Dow plans deep cuts amid poor economy

Responding to economic uncertainty and a longer and deeper chemical industry downturn than it had anticipated, Dow is planning further cuts to manufacturing. The company, the largest US chemical maker, is delaying an ethylene project in Alberta and may idle or permanently shut down three large facilities in Europe, including its ethylene cracker in Böhlen, Germany.

“The reality is our industry is in one of the most protracted downcycles in decades, facing a third consecutive year of below 3% GDP growth,” CEO Jim Fitterling said in an April 24 conference call with analysts. “This has been further exacerbated by geopolitical and macroeconomic concerns, which are weighing on demand globally.”

Dow is delaying its so-called Path2Zero project in Fort Saskatchewan, Alberta. The $6.5 billion project includes the construction of new ethylene and polyethylene plants. Instead of using fossil fuels to heat the furnaces, the company plans to use hydrogen produced by feeding cracker off-gases into an autothermal reformer. The carbon dioxide emissions would be captured and stored underground.

“We now see a higher probability of a lower-for-longer earnings environment, which changes our expectations for when the capacity from this project will be needed,” Fitterling said.

Earlier this year, Dow announced plans to reduce capital spending by $300 million to $500 million in 2025. At the time, it also unveiled a $1 billion cost-reduction program that would lead to 1,500 layoffs, or about 4% of its staff.

With the Fort Saskatchewan delay, Dow is now reducing capital outlays by $1 billion for the year. The company says it will decide by the end of the year whether it will ramp up construction in 2026.

Additionally, Dow is expanding its European asset review, which it expects to complete by the middle of this year. Disclosed last October, the effort focused on the fate of the firm’s European polyurethane raw material business.

Now the company is broadening that effort. It plans to idle or shut down its cracker in Böhlen, Germany, and its chloralkali and vinyl assets in Schkopau, Germany. Additionally, the company says it will close its siloxanes plant in Barry, Wales, a move it earlier said it was evaluating. These facilities, Fitterling said, are either not fully integrated or have relatively high production costs.

Fitterling said the new US tariffs, such as the 145% duties on Chinese goods, as well as reciprocal tariffs, influenced Dow’s decision to delay the Fort Saskatchewan project. “With the situation that we’re in now, with the uncertainty around where tariffs are going to land, with the impact that’s having on demand, that’s driving our lower-for-longer outlook,” he said.

Dow’s financial results, an early indicator of how the rest of the industry will perform in the first quarter, declined sharply. Earnings, excluding significant items, dropped 96% on a 3% decline in sales.