Midland, Michigan - Dow Chemical will raise the price of its products by up to an additional 25 percent in July, the company announced 24 June. The price increases are aimed to offset the "continuing relentless rise in the cost of energy and hydrocarbon feedstocks," the company said. This announcement follows Dow's recent price increase of 20 percent on average across all of its products.
Dow also announced that it will implement a freight surcharge of $300 per shipment by truck and $600 per shipment by rail, effective 1 August, to North American customers buying chemicals, hydrocarbons and plastics, where Dow absorbs the freight currently. The company added that later this year "a freight surcharge will be implemented in other geographic regions as appropriate."
As a part of continuing efforts to cut costs, Dow also announced it is moving ahead with plans to temporarily idle or reduce production at a number of manufacturing plants, including reducing ethylene oxide production worldwide by 25 percent.
The company plans to reduce or idle capacity of a number of other products, not related to polyurethanes, this includes idleing 40 percent of its European styrene production capacity and reducing European polystyrene production rate by 15 percent, said Dow.
"The price increases we announced on May 28 helped, but they were not enough to fully cover the additional costs we are now facing. For the first half of 2008, our feedstock and energy costs are up more than 40 percent compared with the same six months of last year. Even since our last announcement, the cost of hydrocarbons has continued to rise, and that trajectory shows no sign of changing," said Andrew Liveris, Dow chairman and ceo. "We must restore margins in our businesses, both through price increases and the reduction of operating costs at certain facilities."
He continued, "We improved energy efficiency by 22 percent from 1995 to 200 and are targeting another 25 percent by 2015. We're cutting costs significantly. We have an array of efforts around alternative energy and alternate feedstocks. We're making great progress in the implementation of a strategy that will address the issue over the medium to long term. But the staggering increases in our costs over the past few months have forced us to take these further measures in order to restore our margins."
Dow said in the statement that over the past five years its bill for hydrocarbon feedstocks and energy has "surged four- fold", from $800 million in 2002 to an estimated $3200 million-plus this year.