’17 ethylene outlook is too bearish – US Dow CEO

Andrew Liveris and COO Jim Fitterling say new crackers and strong demand show analysts are “way too pessimistic” about the ethylene and derivatives market next year. Above, operations in Louisiana. (Source: Dow Chemicals)

NEW YORK (ICIS)–Analyst and consultant expectations of a “very weak” ethylene and derivatives market for 2017 are “way too pessimistic”, Dow chairman and CEO Andrew Liveris said on the company’s third quarter conference call.

“We are already seeing delays [for new projects] and notably, our three polyethylene [PE] units started up in Sadara are running flat out”, which is indicative of strong demand, said Liveris.

In the US, there are four ethane cracker and derivative complexes scheduled to start up in 2017.

Jim Fitterling, president and chief operating officer (COO), sees the start-ups of new crackers being staged over 2017.

“We’ve been running as a franchise flat out for the last 12 months and inventories are at five-year lows in the downstream chain,” said Fitterling on the conference call.

“So our view is that market demand, as long as you don’t have a cataclysmic event in the economy, is going to be there for these products, and the timing of these start-ups are such that I don’t think you’re going to see things loosen up that much next year,” he added.

Dow had another robust performance in Q3 from its performance plastics segment, where its PE business resides, with 11% underlying volume growth year on year.

However, underlying earnings before interest, tax, depreciation and amortisation (EBITDA) fell 7% to $1.25bn, and its EBITDA margin ticked down to 27% versus 29% in the year-ago period. Sales were essentially flat at $4.7bn.

Dow faced higher costs from a turnaround and expansion at its Plaquemine, Louisiana, cracker as well as its Sadara project with Saudia Aramco in Saudi Arabia.

In the quarter, Dow’s packaging and specialty plastics business saw double-digit volume growth in developed geographies and saw adoption of new innovations in food and specialty packaging applications.

“There is huge demand for safe food products supply in China. So that type of driver is actually growing double digits – way above the Chinese economy,” said Liveris.

“Where things are weak are in the industrial economy around the world. But where things are strong are safety drivers, hygiene drivers, environmental drivers and consumer drivers,” he added.