Biotech to drive chemicals sales, report says 

Reuters 22may01

FRANKFURT  - Biotechnology products, or products derived from biotech processes, will account for about 30 percent of the $1.5 trillion chemicals market by 2010, a new report from McKinsey & Co. Inc. says.

Companies like Dow Chemical Co. (DOW.N), DuPont Co. (DD.N), DSM N.V.(DSMN.AS), Alusuisse Lonza Group AG (ALUSn.S), Degussa AG (DGXG.DE), Bayer AG (BAYG.DE) and BASF AG (BASF.DE) have already started getting involved in biotech research and development, the consultants said.

They are urging more companies to look at the potentially cost effective and environmentally friendly processes.

"The findings present real challenges for players in the market, not only in areas such as agrochemicals but also in industrial application," Wiebke Schlenzka a McKinsey consultant told reporters at a briefing in Frankfurt on Tuesday.

In the report, the agrochemicals market is seen rising by over one and a half times to $46.2 billion by 2010 from 1998. Plant biotechnology is expected to generate $20 billion of that.

While sales of fungicides in crop protection are expected to remain stable, insecticides are seen losing about 30 percent of their market share. Half of all herbicides sales will be lost as the number of genetically modified crops increases.

Speaking at the meeting, Hans Kast, the head of BASF Plant Science Holding GmbH said his company was investing 700 million euros ($607.1 million) in the unit over the next decade.

"We believe that biotechnology has the ability to open up a new world," for agrochemicals, said Kast.

BASF Plant Science is working on potatoes with modified starch composition for use in industrial applications, such as the paper and glue industries, as well as nutrion enriched-plants which are resistant to cold and drought.

It has biological projects to produce vitamins and proteins like lysin for animal feed. Typically, any new project takes five to 10 years to develop, Kast said.

While there is significant resistance to genetically modified organisms in Europe, with 61 percent of the population in Germany against the planting of modified crops, McKinsey predict that this sentiment will subside from 2005 onwards as more evidence from the U.S. GMO's reduces fears.

The consultants also expect biotechnology to play an increasingly important role in industrial chemical processes over the next decade. Genetically designed enzymes, cells and organisms can produce or modify chemicals.

For example Dow Chemical Co. and DuPont Co. are both separately working on biopolymers to compete with synthetically produced polyester and nylon. The companies have large production plants to produce the material, which is derived from renewable resources and is biodegradable.

Future projects could also include areas such as biosteel, the consultants added.

Scientists have isolated and cloned spider silk genes, which they transferred to goats in 1999, to secrete the proteins in their milk. They are now looking to develop a technical spinning process so that spun biosteel can be used as a substitute metal in the construction of earthquake-resistant bridges.

14:49 05-22-01