Algal oils producer, Solazyme, has expanded its algal oil supply agreement with specialty chemicals company, AkzoNobel,  with a new five-year supply of up to 10,000 tons/year of Solazyme’s Tailored™ algal oil for surfactant production pending successful joint product development.

The parties expect that the algal oil under the joint development agreement would be able to replace both petroleum and palm oil-derived chemicals.  The target product is designed to have improved functional and environmental performance, as well as a lower overall cost to AkzoNobel.

Product development is expected to commence immediately, and the parties anticipate entering into a definitive supply agreement as they near completion of product development.

Solazyme is now manufacturing its algal oil and algal oil-derived products at three large scale facilities, including its 2 ktpa integrated facility in Peoria, Illinois; the 20 ktpa Iowa facility (owned by ADM) in Clinton/Galva; and the 100 ktpa facility in Moema, Brazil, under the Solazyme Bunge Renewable Oils partnership, which began production in May.  It was mentioned that the Moema production is expected to reach its nameplate capacity within the next 12-18 months.

The company said during its recent earnings conference call that it has increased its output in Clinton by more than 40% from Q1 to Q2 2014. How much is really being produced at Clinton is anybody’s guess. The company previously said in Q1 that it has already produced over 1,000 metric tons in Clinton/Galva, including some that was produced in 2013.  Solazyme said it has also expanded its customer base by 50% from 10 to 15 unique companies, and currently has 75 customers who are qualifying Solazyme’s Clinton products through multi-ton samples.

The company’s initial target average selling price for its algal oils is around $2,000/ton although it does depend on what type of tailored oils its customer wants and how much Solazyme can charge for them. As I’ve mentioned in previous Solazyme posts, within the oleochemical markets, capric/caprylic fatty acid chains are in very much high demand/tight supply situation worldwide and they can command between $3,000-5,000/ton.

High oleic oils also command premiums within the lubricants/base oils/food markets.  The company recently signed an agreement with a leading North American oleochemicals company to commercialize kosher-certified microalgae-derived high oleic acids.  There are not that many oleochemicals producers in North America actually – you could choose between Vantage Oleochemicals, Twin Rivers Technologies, Procter & Gamble Chemicals, Croda, Evonik, Emery Oleochemicals… Solazyme said they were able to produced and shipped one of the highest monounsaturated oils, which reportedly displayed stability far superior to those available in the marketplace. In the food industry, olive oil and canola oils are two examples that are high in monounsaturated fats. However, I think it was mentioned that these high oleic acids will be used in metalworking applications.

In AkzoNobel’s case, the companies said they are focusing on the development of an oil for use in a new and proprietary surfactant.