October 5, 2018 – Bloomberg
DowDuPont Hit as Factory Splurge Boomerangs to Drive Up Costs
By Jack Kaskey
The U.S. shale boom has for years blessed chemical makers with cheap energy, prompting record spending on new factories. Now that unchecked growth is costing the companies big.
DowDuPont Inc., Exxon Mobil Corp., Chevron Phillips Chemical Co. and others invested billions in new plants to take advantage of rock-bottom prices for ethane, a key raw material for making plastic. But they built so much so fast that demand for the feedstock exploded. Prices soared 43 percent last month and have doubled so far this year.
That’s turning ethane, which used to give chemical makers a reliable cost advantage, into a squeeze on profit margins -- and a drag on shares. More ethane-fed plants are set to open next year, adding to the pressure on prices.
“Unfortunately, it could get worse,’’ said Kelly Van Hull, manager of energy analytics at RBN Energy. Ethane supplies may not be able to catch up to demand until 2020, she said.
Read the full article here: https://www.bloomberg.com/news/articles/2018-10-05/dowdupont-hit-as-factory-splurge-boomerangs-to-drive-up-costs
