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May 11, 2017 02:00 AM

Dow Chemical unveils broader US investments

Frank Esposito
Senior Staff Reporter
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    Crain's Detroit Business
    Dow Chemical Co.'s investment plan includes s $100 million innovation center in Midland, Mich.

    Dow Chemical Co. is increasing its already major investments in U.S. plastics and petrochemicals.

    One plastics industry analyst was surprised by the size of the new investments, which join a huge second wave of polyethylene expansion projects spurred by inexpensive U.S. natural gas.

    Company officials revealed the new investments May 11 during Dow's annual shareholders' meeting at its headquarters in Midland, Mich. New projects include:

    • Construction of a world-scale PE unit with more than 1.3 billion pounds of annual production capacity on the U.S. Gulf Coast. The new PE unit will be based on Dow's proprietary Solution Process technology and will address demand in specialty packaging and industrial and consumer packaging applications.

    This investment is in addition to four new PE lines already being installed at Dow's Gulf Coast locations that will add approximately 2 billion pounds of annual production capacity.

    • Expanding annual capacity of Dow's new ethylene cracker in Freeport, Texas, to more than 4 billion pounds, making it the world's largest ethylene facility. The cracker will add two furnaces.

    • An unspecified series of investments to strengthen Dow's polyurethanes franchise. These investments will be aimed at driving downstream specialty polyols and systems growth.

    • Increasing PE capacity by almost 800 million pounds — primarily in North America — through a series of incremental debottleneck projects.

    • Construction of a world-scale polyolefins facility in Europe with annual capacity of almost 1 billion pounds. This addition will maximize Dow's ethylene integration in the region and will serve growing demand for high-performance pressure pipes and fittings, as well as caps and closures.

    • Enhancing its Pack Studios global network of packaging experts, equipment and testing capabilities that encourages collaboration to develop better packaging. Over the next two years, Dow will drive several advancements in the U.S. and globally in PE and adhesive innovations and rapid prototyping.

    • Investing an additional $400 million in Midland to integrate Dow and Dow Corning's manufacturing operations.

    • A new, $100 million innovation center in Midland. The center will house scientists and engineers who will focus research and development activities for home and personal care products. They will work to broaden Dow's energy-saving building technologies; enhance materials for infrastructure; and drive closer partnerships with automakers as they accelerate efforts to light-weight automobiles.

    Polyolefins market analyst Robert Bauman said he was surprised by the scope of Dow's announcements, especially in PE resin.

    Liveris

    “It's almost as if Dow and ExxonMobil are competing with each other to be the largest polyethylene producer in North America and the world,” said Bauman, president of Polymer Consulting International Inc. in Spring, Texas. “The way things are going, the second wave of polyethylene could be larger than the first.”

    He added that if that were to happen, PE exports from North America “would have to triple — and I believe [PE] prices would drop to new lows.”

    The new projects will increase Dow's recent investment total to more than $12 billion over a 10-year period. They're expected to employ approximately 5,500 workers at peak activity, as well as create 300 permanent jobs and almost 2,000 related jobs in the broader economy.

    “Manufacturing plays a vital role in driving economic growth and prosperity across virtually all sectors of society,” Dow Chairman and CEO Andrew Liveris said in a news release. “The positive investment environment in the U.S. chemical and materials sector, driven by competitive feedstocks and a skilled workforce, is a driver for Dow to further invest in the USA.”

    The investments announced May 11 are expected to come online “in a phased manner,” beginning in 2020. They'll require estimated capital expenditures of approximately $4 billion, spread over the next five years.

    Dow President and Chief Operating Officer Jim Fitterling added in the release that the investment plans “enhance our unparalleled, cost-advantage integration and bolster our industry-leading innovation to deliver long-term growth.”

    Dow is one of the world's largest plastics and chemicals producers, with 2016 sales of $48.2 billion. Dow is in the process of merging with DuPont Co., another global plastics and chemicals giant. The combined firm then plans to split into three separate public companies, including one focused on materials.

    Performance Plastics — including PE and specialty plastics — and Performance Materials & Chemicals, which includes PU, were the two largest of Dow's five operating units in 2016, combining for more than 55 percent of the firm's total sales.

    Liveris, 63, plans to serve as chairman of the combined firms after the merger, then retire in July 2018. He joined Dow in 1976 and has served as its CEO since 2004.

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