APIC '09: Dow see cloudy petchem outlook through H1 2010

15 May 2009 10:07  [Source: ICIS news]

SEOUL (ICIS news)--Dow Chemical’s outlook for the global petrochemical industry remains cloudy, with the current uncertainty surrounding commodity prices making it almost impossible to predict what business conditions will be like through to the first half of 2010, a top executive from the US chemical major said on Friday.

“The last four to six months have been phenomenal. It’s almost like the perfect storm. How do you look forward in this environment? It’s almost impossible to predict. There are a lot of opinions, but no one has much certainty,” said James McIlvenny, senior vice president of Dow's performance products division.

McIlvenny delivered the keynote address to delegates at the ninth Asia Petrochemical Industry Conference (APIC) in Seoul, South Korea.

Although demand had picked up significantly in the Chinese market, people remained very cautious, as the domestic economy of China, which makes up 2-3% of world GDP, is not large enough to drive “real growth”, McIlvenny said

Speaking about Dow’s recent acquisition of Rohm and Haas, he said that it would allow Dow to extend in to the downstream specialty chemicals segment, which would also position the companies to better survive the current downturn.

“This is a company that we coveted for 20 years. We proceeded with the acquisition in very difficult times and it stressed our balance sheet,” McIlvenny said.

“I got more grey hair in the last three months than I did in the previous three years,” he quipped.

The collapse of Dow’s proposed K-Dow joint venture with Kuwait’s Petrochemicals Industries Co (PIC) in  December 2008 deprived the US chemical major of a $7.5bn payment from PIC and a $1.5bn cash distribution from K-Dow had the deal went through.

This made it difficult for Dow to raise sufficient funds for its $18.8bn merger deal with Rohm and Haas.

“But it was an acquisition that was very important for Dow. It is a company that we really think, transform us downstream,” McIlvenny said.

He added that Dow also had extensive plans to preserve the value of its newly acquired specialty chemicals maker and the growth synergies from the combined entity would push the companies forward.

“Rohm and Haas had very good access to the electronics markets and they have very good customer pipelines. And now, they have full access to Dows capabilities,” he said.

Meanwhile, McIlvenny also said that Dow’s joint venture with The Shenhua Group in China for a world-scale coal-to-chemicals complex in Shaanxi province was still in a feasibility study stage, which is to be completed by the end of this year.

McIlvenny also noted that the general public does not have the perception that the overall chemical industry was “innovative” in nature and had a profound impact on society as a whole.

“If you use the word innovation while talking to the general public, they don’t think of the chemical industry. They relate it to information technology (IT) and the electronics [sector]. It’s something we have to change in the industry.”

APIC ’09 began on 14 May and concludes on 15 May.

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By: Bohan Loh
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