Dow Chemical U.S. PE Projects Expected to See Completion by Year's End

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Researched by Industrial Info Resources (Sugar Land, Texas)--Dow Chemical Company (NYSE:DOW) (Midland, Michigan) will continue to enjoy strong profits from its polyethylene (PE) business as the start-up of new production across the industry will be slow to catch up with growing demand, according to Dow executives.

New PE production will lag the wave of ethylene additions during a time when global demand for PE is growing, Dow executives said during the company's recent earnings conference call. Industrial Info is tracking three major PE capital projects by Dow in Texas and Louisiana with a combined worth of $1.1 billion, all of which are expected to see completion by the end of this year.

"The main point of disagreement that we have with consultant projections is the speed in which new U.S. [PE] projects are brought online, as well as assumptions about projects in Asia and the Middle East, which we find overly optimistic," said Chief Operating Officer Jim Fitterling. "If you look at history, you will see that industry supply projections are almost always higher than what is achieved due to project cancellations, construction delays and labor constraints." As an example, he said in 2007, supply projections for 2012 were about six world-scale ethylene crackers worth of production higher than what became reality.

As a result, "polyethylene over ethylene margins are likely to remain solid, as polyethylene capacity additions lag ethylene expansions, especially in the U.S.," he said. Dow forecasts global PE demand to grow from more than 200 billion pounds in 2016 to roughly 230 billion pounds in 2019. Demand will exceed production by roughly 20 billion pounds by 2019, according to Dow.

Three Dow PE capital projects in the U.S. being tracked by Industrial Info include:

• Poly D Low Density Polyethylene (LDPE) Unit Addition at Plaquemine, Louisiana, valued at $450 million. The new unit will produce 500 million to 550 million pounds per year. Project completion is expected by the end of September this year, with startup in the fourth quarter. For more on this project, see Industrial Info's project report.


• Freeport, Texas Plant Linear Low Density Polyethylene (LLDPE) (Poly 6) Unit Addition, valued at $350 million. The 650,000-metric-tonne-per-year unit is expected to see completion and startup in fourth-quarter 2016. For more on this project, see Industrial Info's project report.


• Freeport Plant B LDPE (POLY 5) Unit Addition, valued at $300 million. The 400,000 metric-tonne-per-year unit is slated for completion and startup in fourth-quarter 2016. For more information on this project, see Industrial Info's project report.

Fitterling also mentioned the PE expansion by Sadara, a joint venture in Saudi Arabia between Dow and Saudi Aramco, where parties are "screaming for more product." Located at Sadara's Al Jubail chemical complex, the High-Pressure LDPE Unit project has a total investment value of $360 million. Completion of the 661 million-pound-per-year unit is set for the end of June this year. For more information on this project, see Industrial Info's project report.

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