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July 23, 2021 12:00 PM

Fitterling: Dow expects ‘quite a demand' for PE to continue

Frank Esposito
Senior Staff Reporter
Plastics News Staff
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    Plastics News photo by Marco Stepniak
    Dow CEO Jim Fitterling at K2019 in Dusseldorf, Germany.

    High polyethylene prices drove record results for Dow Inc. in the second quarter.

    On a conference call with analysts, Chairman and CEO Jim Fitterling responded to several questions about the PE market and sustainability.

    "I don't think you'll see a chance for us to build any [PE] inventory through the third quarter; there's still a fair number of planned turnarounds," he said. "Our view is with these GDP growth rates, over 6 percent for this year and currently forecasted at 4.5 percent, maybe 5 percent for next year, there's going to be quite a demand for polyethylene."

    Fitterling added that with PE pricing, which has soared in the last 18 months, Dow "is still seeing some positive upward price movement on certain grades of product."

    "High density [PE], for example, right now is pretty tight. … I think you're going to continue to see some price movement upward there," he said.

    Midland, Mich.-based Dow on July 22 reported second-quarter sales of $13.9 billion, up 65 percent vs. the second quarter of 2020 — when the COVID-19 pandemic hit global markets — and up 17 percent vs. the first quarter of 2021. Dow also posted a profit of $1.9 billion for the quarter after losing $217 million in the same quarter in 2020.

    Second-quarter sales in Dow's Packaging and Specialty Plastics unit, including one of the world's largest PE resin businesses, were up 78 percent vs. the year-ago quarter to $7.1 billion. That represented a gain of 16 percent over the previous quarter.

    Officials said the P&SP unit's growth was tied to local price gains of 70 percent in industrial/consumer packaging and flexible food/beverage packaging applications. The unit's sales volumes declined year-over-year due to lower PE supply volumes from lingering effects of the February winter storm in Texas and planned maintenance turnarounds.

    Dow's Industrial Intermediates and Infrastructure unit, including polyurethanes, saw second-quarter sales of $4.2 billion, up 75 percent vs. the year-ago quarter and 17 percent vs. the previous quarter. Officials said the unit's sales volumes increased by 15 percent as strong demand in infrastructure, mobility and furniture/bedding end markets was partially offset by supply constraints in solvents and intermediates.

    On sustainability, Fitterling said that with the fact that plastic packaging "is so lightweight and so strong and is the lowest carbon footprint package out there, you're going to continue to see a drive toward that."

    "For most companies, the shipping costs and the CO2 footprint, and the shipping cost will drive that," he added. "I just use a paper vs. plastic scenario in a grocery store. One truckload of plastic shopping bags would take four to five truckloads of paper bags to replace it.

    "For many, many decades, [plastics demand growth] has been in that one and a half type of GDP growth rate. I think that will stay. There are some functional polymers that are made out of ethylene and polyethylene derivatives that are continuing to grow, materials for construction that are positive," he said. "You're going to see growth in some other applications like products that go into alternative energy, both solar panels for encapsulation, wind blades and other types of applications. So I think we can sustain that over a long period of time, which is positive."

    Kellogg Co.
    Dow helped Kellogg Co. develop a monomaterial pouch for its Bear Naked Granola.

    Fitterling also said that Dow "is seeing a real demand pull from consumers and brand owners that want more post-consumer recycled material in there or they want more material that's made from either a biosource to ethylene or something that is made from advanced recycling to get back to feedstock and back to a product."

    "I think the drivers that are going to help on the virgin side of things are obviously redesign of packaging types on flexible packaging, many packages are complicated and hard to recycle. I think one of the positives of our portfolio right now is the greater than 80 percent of our portfolio is fully recyclable or reusable today, and the research team and the tech service team are working hard to get the rest of that to 100 percent."

    As an example, he cited a monomaterial pouch that Dow helped develop for Kellogg Co.

    "We use that Bear Naked Granola example with Kellogg's, where that package has been redesigned. This is going on across the value chain," he said.

    Looking ahead, Fitterling said in the news release that Dow "expects earnings momentum from additional improvements in consumer spending, international travel and industrial production."

    "As the economic recovery broadens around the world, Dow is well positioned to continue capturing value with our differentiated materials science portfolio and participation in fast-growing end markets," he added.

    On Wall Street, Dow's per-share price was at $60.15 in early trading July 23, up more than 11 percent for the year to date.

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