Industry News

Dow Epoxy Takes Action to Address Unacceptable Margins

Published on 2008-06-04. Author : SpecialChem

Midland, MI -- Dow Epoxy, a business unit of The Dow Chemical Company ("Dow"), has announced plans to raise prices in North America and other world regions as necessary, in response to the current climate of rising costs and shrinking margins.

"Profit margins have substantially eroded in the face of step-change hydrocarbon and energy and other manufacturing costs, and the situation shows no signs of improvement," said Patrick Ho, business group president, Dow Epoxy & Specialty Chemicals. "We have absorbed our share of the increased costs and done what we can to mitigate them, but we have no more room and must act immediately and definitively to ensure our business is healthy over the long-term to help our customers succeed."

The business is currently meeting with customers to discuss market issues and upward price movement primarily driven by rising costs. On the cost side, Dow has incurred new hydrocarbon and energy costs of greater than $2 billion in the first quarter of this year alone and an additional $665 million so far in the second.

"Inaction on pricing means severe consequences," said Ho. "Dow Epoxy has supported industry growth for more than 60 years through trusted supply of raw materials and delivery of new epoxy solutions. Our customers need trusted supply and continual innovation from us to help them win in their markets. They also expect us to meet ever-increasing performance and delivery standards across the world. We are rising to those challenges, but prices must be at reinvestment levels to sustain our ability to do so."

Ho cited several recent technology and business initiatives to reinforce the importance of continual business investment in support of customers' future growth, including:

  • New global application centers and a new R&D lab in support of coatings and electrical laminates
  • Increased investment in sustainable technologies that will lessen the industry's reliance on costly petrochemicals, such as Dow's proprietary glycerine to epichlorohydrin (GTE) technology, which uses a renewable resource - glycerine from biodiesel - to produce epichlorohydrin
  • Ongoing efforts to increase energy efficiency at Dow production facilities worldwide
  • Two new production facilities - a 100,000-MTPA liquid epoxy resins (LER) and a 150,000-MTPA GTE plant - in Shanghai, scheduled to start up in 2010
  • Multiple new epoxy products designed to meet needs ranging from high temperature protection to halogen-free electrical laminates
  • Dow Epoxy Systems, a new unit of Dow Epoxy focused on supporting the growth of specialty epoxy systems users in various industries, including civil engineering and infrastructure, composites, wind energy and others

"The economics are simple, but the situation is tough," said Ho. "We need sustainable returns above costs to allow for reinvestment. Our customers need that same formula. All of us are caught in the hard-hitting squeeze of soaring costs on one end and downward pressure on prices from retailers and consumers on the other. For us, it's not a sustainable situation. We must take action to protect the health of our business and ensure we're well positioned going forward to support our customers' growth."

About Dow Epoxy:

Dow Epoxy is one of the world's largest epoxy resins and intermediates manufacturers, with strong positions in a number of major application areas, including coatings (Dow Coating Solutions), electrical laminates and civil engineering. Dow Epoxy, through a new business unit known as Dow Epoxy Systems, also serves as a formulator for users of specialty epoxy systems in many industries, including civil engineering and infrastructure, composites, wind energy and others.

About Dow:

With annual sales of $54 billion and 46,000 employees worldwide, Dow is a diversified chemical company that combines the power of science and technology with the " Human Element " to constantly improve what is essential to human progress. The Company delivers a broad range of products and services to customers in around 160 countries, connecting chemistry and innovation with the principles of sustainability to help provide everything from fresh water, food and pharmaceuticals to paints, packaging and personal care products. References to "Dow" or the "Company" mean The Dow Chemical Company and its consolidated subsidiaries unless otherwise expressly noted.

Source: Dow

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