By Patrick Raleigh, UT On-line/news editorMidland, Michigan-Dow Chemical Co.'s propylene oxide business is facing some severe difficulties, despite an anticipated growth rate of 3-4 percent in the market this year, according to the US group.Margins in the global PO business are likely to remain under pressure in 2004, forecasts Earl Shipp, who has recently replaced David Pashalidis as director of Dow's propylene oxide/propylene glycol business. The group is one of the world's largest PO producers with a capacity of around 1800 kilotonnes per annum (ktpa).Dow's PO production costs are closely linked to its US energy prices, as well as to prices for feedstocks, including natural gas, oil derivatives and propylene. These costs are likely to remain "at current high levels," and "will continue to have a significant impact on our costs," Shipp commented.Dow is particularly concerned about an "extreme tightness" in the supply of propylene monomer, which has risen in price by over 45 percent in the past six months, Shipp added in a 31 March company statement."We expect propylene pricing to continue to escalate. This has a significant negative impact on our margins for PO … and remains a challenge for Dow and our customers," the Dow executive commented.PO pricing is, meanwhile, being subdued by a supply overhang caused by capacity expansions of the last three years, continued Shipp. Overall PO industry production capacity is about 6800 ktpa, well above the current market demand of 5400 ktpa, he said. "