21 September 2009 17:58 [Source: ICIS news]
By Nigel Davis
LONDON (ICIS news)--The US economy has reached the bottom, international chemicals major Dow Chemical said last week. But the company's CEO, Andrew Liveris, warned that the recovery could be slow amid ongoing concerns about unemployment and consumer spending.
Dow’s volume sales grew strongly in June as a result of better business conditions in Asia-Pacific, most notably China, and in other emerging economies. There was solid volume growth for the advanced materials businesses, he said in a presentation to financial analysts, which has continued into the third quarter with operating rates improving.
The Dow chief’s remarks add further weight to the assumption that the chemicals sector is emerging from the slump. But companies are unlikely to roar ahead. Recent growth largely has been discounted on the world’s financial markets. Let’s hope there aren’t too many disappointments in the coming months.
For producers upstream, particularly, this continues to be a tough time. ?xml:namespace>
Years of demand growth has been lost since September 2008. There is little likelihood of volumes being made up to any great extent any time soon.
The industry is running into another tough period at the start of the fourth quarter. Prices are off in China, suggesting that while there may have been pre-buying for the peak manufacturing period prior to Christmas, demand is not sustainable.
Chemicals growth will resume as economic expansion gets underway. But the lack of consumer spending power will, ultimately, weigh heavily on demand in the US and Europe.
Capacities need to be adjusted to the new reality. Christophe de Margerie, Total’s CEO, put it succinctly on 16 September when he said there was simply too much capacity in the
Dow has already announced closures as it has grappled with changed supply/demand balance. The shutdown of olefins and downstream capacities in the
And that worldview is changing as new(er) players emerge to invest in and take control of petrochemicals assets in the west.
Private equity is hardly in a position to help consolidate a chemicals business segment such as this. But the “promise of consolidation” is there, Liveris suggested, with emerging companies (
Dow is seeking to monetise some of its styrenics assets to help pay down debt acquired when it bought Rohm and Haas at the start of 2009.
It’s so-called “asset-light” strategy then was in tatters with its partners in
Liveris confirmed that Dow was in serious discussions with two potential partners for its polyethylene operations. Polyethylene and some olefins assets were part of the scuppered
Six months ago Dow was approached by more than a dozen interested parties but talks with the narrowed field had occupied a lot of his time, Liveris said. “I’m delighted with those discussions because the people we’re talking with are not opportunists,” he said.
Dow is unlikely to move fast on creating a new asset-light venture for PE. Dow wants to grow with these assets in a new venture, Liveris suggested, and not exit the business. “We’re not rushing it out the door,” he said.
It will want to grow with PE as market conditions improve and capitalise on what he called the operating leverage in the Dow business.
Dow’s strategies, asset light and otherwise, appear to be on track and gaining new momentum as business slowly improves.
For more on Dow Chemical visit ICIS company intelligence
To discuss issues facing the chemical industry go to ICIS connect
For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.
Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.
|ICIS news FREE TRIAL|
|Get access to breaking chemical news as it happens.|
|ICIS Global Petrochemical Index (IPEX)|
|ICIS Global Petrochemical Index (IPEX). Download the free tabular data and a chart of the historical index|
Asian Chemical Connections