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Dow CEO Expects Plastics Prices to Moderate with Improved Volumes

Dow CEO Jim Fitterling said during the company's Q3 earnings call that although plastic resin inventory is low he expects to see prices moderate as volumes improve as the company continues to see robust end-market demand that is expected to extend into 2022, coupled with near-term logistics constraints and low inventory levels across its value chains.

Fitterling also noted that the industry is looking at volume increases of 8-9% for plastics and that he does not know when the price moderations will happen, but he does not think the fall will be as precipitously as some forecasts estimate.

"I expect the volumes will be better. We had St. Charles, obviously out in the month of September, and it came back here earlier in October. So I expect fourth quarter will have the strong run," Fitterling said.

As industry inventories in September were down about 120 million pounds, with declines in High Density and Linear Low, and a small build in Low Density, Dow's CEO noted that days of inventory dropped as alongside strong demand, while domestic and export exceeded production.

During its Q3 earnings call, Dow showed an increase in its net sales by 53% year-over-year (YoY), and 5% over the previous quarter with gains in all business segments and regions, despite operational issues brought on by Hurricane Ida in September. The company's top and bottom-line growth, included its "Packaging & Specialty" plastics business led by local price gains in industrial and consumer packaging, and flexible food and beverage packaging applications.

Volumes within the segment declined year-over-year however due to lower Polyethylene supply from planned maintenance turnarounds and the weather-related outages. Compared to the prior quarter, the business delivered increased volume and price gains on strong demand in industrial and consumer packaging applications that were partly offset by additional weather-related outages.

Net sales for the Packaging & Plastics segment were at $7.7 billion, up 69% versus the year-ago period with local prices up 63% YoY due to tight supply and demand dynamics, with gains in both businesses and across all regions.

Equity earnings for the segment were $124 million, up $53 million compared to the year-ago period due to higher integrated Polyethylene margins at its principle joint ventures.

Although Dow expects price moderation and improved volumes ahead as capacity comes back from the hurricanes, it reminded the industry of bottlenecks when it relates to marine packed cargo for export and product being shipped by truck.

By Brian Balboa for The Plastics Exchange.

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