Truck shipping

Dow expects supply chain lockdowns to last until 2022: CEO

Dow Chemical expects supply chain bottlenecks that have slowed exports of chemicals and resins to last through the first quarter of 2022 amid continued high demand for plastics across various industries, said CEO Jim Fitterling on October 21.

Dow’s backlog is around 30% higher than normal due to supply chain bottlenecks that reduced its inventory-to-sales ratio by around 10% in the third quarter of 2021, Fitterling said when calling the company’s quarterly results.

These supply and logistics bottlenecks exist “everywhere”, especially marine cargoes destined for export and products transported by truck, he added.

“It’s a little hand-to-hand combat right now,” Fitterling said. “If a truck driver doesn’t show up, the shipment is delayed. I think we’re going to be in this situation for the rest of the year and into the first quarter.

Dow reported net income of $ 1.68 billion for the quarter, up from a loss of $ 25 million in the previous year quarter. The strong recovery is due to net sales up 53% compared to the third quarter of 2020 and higher prices in a context of robust demand despite supply and logistics constraints.

Fitterling said the price hikes had boosted sales of industrial and consumer packaging as well as flexible food and beverage packaging, although volumes were lower than in the third quarter of 2020 due to the drop in l polyethylene supply due to turnarounds and weather-related outages.

Hurricane Ida’s assault on Louisiana on August 29 affected Dow’s Taft and Plaquemine complexes along the Mississippi River, forcing the company to shut down a cumulative capacity of 2.5 million t / year of capacity. of ethylene and a total of 3.37 million t / year of polyethylene capacity.

The Plaquemine complex resumed operations first, but the Taft complex was closed until later in September.

CFO Howard Ungerleider said the continued recovery in industrial activity is expected to continue through the fourth quarter as production rises from low inventory levels to meet demand. He said demand for electronics, mobility, building and construction “continues to exceed supply”, and that higher energy costs along the US Gulf of Mexico coast and particularly in Europe are expected. cost an additional $ 100 million in the fourth quarter.

Ungerleider said Dow expects supply chain disruptions to persist, extending the ability to replenish inventory.

Dow further expects these persistent global problems to create tougher-than-expected market conditions, exacerbated by the Chinese government’s crackdown on energy use that has prompted many petrochemical producers to close factories or scale back. their rates.

“We expect robust economic growth to continue,” Ungerleider said. “With the Delta variant slowing the reopening of economies around the world, there remains significant pent-up demand globally, particularly in our industrial and consumer end markets.”
Source: Platts


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