08 February 2013 10:08 [Source: ICB]
The world has too much epoxy resin capacity, and some companies are likely to take some of that capacity off line, said Dow Chemical CEO Andrew Liveris.
"On epoxy, the Chinese just overbuilt - that plus the Taiwanese and the Koreans," said Liveris on the company's fourth-quarter conference call on 31 January.
"Epoxy will continue to be oversupplied, and frankly, there needs to be capacity taken out. Capacity will need to come out," Liveris said. "We've done some of it, and others will do it as well."
In October 2012, Dow announced it would close an epoxy resins plant in Kina Ura, Japan.
Epoxy resins are in Dow's performance materials segment, which the company is intent on improving, Liveris said. Fourth-quarter sales for the segment were $3.4bn (€2.5bn), down 5% year on year.
Epoxy resins and the entire polyurethanes chain are the two key parts of the segment that are underperforming, Liveris said.
In the US, propylene has been subject to wide swings for several months. Recently, the US January contract for propylene settled at an increase of 15 cents/lb ($331/tonne). A US producer nominated a 9-cent/lb increase for February.
NEW PDH PLANT
Ultimately, volatile propylene should be addressed by Dow's new propane dehydrogenation (PDH) plant, Liveris said.
The 750,000 tonne/year unit should start operations in 2015 at its Freeport complex in Texas.
Dow's PU business should also benefit from the start-up of the company's Sadara petrochemical joint venture in Saudi Arabia.
In the meantime, Dow will attempt to improve the segment's performance through price action, which could lead to volume losses, Liveris said.
That, in turn, could cause more assets to go down, he said. "We have to intervene on high-cost assets in low-growth jurisdictions."
Liveris added: "We are going to put laser-like focus because we are unsatisfied, dissatisfied, with the last two years in performance, and it's creating headwinds that speak against the positive side of the Dow portfolio. We are determined to fix those two businesses and do it in a short order."
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