In sync with its strategy to leverage cost-advantaged shale
gas-based feedstocks, U.S. chemical kingpin
) will start the construction of its world-scale ethylene
production facility in Freeport, TX, on Jun 30. This new cracker
(converts ethane into ethylene) represents a significant part of
Dow's Texas Operations in Freeport.
The Freeport ethylene cracker, which represents a major part of
Dow's roughly $4 billion U.S. Gulf Coast investments, is expected
to be operational in first-half 2017 and employ 2,000 people during
its construction. The facility, which has an estimated capacity of
around 1,500 kilotons per annum (KTA), will facilitate growth and
expansion of the company's performance plastics business.
Dow's U.S. Gulf Coast investments in Texas and Louisiana are
expected to collectively employ 5,000 people during peak
construction. The projects in Freeport represent most of these
employments with 4,000 workers needed for building multiple
feedstocks, derivatives and supporting infrastructure projects.
Dow Texas Operations in Freeport is the company's biggest
integrated manufacturing site globally and the largest chemical
complex in North America with over 4,200 workers.
Jim Fitterling - Dow's executive vice president of feedstocks,
energy and performance plastics - said that the Gulf Coast
investment will connect cost-advantaged raw materials to many of
the company's highest-margin downstream businesses including
Affordable natural gas and ethane (derived from shale gas) offer
U.S. producers a compelling cost advantage over their global
counterparts who use a more expensive, oil-based feedstock.
Leveraging the abundant natural gas supply and cost advantage,
chemical makers, including Dow, are investing billions of dollars
for setting up crackers that produce ethylene from ethane.
Dow, one of the biggest ethylene producers on the planet, is seeing
significant feedstock advantage in North America. The company's
investments in U.S. Gulf coast and Middle East (including the
Sadara joint venture) are focused on boosting this advantage. Dow
expects its U.S. Gulf coast investments to deliver EBITDA of $2.5
billion when fully operational and offer a strong base for growth
in the long term.
The new ethylene cracker together with Dow's propylene PDH project
will take it a step further to realize the financial benefits of
its Gulf Coast investments. The PDH unit in Freeport is more than
30% complete and is expected be fully operational by mid-2015. The
unit is expected to benefit from favorable propane to propylene
Dow's strategic investments, including Sadara and U.S. Gulf coast,
are expected to help it achieve its overall EBITDA target of over
$10 billion in the near term.
Dow is a Zacks Rank #3 (Hold) stock.
Other companies in the chemical space worth considering include
Compass Minerals International Inc.
). While both Compass Minerals and PetroLogistics carry a Zacks
Rank #1 (Strong Buy), Celanese sports a Zacks Rank #2 (Buy).
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