Bio-Plastics Come To Brazil
A new partnership could help to bring bio-plastics to medicine cabinet near you. Dow Chemical (NYSE: DOW) and Japan's Mitsui have formed a new Brazilian joint venture in order to turn sugar cane into ethanol and plastic. The pair plan on creating the world's largest integrated facility for producing bio-plastics, using renewable, sugarcane-based ethanol. These sustainable plastics will be used in the packaging and medical markets and is widely considered the future of the chemical industry. Analysts estimate that the facilities will cost roughly $2 billion. Production of biopolymers is set to begin in 2015, with an annual output of about 350,000 tons.
These moves by Dow and Mitsui follow directly on the heels of Brazilian chemical giant, Braskem (NYSE: BAK). In 2010, the company opened the world's largest facility for the production of sugarcane-based ethylene. Recently, it announced plans to build a factory that will produce green propylene by 2013.
While some analysts have question future conflicts between the two groups, the market for green plastics could be huge and can accommodate many players. Braskem has also stated that Brazil uses less than 1% of its arable land for sugarcane production, indicating that there is plenty of room to grow.
For investors, that growth could come from the ethanol and sugarcane growers. Cosan (NYSE: CZZ) represents a great play on the future of these ethanol based plastics. The company could see future revenue gains as it shifts some of its production from fuel to feedstock for bio-plastics.
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