Dow Chemical Announces
New Round of Price Increases By DONNA KARDOS
June 24, 2008 8:33 a.m.
Dow Chemical Co. announced its second round of price hikes in a month, saying they will rise as much as 25% starting July 1 as the company continues to deal with surging energy costs. The inflation risks poised by the new price hikes, on top of up to 20% increases that began June 1, show the pressures facing the Federal Open Market Committee as it meets starting Tuesday to discuss the U.S. economic picture and set interest-rate policy. Dow's price increase, which it said was caused by "the continuing relentless rise in the cost of energy and hydrocarbon feedstocks," will be coupled with freight surcharges and the idling of additional manufacturing plants. Chief Executive Andrew N. Liveris called the steps "extremely unwelcome but entirely unavoidable" as the global cost of oil, natural gas and hydrocarbon derivatives surge ever higher. He noted that for the first half of the year, feedstock and energy costs are up more than 40% from a year earlier. Dow Chemical, one of the largest chemical manufacturers in the world, uses oil-based products and natural gas as raw materials and is also a heavy user of energy to power its manufacturing plants. Dow's price hike last month led a parade of other chemicals makers boosting prices to pass on higher raw-material costs to their customers. In addition, past increases had been usually confined to one product or one region. Analysts said when Dow made its first price hike that its decision to increase prices for all its products world-wide was nearly unprecedented. Citing "a serious decline" in North American auto sales, Dow said Tuesday its automotive unit will cut costs and that ti will sell consolidate plants and sell its paint-shop sealer business. Regarding the production cuts - which Dow said are due to the slowdown in the U.S. and European economies and a recent surge in hydrocarbon feedstock costs - it has already cut ethylene oxide production worldwide by 25%, its European polystyrene production rate by 15%, and idled 30% of its North America acrylic acid production. It plans to additionally idle 40% of its European styrene production capacity. The freight surcharges of up to $600 per shipment will be effective in North America Aug. 1, applying to customers buying chemicals, hydrocarbons and plastics where Dow absorbs the freight currently. Other geographic regions will see a freight surcharge implemented "as appropriate," the company said. Dow also said its building-solutions unit temporarily idled 20% of its European capacity for producing styrofoam insulation, citing declines in the housing and consumer sectors, as well as rising costs. Write to Donna Kardos at donna.kardos@dowjones.com1 | 
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