Dow at 16th Annual Global Industrials Conference: Strategic Resilience

On Thursday, 05 June 2025, Dow Inc. (NYSE:DOW) participated in the 16th Annual Global Industrials, Materials & Building Products Conference. CEO Jim Fitterling discussed the company’s strategies to navigate a challenging macroeconomic landscape. While Dow faces industry headwinds like slower global growth and tariff implications, it remains committed to optimizing its portfolio through cost reductions and strategic investments.

Key Takeaways

• Dow is targeting $1 billion in cost savings by 2026 and expects $6 billion in cash support over the next two years.
• A strategic partnership with Macquarie Asset Management for Gulf Coast infrastructure is projected to yield $2.4 billion in initial cash proceeds.
• The company is focused on growth in packaging & specialty plastics and optimizing European assets.
• Dow is committed to sustainability initiatives and advancing nuclear energy projects with X Energy.
• Despite economic challenges, Dow reaffirms its commitment to delivering shareholder value.

Financial Results

• Strategic Partnership with Macquarie: Initial cash proceeds of $2.4 billion, potentially increasing to $3 billion.
• Nova Chemicals Resolution: Over $1 billion in cash proceeds expected this year.
• Cost Savings: Aiming for $1 billion in annual run rate savings by 2026, with $50 million in Q2 and $300 million by year-end 2024.
• CapEx Reduction: 2025 CapEx reduced to $2.5 billion from $3.5 billion.
• Cash Support: Anticipating $6 billion in cash support over the next two years.
• Divestitures: Completed divestitures totaling $200 million at 10x EBITDA multiples.
• Q2 EBITDA Guidance: Approximately $950 million, facing more headwinds than tailwinds.

Operational Updates

• New Projects: Packaging & specialty plastics and alkoxylation capacity projects to contribute starting in Q3.
• European Asset Review: Expanded review with potential idling or shutdown of capacity in three upstream assets.
• Footprint Optimization: Focus on optimizing global footprint, especially in higher-cost regions like Europe.
• Divestitures: Sale of Talon soil fumigation product line and 50% ownership in Dow AXA joint venture.
• Nuclear Ambitions: Progress on nuclear construction permit with X Energy.
• Recycling Initiative: Acquisition of Circulus, running at full capacity.

Future Outlook

• Mid-Cycle Timing: Improvement in plastics expected in the next one to two years.
• 2030 Targets: Aiming for more than $3 billion of underlying EBITDA by 2030, with a range of $9 billion to $15 billion.
• M&A Strategy: Exploring smaller, bolt-on M&A in key growth areas and evaluating options for European assets.
• Alberta Delay: Path to zero project delayed, with a decision on extension due by year-end.

Q&A Highlights

• Seasonality: Normal demand in packaging, silicones, and coatings; slower in automotive and construction.
• Polyethylene Pricing: Announced a $0.05 per pound increase for June.
• Tariff Navigation: Leveraging global footprint to mitigate impacts and engaging with government representatives.
• Dividend Policy: Commitment to dividend payout while maintaining flexibility.
• European Assets: Considering strategic partnerships rather than shutdowns for European assets.

For more details, refer to the full conference call transcript below.

Full transcript - 16th Annual Global Industrials, Materials & Building Products Conference:

Dave Begleiter, Analyst, Deutsche Bank: My name is Dave Begleiter with Deutsche Bank’s US Chemicals team. And, again, welcome to the Deutsche Bank Global Industrials Materials Conference. With us today is the team from Dow, Dow Inc, led by CEO Jim Fiddling. Jim has been CEO of Dow since 2018. I spent more than forty years at Dow creating value and driving successful outcomes.

So with that, so I hope you’ll make a few brief comments. We’ll go into the q and a portion and the fireside fireside portion of the session. So, Jim, all yours.

