Commentary: US vinyls company stock prices surge on Dow carve-out announcement

06 December 2013 09:46 Source:ICIS Chemical Business

Vinyls stock prices soar on Dow carve-out

US-based Dow Chemical’s announcement that it will carve out its $5bn chlorine and derivatives businesses and shut down an old chlor-alkali facility led to a surge in the stock prices of two US vinyls companies.

Shares of Axiall, the integrated polyvinyl chloride (PVC) producer resulting from the merger between Georgia Gulf and PPG Industries’ commodity chemicals business, jumped 10.3% on 2 December – the day of the Dow announcement. Chlor-alkali producer Olin saw its stock rise 7.8%.

Dow’s plan to shut down 1.8bn lb/year (816,000 tonnes/year) of chlorine capacity in Freeport, Texas, US, in coordination with the start-up of its 800,000 tonne/year chlorine joint venture facility with Japan’s Mitsui at the same location, in early 2014, encouraged investors.

This was “a better outcome than consensus expected and better than our bullish expectation of a 60-75% offset of Dow’s new capacity,” said Charles Nievert, analyst at financial firm Cowen & Co. “The Dow announcement removed considerable uncertainty and likely means upward revisions to ECU [electrochemical unit] values, with one of the early benefits possibly coming via the H1 2014 aluminum industry caustic contract.”

By Joseph Chang