DuPont warns and stresses “productivity initiatives”

D'turn 10Dec11.pngBy now, companies should be reordering for the New Year. CFOs have achieved their working capital targets for year-end. And the commercial people should be planning Q1 sales.

So far, however, it seems that this restocking has proved rather weak. This parallels September’s disappointment, when the return from the summer holidays also failed to produce a major recovery in order flow.

Business managers have indeed been increasing their list prices, in preparation for a wave of orders. And China’s PTA producers have postponed planned commercial shutdowns. But DuPont, often a bellwether company for the global industry, summed up the general nervousness in their profit warning on Friday, when CEO Ellen Kullman noted:

“We are seeing slower growth in certain segments during Q4, driven by global economic uncertainty. This uncertainty is contributing to ongoing conservative cash management in some supply chains. The earnings revision reflects destocking across polymers and certain industrial supply chains that has accelerated during the fourth quarter. Consumer electronics demand has further softened, and housing and construction markets remain weak. Other markets remain as expected.”

Kuhlman went on to add that “with customer inventories at very low levels, we are staying close to our customers to assure that we are ready to respond when demand returns”. But she prefaced this with a reference to DuPont’s “aggressive productivity initiatives“. Companies expecting a quick recovery are not usually focussing their efforts on cost reduction.

ICIS pricing comments this week, and price movements for the benchmark products since the launch of the IeC Downturn Monitor on 29 April are below:

Benzene NWE (green), down 23%. “Market firmed though fundamentals still weak”.
HDPE USA export (purple), down 22%. “Producers began to implement price increases but with falling Asian and Middle Eastern prices, trade to Asia was all but impossible.”
Naphtha Europe (brown dash), down 21%. “Oversupply eases slightly on demand from Asia.”
PTA China (red), down 18%. “PTA producers had initially planned a large-scale production cutback because of negative margins, but have not done so yet as they expect margins to improve in December”
Brent crude oil (blue dash), down 12%
S&P 500 Index (pink dot), down 8%

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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