Investors tank Origin Materials

Shares of Origin Materials tumbled following the firm’s announcement that it will drastically alter and delay its next major project.

Origin is developing technology to catalytically make chloromethylfurfural (CMF) from cellulosic biomass such as wood residue and processing waste. CMF is a potential building block for p-xylene, a precursor to the packaging polymer polyethylene terephthalate (PET). It can also be transformed into furandicarboxylic acid (FDCA), a raw material for the up-and-coming polymer polyethylene furanoate (PEF).

Origin’s process yields a carbonaceous coproduct made of furanic resin and lignin, which could be converted into products such as carbon black and activated carbon. The firm also produces residual oils that can be used as biofuel.

Origin is currently starting up its first plant, in Sarnia, Ontario.

“The commercialization of a molecule like CMF is historic, on the order of commercialization of the ethylene molecule,” said Origin founder and co-CEO John Bissell in a conference call with analysts on Aug. 9.

However, the company unveiled major modifications to its second project, originally slated to be completed in 2025. The company said that the second plant will focus on making FDCA, not p-xylene as initially planned.

Bissell said that market development for FDCA, a relatively new molecule, is progressing faster than was expected two years ago when Origin first planned the complex. Moreover, he said the performance advantages of PEF, which has better barrier properties than PET, suggest that FDCA will capture higher prices and profits than p-xylene.

Origin is also delaying the second project. The company now plans two stages, one to come online in 2026 or 2027 and a one to start up in 2028. In the first phase, Origin will make oils for the biofuels market. The second phase will produce CMF and downstream chemicals, primarily FDCA.

Origin says the budget for the project has overrun its initial expectations due to rising costs for labor and materials as well as higher interest rates. In 2021, the company set a capital budget of $1.1 billion. Now the company estimates that the two phases of the project will combine to cost up to $1.6 billion.

Moreover, the company is paying more for less. It is scaling back the capacity of the project. Initially it planned a plant that could process 1 million metric tons (t) of feedstock per year; now the facility will have 500,000 t of processing capacity. The Sarnia plant has 25,000 t of annual capacity.

Origin’s stock price plummeted 66% on the day following the announcement. The company went public via a merger with a special purpose acquisition company in 2021.

In a note to clients, Pavel Molchanov, a stock analyst with Raymond James & Associates, said Origin is “facing a painful reset after a sudden pivot.” He noted that the turn to biofuels, which had never been a priority for Origin’s management, is “jarring for investors.”

“Bio-based plastics are an important means of decarbonizing the chemical industry, and the addressable market is practically limitless. But the lesson of history is that scaling up production is easier said than done,” Molchanov wrote.