It is urgent to break through the "raw material bottleneck"
When human beings begin to pursue carbon neutralization, the biomass industry chain will become the protagonist on the stage of material production. According to the biomass industry chain development plan of the three major economies in the world, By 2030, it is estimated that at least 20% of chemicals in the world will be replaced by biomass products (OECD forecast), the corresponding market space is USD 800 billion; we calculate according to the average price of high-value products, and the corresponding market scale is 280 million tons of products; assuming that all raw materials are corn and the unit consumption is calculated according to the lower statistical limit, 840 million tons of corn will be needed; the global corn output will be 1.16 billion tons in 2020, which means that even if the corn output is increased by 72%, it will not meet the demand, not to mention the existing technology and geography Conditions are out of reach. Therefore, the premise of large-scale biological manufacturing is that the bottleneck of raw material availability can be solved. In particular, as a populous and food importing country, the contradiction between food security and large-scale biological manufacturing may be more prominent. The development of biomass diversification is as urgent as the development of energy diversification.
Import and GM are only transitional programmes
Liberalizing the import of industrial crops or popularizing genetically modified crops can not support such a huge industrial chain in the future: 1) liberalizing the import can be seen from the growth of China's crude oil import and the corresponding policy changes. In recent ten years, the rapid increase of China's dependence on foreign crude oil has almost touched the red line. Therefore, compared with the 13th five year plan, the policy on oil refining and petrochemical enterprises in the 14th five year plan has significantly turned around. In the short term, the lessons learned from oil refining and refining may affect the formulation of relevant policies, and the probability of fully liberalizing the import of industrial crops is small. In the long run, if the development of China's biomass industry only depends on external resources, it will lose its voice and become a vassal of the global supply chain. 2) Popularizing genetically modified crops and comprehensively popularizing genetically modified crops has a long way to go, so it is necessary to guide the consumption concept of the whole society. If only the cultivated land of industrial crops is popularized with genetically modified crops, the increase in production can be very limited, which is a drop in the bucket compared with the demand.
Straw or is one of the best raw materials
The confirmation principle of raw material system is "rich + easy access": the former determines the industrial volume that can be supported, and the latter determines the product cost. We believe that straw is one of the best raw materials for biomass industry. China's annual straw output exceeds 800 million tons. Even considering the collection rate and utilization rate, it can support about 150 million tons of biomass products. In addition, compared with other wastes, such as kitchen waste, excreta and waste plastics, straw is more concentrated and involves fewer business objects, which helps to maintain the stability of supply. Although straw is a good biomass raw material, its utilization in the existing technology is generally low-value, and low-quality products can not replace chemicals. The high-value utilization of straw is imperative, and synthetic biology may become one of the core tools.
Cathay Biotech Inc(688065) it is expected to realize high-value utilization of straw
“TRY AND DELETE PART OF THE PROCESS”——Elon Musk
This is the second step of the five step working method shared by musk in an interview with the media at SpaceX Texas launch base in August this year, namely "process simplification". Because the traditional straw treatment technology needs three times or even more than the volume of straw itself, it can only be centralized. Straw must be transported from all directions to the concentration area. Therefore, the problems of "collection, storage and transportation" exist in the supply chain: 1) there are problems of decentralized straw sources and pricing; 2) Problems such as sugar loss and fire hazards exist in "storage"; 3) "Transportation" has the problems of low straw density and high transportation cost. Cathay Biotech Inc(688065) it is expected to use synthetic biology technology to pretreat straw to improve density and distribution. The original three key processes of "collection, storage and transportation" are reduced to one key process of "collection" and "process simplification" is realized. High value utilization of straw is more critical. The traditional "use" method requires multi-step separation and purification of inhibitors and miscellaneous sugars, so the cost is high. Cathay Biotech Inc(688065) it is expected to use synthetic biology technology to realize "process simplification" and reduce costs.
High value utilization of straw or start China's "shale gas revolution"
We believe that the commercial and strategic significance of high-value utilization of straw is equivalent to the "shale gas revolution" in the United States. High value utilization of straw has many similarities with shale gas development: 1) compared with packaged oil and gas fields, the exploitation of shale gas and shale oil is relatively scattered, the exploitation cycle is short, but the reserves are huge. So is the high-value utilization of straw; 2) The exploitation cycle of shale gas and shale oil is short and the geological conditions are diverse. Continuous technical iteration is needed to reduce cost and increase efficiency. The same is true for the high-value utilization of straw and other biological wastes; 3) Although the exploitation cost of shale gas and shale oil in the United States is not the lowest in the world, However, because of the large amount of exploitation, it has realized the ability to regulate the supply of global oil and gas and its downstream products (such as ethylene industry chain). The high-value utilization of straw can also be the same; 4) the shale gas revolution has realized the self-sufficiency and export of energy in the United States, and the freedom of energy has strengthened the voice of the United States in Global trade and politics. The high-value utilization of straw also has a global voice in China's biomass industry.
Investment advice
It is recommended to pay attention to Cathay Biotech Inc(688065) .
Risk statement
The development progress of biological waste technology is less than expected; The development of straw utilization business model is less than expected; The progress of new technology development is less than expected; Technology industrialization is less than expected; Policy continuity is less than expected; Risk of price fluctuation of raw materials; Risk of technology leakage.
