Dow, one of the world´s biggest petrochemical companies and based in Midland, Michigan, has resorted to the elimination of 2,000 positions this year as the company faces challenges including the consequences of lower polyethylene profit margins in 2023 compared with a year earlier.

Dow plant in MIdland, MIchigan. Courtesy of Dow

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The job reduction at Dow is the most significant job elimination since the payroll cuts announced in the second quarter of 2020 during the Covid pandemic. At the time the company said it was going to reduce about 6% of its global workforce. Its total employees at the time were about 36,500.

Earnings from the company packaging and specialty plastics were about slashed in half for the January-March 2023 period compared with a year earlier to $642 million compared with $1.2 billion in the year-ago period, “primarily due to lower integrated polyethylene margins,” company´s CEO James Fitterling said during the first quarter 2023 earnings call.

Job reductions to last all of 2023

“On the 2,000 headcount reduction (…) you would expect 75% of those exits to happen by the end of second quarter (…) probably close to 90% by the end of the year,” Fitterling said.

“The driving force for that is obviously just looking at our overall cost position and trying to keep our costs lean and in line with demand.,” FItterling said.

Petrochemical companies have been hit by reduced demand for resin commodities, he said.

“If you can take a look at demand really hit in the fourth quarter, really hit the lowest we've seen since the beginning of the COVID pandemic, which was back in March of 2020. And so we really need to tighten up to that level (…),” he said.

Cost cuts to also affect maintenance spending

Notifications have begun and 75% of the impacted roles will exit by the end of the second quarter, said the company CFO Howard Ungerleider.

“We're also continuing to review our global asset footprint on a business by business and region-by-region approach, rationalizing select higher-cost, lower-return assets in line with market fundamentals,” he said.

Opportunities to reduce operating costs include “decreasing maintenance turnaround spending by $300 million year-over-year and driving efficiencies through the value chain, including streamlining our logistics networks and reducing our spend of purchased raw materials and contract services,” Ungerleider said.

“All in, we expect to deliver approximately 35% of our cost savings in the first half of the year and the remaining 65% in the second half of the year,” he added.

LyondellBasell saw improved margins

LyondellBasell, a company that like Dow produces plastic resin commodities, said on April 28 along with the release of first quarter results that its profit margins improved in the first quarter because it enjoyed better prices for feedstock.

“Global olefins and polyolefins margins increased during the first quarter driven by lower ethane cost in the U.S., lower energy costs and moderately improving global demand.  LyondellBasell increased global operating rates to align with market conditions,” it said.

LyondellBasell said that while plastic capacity additions were supposed to increase challenges to North American producers already facing the perspective of weakened demand along with slower economic activity, some new projects have had a slow start. This will bring relief from new product that could potentially add to excess inventories.

“Delays in the start of North American polyethylene capacity additions across the industry are expected to reduce new market supply and support polyethylene margins,” LyondellBasell said 

“During the second quarter, LyondellBasell expects to operate Intermediates & Derivatives assets at 80% and modestly increase global olefins and polyolefins operating rates to 85% to match the market outlook.  The company remains watchful for the effects of changes in global monetary policies and improving economic conditions in China on petrochemical markets during the second half of 2023,” it added. 

By Renzo Pipoli