Jim Fitterling, CEO, Dow Inc: Thanks, David. Good morning, everyone, and thanks for having me today. Before we get into Q and A, I’d like to share some progress and things that we’re seeing across key end markets and regions and progress that we’re making on the actions that Dow previously announced. These actions include the reduction of costs, adjustment of our supply chains aligned to the tariff mitigation, and the overall protection and improvement of our margins as we navigate the prolonged downturn that our industry is facing. If you turn to Slide two, from a macro standpoint, our view shared during our first quarter earnings call remains largely unchanged.

We continue to see slower global growth and an increasing macro uncertainty across many markets largely due to tariffs and the implications on global trade and geopolitics. In The US, trade negotiations with China have been back and forth, obviously, heightening concerns about the economic impact on both nations and on the global economy. And as you’ve seen recently, the imposition of US tariffs on European steel and aluminum along with potential tariffs on automobiles has further strained those relations. In both of those cases, though, the two sides are talking which and positioning, which is real progress and provides some level of optimism for us. The data suggests that these uncertainties did have some negative impact on the economy at least in the month of April, and early May data has shown some improvement in select regions with many major regions remaining contractionary from a manufacturing index standpoint.

So for example, global manufacturing PMI in April moved into contractionary territory for the first time this year, led by a decline in new orders. And we see a lot of this pressure in durable goods markets versus services business or discretionary business in the consumer side. If you look across our four market verticals, we’re experiencing some sluggishness in order patterns in the beginning of the second quarter, which was largely attributed to the tariff induced kind of a wait and see attitude that we saw across many markets. This was notable in the packaging space where early April orders were impacted by industry balances and customer discussions, which led to a lower industry price settlement in April and then subsequent flat pricing in May. Fundamental underlying demand for packaging remains solid and when combined with elevated feedstock costs, provide some support for near term price increases as current polyethylene industry margins are at unsustainable levels.

So we have a $05 per pound increase announced for June, which we expect to be fully implemented. Switching to infrastructure, housing demand continues to be persistently soft globally. In The US, mortgage rates remain high and as a result, building permits declined year over year in April, reaching the lowest level since May of twenty twenty four. Additionally, if you look at Eurozone construction, that PMI has remained in contractionary territory for three consecutive years. These two areas in infrastructure really have a high impact on the polyurethanes business.

On consumer spending, end markets such as electronics and pharma continued to display stability. On the other hand, building and construction, as I mentioned, including some adjacent markets like durable goods and appliances have seen a slower than normal seasonal build. And in mobility, we continue to monitor for the impact on sales and production from potential global tariffs. We continue to see demand growth for our products in high value applications such as silicones that are used in thermal management, which creates more demand because they dissipate heat and ensure stable performance, whether it’s in data centers or in chips or in electronic devices themselves. Additionally, in our industrial solutions business, our Dalfrost fluids for data center cooling and chip cooling reduced power usage by about 30%.

And with that being a a very topical and high interest area, I think we’re we’re looking for some upside growth there as we continue to see data center build out. And our new Diamond Infrastructure Solutions business model offers some leading infrastructure services to meet growing demand for power and utilities for data centers. On slide three, you’ll see that given these dynamics, we continue to remain focused on the actions that we need to take, including near term cash support and cost reductions in order to help mitigate margin pressures and navigate through this cycle. First, we finalized a strategic partnership with Macquarie Asset Management for the sale of a a minority equity stake in select US Gulf Coast infrastructure assets on May. We received approximately $2,400,000,000 in initial cash proceeds from a deal that has been several years in the making.

And as a reminder, Macquarie has the option to increase their stake from 40% to 49% within six months of closing. Doing so would increase the total cash proceeds for Dow to approximately 3,000,000,000 before the end of this year. The new company is called Diamond Infrastructure Solutions. They just recently announced a partnership with a company named Again. That company will build a first of its kind plant that will recycle waste c o two emissions from an on-site tenant in the Texas City Industrial Park.

