Behind the recent launch of China's largest polylactic acid plant stand the Chinese Academy of Sciences and pharmaceutical and chemical maker Zhejiang Hisun Chemical Co.Ltd.

The academy's subsidiary, Changchun Institute of Applied Chemistry, announced March 18 that a new line with 5,000 metric tons (about 11 million pounds) of annual capacity has come on stream, claming the products are "as good as, and some with even better properties" than the world leader NatureWorks'.

The project took off after seven years of research and preparation, the announcement said.

NatureWorks' plant opened in 2003 with a nominal capacity of 300 million pounds (about 136,000 metric tons). But the company has been running at half that capacity, according to a report from PN's sister publication European Plastics News. NatureWorks, however, said it will reach, and probably exceed, its 300-million-pound capacity.

China National Offshore Oil Corp. (CNOOC), which spurred controversy in the United States in June 2005 by offering $18.5 billion to buy Unocal Corp., is finishing up a project that converts CO2 to degradable plastic.

China Blue Chemical Ltd., a subsidiary of CNOOC, announced it will start the production of carbon dioxide-propylene oxide copolymers (PPC) in June, according to China's Shanghai Securities News. The project will be the largest in the world with an annual capacity of 3,000 metric tons, the company said in a press release.

The facility is located in China's most southern province and an island in the South China Sea, Hainan.

The total investment on the project was reported to be around 152 million yuan ($21.4 million).

Heavily dependent on imported oil and petrochemical products, Vietnam is joining the club of bio-based plastics. Tien Thanh Co. Ltd. in Ho Chi Ming City is marketing plastic items made out of wheat or maize flour, a report in the Viet Nam News said.

The product line seems to consist of boxes and cups that are said to decompose in wet environments in 102 days. They cost 40-50 percent more than their conventional plastic counterparts.

The caveat, as I see it, is that the humid tropical nation in Southeast Asia is home to agriculture products such as rice, soybeans and sugar cane, but wheat and maize are not primary crops and the production is limited. Meantime, the soaring food prices in Vietnam will have a great impact on the supply and cost of domestic and imported wheat and corn. The domestic market size for bio-plastic products is also minimal.

With the apparent roadblocks, the concept of corn-based plastic may remain more symbolic than practical for a while.

Medical equipment and supplies manufacturer Henan Piaoan Group Co. Ltd. has sealed an agreement to purchase patented polylactic acid production technology, engineering and equipment from Japan's Hitachi Plant Technologies Ltd.

The project in Changyuan, Henan province, is expected to go on stream in March 2011, with an initial annual capacity of 10,000 metric tons (22 million pounds), according to a press release issued by Hitachi. Piaoan plans to expand the capacity to 150,000 metric tons (331 million pounds) "in the future," with a total investment of 1.83 billion yuan (US$267 million).

Piaoan plans to make medical supplies out of PLA biopolymer and become the first "high-quality, industrialized PLA production base in China," the release said.

Hitachi Plant Technologies developed PLA manufacturing technology in 2004. The company claims its patented technology produces pure, colorless and easy-to-process PLA materials.

Privately-owned Piaoan reported 1.2 billion yuan (US$176 million) in 2007 annual sales. The company didn't comment on the new project. Its corporate Web site, however, said the company invested 300 million yuan (US$44 million) to build 10,000 metric tons of PLA capacity with equipment imported from Switzerland.

One of China's leading manufacturers of bioplastic products, Wuhan Huali Environment Protection Science Technology Co. Ltd., has received US$13.5 million of venture capital funding from DT Capital Partners.

At last week's signing ceremony, Huali Chairman Zhang Xianbing projected 2009 sales to reach 120 million yuan (US$17.6 million), according to the company's Web site.

The 9-year-old company in Wuhan, Hubei province, touts its annual capacity of 40,000 metric tons of biodegradable plastarch materials (PSM), which meet international standards such as EN 13432 and ASTM D6400. Its product portfolio also includes finished products and processing equipment.

Huali said it exports PSM materials and packaging products to more than thirty countries. Sales have been growing at a compound growth rate of 50 percent and higher in the past few years.

Shanghai-based DT Capital, which manages more than US$500 million in US dollar and RMB funds, said China has a greater need to develop biodegradable plastics than developed markets.

"It's difficult to predict the payback period," managing director Zhao Jun said, "but the market prospects are looking good. Huali is the leader of the industry."

