| NEW YORK
NEW YORK Dow Chemical Co and Mitsui & Co Ltd have formed a Brazilian venture to turn sugar cane into ethanol and plastic, in an area widely considered the future of the chemical industry.
The move directly challenges Braskem SA, Brazil's largest chemical company, which last fall opened its own plant to turn sugar cane into plastic.
Dow downplayed any perceived conflict, saying the market for renewable chemicals can accommodate many players.
"We didn't look at this as taking share from anyone," said James Fitterling, Dow's president of corporate development and hydrocarbons.
"We looked at it as supplying green alternatives to our customers. We know from our customer demand globally there's plenty of pull for these products."
Japanese trading firm Mitsui said it will buy a 50 percent stake in Dow's Brazilian sugar cane operations, with an initial investment of $200 million.
The Nikkei business daily said the venture could cost more than $2 billion, with mass production of biopolymers and other sugarcane-based products set to begin in 2015 and annual output slated at 350,000 tonnes.
But Mitsui representatives said they did not expect the project to cost $2 billion.
"Bioplastics is uncharted territory, and we believe the field could well expand faster than our expectations. Still, $2 billion seems kind of high," said one Mitsui official, asking not to be identified as he was not authorized to talk to the media.
By partnering with Mitsui, Dow is essentially cutting its own risk in the unlikely event the sugar cane operation fails. But the company and its shareholders also lose out on a full share of profits.
The venture will begin building a sugarcane mill in the third quarter of 2011, and aims to have an annual production capacity of 240 million liters of ethanol by mid-2013, a Dow spokesman said.
Dow's 2007 push to make sugarcane-based plastics was derailed two years later when its partner Crystalsev collapsed. Dow bought Crystalsev's stake and has since been searching for a new partner.
Dow already grows sugar cane on roughly 42,000 acres in Brazil.
Dow has separate joint ventures with Corning, Petrobras, Exxon Mobil and several Kuwaiti state-owned firms.
Dow and Mitsui also have another joint venture, based in Texas, that produces chlorine.
Shares of Michigan-based Dow were up 1.4 percent at $34.76. The stock has traded between $22.55 and $42.23 in the past 52 weeks.
Shares of Mitsui were flat, compared with a 1.2 percent rise for the benchmark Nikkei average.
(Additional reporting by Mayumi Negishi in Tokyo; Editing by Gerald E. McCormick and Edwina Gibbs)