Despite months of challenges in the first half of the year, chemical companies showed improved third-quarter results and are positioning themselves to reap profits when demand recovers after the end of the Covid-19 pandemic.
During the second-quarter, nearly every major chemical company saw sharp declines in sales and earnings, and several posted losses. Earnings started rebounding in the third-quarter, especially for U.S. specialty chemicals markets, as Covid-19 lockdowns ended, businesses reopened and manufacturing demand for chemicals picked up.
But, despite improved chemical sales, companies like BASF report there is a shift in manufacturers’ orders toward more short-term purchasing because of the uncertainty over consumer demand.
To improve profitability and position themselves to take advantage of the profit opportunities when demand recovers after the pandemic, chemical firms are remaking themselves by divesting non-core assets, cutting expenses and laying off non-represented staff and management.
Speaking at a virtual annual meeting of the European Petrochemicals Association, Dow CEO Jim Fitterling said that chemical companies are likely to emerge from the Covid-19 recession leaner and more focused. He said companies are cancelling projects that were not competitive or integrated into the firms’ other operations. They also are decreasing operating expenses to preserve their profit margins and free up cash.
Divestitures
Dow announced in October 2020 that it would exit uncompetitive assets, reduce costs and strengthen its competitive position when market conditions improve. The company said its closures would include some amines and solvents facilities in the U.S. and Europe; some small-scale downstream polyurethanes plants; small coating reactors; and siloxane and silicon metal plants in the U.S., Canada and Europe.
The company’s silicones business at its east side operations on the Midland, Mich., complex is one of the affected sites. Kent Holsing, DowDuPont North American Labor Council (DNALC) president, said that in order to prevent a chance of potential layoffs, USW local 2-12934 is negotiating with Dow over an incentive severance package for up to 30 members.
Dow also divested its rail infrastructure, marine and storage terminal operations and assets, but no union bargaining units were impacted, according to Holsing.
DuPont also is shedding more of its businesses. The company’s sale of its trichlorosilane business last September, biomaterials unit in October and its equity interest in the Hemlock Semiconductor joint venture did not affect any DNALC members.
USW Local 2-12075-24 members jobs, union and contract will be preserved when DuPont’s sale of its Nutrition and Biosciences unit at the Midland, Mich., complex to International Flavor and Fragrances (IFF) is expected to close Feb. 1, 2021.
About 100 members in the unit work in the methocel and ethocel chemical departments. Holsing said IFF recognized the union and will continue the existing contract through the first year of the purchase. This new IFF unit will join USW represented workers at an IFF plant in Jacksonville, Fla.
Union members not impacted
3M announced Dec. 2 that it will also cut about 3 percent of its global workforce as it continues to restructure amid reduced demand for its products that are unconnected to the health care sector.
The company said it will eliminate approximately 2,900 jobs across all of its business units. However, 3M told the USW it does not have plans to reduce bargaining unit jobs.