Previous news reports show that Huali posted 86 million yuan (US$12.6 million) in 2008 sales and 17 million yuan (US$ 2.5 million) in net profit.

Huali's first experience with venture capital investment dates back three years, when it received $US$5 million from a Hong Kong-based firm.

Huali is not the only bioplastic firm that's gaining popularity from the investment community. According to the 21 Century Business Herald, last year, Tianjin Green BioScience Co. Ltd. received US$20 million from investors including DSM. Also, Shenzhen Ecomann Biotechnology Co. Ltd. obtained investment from Shenzhen Capital Group Co. Ltd.

A trade group official said at an industry conference that among the 200-plus bioplastic companies in China, only 20 percent make profits. "Most of them are still in the early stage of investment," Weng Yunxuan of the China Plastics Processing Industry Association was quoted as saying in news reports.

A bio-plastic manufacturer in Chengdu, Sichuan province, is ready to take advantage of the China-ASEAN (the Association of Southeast Asian Nations) free trade agreement and increase its export of bio-resin film.

Ye wenbin, general manager of Sichuan Corn-T Biology Technology Co. Ltd., has come up with a business plan to export PLA film to ASEAN countries, where the film is processed into bags and then exported to Europe.

Under the free trade agreement, which started on Jan. 1, China and the six richest ASEAN members -- Brunei, Indonesia, Malaysia, the Philippines, Singapore and Thailand -- eliminated tariffs and barriers to investment on more than 90 percent of the products traded between China and ASEAN, or more than 7,000 products. The zero-tariff status is expected to extend to the four new ASEAN members -- Cambodia, Laos, Myanmar and Vietnam -- by 2015.

Thanks to the zero-tariff, Ye told the Western China Metropolis Daily, orders from Singapore, Thai and Malaysia are on the rise.

Corn-T makes both PLA resin and film, according to a speech Ye gave last year. The company priced PLA film for 30,000 yuan (US$4,394) per metric ton and claimed annual sales of 6 million yuan (US$878,818).

The China-ASEAN free-trade agreement is the world's third-largest regional agreement in terms of economic value, after only the EU and NAFTA.

Taiwan's Wei Mon Industry Co. Ltd. has established its first factory in Mainland China that makes PLA-coated food packaging items. NatureWorks CEO Marc Verbruggen also paid a visit to China earlier this month.

Wei Mon's new factory was officially opened last week in Xiamen, Fujian province. The facility produces PLA-coated paper, and then, through cutting, printing and molding, food packaging products such as cups, bowls, containers. It reported a current capital investment of $5 million, and Wei Mon plans to double that amount by the end of the year, according to Taiwan's Want Daily.

Wei Mon of Taipei owns 70 percent of the facility and expects annual turnover of 1 billion yuan ($146.3 million). Other investors include Xiamen Goods & Materials Group Co. Ltd. and Wei Mon's mainland sales subsidiary, Xiarui Biotechnology Co. Ltd.

Publicly traded Wei Mon was founded in 1987 with its core business centered on the manufacturing of concrete pipe for public water projects.

Wei Mon started its Environmental Materials Division in 1999, trying to develop applications for Mater-Bi branded bioplastic from Italy's Novamont. Due to technical challenges, the company said on its Web site, it switched direction and became NatureWorks' exclusive distributor in Taiwan in 2002.

Wei Mon said it PLA-coated paper product line, branded "Pland Paper," is the first time pure PLA adheres to paper without the use of any additives. In addition to supplying PLA-coated paper, resin, sheet and film, the firm also claims to provide technology for PLA-based injection and thermoforming processes.

The company has announced plans to build four sites that will be similar to its Xiamen factory, in Beijing, Shanghai, Jiangsu and Chongqing, within three years.

Wei Mon claims about 600 million yuan ($87.8 million) of annual sales in PLA-related business. It also is active in organizing Taiwan's PLA recycling network.

Earlier this month, NatureWorks CEO Marc Verbruggen paid a visit to China, in a mission to investigate the market. He told a group of Chinese journalists that NatureWorks is searching for a site for its second plant, and the company hopes to [eventually] start manufacturing in China. Natureworks' new site will be completed by 2013/2014 with $300 million investment and 140,000 metric tons of annual capacity.

Verbruggen hopes that China's policy makers will consider giving more favorable tariff rates and investment packages for NatureWorks, according to reports in multiple Chinese media. He said the import procedure of PLA materials from the US to China adds 30 percent to the original cost. He feels that PLA should not be treated like other petroleum-based plastics.

