Dow hikes prices by further 25%, idles plants

24 June 2008 14:09  [Source: ICIS news]

Dow actions unwelcome but unavoidable, says LiverisTORONTO (ICIS news)--Dow Chemical announced on Tuesday an additional across-the-board price increase of up to 25%, effective July, and drastic measures to idle production capacities in North America and Europe as it struggles to cope with rising energy and hydrocarbon feedstock costs.


Dow CEO Andrew Liveris described the steps as “extremely unwelcome but entirely unavoidable” as the global cost of oil, natural gas and hydrocarbon derivatives surge ever higher.


“The price increases we announced on 28 May helped, but they were not enough to fully cover the additional costs we are now facing,” he said.


For the first half of 2008, Dow’s feedstock and energy costs were up more than 40% compared with the same six months of last year, he said.


“We must restore margins in our businesses, both through price increases and the reduction of operating costs at certain production facilities.”


The company would also implement a freight surcharge of $300 (€192) per shipment by truck and $600 per shipment by rail, effective 1 August, for customers in North America, while freight surcharges for other regions were planned for later this year, it added.


Dow would also go ahead with plans to temporarily idle or reduce production at a number of manufacturing plants in North America and Europe, it said.


Dow had reduced its ethylene oxide (EO) production worldwide by 25% and idled 30% of its North America acrylic acid production, it said.


In addition, it would also idle 40% of its European styrene production capacity and reduce European polystyrene (PS) production rates. 


Dow was also cutting back in its automotive business unit, due to the serious decline in North American auto sales, it said.


That unit was divesting its paint shop sealer business and implementing consolidations resulting in the closure of three production units, Dow said.


In addition, Dow Building Solutions had temporarily idled 20% of its European capacity for producing Styrofoam insulation. 


Earlier this month, the company announced plans to idle three emulsion polymers plants representing 25% of North America capacity and 10% of European capacity.  These reductions were directly related to declines in the housing and consumer sectors, as well as rising costs, Dow said.


Over the past five years, Dow’s bill for hydrocarbon feedstock and energy surged four-fold, from $8bn in 2002 to an estimated $32bn-plus this year, it added.


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($1 = €0.64)

By: Stefan Baumgarten
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