This agreement is just one of many growth opportunities that the Diamond Infrastructure Solutions business model is set up to capture with new and existing customers. In addition, we expect cash proceeds of greater than a $1,000,000,000 this year from the final resolution for damages related to the jointly owned ethylene asset with Nova Chemicals in Joffrey, Alberta, Canada. And on the spending side, we announced in January that Dow would deliver at least a billion dollars in targeted cost savings on an annual run rate basis by 2026 in response to the ongoing macroeconomic challenges. Altogether, these cost savings are expected to deliver $50,000,000 tailwind in the second quarter and a minimum of $300,000,000 by the end of this year. In addition, we now expect our enterprise CapEx for 2025 to be $2,500,000,000 which is a $1,000,000,000 reduction compared to our original plan of 3,500,000,000.0 This is largely attributed to our decision to delay our path to zero project in Fort Saskatchewan, Alberta until market conditions improve.

So all total, our collective actions to navigate the realities of the current environment will deliver $6,000,000,000 in cash support over the next two years and enable Dow to maintain our financial flexibility. We do remain focused on delivering on our balanced capital allocation approach over the cycle while also positioning the company well to generate shareholder value. And as our industry weathers the current challenging conditions, we intend to pull all the levers we can to improve margins, support near term cash flow and optimize our global portfolio. This includes the 6,000,000,000 actions, cash support items that I just outlined. At the same time, we continue to upgrade our footprint in our cost advantaged U.

S. Gulf Coast with the completion of two of our incremental growth projects. They’ll come online at the end of this quarter and begin to show benefit in the third quarter and beyond. The first of the two projects is in packaging and specialty plastics, which will allow Dow to grow in high value segments such as food packaging and health and hygiene products. This new world scale unit will be the largest solution polyethylene train in Dow’s fleet.

It’s designed for lower cost conversion, increased production capacity, as well as improved efficiency and flexibility across multiple product grades, making it adaptable to changing market demands. This asset also absorbs our remaining ethylene length in The U. S. Gulf Coast and allow Dow to produce higher value functional polymers at other assets in the regions. The completion of our other growth project this quarter delivers new alkoxylation capacity in Seadrift, Texas that will support growth in our industrial solutions business, which serves attractive end markets such as home care, pharma, and energy production.

After completing this project, Dow will also exit its own last remaining wholly owned capacity from MEG. Moving this direction has been part of our strategy with Industrial Solutions for some time to move into higher value ethylene oxide derivatives that deliver margins in excess of a thousand basis points higher than MEG and increasing our production capacity for products that provide the highest return to the ethylene molecule in the company. Since our last earnings call, we also completed two small divestitures totaling additional approximately $200,000,000 in at very attractive EBITDA multiples of about 10x. Consistent with our best owner mindset, we announced that Dow completed the sale of our Talon soil fumigation product line in May to a strategic buyer. This enables them greater integration for their future operation.

And earlier this week, we announced that Dow would sell our 50% ownership in the successful Dow AXA joint venture, which is a leader in carbon fiber for the wind energy space. These actions provide additional near term support for our balanced capital allocation approach. At the same time, we continue to optimize our global footprint, particularly in higher cost regions like Europe. In April, we shared that we’ve expanded our European asset review beyond our previously announced plans to determine the best strategic option for our polyurethanes business in the region. We identified three upstream assets across each of our operating segments where we expect to either idle or shut down capacity to address the ongoing demand challenges and regulatory environment in Europe.

Each of these assets represents a meaningful portion of our regional capacity, which is either not fully integrated resulting in excess merchant sale exposure or is high on the cost curve where we have better options to supply derivative demand and optimize margins. We’ll have more details to share as it relates to several of these asset decisions in the coming weeks. Certainly, I expect that to be a big topic on our earnings call in July. And lastly, our purpose built asset footprint and our low feedstock cost positions primarily in The Americas, in The Middle East, create a meaningful cost advantage for Dow and provide industry leading flexibility to navigate the global trade dynamics. We remain committed to closely monitoring the current macro environment and as you’ve seen with our already announced actions, we’ll take the necessary steps to improve our competitive position as we move forward.

