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April 16, 2014  |  Login
Green Materials’ Growth Prospects
By John Rubino
 
A decade from now, most things will be lighter, stronger, and cleaner, and many companies will be profitably supplying the new materials that make this possible. But the pace of innovation makes specific predictions about which materials will end up where highly risky. Right now, the two with the clearest prospects are carbon fiber and bioplastic.
  • Carbon fiber should see fast growth in aerospace, continued growth in wind turbines, and gradual penetration of the high-end auto market. But it's still far too expensive for mass-market cars, so the price will have to fall dramatically before carbon fiber replaces steel and aluminum in your Chevy. Most of the major carbon fiber makers are diversified giants like Cytec and Kawasaki Heavy Industries, though there are a few relatively pure plays like Toray and Zoltek.

  • Bioplastic has two possible growth paths. The conservative view calls for double-digit annual growth rates from a very low base through 2012 or so. Then, if bioplastics derived from nonfood plants prove to be viable, growth will accelerate as they compete effectively in a wide range of applications. The aggressive growth scenario requires a longer look at the stuff that's in traditional plastics. It turns out that what were once thought to be inert juice bottles and baby pacifiers actually release minute amounts of substances called phthalates and BPA (Bisphenol A) that appear to function as "endocrine disruptors," with some truly terrifying effects. In animal studies, these substances have been shown to cause developmental and reproductive disorders ranging from miscarriage to malformed testicles. And after decades in the food chain, they saturate our kids' bodies. If these and other endocrine disruptors turn out to be as dangerous as the early results imply, the legal and regulatory ramifications for petroleum-based plastic are deadly. In that scenario, bioplastic will find a more open field and might become one of the great growth businesses of the next decade. It's not yet clear how to invest in bioplastics, however. Besides Metabolix there are a handful of emerging companies with interesting ideas. But they face chemical and agribusiness giants like Archer Daniels Midland, Dow, and Cargill, which see bioplastics as a natural extension of their existing businesses.

Beyond carbon fiber and bioplastic, green materials as an investment theme becomes a bit nebulous. Virtually all the big-name tech conglomerates are doing cutting-edge work in advanced materials, and they all have breakthroughs to crow about. But for the General Electrics and 3Ms of the world, materials are sidelines, and certainly not a reason to buy their stock. A few years from now the story may be very different, as breakthroughs now labs are commercialized. I'll go out on a limb and predict that within five years there will be at least ten profitable growth companies making specialized bioplastics and carbon nanotubes.

Table: Green Materials Stocks

 

Ticker/Exchange

Headquarters

Material

Market Value, 6/27/08 ($ millions)

Allegheny Technologies

ATI/NYSE

U S

Specialty metals

6,110

Archer
Daniels Midland

ADM/NYSE

U S

Bioplastic

21,200

Cereplast

CERP OB/NASDAQ

U S

Bioplastic

92

BioSolar

BSRC OB/NASDAQ

U S

Bioplastic

56

Corning

GLW/NYSE

U S

Ceramics

36,930

Cytec Industries

CYT/NYSE

U S

Carbon fiber

2,620

Hexcel

HXL/NYSE

U S

Carbon fiber

1,850

Kawasaki
Heavy Industries

7012 T/Tokyo

Japan

Carbon fiber

4,574

Metabolix

MBLX/NASDAQ

U S

Bioplastic

229

Rohm & Haas

ROH/NYSE

U S

Variety

9,290

Toray

3402 T/Tokyo

Japan

Carbon fiber

7,531

Zoltek

ZOLT/NASDAQ

U S

Carbon fiber

845

 
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