CHICAGO (July 12, 1:55 p.m. EDT) — Dow Chemical Co. is in good shape in both sales and technology as it prepares for its super-merger with Union Carbide Corp., Dow Plastics chief Anthony Carbone said in an interview at NPE 2000 in Chicago.
"We´re making very good progress," Carbone said. "A merger of this size obviously has a lot of issues. If you trace the consolidation down to the point where there are important overlaps in technology ... it´s hard to imagine how it will all be sorted out."
The merger has been approved in Europe and Canada and is expected to receive U.S. approval in the third quarter. Industry insiders have said concerns over the combined firm´s stake in metallocene technology have been a sticking point with federal trade officials.
In Europe, the new company is being required to sell off a variety of assets, including a portion of Union Carbide´s PE production and Dow´s share of a gas-phase metallocene polyethylene technology partnership with BP Amoco plc.
The combined firm will have annual sales of about $24 billion and will rank as North America´s largest PE maker, as well as being a global leader in polystyrene production.
Dow´s fortunes also have been boosted by strong growth in linear low density PE, one of its largest-volume plastics. Through April, LLDPE sales in the United States and Canada were up almost 8 percent, according to the American Plastics Council in Arlington, Va.
LLDPE prices have climbed an average of 7 cents per pound in 2000 and are up a total of 22 cents since early 1999, a jump of 68-83 percent in film grades of LLDPE, according to Plastics News´ resin pricing chart.
At Midland, Mich.-based Dow, growth in sales of LLDPE and other plastics fueled its plastics and performance plastics units to post combined first-quarter sales of $2.76 billion — almost 27 percent higher than the combined figure for the first quarter of 1999.
"LLDPE shows no sign of a slowdown," said Carbone, who serves as Dow´s executive vice president and vice chairman of the board. "We´re still looking at double-digit growth for the year."
But just as resin prices have climbed, rising costs for oil and feedstocks such as ethylene have eaten into producers´ profit margins.
"Nobody expected to be on this trend line where feedstocks are concerned," Carbone said. "Going into the third and fourth quarters, people have reforecast some stability. I think the worst is behind us as far as quarter-to-quarter activity.
"Forecasting gets even more difficult with the added complication of what customers are doing with their inventories, but we´ve seen no let-up in demand for our products."
Although some prognosticators are anticipating a slowdown in the U.S. economy, Dow is well-prepared for such an event, according to Carbone.
"We think eventually some air will be let out of the market," he said. "We´re not silly enough to believe the economic boom would go on forever.
"We´d probably feel (a slowdown) first in areas like automotive and durables, but even if there are signs of slowing up in the U.S., we have such good geographic balance that we can continue to thrive with growth in Japan and Latin America."
The combined Dow Carbide will stick to Dow´s technology-first strategy, said Carbone.
"The industry has matured quite a bit, which has globalized the importance of business cycles," he said. "When Dow comes along with a truly technology-driven approach, we can focus on customer needs and talk about cost-benefit. We can divorce ourselves from cycles.
"We´re trying to go beyond the classic sales-and-marketing approach and add (problem) solving — and we´ve been rewarded for that. We want to be a customer´s preferred supplier, not a low-cost provider."