Dow to Throttle Back PE Production in the Americas

Dow, Midland, Mich., is among the first PE suppliers to announce that it will throttle back production—equating to about 10% of its global capacity in order to address a supply/demand imbalance. The move includes idling for at least one month three PE plants—a solutions PE train in Freeport, Texas, two gas-phase units in Seadrift, Texas, and one in Argentina, as well as two elastomer plants in Louisiana. Although the PE market was already becoming oversupplied as a result of the significant new capacity that has been brought on stream over the last few years with more planned underway, the impact from the coronavirus epidemic has exacerbated the situation. 

Reporting on his company’s first quarter earnings, Dow CEO Jim Fitterling characterized volumes as flat to slightly up in Packaging & Specialty Plastics (P&SP). However, the company decided to tighten up supply as it is modeling volumes for its P&SP segment in second quarter as flat to 10% decline-with sales dropping 10% to 20%. In step with this modeling, prices are expected to trend lower globally.

Although Dow is seeing plastics demand for industrial and automotive applications and industrial shipping as weaker, the company is in concert with others in the industry who are optimistic that a positive turnaround on the industrial side of the economy could be seen in the May-June time frame as automotive plants reopen. Still, Dow’s move to help halt oversupply is expected to be joined by similar actions from other suppliers, while others are likely to delay new project expansions.