Dow Chemical says it is raising the prices of its products in July even more than the increases it announced in May — by as much as an additional 25 percent — to offset increasing costs of energy and hydrocarbon feedstocks.
The increases include a North American freight surcharge of $300 per shipment by truck and $600 per shipment by rail, effective Aug. 1, 2008. Later this year the company will implement a freight surcharge in other geographic regions, as it deems appropriate.
Other measures Dow plans include temporarily stopping or reducing production at a number of manufacturing plants.
“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,” according to Andrew N. Liveris, Dow chairman and CEO. “We must restore margins in our businesses, both through price increases and the reduction of operating costs at certain production facilities.
The company says it has already stopped or reduced the production of several of its products including ethylene oxide, polystyrene, and acrylic acid production and plans further cost reduction measures.
“We improved energy efficiency by 22 percent from 1995 to 2005 and are targeting another 25 percent by 2015,” Liveris said. “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 Chemical spent roughly $1 billion between 1995 and 2005 on refining its energy efficiency practices, investing in new clean-tech technologies, and working with manufacturers on new green chemistry.