And with that, I’m happy to take your questions. Thanks, David.

Dave Begleiter, Analyst, Deutsche Bank: Just a little bit more on the near term macro. In terms of the seasonality you mentioned, where are you seeing normal seasonality? Where are you seeing below normal seasonality? Where are you seeing above normal seasonality?

Jim Fitterling, CEO, Dow Inc: Packaging is showing good demand resilience, and so we see normal order patterns there and consistent demand like you would expect. It typically does through the down cycles consistently out deliver because of the discretionary nature. Silicones is seeing normal seasonality. I’d say normal seasonality plus, you know, a little bit of the bump up that you see with electronics and chips and data centers. Coatings is is good, but it’s a little bit softer than same time last year.

Last year was a a pretty strong year for coatings when you think about the backdrop of what’s going on in housing and construction. And there was a lot of DIY business last year, and that favors us. We see good growth this year, but not as robust as we saw last year. Downside, I’d say automotive has been slower to start. We see production rates here, and that really drives the near term demand for us is the production rates down about 6%, seven %.

Sales, I mean, the OEMs are selling products, so that’s good, but most of it was produced last year. We do see China continue to have some growth in EVs. It’s not as robust as it was in previous years, but it’s still there. And then I would say the other part of the business is just building and construction below normal seasonality. And the knock on effect for building and construction is all the other materials that would go in, any fit out materials like products that go into carpets, products that go into remodeling materials that are used in kitchens, bathrooms, flooring, insulation, obviously, is a big driver for polyurethanes.

So we see that slow down. Appliances have been relatively slow. Inflationary pressure on big ticket items really is pushing some of that away. Okay. By month, some people is

Dave Begleiter, Analyst, Deutsche Bank: a bit of a slow start. Things came back in May, maybe post the nine day pause. How are your order books looking for June?

Jim Fitterling, CEO, Dow Inc: Good. Consistent, I’d say, with May and the way we started there. We don’t see any massive negative aberrations. Export product is flowing. Despite my comments about US China, our ability to export out of The US Gulf Coast is not restricted right now, so we’re able to move that.

We watch closely, obviously, on China and their ability to export and get product in here, and you’ll see most of that plays out with the retailers when the retailers talk about what are they doing in terms of sourcing and what are they doing with prices. Are they gonna have to pass some of that on to consumers? But but so far, is moving well. A few few disruptions that the supply chain and the trading team has to deal with, but I’d say it’s all on the margin. Good.

Dave Begleiter, Analyst, Deutsche Bank: On polyethylene, prices fell £36 in April, I think, to more tariff knock on impacts. They were flat in May. You’ve announced in your period a 5¢ per pound price increase for June. What gives you the confidence that we’ll go through in this environment?

Jim Fitterling, CEO, Dow Inc: I think the demand is there. The inventory levels are low. We’ve got some cost pressures. I mean, there’s there’s cost pressures on both sides. You’re starting to see oil climb back up.

That usually helps on the pricing side. You’re seeing ethane costs, the structural costs, not the spot costs, you know, continue to keep high because The US natural gas and the demand for natural gas for electricity is driving some higher costs there. Those things are gonna help push some of that through as well.

Dave Begleiter, Analyst, Deutsche Bank: You mentioned ethane. That thing was below 19¢ a gallon last night. Yep. It’s down 25% in a week, really post the Trump administration putting in place requiring licenses to export ethane in China. Which have retaliation for rare earths, etcetera.

What do you make of this ethane move? And how has this changed your outlook for integrated polyethylene margins this quarter and perhaps next?

Jim Fitterling, CEO, Dow Inc: Yes. I think well, obviously, it’s spot market move, Right? So most of our ethane is bought on contract arrangements based on a frac spread and based on natural gas price. So we’ll watch it, and we’ll see whether it has any impact on the forward curve on ethane and gas. And if it does, that might, you know, move into something more substantial.

