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Dow Chemical Anticipates Strong PE Demand and Expansion
July 22, 2022

In its second-quarter (Q2) 2021 earnings report, Dow Chemical said it expects strong Polyethylene demand to continue for the remainder of the year, with little opportunity to build up inventory. The company saw double-digit sales gains in all operating segments and businesses. A 66% increase in sales compared to a year ago was led by local price improvement of 53% combined with a 9% volume increase.

The company's sales increased 17% sequentially, underpinned by tight supply and demand fundamentals across all of its value chain, and it delivered higher operating EBIT of $2.8 billion year-over-year and $1.3 billion sequentially, with improvements in all segments and businesses.

The increase in sales came amid strong consumer demand trends in the retail, housing and manufacturing sectors, while inventory levels remain low across most of its value chains. These dynamics are expected to support price strength in the third quarter as the industry continues to work to fulfill pent-up demand.

Strong demand seen in Q2 across the company's Polyethylene, Polyurethane, Acrylic and Silicone chains is expected to continue through the remainder of 2021.

"Polyethylene demand growth, for example, is projected to outpace supply additions in the near-term with pricing strength and resilient margins on a sustained and favorable oil to gas ratio with the majority of industry capacity adds coming in the higher end of the cost curve," said Dow Chemical's President and CFO, Howard Ungerleider.

"I don't think you'll see a chance for us to build any inventory through the third quarter, there are still a fair number of planned turnarounds," said Dow CEO Jim Fitterling. "And our view is with these GDP growth rates, or 6% for this year, and currently forecasted at 4.5%, maybe 5% for next year, there's going to be quite a demand for Polyethylene."

Dow is also looking at expanding its Plastics portfolio downstream.

The company said it was revisiting a 600,000 tonne/yr PE project for the US Gulf Coast that was shelved when Covid-19 hit. A decision for the Gulf Coast project is planned for sometime this year.

By Brian Balboa for The Plastics Exchange.

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