Dow Chemical, the largest U.S. chemical maker, and Befar Group of China intend to form an equal joint venture to produce perchloroethylene, a key raw material used in non-ozone depleting refrigerants.

Under the memorandum of understanding (MOU), the two firms will explore the development of a new manufacturing plant with an initial target capacity of 40 kilotons a year, and with the ability to double production soon thereafter.

The Binzhou, Shandong Province-based plant will likely start production in 2014.

Dow and Befar, a chemical raw materials producer, said the limited local supply of perchloroethylene has not been able to meet the rising demand, thus, presenting a "significant market opportunity