In the short term, we’ll try to take advantage of as much of the spot as we can and bring it in and convert that over for our own ethylene use. I think it’s logical. I’m you know, when you heard my comments about our ability to move polyethylene to China, when when tariffs were announced on China, there were off also a lot of exceptions on the Chinese end, as you can imagine. They want access to all the materials they need to make the products that they make to, in turn, export them. So ethane and all the polyethylene materials were excluded from those list and most most of the other materials that we sell over there.

That’s logical. The real question is what happens to the downstream demand and does that ever back anything up? I think ethane in particular, because it’s low cost is funding Chinese competitiveness gets a little bit different scrutiny, but I just don’t know how long that will last. I don’t know what policy was used to restrict that, and I don’t know if that’s something we’re gonna see last, for the duration of this negotiation. But certainly, if I were an ethane exporter, I’d be putting some pressure on.

Right.

Dave Begleiter, Analyst, Deutsche Bank: On tariffs, and we’ll go there, how are you navigating this current environment? And terms of yourself, your customers, and forecast and planning?

Jim Fitterling, CEO, Dow Inc: We have a great international trade operations and supply chain team that’s been doing this for decades. And so they’ve got great relationships in every country where we do trade and business. Mhmm. They work, you know, we’re you know, they work hard, but we’re also trying to make sure they don’t burn themselves out because tomorrow could be a totally different day in the tariff negotiations. So they’re making no regrets moves, good structural moves to make sure that we maintain that.

We’re really doing everything we can to mitigate, know, take advantage of our global footprint. So having the Canadian footprint, The US footprint, Argentina, The Middle East, being in most of the markets that we sell into allows us to flex the supply chain, and that allows us to mitigate any direct tariff impact. USMCA is a great example in Canada. When the negotiations started there, anything that was USMCA compliant was exempted, then that’s greater than 95% of what we trade back and forth between Canada. So there will be in the trade negotiations, there will be agreements, and there will be rules of the road like USMCA compliance.

There will be exceptions that are made along that process. Our working team works at that level on you know, with the US government, US trade representative, as well as MOFCOM, for example, in China. And then at my level, my government affairs staff, we spend a fair amount of time talking to the administration about the impact that our products have on value chains that we sell into almost every value chain in manufacturing. So just talking about, you know, what’s the value chain for automotive? What happens with tariffs depending on where you put the tariffs?

Try to be a resource for them of information so that as they’re getting into negotiations, they can ask questions about what would the impact of this be, how might we see, what would we see happen with demand, how would this work vis a vis trying to get more manufacturing investments back into The US.

Dave Begleiter, Analyst, Deutsche Bank: So for Q2, given all these cross currents, headwinds, tailwinds, your guidance was rough your EBITDA guidance was roughly $950,000,000 Are we still tracking towards that number?

Jim Fitterling, CEO, Dow Inc: Yes, there’s pressure. I mean there’s more headwinds than tailwinds in that number. Most of the tailwinds are things that we’re going to have to do ourselves. But like you said, on spot ethane, you see a little bit of positive move. We’re seeing some lower input costs as we move through the quarter.

We’re seeing if we get some price support in June, that will be a positive to help things out. But it’s it’s heavy lifting. It’s really day to day and week to week bookmaking, sausage making. So still within the range? Is that the best way to phrase it?

It’s it’s within the range. If we if we do that, it’s it would be a good quarter if we can deliver that. Okay. Excellent. On to dividend,

Dave Begleiter, Analyst, Deutsche Bank: parsing your comments on the Q1 call, I noticed a potential opening, some more perhaps flexibility on dividend if current conditions hold. Just again discuss your thinking on the dividend, if the current conditions do hold persist into next year.

Jim Fitterling, CEO, Dow Inc: Yeah. We’ve and we have a healthy dividend. We came out of spend with a dividend. We we pay out in the neighborhood of 1.9 to $2,000,000,000 a year on dividend. It is not unusual at the bottom of the cycle for dividend yield on a stock price basis to get to nine plus percent.

