Oil hurts: Dow announces further price increases, freight surcharges

27 June 2008

The Dow Chemical Company will raise the price of its products by as much as an additional 25 per cent in July in an effort to offset the continuing relentless rise in the cost of energy and hydrocarbon feedstocks.

It wil also implement a freight surcharge of $300 per shipment by truck and $600 per shipment by rail, effective 1 August.  The surcharge applies to North America customers buying chemicals, hydrocarbons and plastics where Dow absorbs the freight currently (seller absorbs freight). 

Later this year a freight surcharge will be implemented in other geographic regions where required.

Dow is also moving ahead with plans to temporarily idle or reduce production at a number of manufacturing plants - it has reduced its ethylene oxide production worldwide by 25 pe rcent, and idled 30 per cent of its North America acrylic acid production. The company also will idle 40 per cent of its European styrene production capacity, and has reduced its European polystyrene production rate by 15 per cent. These actions are due to the slowdown in the US and European economies, and the recent surge in hydrocarbon feedstock costs.

In light of a serious decline in North American auto sales, Dow's Automotive unit is announcing a series of cost reduction measures covering facilities, people and external spending.  In addition, the business is in the process of divesting its paint shop sealer business and is implementing plant consolidations resulting in the closure of three production units.

In addition, Dow Building Solutions has temporarily idled 20 per cent of its European capacity for producing Styrofoam insulation.  Earlier this month, it had announced plans to idle three Dow Emulsion Polymers plants representing 25 percent of North America capacity and 10 per cent of European capacity.  These reductions were directly related to declines in the housing and consumer sectors, as well as rising costs.