Dow Chemical Co. is embarking on a global polyolefin elastomers expansion that will increase annual capacity for those materials by 550 million pounds.
The expansion will take place at existing Dow production sites in Freeport, Texas, and Tarragona, Spain, as well as at a new facility in Map-Ta-Phut, Thailand. In an Aug. 3 news release, officials with the Midland, Mich.-based company said the expansion is a strategic investment to meet the growing needs of customers worldwide while maintaining Dow's cost-competitive position.
“Dow has been the leader in polyolefin elastomers and plastomers from the very beginning, and we are committed to holding that position,” Luis Cirihal, Dow elastomers global business director, said in the release. The firm “is well-positioned to utilize this technology-breakthrough debottleneck project to take full advantage of current and future growth,” he added.
The Thailand plant is set to be operational by mid-2011. Capacity additions in Freeport and Tarragona will be done on an as-needed basis, a Dow spokesperson said. No details were available as to how the additions will be split among the three locations. No cost estimate for the expansion was available.
Currently, Dow operates 1.5 billion pounds of polyolefin elastomer capacity. Products affected by the expansion include Engage-brand polyolefin elastomers, Affinity-brand polyolefin plastomers, Infuse-brand olefin block copolymers and Versify-brand plastomers. Those products are used in an array of applications including automotive parts and packaging.
“Dow will definitely progress with this venture,” market analyst Balaji Singh said via e-mail. “Dow and ExxonMobil [Corp.] have been the world leaders in the development of polyolefins for the last three decades, especially with the reduction in the number of players like [Union Carbide Corp.], Mobil, LyondellBasell [Industries AF SCA].”
“Both Dow and ExxonMobil made the decision to address the Chinese markets with the new and innovative elastomeric products that present them differentiation and opportunities for new product innovations,” added Singh, president of the Chemical Market Resources Inc. consulting firm in Houston.
“Future growth opportunities are in China and Asia and some in Europe. Of course, the current markets and commodities will still depend upon the U.S., Western Europe and Japan, that are essentially in a recovery mode compared to the past economic crisis.”
Singh also said he is optimistic about Dow's chances for success in Thailand, particularly since the company is partnering with Siam Cement Group on the project. Singh described SCG, which has collaborated with Dow for many years, as “one of the most innovative public companies in Thailand.”
“SCG is committed to innovations in polyolefins and is the best suitable partner for Dow,” Singh said. “Plans to develop newer products in Thailand with SCG's commitment to [research and development] and innovations will present excellent product and market development opportunities.
“Thailand, due to its strategic location between Japan and China, is an excellent location for developing newer, differentiated products for the Asia region. Because of Dow's current technology leadership position, Dow/SCG is guaranteed success in differentiated products. There are no other players in the world with such synergy.”
Dow also reported its second-quarter and first-half results Aug. 3. Quarterly sales were up 20 percent vs. the year-ago period to $13.6 billion. For the half, sales were up 32 percent to $27 billion. The firm also registered a quarterly profit of almost $600 million after losing almost $500 million in the same quarter in 2009.
Basic Plastics and Performance Products — the two Dow units with the most plastics concentration — ranked as the two largest of the firm's eight units in the second quarter and in the first half, based on sales. Basic Plastics sales — including polyethylene and polypropylene — were up 26 percent in the quarter to almost $3 billion, while sales in Performance Products rose 32 percent to almost $2.8 billion.
For the quarter, pretax profit in both units improved drastically from a lackluster quarter a year ago. Pretax profit in Basic Plastics was up 72 percent to $696 million, while pretax profit in Performance Products leaped 55 percent to $328 million.
For the first half, Basic Plastics sales jumped 37 percent vs. the year-ago period to just over $6 billion. Performance Products sales shot up 36 percent to $5.6 billion in the same comparison. First-half pretax profit also showed remarkable growth in both units. For Basic Plastics, first-half pretax profit almost tripled to $1.4 billion, while first-half pretax profit for Performance Products soared 72 percent to $618 million.
The two units accounted for 42 percent of Dow's second-quarter sales and 43 percent of the firm's first-half sales.
Dow's second-quarter numbers were impressive, but they weren't enough to satisfy investors, who had expected even higher profits. As a result, Dow's per-share stock price fell 10 percent Aug. 3 to close at $25.50.