New US propylene plant to lower costs, boost margins for Dow

03 August 2010 18:07  [Source: ICIS news]

HOUSTON (ICIS)--The expected start-up of a new propylene plant in the US should keep prices down for the key feedstock for Dow Chemical and boost margins, the company's chief executive said on Tuesday.

Petrologistics planned to start the propane dehydrogenation (PDH) plant this month. The plant would have a capacity of 544,000 tonnes/year, making it the world's largest PDH plant.

Already, Dow Chemical had 50% of the plant's outtake, said Andrew Liveris, Dow chief executive.

Liveris made his comments during an earnings conference call.

"This will help us enormously on propylene competitiveness in the US and enable us to have margin expansion," Liveris said.

The new propylene capacity could help Dow avoid a repeat of the second quarter, when the company was on the wrong end of propylene arbitrage between the US and Asia, according to Liveris.

Normally, US propylene has a roughly 20% discount versus Asian material, Liveris said. However, "We had exactly the inverse through the quarter."

Because of the propylene arbitrage, Dow lost sales volumes because it could not export to Asia.

However, propylene prices should return to a more normal level in the third quarter, allowing Dow to increase margins in its performance business, Liveris said.

Next year, Dow plans to start up its propylene derivative facility in Thailand, which should also address the company's propylene imbalance in Asia, Liveris said. "All of the remedies are in place."

Dow shares were down by nearly 10% in midday trading.

For more on propylene visit ICIS chemical intelligence
For more on Dow visit ICIS company intelligence

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By: Al Greenwood
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