Tuesday, January 26, 2010

Bio-Chemistry Set

The Department of Energy (DOE) awarded American Process, Inc. (private) a fairly most award compared to some of the other grants announced in December 2009. American is getting $17.9 million to produce biofuel and potassium acetate using wood waste. American will need to come up with $10.2 million of its own funds to complete the project.

American’s pilot plant is located in Alpena, Michigan near a manufacturer that uses hardboards to make wood panels among other products. The facility is expected to produce up to 890,000 gallons of potassium acetate per year beginning in 2011. American, which is a self-described consulting firm, plans to use ist proprietary “American Value Added Pulping” technology.

Why potassium acetate? It is a salt that can be used as a de-icer instead of chlorides. It is less corrosive, making it particularly attractive in places like airports that must have de-icers to keep planes going in and out, but need to minimize environmental impact. Fire extinguishers, food additives and certain pharmaceuticals (penicillin) also require potassium acetate.

The use of this specialty chemical across so many diverse industries may be a factor in the limited amount of information available on total production and market size. China is a major producer and exporter to the U.S. and the rest of the world. American Elements (private) is a major producer in the U.S.

During the winter of 2008-2009 the U.S. FAA reported shortages of potassium acetate-based runway de-icer. This was primarily due to a shortage in raw materials typically used to make potassium-acetate de-icers. Major potash mines can be found in Saskatchewan, Canada; California, New Mexico and Utah in the U.S.; China and Germany.

The de-icer situation suggests a door might be open for American if they can make the stretch from “consultant” to “producer.” However, the pilot project may require an additional player to commercialize this science project.

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.

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