NEW YORK — Dow Chemical Co. won't be satisfied with just surviving the 1998-2000 business trough many economists are predicting for the plastics industry.
Instead the Midland, Mich., firm plans to push through the period with sustained growth and new technology.
At Dow's year-end press briefing in New York on Dec. 12, Anthony Carbone, executive vice president of plastics, hydrocarbons and energy, spoke of how 1997 was stronger for Dow and its competitors than many had predicted. The 35-year Dow veteran also spoke out against what he described as ``passive acceptance of business cycles.''
``If you go back in time, there was a whole generation of managers who were fatalists,'' Carbone said. ``They would say, `I didn't do it, someone else did it. Now there's overexpansion in these areas so we'll have to grin and bear it.' That attitude doesn't exist in our company.''
Dow already has taken steps to resist this cyclicality, including cutting personnel by as much as 30 percent since 1992, reducing its administrative layers from as many as 12 to as few as four and continuing to act on plans to remove another $1 billion in company costs. These steps will result in modest sales growth at Dow Plastics in 1998, with sales climbing from $9.3 billion to $9.6 billion, Carbone said.
Carbone added that Dow expects the bottom of the resin cycle to hit in late 1998 or early 1999, with business turning up globally in 2000. Dow, with leading commodity positions in both polyethylene and polystyrene, is prepared to battle it out in a year in which resin prices are expected to be flat at best.
``Commodities are still the biggest piece of the action at Dow Plastics,'' Carbone said. ``To compete with the Exxons, Shells, BASFs and Bayers, you have to continue to drive for the first quartile. You're nobody in this business if you can't get out there and slug it out when prices are approaching cash costs.''
And like most international companies, Dow is keeping a watchful eye on recent economic turmoil in the Asian market, where 10 percent of Dow Plastics' sales are concentrated.
``We don't see a second-wave effect from the Pacific in Europe or North America,'' Carbone said. ``But there could be much greater weakening in Korea and possibly Japan than imagined. We're heavily invested in Asia so we'll have to deal with the aftereffects of devaluation.''
Officials from Dow Plastics' separate business groups also addressed their respective areas. Highlights included:
A prediction of PE growth at a rate 2 percent higher than that of the gross national product. Romeo Kreinberg, global vice president for PE/PET/purified terephthalic acid, said 1997 was better than expected for PE, but pricing will be flat in 1998, even with new ethylene capacity coming on stream from several sources.
Dow will open two PE plants in 1998, each with more than 500 million pounds of capacity. The plants, in Schkopau, Germany, and Fort Saskatchewan, Alberta, will be equipped to use Dow's Insite metallocene technology.
Dow remains optimistic about opening a PE plant in Map-Ta-Phut, Thailand, in 1999.
``In times like this, people put off purchases of durable goods, but purchases of everyday goods continue to grow,'' Kreinberg said.
In engineering plastics and polypropylene, the biggest news was that Dow failed to announce whether it would build its first North American PP plant in Freeport, Texas, or Plaquemine, La. Dow had indicated a decision would be made by the end of the year, but the New York event offered only a brand name: Inspire.
George Hamilton, Dow's North American commercial director for engineering plastics, said Dow's Schkopau PP plant is set to open early next year.
Overall, engineering plastics and PP enjoyed a growth rate of more than 20 percent last year, a number much higher than the industry average of 6-8 percent.
This growth is allowing Dow to complete a 40 million-pound polycarbonate expansion in Freeport; to double thermoplastic polyurethane capacity in La Porte, Texas; and to plan to produce Questra crystalline polymers in Schkopau.
Dow PS business Vice President Kathleen Bader predicted ``fairly slow, steady growth'' in 1998 through debottleneckings at Dow's seven North American PS sites. The PS market has struggled recently with overcapacity and descending styrene monomer prices. Globally, Dow is making technological improvements to its PS works in Guaruj , Brazil, and planning a PS plant in Zhangjiagang, China.
Dow's polyurethane announcement focused on a new joint venture to produce toluene diisocyanate, a key raw material, with Pronor of Brazil.
The 50-50 venture will produce 165 million pounds of TDI annually. Dow also recently acquired Eastman Chemical's North American production for polyols, another raw material.
Dow's PU business Vice President Bob Wood said other acquisitions are in the works.