LG Chem and Archer Daniels Midland (ADM) have cancelled plans to build lactic acid and polylactic acid (PLA) plants in Illinois, United States.
The collaboration between the Korean chemical company and ADM, a grain processing company based in Chicago, was first announced in September 2021, culminating in the establishment of two joint ventures in August 2022.
Manufacturing facilities for the joint ventures were planned for Decatur, Illinois. The first, GreenWise Lactic, would have produced up to 150,000 tonnes of high-purity corn-based lactic acid annually, whilst the second JV, LG Chem Illinois Biochem, would have used the lactic acid to produce about 75,000 tonnes of PLA per year.
Now, the companies have backtracked from both projects citing high construction costs.
“Since we originally announced our two joint ventures with LG Chem for lactic and polylactic acid in 2022, construction costs have skyrocketed,” said Chris Cuddy, president of ADM’s carbohydrate solutions business. “We looked at a variety of options, but when the time came to make final investment decisions, it had become clear that these projects no longer represented a prudent use of our investors’ capital that would meet our returns objectives,” he added.
According to the Associated General Contractors of America (AGC), the price of materials and services used in non-residential construction rose 10.1% between November 2021 and November 2022. The year-over-year rise outpaced the 7.4% increase in the overall producer price index for finished goods.
Overall inflation rates have since cooled, but the association says that costs have continued to rise in the construction sector.
The joint ventures were intended for vertically integrated supply of PLA at commercial scale. PLA is produced through the fermentation and refining of glucose extracted from a plant source, such as corn. ADM operates crop procurement facilities in 200 countries around the world and has ample experience in glucose production and fermentation technology.
“ADM remains committed to leading in the decarbonisation of the industries in which we participate, and we continue to expand our biosolutions portfolio to meet growing demand for sustainably sourced solutions,” Cuddy said.
Global demand for bioplastics and biopolymers is projected to grow from $10.7 billion in 2021 to $29.7 billion by 2026, representing annual growth of almost 23%.
PLA has the largest market share on the global stage, accounting for 27% in 2022. It is forecasted to account for 43.6% of production capacity in 2028.