UpdateUS Dow may seek more closings on weak 2009 - Liveris

03 February 2009 17:38  [Source: ICIS news]

Dow reports net loss(Adds conference call updates, Liveris statements throughout)

HOUSTON (ICIS news)--US major Dow Chemical may announce another large round of plant closings and layoffs as overall chemical demand will remain weak through 2009, CEO Andrew Liveris said on Tuesday.

"The basic chemical sector is going to have a terrible '09," Liveris said during an earnings conference all. "We are assuming that late 2008 demand levels will continue for several quarters and possibly beyond."

Dow reported a net loss of $1.55bn for the fourth quarter of 2008 on Tuesday as demand dropped away sharply and the company took restructuring and other charges.

The fourth-quarter loss compares with a net profit in the 2007 fourth quarter of $497m (€388m).

Weak demand for chlorine and its derivatives will persist because the world's housing markets are showing little signs of recovering, Liveris said. Chlorine is used to make polyvinyl chloride (PVC) and polyurethanes, and housing is a key end market for both.

In addition, markets for aluminium and other metals are weakening, which would reduce demand for caustic soda.

"We are preparing for the recession to persist through 2009 and are running our business accordingly," Liveris said.

That could mean more plant shutdowns and layoffs, he said. "We are already working on another round - to seek another round if necessary."

This would be in addition to the large round of closings and layoffs that Dow announced in December.

Dow would announce more details about possible cost-cutting programmes within three months, Liveris said.

Demand for other products outside of chlorine may not be as low, Liveris said.

Demand for polyethylene (PE) has remained resilient, as it is used in packaging, Liveris said. Already, Dow has nominated a price hike of 7 cents/lb ($154/tonne, €120/tonne) for January and 5 cents/lb for February.

"Polyethylene, going back many decades, has had steady annualised growth," Liveris said. "We've never seen two back-to-back down years in volumes."

In addition, European countries are adopting stricter regulations for energy conservation, a development that would increase demand for insulation, Liveris said. Also, the fundamentals for water chemicals remain strong.

By the end of 2009, government stimulus programmes could increase construction for roads, highways and bridges, a development that would increase demand for various construction chemicals, Liveris said.

($1 = €0.78)

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For more on PE, PVC or chlor-alkalis visit ICIS chemical intelligence
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By: Al Greenwood
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