Dow bullish on the outlook for plastics on rising demand for packaging and wire coatings

Dow, the world’s second- biggest chemical maker, said it’s “bullish” on the outlook for plastics because of rising demand for packaging and wire coatings and falling energy costs at its US plants, as per Bloomberg. The profit margin for Dow’s plastics business will stay near this year’s level in 2011 before rising further, as per Chief Executive Officer Andrew Liveris. New ethylene and polyethylene plants in the Middle East and Asia haven’t started as quickly as predicted by some industry consultants and delays will continue, Liveris said. Even if excess capacity does materialize, older plants in Europe and Asia will shut, keeping supply tight. Liveris, who tried unsuccessfully to sell a 50% stake in Dow’s basic-plastics unit in 2008, said he’s no longer considering such a deal. The plastics business has led earnings growth this year after Dow closed older plants while lower natural-gas prices made U.S. plants more competitive. “We remain bullish on plastics,” Liveris said. “Industry-pundit forecasts for 2011 are too bearish, both in terms of demand growth as well as effective operating rates.” Lower natural-gas prices relative to oil will continue to benefit Dow for years. Ethylene operating rates should rise starting in 2012, he said. That will help overall company earnings to rise next year and in 2012, he said, declining to be specific. Annual profit will reach US$3.50-5.50 a share “in the near term,” Liveris said. Dow plans to retain more than half the basic-plastics unit, the business that makes linear low density polyethylene, or LLDPE, because Dow technology and end markets in packaging and coatings for wire and cable make it highly profitable. Dow will consider selling its stake in its Equate venture with Kuwait after completing an arbitration proceeding next year over Kuwait’s cancellation of the so-called K-Dow plastics venture. Dow’s proposed venture with Saudi Aramco, the world’s largest state-owned oil company, in Jubail will be smaller than originally envisioned, Liveris said. The project probably will feature one ethylene plant that can crack either heavy raw materials such as naphtha and light feeds such as ethane, rather than two crackers, Liveris said. The site will include plants to convert the commodity chemicals into higher-value products, he said. A final decision on the scope of the Aramco project will be made in the third quarter of 2011 with production beginning in 2015 or 2016, Jim McIlvenny, group corporate vice president of megaprojects, said in an interview. Since Dow sold commodity units such as Styron and closed plants, most of its commodity products are used as raw materials for specialty products rather than being sold on the merchant market, Liveris said in an interview.