Dow: Energy Efficiency Not Offsetting Rising Costs of Energy

Dow: Energy Efficiency Not Offsetting Rising Costs of Energy

Dow Chemical Co. has taken steps to reduce its energy consumption and reliance on non-renewable feedstocks to make products that sell in some 160 countries around the world.

Yet even a company making gains in trimming its costs and operating more efficiently is not immune from feeling the pinch caused by the endless upward march of energy and hydrocarbon costs. Dow said Tuesday it would raise prices for the second time in a month, idle plants and impose fuel surcharges as it struggles to stabilize its shrinking profit margin.

“We improved energy efficiency by 22 percent from 1995 to 2005 and are targeting another 25 percent by 2015,” said Dow Chairman and CEO Andrew Liveris in a statement. “We're cutting costs significantly. We have an array of efforts around alternative energy and alternative 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 will charge about 25 percent more for its products beginning July 1, on top of the 20 percent price hikes it instituted this month. Feedstock and energy costs grew in the first part of the year by 40 percent over the same period in 2007, the company said.

Dow now plans to reduce polystyrene production in Europe by 15 percent, and idle European styrene production by 40 percent. The company will idle or reduce production of ethylene oxide worldwide by 25 percent, and acrylic acid in North America by 30 percent.

The company will make 20 percent less STYROFOAM building insulation in response to a drop in the housing market. A decline in the North American auto market is reflected in a series of cost reduction measures related to facilities, people and external spending, as well as the sale of a paint shop sealer business.

Dow will charge $300 per truck shipment and $600 per rail shipment of plastics, chemicals and hydrocarbons in North America, followed by freight surcharges in other regions later this year.

While announcing the policy changes, Liveris called on the federal government to address energy concerns that are threatening the U.S. economy.

“It is time for Congress to show true bi-partisan leadership, by opening domestic supplies of oil and natural gas, assuring transparency in our energy markets, encouraging even greater energy conservation, and by placing all forms of alternative energy on the table -- including solar and wind, as well as nuclear, clean coal, and biomass -- all the while being mindful of the need to slow, stop and reverse the growth of greenhouse gas emissions," Liveris said.