Lignin: Technology, Applications, and Markets

1. Lignin: Technology, Applications, and Markets Webinar September 30, 2016 A summary of RISI’s special market study Lignin: Technology, Applications and Markets Jack Miller Principal Consultant, Market-Intell LLC Associate Consultant, RISI

2. Thank you Technical advisors: • Joseph J. Bozell, Professor of Biomass Chemistry in the University of Tennessee’s Center for Renewable Carbon • Hasan Jameel, Distinguished Professor, North Carolina State University • World L-S Nieh, National Program Lead, Forest Products and Wood Utilization, U.S. Forest Service • Michael Paleologou, Research Leader – Biorefinery, FPInnovations

3. Thank you Adrian van Heiningen, University of Maine Anders Larsson, Manager LignoBoost and Innovations, Valmet Bernard de Galembert, Innovation and Bioeconomy Director, Confederation of European Paper Industries (CEPI) Blaine Kunkel, CEO, BlueGoose Biorefineries Caio Falcão, Strategy and Business Development Manager, Suzano Fabio Figliolino, R&D Innovation Manager, Suzano Gurminder Minhas, Managing Director, Performance BioFilaments Inc. Hasan Jameel, Distinguished Professor, North Carolina State University Hiroaki Namba, Deputy Gen. Mgr. Chem Div. R&D, Nippon Paper Industries Hou-min Chang, Professor Emeritus, North Carolina State University Joseph Bozell, Professor, University of Tennessee Knoxville Lani O'Flynn CEO/Vice president, Pure Lignin Environmental Technology Ltd. Mats Nytorp, Business Director, Lignin, Domsjö Fabriker Michael Lake, CTO, Lignin Enterprises, LLC Michael Paleologou, Research Leader – Biorefinery, FPInnovations Mike Rushton, Chief Operating Officer, Fibria Innovations, Inc. Peter Axegård, Vice President, Bioeconomy Strategy, Innventia Richard Gosselink, Coordinator Wageningen UR Light Platform, Wageningen University Soydan Ozcan, Scientist, Materials Science & Technology Division, Oak Ridge National Laboratory Ting-Feng Yeh, Associate Professor, National Taiwan University David van Vliet, Adviseur, Structural Reliability, TNO Vesa Pylkkanen, CTO, American Process World L-S Nieh, National Program Lead, Forest Products and Wood Utilization, U.S. Forest Service

4. Study highlights Expert input from four technical advisors Primary research included more than 25 interviews Secondary research included an extensive review of technical journals, conference presentations, magazine articles and websites. More than 100 are listed in the "References," most with hyperlinks to the source material. Secondary research also included a review of more than 300 patents and patent applications that were deemed relevant. These are referenced in the text as appropriate, and listed in several tables.

5. Summary • Lignin is renewable, abundant and cheap. • There are several types of lignin, most notably kraft lignin and lignosulfonate, and they are very different. • Lignin is not a homogeneous material: it is complex and heterogeneous, and properties vary widely depending on feedstock and process. • The potential is enormous, but the challenge is great and more R&D is needed to develop value-added applications for lignin and lignin-based products. • The value of lignin is related to the price of oil.

6. Introduction to Lignin Source : http://www.lignoworks.ca/ content/ what-lignin) The glue that holds the cellulose in trees together Between 20% and 30%, dry weight A billion tons potential

7. Why lignin? Why now? Known since early 1900s High oil prices in 2000s Demand for renewable materials Interest and funding for cellulosic ethanol Kraft mills recovery limited Development of LignoBoost and LignoForce kraft lignin recovery

8. Kraft vs Lignosulfonate • Commercial kraft lignin is generally higher in purity; lignosulfonates may contain as little as 75% lignin. • Lignosulfonate has up to 8% sulfur as sulfate; kraft lignin has 1% to 2% sulfur but it is mostly bonded to the lignin. • Lignosulfonate is soluble in water; kraft lignin is soluble above pH 11. • Lignosulfonate is more reactive than kraft lignin towards certain reagents in aqueous solutions at pH < 11. • Lignosulfonate molecular weight is 20,000 – 50,000; kraft 2,000-3,000. • Lignosulfonate has been a commercial product for decades; kraft lignin is new. Source: RISI, Lignin: Technology Applications and Markets

9. Biorefinery lignin • Organosolv • ASAM • Aceotsolv • Formicofib • Cellulosic ethanol Lots of low quality lignin but some processes under development have the potential for high quality

10. State of the Industry Source: RISI, Lignin: Technology Applications and Markets

11. Recent developments Domtar Plymouth, North Carolina, first LignoBoost kraft lignin site, 2013 Borregaard LignoTech lignosulfonate, Flambeau River Paper, 2015 Fibria acquires Lignol Innovations, 2015 Abengoa Bioenergy bankruptcy, 2015 Startup of West Fraser LignoForce kraft lignin, 2016 Ingevity spin-off from WestRock, 2016 Suzano investment at Limeira mill, 2016, sulfonated kraft lignin

12. Volume by Segment 2015(000 tonnes) Source: RISI, Lignin: Technology Applications and Markets

13. Key players • Ingevity • Nippon Paper • Stora Enso • Suzano • UPM • Valmet • West Fraser Source: RISI, Lignin: Technology Applications and Markets Beta Renewables Borregaard CIMV Domsjö Fabriker Domtar Fibria FPInnovations

14. Second Generation Cellulosic Ethanol Plants * Not operating Source: RISI, Lignin: Technology Applications and Markets

15. Second Generation Cellulosic Ethanol Plants Running at less than 5% of nameplate capacity * Not operating Source: RISI, Lignin: Technology Applications and Markets

16. Applications Source: Gosselink, Richard. Lignin Valorization Towards Materials, Chemicals, and Energy. 2nd Lund Symposium on Lignin and Hemicellulose Valorisation, Lund, Sweden, November, 2015.

17. Carbon Fiber • Carbon Fiber is made from polyacrylonitrile (PAN) which is expensive. • In the lab PAN has been replaced with lignin, and carbon fiber has been produced successfully. • Oak Ridge National Lab (ORNL, a unit of the U.S. DOE) has been working with lignin based carbon fiber, but the carbon fiber quality is not good enough. • If strength can be improved, cost of carbon fiber could be reduced by as much as 50%, and use of carbon fiber in automobiles could easily multiply three-fold from current levels, to 150,000 tonnes. • With conversion rates for lignin at 60%, this would require 250,000 tonnes of lignin. If lignin could achieve even a 10% market penetration, the potential is 25,000 tonnes of lignin. • R&D needed, and is underway, by producers of lignin, producers of carbon fiber, and users of carbon fiber.

18. Leading Carbon Fiber Producers 2013 (000 tonnes)

19. The Road Ahead Source: GAO

20. The Road Ahead Lignosulfonate Kraft Biorefinery Source: GAO

21. Key challenges Source: RISI, Lignin: Technology Applications and Markets • Proof of concept • Economics • Low oil prices • Funding challenges: the Valley of Death • Applications development • Market development • Scale up in production • Scale up of applications • Competitive materials

22. Customer needs

23. Lignin ProductionForecast by Segment(000 tonnes) Source: RISI, Lignin: Technology Applications and Markets

24. “We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten.” --Bill Gates

25. For more information: www.risi.com/lignin Jack Miller Principal Consultant, Market-Intell LLC Associate Consultant, RISI jack.miller@market-intell.com Thank you