Continuing its strategy to take advantage of cheap U.S. natural gas and natural gas liquids, The Dow Chemical Co. plans to build several specialty material production units for its performance plastics franchise on the U.S. Gulf Coast, the company said Monday.

The plan further connects Dow’s U.S. manufacturing operations with cost-advantaged feedstocks available from shale gas.

“These new facilities will include a wide range of technologies that will produce differentiated, high-performance materials for the fastest growing segments in Dow’s existing markets, while providing access to new markets and applications,” said Jim Fitterling, Dow executive vice president.

The planned facilities are in the front end engineering and design phase, which is to be completed next year. They are to manufacture materials for several of Dow’s fastest-growing market segments, including packaging; hygiene and medical; electrical and telecommunications; transportation, sports and leisure and consumer durables.

“The new capacity will be targeted at projected growth in North and South America in addition to select export opportunities over the coming decade,” the company said. “Dow is currently exploring specific location options on the U.S. Gulf Coast, with final investment locations to be determined at a later date.”

The facilities will use building block materials from a previously announced ethylene production facility, which is expected to begin operations in 2017 (see Daily GPI, Dec. 12, 2012).

Dow also announced an initial agreement for a long-term ethylene off-take arrangement with a new joint venture (JV) to be formed by Idemitsu Kosan Co. Ltd. and Mitsui & Co. Ltd. of Tokyo. Idemitsu and Mitsui plan to construct and operate a world-scale, linear alpha olefins unit on the U.S. Gulf Coast. The JV will utilize an integrated supply of ethylene from Dow’s U.S. Gulf Coast production grid to produce linear alpha olefins used as comonomers throughout Dow’s performance plastics business.

“Taken on the whole, positive disruptive trends in U.S. shale gas have led us to make different decisions about where and how we invest for global growth,” said Dow CEO Andrew N. Liveris. “Our comprehensive U.S. Gulf Coast investments will enable our enterprise to deliver higher and more sustainable value from our existing premier U.S. base to supply domestic and global growth.”

Dow is a large consumer of linear alpha olefins and uses them in its performance plastics franchise, which serves markets such as packaging; hygiene and medical; electrical and telecommunications; transportation, sports and leisure, and consumer durables.

“The agreement with the joint venture is beneficial to the project economics and is a good example of the type of strategic projects that Dow is currently evaluating,” said Dow’s Jim Fitterling, executive vice president. “As an investor in Dow’s Gulf Coast project, Idemitsu and Mitsui will receive ethylene integration benefits while improving the capital efficiency of the cracker from a Dow perspective. In addition, Dow secures a reliable, integrated, cost-advantaged source of comonomers for our performance plastics franchise.”

Location options for the linear alpha olefins unit are being explored with final investment locations to be determined later. Construction and start-up of the unit is targeted for 2016.

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