We’ve seen that before. The question is is really how long is the cycle gonna last? We’ve been the third year into it. There’s views that it could be another year or two years. I don’t know what that time frame is.

I think the first real data point we need is to get some certainty around where the tariffs land and kinda get endgame to that so that everybody can say, We’ve got we know where they’re gonna land. Now let’s move forward from here and see how demand takes off, see how what impact it has on the economy. So that’s the reason we generated the $6,000,000,000 of it, interventions to say, how can we make it through this year and next year and try to be secure in capital allocation. Our capital allocation policy was to deliver 45% of net income through that dividend through the cycle Well, we’ve done well in excess of that. And if you look at since then, we’ve we’ve paid down a tremendous amount of debt.

We’ve returned more than we, you know, intended to through the dividend. We did share buybacks. We retired about 10% of the shares during that time frame. So our track record on capital allocation has been good. I think this one is just looking forward structurally with some of the changes that have happened.

How long can you support it? And will there be pressure that becomes overwhelming to take a different look? Right.

Dave Begleiter, Analyst, Deutsche Bank: Longer term, in the cycle turns, things get better, does M and A play a role in your growth strategy, again, longer term?

Jim Fitterling, CEO, Dow Inc: Sure. I think we’re always looking for M and A. We’ve looked for smaller M and A, more bolt on M and A in certain sectors. Our growth businesses still are packaging and specialty plastics, our downstream silicones business, and we have a great cost position and application footprint there, our industrial solutions business. And then, you know, the other area where M and A is gonna play an important role is as we look at the European assets, what’s a better strategic model for Europe going forward.

In our polyurethanes business, especially, we’ve got some very strategic locations. Erstadt, Germany is a great example of one. But are we the right long term owner? Is there a better strategic partnership with another strategic that would be stronger in that market? Polyurethanes business historically is one that makes all of its profitability in a couple year time period.

Its peak is very pronounced peak, and then you navigate through a slower cycle. So if you look at COVID and that big spike and peak that we had, you’re making about $2,000,000,000 a year in polyurethanes EBITDA. So that’s a big drop to where we are today. But if construction starts to take off, you get construction, insulation products, building materials, all the components, durable goods, and all of that takes off, and you can ride the operating rates up pretty dramatically, and the market moves up pretty fast. So I think we wanna look long term, make sure that what we do in Europe positions those assets to be the best in class as they come through it.

I think in polyurethanes, the best value creating opportunity is going to be a better deal structure and a partnership structure than it is shutting down. In a few other areas, announced some asset shutdowns, smaller scale, higher cost assets. Europe, as I’ve mentioned before, volume wise from a demand standpoint, is still about 20% below pre COVID levels. And that’s just an effect of some deindustrialization that’s gone on in Europe. I think with some of the moves that the EU is making, they probably can arrest deindustrialization, but I don’t think the 20% is coming back.

So I think it’s prudent to make a right size adjustment in some areas and then look for a different owner structure in others.

Dave Begleiter, Analyst, Deutsche Bank: Very good. Just on Alberta quickly. Again, what went into the decision to the delay of the $7,000,000 project? And is a one year delay kind of base case for this pause?

Jim Fitterling, CEO, Dow Inc: It was really looking at timing. Our original timing was to start up Phase one toward the end of third quarter in twenty twenty seven. Our feeling when we engineered the project, and so this goes back a ways, was that that would be moving into mid cycle on plastics. I think with all the uncertainties and things that have happened, that’s kinda moved that mid cycle out maybe a year, maybe two years. I think in the year to two is kind of the maximum range you would think about.

So in the near term, was before we get into a big summertime ramp up on construction spend, let’s just pause. Let’s not ramp that construction up this year. Let’s finish our engineering work. We’ve got our long, light lead time equipment ordered. Let’s talk to our partners, Linde and others, make sure that we can navigate that, and then come back the end of the year, see how we’re doing on the tariff discussions and negotiation, see how the market’s responding, and make a call whether a year is enough or we need to take a look at another year.

