SÃO PAULO, BRAZIL (Jan. 10, 1:30 p.m. ET) — Dow Chemical Co. and Japanese trading company Mitsui & Co. Ltd. will postpone plans to build a plant for sugarcane ethanol-based plastics, citing rising design and construction costs and land ownership laws in Brazil for the indefinite delay, Plastics News confirmed this week.
The green plastics project, first announced in 2007, had been slated to break ground this year on a biopolymers facility in Santa Vitoria, Minas Gerais state, at a projected cost of US$1.5 billion. Dow formed a joint venture with Mitsui in July 2011, with plans to plant and harvest their own sugarcane, build an ethanol plant with 2.7 million metric tons of cane capacity, and follow it with an ethanol-to-ethylene and biopolymers plant. The entire complex was originally slated to begin operating later this year.
Dow told Plastics News it and Mitsui will postpone phase two, building the plastics plant. The first phase, which includes expanding sugarcane plantations and building an ethanol plant, remains on schedule. The companies currently have about 50,000 acres of first-generation cane growing and plan to harvest in 2014.
“The Santa Vitoria project is of high strategic importance to Down and Mitsui, and the construction of the first phase for sugarcane ethanol production is proceeding as scheduled,” Midland, Mich.-based Dow said. “The two companies continue to work together to mitigate and eliminate barriers to proceed with the second phase as soon as possible.”
Since 2007, a handful of other ethanol-based plastics projects have been announced in Brazil, but only Braskem SA has been able to follow through. Its first “green” plastics factory began operating in the second half of 2010, in Triunfo, Rio Grande do Sul state. Braskem has announced plans for a second polyethylene plant in Brazil’s center-south region and a third plant for ethanol-based polypropylene, but firm details on either project haven’t been provided.
During IHS’ Latin American Petrochemicals & Polymers Conference, held in May in São Paulo, Braskem and Dow officials said “green” PE easily draws a premium of 40 percent or more from clients eager for an enviro-marketing edge, and Braskem’s product was already cost-competitive with naphtha.
South America remains a net PE importer, with 2.6 million tons imported in 2011 and an average annual growth rate of 6.6 percent expected by IHS through 2016. Brazil’s PE imports should grow at 9 percent per year, reaching 1.2 million tons by 2016.
In the short term, Dow will focus on its most profitable segments, particularly in the United States with shale gas reserves. Dow is investing $4 billion in the U.S. Gulf Coast to boost ethylene and propylene capacity through 2017.