Dow's sales increased for the fourth consecutive quarter in the July-September period, as the company cited strong polyethylene demand despite a soft macroeconomic environment, the company's executives said during the third-quarter earnings call on Oct. 24.
US chemical giant reported net sales of $10.9 billion in Q3, up 1% compared with the same year-ago quarter, led by higher demand and local prices in the US and Canada. Overall sales, considering Material and Coatings, Intermediates and Infrastructure and the Packaging Plastics segments, increased 1% on the year, with the latter rising 1% quarter on quarter.
The increased sales came even after Dow reported that the Texas 8 cracker at Freeport, Texas had experienced issues, “as the plant was returning to normal rates after reduced operations due to Hurricane Beryl,” causing the unit to shut in late July, it said on Sept. 11.
The cracker affected by this unplanned outage “has been successfully restarted and is running well," said Dow's chairman and CEO James Fitterling. However, the event affected the usual market dynamics. "When we had Texas-8 out, we had to go into the market to get some of that propylene, so that was a higher cost."
The company has eight crackers across the Texas and Louisiana area. Three of them are located in Freeport, Texas, with a combined annual capacity of 3.640 million mt of ethylene production.
Ethylene prices in the US were volatile throughout Q3, reaching a two-year high at 38.25 cents/lb for Mont Belvieu on Sept. 11, 2024. Market participants said this was in response to plant outages in the region after Hurricane Francine hit, as well as a perception of a short market, which increased prompt spot transactions.
Prices have since dropped over 17 cents/lb amid an ongoing weak downstream demand.
The company also pointed out that it remains competitive in the ethylene production in the Americas supported by its upcoming path to net-zero Fort Saskatchewan project in Canada, which is set to decarbonize 20% of its global ethylene capacity.
During the call, Dow said that approximately 40% of cracker filings of the project are complete. “I would say we'll be advantaged on ethane in the Fort, and we believe our ethylene cost up in Canada will be some of the best in the world that we have,” said Fitterling.
North America has a competitive advantage regarding ethane availability, which places the region’s cost of production on ethylene as the lowest compared to Europe and Asia, according to S&P Global analyst, Robert Stier.
"[Ethane’s] frac spreads have been consistently at $0.50 or below. So I think we're probably going to see that continue," Fitterling said.
Domestic PE prices increase in all regions, except Latin America
“Demand is still good. I would say we had a little bit of a slowdown at the end of the quarter with exports because of the dock strikes,” said Fitterling. “But overall, downstream demand and volume has been good. So operating rates are continuing to tighten up and the cost advantage assets are running strong.”
The International Longshoremen’s Association went on strike on Oct. 1, the first at the US East and Gulf Coast ports since 1977. A tentative wage agreement with ports operator USMX was reached, ending the strike on Oct. 3.
Latin American PE sources reported delays for US shipments ranging from two to four weeks following the port strike at the beginning of the month, with some offers for prompt delivery priced higher. “Another challenge for US traders as we continued to face shipping difficulties stemming from the port strike,” said a West Coast South America-based source.
However, prices have consistently decreased in the region dragged by weak demand and ample material availability. Dow released an increase letter for $66/mt for resins in November, but it remains to be seen whether market participants will accept the hike.
When asked about expectations on Brazil’s recent import tax impact, Fitterling said: “We see tariffs around the world for countries that are trying to protect local manufacturing and trying not to be completely at the mercy of import materials for all of the needs for their economy.”
