Dow wants clarity on US, China trade before pursuing megaprojects

Author: Al Greenwood

2020/05/28

HOUSTON (ICIS)--Dow wants more clarity about how trade relations between the US and China will evolve before it pursues a large chemical megaproject, the CEO said on Thursday.

"We're not anywhere close to a big megaproject. That, I think, is down the path," said Jim Fitterling, Dow CEO. He made his comments during an investor webinar hosted by Sanford C Bernstein.

"I want to see how global trade and how the trade relations develop between US, China and other parts of the world before we start thinking about a big megaproject that is based on export," he said.

The US and China have imposed tariffs on each of their imports, many of which cover chemicals and plastics. Trade tensions loosened when the two sides reached a phase-one trade deal, but it is unclear whether China can meet the import commitments it made under the agreement.

Other disputes between the two countries could manifest themselves through more trade restrictions.

The climate surrounding trade could cause other chemical companies to hesitate before taking on any large projects, Fitterling said.

"If we're in a trade dispute with China for any protracted period of time, I think anybody that is looking at a big capex project like that is going to say, 'Wait a minute. I better see how things settle out here from a trade standpoint'," Fitterling said.

He did not specify the type of plant, but he made his comments during a larger discussion about polyethylene (PE).

That said, Dow is always thinking about how the next wave of chemical expansion will take shape once demand returns and markets tighten, according to Fitterling.

Right now, one of the most attractive investment areas are in Dow's silicones business, Fitterling said. The materials have a large range of qualities and they can be used an several applications.

Dow would also want to grow its plastics franchise, he said. About 25% of it is in what Fitterling calls functional products. These include elastomers and higher-end materials. This makes them less sensitive to the ups and downs of oil prices, so their prices are less volatile.

Anything that Dow can do in polyurethanes will benefit isocyanates and polyols, he said. Coatings, adhesives and sealants are also attractive.