Dave Begleiter, Analyst, Deutsche Bank: To resume the every delay adds some cost to the project. Is that fair?

Jim Fitterling, CEO, Dow Inc: Yeah. In the near in the one year term, it doesn’t add much cost. Actually, you get some benefit. We have all your engineering done and all of your long lead time equipment. That helps actually in construction.

So when you do ramp up construction, you’ll get some

Dave Begleiter, Analyst, Deutsche Bank: last May at your Investor Day. You reaffirmed targets of delivering more than $3,000,000,000 of underlying EBITDA by 02/1930, a 2030 EBITDA range of 9,000,000,000 to $15,000,000,000 Given the macro headwinds since last May, are these still targets are these still items tracking the their target levels?

Jim Fitterling, CEO, Dow Inc: Yeah. I’d say the only thing that I would see differently in terms of you know, nine would be mid cycle and 15 would be next peak. The only thing I see tracking differently would be what’s the impact on polyurethanes gonna be through that. So will polyurethanes get back to $2,000,000,000 a year? Or will we achieve what we need to with the deal to get it into a better space?

That would probably be the biggest weight on that $9,000,000,000 number. And then the question is just timing, timing of the mid cycle. I think packaging and specialty plastics, our product mix, the investments that we’re making, Canada will be a low cost investment. It will be equal or better than what we did on Texas 9 and The Gulf Coast, and it’s got a more advantaged feedstock cost position through the whole cycle, and we lock that in for twenty plus years under contract. So that project needs to be built.

I mean, it’ll be a low cost asset regardless, and that’s what you want for the footprint going forward. And then we make adjustments on the other side.

Dave Begleiter, Analyst, Deutsche Bank: So I think consensus is about $4,000,000,000 today. Can you predict that $9,000,000,000 of mid cycle? Is it a billion dollars? Polyurethanes, have, you know, Alberta, obviously. How do you how would you bridge that 4,000,000,000 to $9,000,000,000 number?

Jim Fitterling, CEO, Dow Inc: Yeah. Last peak last peak for plastics was 8,000,000,000. That’s before you add on any growth like the poly seven plant that’s coming up or path to zero. So that takes plastics up to the next peak, which is a big a big step up to get to that number. So plastics mid cycle would then come up as well.

If you get path to zero up before mid cycle, you get that benefit. Polyurethanes, we don’t have any big capacity additions. But I I would say there’s also not been a lot of capacity adds in isocyanates, which is a big driver of value there. And there’s been reductions in footprint on propylene oxide. So I think you’ll see the price margin benefit.

We may not be as big in propylene oxide as we move forward. So I think you look at how much propylene oxide capacity do we have to ride up that curve. That’s really kind of a good and silicones will be there and coatings will be there. I’m not I’m not worried about those. Industrial solutions should be an add on layer to mid cycle.

So I don’t know how we’re gonna land the deal on polyurethanes, but if we got the polyurethanes deal into a better space, that would mitigate the downside pressure on mid cycle. Okay. But in that 8 to 9,000,000,000 range

Dave Begleiter, Analyst, Deutsche Bank: makes sense. And is that polyurethanes just European European assets or, you know, other assets as well?

Jim Fitterling, CEO, Dow Inc: No. I think it’s primarily European. We’re we’re taking out some PO capacity here in The Gulf Coast at the end of the year. That’s timed together with Olin taking out some chlorine capacity. So that I think is a is a good adjustment and a rightsizing of the footprint that actually will will help tighten up things a little bit in the PO market.

And then Asia is gonna be really, the big driver there is gonna be construction. China is no different than the market here. Whether it’s residential construction or other construction, it’s slow. In fact, in all construction today, the bright spot is data centers and tech. So everything else has been moving kinda sideways.

