Dow warns

Dow CEO Andrew Liveris has spelled out very clearly his concerns about the impact of the US subprime crisis and high energy prices. He said that last week’s Fed Funds cut ‘flirted with danger’ in terms of the risks it took with inflation, although it was clearly necessary in order to tackle other problem areas.

Liveris’ comments echo those made here in recent weeks, and are striking for their clarity. Speaking to a Credit Suisse investment conference yesterday, he said that ‘the jury is out as to what next year will look like’ and added that:

• ‘The trend line in US housing is still in the wrong direction – it will be the end of next year before we see any flicker of improvement’.
• There is a real fear that the US housing crisis and high energy prices will ‘more than trickle over into consumers’ spending’
• ‘The future of the US ethylene industry is uncertain’. He believes that recent private equity deals are ‘being done on a run for cash basis’, and that it is ‘almost impossible to compete on the basis of $6/MMBTU gas’ versus $2/MMBTU in the Middle East.

Liveris has been warning of potential problems in housing and autos for a year. Yesterday’s presentation made it clear that recent developments have only added to his concerns about the economic outlook.

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. The aim of this blog is to share ideas about the influences that may shape the chemical industry over the next 12 – 18 months. It will try to look behind today’s headlines, to understand what may happen next in important issues such oil prices, economic growth and the environment. We may also have some fun, investigating a few of the more offbeat events that take place from time to time. Please do join me and share your thoughts. Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.

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