CHICAGO (July 28, 3:15 p.m. EDT) — In the midst of a turbulent polyethylene market, Dow Chemical Co. spent almost $200 million earlier this year to extend the life of an ethylene feedstock cracker in Freeport, Texas.
“We're committed to growth and innovation in the Americas,” Dow's Howard Ungerleider said in an interview at NPE 2006 in Chicago. Ungerleider is commercial vice president of plastics in North America for Midland, Mich.-based Dow.
The Freeport cracker received five new furnaces, which replaced 10 existing ones at the 33-year-old plant. The $190 million project was launched in late December and completed by early March.
Dow officials said that the modernization ensures that the site will continue to be a long-term supplier of ethylene. The project also was needed to improve energy efficiency and to meet more stringent regulations related to volatile organic compounds.
In 2006, Dow expects North American PE demand growth to match growth in U.S. gross domestic product, which currently is expected to hit 3-4 percent. For the next several years, North American PE growth should be at 0.8-1.2 times GDP, Ungerleider said.
Dow's commitment to the region also is evident in the construction of a liquefied natural gas terminal, set to open in Freeport in 2008. The terminal is expected to meet a portion of Dow's natural gas needs, making the firm less dependent on domestic natural gas supplies.
On the new product front, Dow recently launched new grades of its Dowlex-brand LLDPE that can handle raised temperatures in parts used in radiant floor heating systems. Ungerleider said the radiant flooring market already has been built up in Europe and now is being marketed into the northern U.S. and Canada.
A new grade of Dow's Inspire-brand polypropylene also was introduced recently for large-part thermoforming. The new grade improves sag and warpage performance in large parts for the automotive and toy markets, as well as in products such as kayaks.
The North American PE market, however, remains unpredictable, with prices going up between August and November 2005, dropping from December through April, and edging up again since May. That's three major inflection points in 10 months.
“It's almost like seven-year cycles have become seven-month cycles,” Ungerleider said. “Where we are with volatility is largely the result of inventory destocking and restocking.”
“When the hurricanes hit, there was a huge run on [PE] material,” he added. “That was a big driver in October, November and December. [Processors] were bringing resin in from places other than their normal suppliers because a number of [petrochemical] reactors were out of commission.
“Processors also brought in [PE] film and bags and imports jumped. There was a big price disparity and a huge arbitrage opportunity.”
But that market eventually cooled, giving way to normalcy — or at least to what passes for normalcy in today's market.
“The window from Asia has closed,” said Ungerleider. “There will be less demand [for imported goods] in the film and bag market.”
“January  was the weakest month of the year, but since then we've had demand increases every month,” he added. “Demand is coming back across the board. We've got good demand strength building, and supply could be tight for the second half of the year.”
Dow ranks as one of the world's largest makers of PE and polystyrene. The firm's basic plastics unit — including PE, PP and PS — posted first-quarter sales of $2.8 billion, equaling its sales amount from the same quarter in 2005.