Because of the price difference, he said, some Chinese companies only use PLA in products that are destined for export markets.

Verbruggen added that the US government has offered support - in terms of funding and taxation - if NatureWorks was to build a second plant there.

NatureWorks is seeing its applications in China from food packaging to a greater variety of end markets, including electronics, telecommunications and textile, Asia Pacific Director Daniel Sawyer told Chinese media.

A bioplastics manufacturer in North China has started building a PLA production base that claims planned annual capacity of 150,000 metric tons. More interestingly, the same company announced a same scale project three years ago, only with a different partner.

This time, Hebei Huadan Complete Biodegradable Plastic Co. Ltd. of Shijiangzhuang, Hebei province, is working with Taiwan's Wei Mon Industry Co. Ltd. to invest 400 million yuan (US$ 60 million) on the large-scale facility that will be making PLA packaging materials and consumer products.

Officials from the Hebei province attended the ground-breaking ceremony on Nov. 19.

Back in 2007, Huadan hosted an equally high-profile signing ceremony for a 150,000-ton PLA project at the Great Hall of the People in Beijing. The amount of investment was the same, the product line was no different, and the site was in same development zone. But the partner was a little-known investment firm - Hong Kong Tianhao Development Ltd.

It's my speculation that the 2007 project may have fallen through at some point. Huadan reported annual capacity of 50,000 tons last year, compared to 6,000 tons in 2006.

The new partner, Wei Mon Industry, is a reputable company that serves as a distributor for NatureWorks in Taiwan.

Huadan's corporate Web site is under development, but the only information there points to its, yet another, "partner" - MJ Group.

In the database of China's Ministry of Land and Resources, I found a recent record of Huadan purchasing the 50-year use rights of a 13-acre industrial-use land at the reported site with 52.5 million yuan ($7.9 million). The contract was signed on Aug. 27, and the construction of the project was expected to start on Feb. 19, 2001 and finish on Feb.19, 2013.

Hopefully, the ambitious project will complete smoothly this time.

A Coca-Cola China executive said last week that the company is interested in setting up R&D for plant-based bottles in Central China, taking advantage of the local agricultural resources.

During a sustainability forum at the Expo Central China 2011, Coca-Cola Greater China vice president Bai Changbo told the audience that the company is developing plant-based bottles and encourages more companies to use agricultural waste to replace some of the current feedstock - such as corn - for bio-based packaging materials.

Considering the high R&D cost at the earlier stages, he was quoted by the Taiyuan Evening News, "If the six central provinces can provide preferential polices and support, we are willing to give it a few tries in this region."

The central six provinces include Shanxi, Jiangxi, Hubei, Hunan, Henan and Anhui.

China's National Development and Reform Commission (NDRC) announced last year announced a specific outline to build this region into a base of grain, energy and machinery production, aiming to boost per capita GDP up to 36,000 yuan ($5,295) by 2015.

China's leading bioresin maker Wuhan Huali Environmental Technology Co. Ltd. has secured a US$30 million equity investment from the Standard Chartered Bank (SCB), which is aimed to help the company launched an IPO in the United States.

Huali said in a statement that it plans to expand capacity and make acquisitions with the funding. An executive from SCB told the Chinese press that the investment, to be followed with another $20 million, is aimed to help Huali launch an IPO in the U.S.

Zhang said he originally planned for an IPO in the U.S. this year. However, due to the recent wave of accounting scandals of U.S-listed Chinese stocks, coupled with the gloomy economic prospect of many global markets, Huali adjusted its timing.

SCB carried out meticulous due diligence before making the decision to invest in Huali, Zhang added, with industry research and evaluation by Nexant Inc. and financial due diligence by Ernst & Young.

The company's annual sales have been growing at a rate of 80 percent yearly for the past four years, said founder and chairnman Zhang Xianbing. He expects to see 400 million yuan (US$62.8 million) in sales and 60 million yuan (US$9.4 million) in profit this year, compared to 40 million yuan (US$6.3 million) in 2010 profit.

Huali reports current capacity of 40,000 metric tons. Its PSM biodegradable resin products are certified by the major international standards, including EN13432 and ASTM D6400. The company said it's also a member of the ASTM D20 international technical committee.

Huali had attracted other investments in its 11-year history, including a US$5 million venture capital investment from a Hong Kong-based fund in 2004 and US$13.5 million combined from DT Capital Partners and Draper Fisher Jurvetson.