Dow (DOW) Morgan Stanley‘s 12th Annual Laguna Conference 2024 summary

Market environment and near-term outlook

• Muted demand persists across most market verticals, with packaging showing resilience in North America and price increases in July.

• Infrastructure demand remains soft globally due to high interest rates, while consumer electronics and home/personal care are steady but durables are impacted by tighter discretionary spending.

• Automotive demand slowed in August, especially in China and Europe, with inventory build-up in North America.

• Third quarter guidance updated: revenue expected at $10.6 billion and operating EBITDA at $1.3 billion, impacted by an unplanned Texas cracker outage and higher input costs in Europe.

• Fourth quarter expected to benefit from lower turnaround costs, higher operating rates as Texas cracker ramps up, and fewer weather-related disruptions.

Strategic positioning and investment plans

• Growth investments focus on high-value product chains in regions with advantaged energy and feedstock, especially the Americas, targeting 70% of global capacity by 2030.

• Asset optimization continues, with recent closures in Europe and ongoing evaluation of the global footprint.

• No new polyethylene capacity expected in the Americas until 2027; propylene oxide unit in Freeport, Texas, to shut down by end of 2025.

• Path2Zero project in Alberta reached a milestone with a clean hydrogen supply agreement; phase one to start in 2027, aiming for net-zero emissions.

• Investments in packaging, industrial solutions, and silicones could yield $2 billion EBITDA improvement as the cycle improves, with Path2Zero adding $1 billion more.

Regional and industry trends

• Europe faces regulatory uncertainty, high energy costs, and weak industrial demand, with potential for further asset rationalization.

• Demand in Europe remains 25% below pre-COVID levels; older, less efficient assets are at risk of closure.

• China’s domestic demand is weak, with government stimulus expected post-elections; exports remain strong, especially in packaging.

• U.S. housing market constrained by high mortgage rates; pent-up demand could be released if rates fall to around 5%.

• Silicones and downstream applications show strong demand drivers, with tightening expected as negative margins for non-integrated players ease.