February 7, 2007
Andrew N. Liveris, chairman/CEO of polymer maker Dow Chemical (Midland, MI), says the company is discussing placing its two commodity plastics businesses (polystyrene (PS), of which it is the world’s largest supplier, and polypropylene (PP), world’s fifth largest producer) into joint ventures. The move would help the company reduce its vulnerability to the cyclical nature of the business, a company spokesman told MPW.
Although Dow saw record earnings in 2006 and was particularly happy with the return it received from its engineering thermoplastics business, its commodity plastics sales rose a measly 1% in the fourth quarter of 2006 while volume increase was only 4%. Double-digit improvements were seen only in Latin America and Asia/Pacific while growth in Europe was at best modest and North America, where prices fell 3%, was rated soft. “Despite reporting price improvements for polystyrene in every geographic region compared to the same period last year, the overall double-digit increase was not sufficient to keep pace with the escalating cost of benzene, which continues to present a significant challenge for the business,” Liveris says.
The decision to seek joint-venture partners, termed the “asset light” strategy, was made to fortify the company’s portfolio, he says and add strengths that partners could bring to complement what Dow already offers. These could involve back integration of feedstocks or expanded geographic presence.
The company already put several assets into joint-venture operations including ethylene glycol and its polyethylene terephthalate (PET) businesses with MEGlobal and Equipolymers as well as for polyethylene in the Middle East with Kuwait’s Petrochemical Industries Co. (PIC). Apparently Dow sees a good future in joint ventures or off-take agreements such as with Romania’s Rompetrol, which produces low- and high-density PE that is then marketed by Dow in Eastern Europe. Kathleen Fothergill, Dow’s corporate director for investor relations, says last year the contributions of Dow’s joint ventures increased 8% for the last quarter of 2006.—[email protected]
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