Dow says all but one of its US Gulf Coast crackers operating post-freeze: CFO

Houston — All but one of Dow Chemical's US Gulf Coast crackers are operational and the company expects its assets affected by the February deep freeze to continue ramping up through March into April, CFO Howard Ungerleider said March 16.

"We still are dealing, like many others are, with a few raw material constraints, and we are continuing to do some freeze damage repairs," Ungerleider said during the JP Morgan Virtual Industrials conference.

Ungerleider said he expects Dow's Texas assets to reach 80% rates by the end of March and full rates "at some point" before the end of April.

"That will really enable us to begin to fulfill the backlog of demand, which is pretty significant," he said.

Dow's lone cracker that remains shut is an 880,000 mt/year facility in Orange, Texas, which is expected to restart later in March, he said.

The winter storm brought more than 72 hours of sustained sub-freezing temperatures to the US Gulf Coast, as well as much of the US, in mid-February. The storm prompted widespread power outages and forced many petrochemical plants to shut down, including more than 70% of US ethylene capacity.

While the majority of plants that shut because of the storm have restarted, ramp-ups have been slow as producers continue damage assessments and stop for repairs as needed.

Ungerleider noted that despite costs of repairs and ramp-ups, Dow expects a net profit upside for Q1 2021 from tight supply and strong demand for both single-use consumer plastics and more durable plastics, such as those used in vehicles and appliances.

He said the company exited 2020 with increasing momentum on demand, which continued to improve despite the winter storm's impacts. The shutdowns prompted producers to pull from inventories to supply customers – albeit with smaller volumes than usual – which further squeezed resin supply that already was tight before the freeze.

"We expect these strong supply-demand fundamentals to continue in light of the order backlogs that I mentioned, the pent-up demand, and the low inventories in most of the value chains that we see," Ungerleider said.

The freeze demonstrated that the petrochemical industry is one weather event away from significant tightening of operating rates amid strong demand, "so it doesn't take much to tilt the market," he said.

Ungerleider said PE demand rose 2% in 2020 despite the global emergence of the coronavirus pandemic, illustrating that packaging consumption growth continued more in homes and less in restaurants, hotels, stadiums and theaters.

"Your amount of packaging per square inch of food consumed, as an example, went up, and that's what's allowed the market to continue to grow even though overall GDP was reduced," he said.

With COVID-19 vaccines rolling out, travel and commercial construction industries are poised to improve as well.

"I think there's a lot of potential upside in front of us over the next several years," Ungerleider said.