K. And switching back to ethane,

Dave Begleiter, Analyst, Deutsche Bank: The US is on track to double its ethane export capacity over the next eighteen months. Yeah. Are you concerned The US is going to export away its cost advantage to other regions?

Jim Fitterling, CEO, Dow Inc: I don’t think so. And the reason I say that is the demand for natural gas is gonna be strong. Electricity is gonna drive that. Tech and AI is gonna drive that. So that comes in and competes, obviously, for natural gas.

When you look at The United States, you add on Canada, we’re blessed in this part of the world to have the majority of the available ethane in the world. So there’s some amount of this that wouldn’t find a home in this market. There’s not gonna be an as much capacity added to consume all that ethane. So you either leave it in the natural gas and ship it out as natural gas with higher BTU value, or you strip it out. In the case of it being stripped out, actually, it’s beneficial for us because if you strip it out here, it’s available in the market.

So the netback price on ethane will continue to be the lowest. Just like LNG, netback price here will continue to be the lowest.

Dave Begleiter, Analyst, Deutsche Bank: And how do you how do you think about ethane prices long term, either absolute or relative to natural gas?

Jim Fitterling, CEO, Dow Inc: Yeah. They typically move on frac spread is what we talk about. This is a spread business at the end of the day. So on frac spread, we typically see kind of on average a dollar a million BTU kind of a frac spread number. And when market’s down and and there’s pressure there, you’ll see maybe 50¢ in that range.

So I think if you look over history at the frac spread, you can kinda get an idea for how ethane will move relative to nat gas.

Dave Begleiter, Analyst, Deutsche Bank: I was curious on your nuclear ambitions. You signed a construction permit back in in in May in March. Sorry. And in May, president Trump signed an e executive order to speed the process of building nuclear power plants. Did that EO accelerate your efforts to build a small modular nuclear facility in Texas?

Jim Fitterling, CEO, Dow Inc: Yeah. I don’t the short answer is I don’t know yet. We’re in the we’re in the permitting part of the process. So the construction permit is in, and the good news is NRCs docketed it, which is a a big step after you file within forty five days. If you get docketed, yeah, that’s a very positive step.

Now we go through the detailed parts of the construction permit. And then when you get through kind of your well through that part of it, you start talking about long lead time materials and placing orders and things. We’re not we’re not at that stage yet. We’ve made great progress. X Energy is making great progress.

That project in particular and that technology in particular has attracted a lot of hyperscaler interest. And Amazon came in as a big investor in X Energy, which is a, I think, a big positive move forward. So it’s it partly is a bet on us for future energy use. It’s partly a bet on the future of nuclear power in The United States and being a partner with X Energy as well as an owner operator. And long term, like, once we would get it up and build, obviously, I don’t need to be the owner operator of it.

So I think we would look at different business models for that.

Dave Begleiter, Analyst, Deutsche Bank: Great. And last question, your Transform the Waste plus recycling initiative. Are you seeing any pushback from customers delaying new projects given overall macro? And is your 3,000,000 metric ton target for 2030 still achievable? Still still high demand goal for the recycled materials.

Always at

Jim Fitterling, CEO, Dow Inc: the bottom of the cycle when virgin plastic is cheap. There’s always that trade off on price. The biggest issue right now is the ability to get enough high quality waste material collected and in. But we made the acquisition of Circulus at the end of last year, beginning of this year. That asset is running full and flat out.

So the brand owners demand interest is there. And you probably go to the stores and see more recycled packaging and products out there. I think when it comes to whether you’re talking about the demand for low emissions, low carbon emissions, the demand for recycled materials, anything that has less of an environmental impact, that demand is there. It’s always down to the trade off at what cost. And that’s also the debate that’s going on in The US right now.

Which projects get supported and don’t get supported is really what’s the relative cost adder.

Dave Begleiter, Analyst, Deutsche Bank: Great. We’ll stop there. K? And thank you very much. Thank you.

Thank you all. Thank you.

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