Dow to idle polyethylene plants

Dow Chemical Co., headquartered in Midland, Michigan, is idling three polyethylene (PE) plants and two elastomers units on the U.S. Gulf Coast and in Argentina for at least 30 days. The plants have 2 billion pounds of aggregate annualized capacity and will reduce the company’s global production capacity by 10 percent, Dow CEO Jim Fitterling said in an April 30 conference call about the company’s Q1 2020 earnings.

“We are taking actions to idle facilities or reduce operating rates in line with demand trends in the U.S, Europe and Latin America,” he said.

“Let me be clear, Dow’s operational and financial playbook have put us in a very good position,” Fitterling stressed. “The actions we are announcing today build upon our focus to provide additional agility, drive cash generation and adjust our spending to current realities.”

Fitterling says Dow has taken these moves to balance reductions in demand the company has seen arising from the COVID-19 pandemic. “We had a good strong first quarter–volumes were flat to slightly up in Packaging & Specialty Plastics, but we’re going to see some impact on volumes on the industrial part of the sector in the second quarter, which is why we tightened up some of the supply,” he said. “That was primarily due to industrial shipping, industrial applications, automotive applications.”

Fitterling added that he expects the second quarter to present the most challenges for the business.

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“We’re not closing high-cost assets; we’re closing to balance demand,” he said. “The reality is there’s been a pretty significant amount of industrial capacity shut down on the downstream, and so we don’t feel like in this environment really plowing a lot of material into inventory is the right thing to do.”

Fitterling said he is not concerned about losing market share as a result of the actions. “I don’t think we’ll lose share. We were flat to slightly up in share in the first quarter across our plastics business.”

He added that 9 to 10 percent of PE production capacity is on the U.S. Gulf Coast, “so we’ll balance that out.

“It’s easy to fire these polyethylene units back up to meet demand,” Fitterling continued.

Many plastics recyclers have mentioned how the abundance of available virgin and off-spec polyethylene has been driving down pricing and demand for their reprocessed material. The extent to which they will benefit from Dow’s move remains to be seen.  

COVID-19 also is being cited as the reason a planned plastics manufacturing plant in Ohio has been put on hold.