Responding to the skyrocketing energy prices of the last several months, some of the larger global industrials began showing the strain last week as they announced price hikes across their entire product lines. Just one day after Dow Chemical Corp. reported product price hikes due to higher commodity, feedstock and transportation costs, Huntsman Corp. followed suit.
Dow said that Sunday (June 1) was the kick-off date to raise the price of all of its products by up to 20% -- depending on their exposure to the various rising costs. Huntsman said it will raise prices for all products, some by as much as 25%, and also impose an energy surcharge across a wide range of products.
In a year to year comparison, front-month crude oil futures prices have more than doubled from $65.20/bbl for the week ended May 25, 2007 to $132.19/bbl for the week ended May 23, 2008. Likewise, front-month natural gas futures prices have vaulted higher from $7.640/MMBtu during the 2007 week to $11.857/MMBtu for the 2008 week.
Dow CEO Andrew N. Liveris said the sweeping price increases and reviews are essential as the company attempts to mitigate the extraordinary rise in energy and related raw material costs.
"Our first quarter feedstock and energy bill leaped a staggering 42% year over year, and that trajectory has continued, with the cost of oil and natural gas climbing ever higher," Liveris said. "The new level of hydrocarbons and energy costs is putting a strain on the entire value chain and is forcing difficult discussions with customers about resetting the value proposition for our products."
Dow says it spent $8 billion on energy and hydrocarbon-based feedstock costs in 2002. At the current rate, those costs would climb to $32 billion this year. Dow is a diversified chemical company with 46,000 employees worldwide and annual sales of $54 billion. The company delivers a broad range of products and services from fresh water, food and pharmaceuticals to paints, packaging and personal care products.
"In addition to these price increases," Liveris said, "the company is continuing its aggressive cost-control plan internally and is accelerating its existing top-down competitiveness review for all of its businesses and manufacturing facilities in the light of these new feedstock and energy prices."
Huntsman, a global manufacturer and marketer of differentiated chemicals, said the price increases were in response to sharp and sustained increases in its costs for energy, commodity and intermediate feedstocks, and transportation, The amount of each price increase and energy surcharge will vary by product, in accordance with costs attributed to each product, the company noted.
"We hope we have seen the worst of the energy and commodity price increases, but the impact of large scale speculation by traders on the price of energy, in addition to the increased costs we are absorbing from our raw material suppliers and service providers, cannot be underestimated," said CEO Peter Huntsman. "Having implemented aggressive internal steps to manage these costs, we are now reviewing all Huntsman products and are announcing specific price increases, as well as an energy surcharge to be applied to each product where warranted."
Huntsman Corp. has been an longtime outspoken critic of speculators and their perceived impact on energy commodity markets. Jon M. Huntsman, chairman and founder of Huntsman Corp., said in December 2005 that "greedy" speculators and traders on the New York Mercantile Exchange were responsible for forcing the price of natural gas to all time highs (see NGI, Dec. 12, 2005). The last several years of high natural gas prices, have provided Huntsman with numerous occasions to blame the exchanges, federal regulators and market speculators for high prices and sudden price changes (see NGI, June 6, 2005; Nov. 22, 2004; Oct. 28, 2004; May 10, 2004; Dec. 11, 2003).
Each price increase and any necessary surcharge will be effective immediately or as soon as applicable contracts allow. Huntsman's operating companies manufacture products for a variety of global industries, including chemicals, plastics, automotive, aviation, textiles, footwear, paints and coatings, construction, technology, agriculture, health care, detergent, personal care, furniture, appliances and packaging.
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