Dow Chemical more bullish on ethylene chain than before - CFO

08 June 2010 17:15  [Source: ICIS news]

TORONTO (ICIS news)--Dow Chemical has become more upbeat in its outlook for the ethylene chain, chief financial officer William Weideman said on Tuesday.

“We are more bullish on the ethylene outlook than we were even six months ago,” Weideman told analysts at a webcast investor conference in New York.

The main reasons were improved 2010 GDP forecasts, Dow’s cost-advantaged and flexible ethylene plants in the US and elsewhere, and likely delays in the start-up of new rival ethylene capacities, especially in Iran, Weideman said.

Recent GDP forecasts were better than before, an important factor, as global ethylene demand has typically grown at a rate of about 1.4-1.5 times GDP, he said.

Dow’s ethylene demand in the Americas and Europe was up about 6% in the first quarter, with the growth due to “real underlying demand”, he said.

In fact, US ethylene and polyethylene inventories were low in the first quarter, and remained low through today, he added.

Meanwhile, on the supply side, planned and unplanned turnarounds had tightened the market, he said.

But even as those plants came back into operation, new ethylene capacity in the Middle East and Asia was not ramping up or coming online as quickly as expected by some, Weideman said.

“We believe the projected ramp-up of this new capacity will continue to be delayed, most notably in Iran,” he said.

Furthermore, some 5m-8m tonnes of older, high-cost, naphtha-based capacity in Europe and Asia could exit the market - depending on margins, he said.

Dow was well-positioned to withstand any industry restructuring as the company had already acted in shutting down over 3bn lbs (1.4m tonnes) of ethylene derivative capacity, he said.

An important benefit for Dow’s US productions were that country’s new shale gas volumes, he added.

“We expect emerging developments, like new fractionation capacity, coming online this year and next, to further improve the competitiveness of our US [ethylene] cost position.”

In addition, Dow had feedstock-advantaged production in the Middle East, western Canada and Argentina, he said.

“All of this underscores why we are more bullish in our ethylene outlook than we were just six months ago.”

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By: Stefan Baumgarten
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