in DuPont’s lower margin businesses. So, in a classic shareholder maximizing move, DuPont will be splitting itself into three publicly traded companies (electronic materials, water solutions, and industrial solutions). This will all take place over the next 18-24 months. (Oh, and if you’re looking for a deep dive on DuPont, Tony wrote one up not too long ago.) [LINK]

Standalone alkylate production

This actually happened back in March, but the news was recently surfaced on chemengonline.com, so it crossed my radar: a company called Next Wave Energy started up an ethylene-to-alkylate plant along the Houston Ship Channel. As far as I know, alky units typically react propylene and butene with isobutane to make longer-chain branched molecules we call alkylate (which mostly consists of isoheptane and isooctane). That alkylate becomes part of gasoline, increasing the gasoline's octane rating and reducing the emissions associated with its burning. Generally speaking, the highest value end market for olefins like propylene and butene starts with converting them into petrochemicals, but for a refiner the economics of converting them into a fuel additive might be more attractive. This is equally if not more true for ethylene, so it shocks me that an independent company is able to buy ethylene and convert it into a fuel additive for a profit. We either have a surplus ethylene situation on our hands, or the demand for higher quality fuels is greater and increasing faster than I realized. [LINK]

Other Things Happened:

ConocoPhillips is going to acquire Marathon Oil in a $22.5bn all-stock transaction. ENEOS and PFN are operating a crude distillation unit with AI. Air Liquide just issued more green bonds. Toray is expanding its carbon fiber capacity in South Korea. Resonac is going to start cracking Neste’s sustainable naphtha analog. Ineos and Hanwha might build a blue ammonia site somewhere in the USA. Origin Materials found a partner to make their new PET caps, and they plan on making them available before the end of the year. Canada is getting another pre-cursor cathode active material plant. LyondellBasell acquired a stake in a Saudi Arabian petrochemical company. Mura Technology locked in a supplier for their upcoming plastic recycling site. A couple of companies plan to recycle carbon fiber in Salt Lake City.