DÜSSELDORF, GERMANY (Nov. 14, 4:10 p.m. EST) — A senior polyolefins executive with Dow Chemical Co. expects a slight uptick in fourth-quarter business.
Bob Beil, commercial vice president for Dow's North American polyolefins business, remains realistic yet optimistic about next year, and reports that the merger with Union Carbide Corp. is progressing even better than expected.
“Our business has looked pretty much the same since July,” Beil said in at K 2001, held Oct. 25-Nov. 1 in Dusseldorf. “The first half was tough,” he said, noting an 8 percent drop in industrywide polyethylene demand. After some marginal improvement in July and August, business has held fairly steady through the second half.
“We have not seen any falloff as a result of the [terrorist] events of Sept. 11. Maybe Asia has a little bit of weakness, but nothing fell off the table,” Beil said.
He wouldn't be surprised to see North American PE demand finish down 6.5-7 percent for the year. He pointed out that Dow — the world's largest PE producer, with global annual capacity of 15.7 billion pounds — still is seeing healthy growth rates for specialty polymers such as its Affinity polyolefin plastomers and Elite enhanced PE resins.
“We think 2002 is going to remain a tough year,” he said. “There's too much capacity chasing not enough demand.”
Beil acknowledges that if the economy were to tank, then a bad situation could get even worse. But at the same time, he believes the so-called inventory effect will help spur a significant rebound in resin demand when business finally does bounce back.
“Since late 1999, this entire industry has taken inventories way down. So what we see going out is moving all the way through the chain to the ultimate consumer. We believe that as soon as the converters believe that the market has hit bottom from a pricing standpoint, they will start to take inventory position.”
And the end result of such actions?
“When this baby comes back, it's going to snap back plus 10, plus 11, plus 12 [percent],” he predicted.
Meanwhile, Beil spoke enthusiastically of his firm's megamerger with Union Carbide Corp.
“We're ahead of schedule on the merger. We are realizing more cost synergies than we thought were there. … The people were almost a drop-in, from a culture perspective.”
The deal overnight gave Dow critical mass in polypropylene, which remains the healthiest of the major commodity resins.
“In polypropylene, a couple years ago we were just a gleam in somebody's eye,” he said. “Now, we're the sixth-largest producer in the world. We've tripled our capacity in the last six months,” to 2.6 billion pounds a year. And the firm has said it will build a new PP plant in Tarragona, Spain, when market conditions warrant more capacity.
That may be a while, according to one analyst. Howard Rappaport, polyolefins director for Houston-based consultants Chemical Market Associates Inc., said at the K show: “Margins for polyolefins producers have been terrible for an extended period of time. And right now there really are no reinvestment economics [for resin producers] in the foreseeable future, until very late in 2002 or even into 2003.
“Our forecast,” Rappaport said, speaking of polyolefins in general, “shows the next upturn reaching its peak by 2005. That's a long time. And basically, resin producers are going to have to be in survival mode to get from point A to point B, and be a little more creative about how they run the business.”
Beil insists that much internal, merger-related work remains, but those targets are being knocked down, one by one. He said the biggest hurdles facing Dow right now do not relate to integration of Carbide.
“Our challenges,” he acknowledges, “are out in the marketplace.”
