In the US, Overlooked Chemical Companies Are Feeling the Love

Like a black hole, the US is pulling chemical investment away from Europe and China thanks in part to slew of grants, loans and tax breaks.

Initiatives like the Inflation Reduction Act are not only jump-starting projects in trendy solar- and wind-power and EV battery materials. There’s help at a scale never seen before for far less-fashionable fertiliser, fluorocarbon-based polymers and other chemicals. The Biden administration has broadened out support to biotechnology, and biodegradable polymers have got in on the act.

Danimer Scientific is hoping to be the first biomaterials business to land a US Department of Energy loan guarantee that will accelerate a greenfield project in Georgia. The company, which supplies biopolymers to Starbucks for straws, is filing the second part of its loan application and expects a reply sometime in the second quarter of 2023, CEO Stephen Croskrey said in an interview with chemicalESG.

“Getting someone to take the risk on that first plant is difficult,” said Croskrey, who participated in a White House summit on promoting national biotechnology following Biden’s executive order to promote homegrown bioplastics. “What’s cool is you’ve got all these government employees now who have this mandate to go out and make this happen.”

Even in relatively unglamorous fertiliser, there’s $500 million in grants to encourage local producers of crop nutrients to help counter the pricing and energy impact from Russia’s invasion of Ukraine. As long as you are not a top four player, you can apply. LSB Industries fancies its chances and the group is preparing its application for a handy cash contribution for a couple of de-bottlenecking projects in ammonia, urea and nitric acid in time for the Dec. 29 deadline.

“I look at the USDA funding as not whether we move forward or not, it’s just creating opportunities to get better returns,” LSB Industries’ CEO Mark Behrman said on a recent call. “There might be a project that’s on the edge of where the investment returns profile is, and I guess that could push us forward.”

It’s hard to find such an upbeat tone across the Atlantic, where the energy crisis is undermining the very viability of Europe’s historic chemical industry. BASF, a company that played a pivotal part in forging energy ties with Russia, has made its exasperation with the European Commission’s technocratic approach abundantly clear. The UK’s overall policy for chemicals has been largely adrift ever since Brexit.

Some European companies have got with the program in the US. Belgium’s Solvay is partnering with Orbia of Mexico to build North America’s largest PVDF production plant serving the local battery materials industry. The $850 million cost will be partially funded by a $178 million grant to Solvay from the Dept of Energy.

There’s more to the gravitational pull of the US than just the IRA.

Germany’s Lanxess AG is prioritising growth investments in the US over Europe, and even China, despite the best efforts of German Chancellor Olaf Scholz, who led a delegation of business leaders on a visit to see Xi Jinping in November.

“When borders are closed, engineers cannot travel and are confronted with lockdowns in the domestic market and when entering China, the likelihood that you can get new customers and make brownfield or greenfield investments is not very high,” Lanxess CEO Matthias Zachert said on a recent call.

By contrast, Lanxess is accelerating investments in the US after purposefully making strategic acquisitions there, he added.

“In the US, borders are no longer closed, we are not quarantined and can travel freely,” Zachert said. “Governance and approval schemes are, in most of the states, speedy. For an investment focus, this is an area where we can invest.”

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