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Dow CFO expects demand for PE to remain strong in 2022 as the global economy continues to expand at levels not seen in more than a decade
.
Dow Chief Financial Officer Howard Ungerleider said the global economy will grow 5% in 2022, a level last seen globally in 2005
.
Other indications are that demand for PE continues to grow
.
The Institute for Supply Management's (ISM) Manufacturing Purchasing Managers' Index (PMI) remains well above its 10-year average
.
"Demand is strong all over the world,
" Ungerleider said
.
Resilient PE demand has been a hallmark of the post-pandemic economy
.
During a recession, demand typically drops by 3-5%, Ungerleider said
.
But demand has risen by 3-5% during the pandemic due to changing consumer habits
.
By 2021, that number should rise by 5%, he said
.
GDP forecasts for 2022 point to additional supply needs
.
As a rule of thumb, Ungerleider said, for every 1 percent increase in GDP, two or three world-scale PE factories are needed
.
Dow acknowledged some problems with its forecast for continued growth
.
Earlier on Wednesday, the company said its fourth-quarter earnings before interest, taxes, depreciation and amortization (EBITDA) would be $150-200 million lower than the current consensus, due to higher raw material costs, PE and The price of its by-products fell
.
Ungerleider said higher costs and lower prices contributed to lower margins in Dow's packaging and specialty plastics divisions
.
Still, the drop in demand didn't factor into Dow's fourth-quarter expectations, and the company expects demand to remain strong in the months ahead
.
Ungerleider said the order backlog remained strong
.
The inventory-to-sales ratio is well below the 20-year average
.
Global demand in November increased by double digits compared to October, Ungerleider said
.
Dow's December orders were higher than November, Ungerleider said
.
This development bucks the trend, as Dow typically slows between mid-November and the end of the year
.
