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Dow Chemical to raise prices

Record energy and material costs drive another increase.

June 25, 2008|From the Associated Press

GRAND RAPIDS, MICH. — Shares of several chemical companies fell Tuesday after industry leader Dow Chemical Co. announced its second set of wide-ranging price hikes in less than a month, again trying to offset record costs for energy and raw materials.

Midland, Mich.-based Dow said it would raise the prices of its products by as much as 25% in July after across-the-board price increases of as much as 20% on June 1.

The company makes a wide range of chemicals, including the propylene glycols used in antifreeze, coolants, solvents, cosmetics and pharmaceuticals, and the acrylic acid-based products used in detergents, wastewater-treatment and disposable diapers. Its products are sold in 160 countries.

When Dow raises prices, the increase is felt across dozens of industries that buy its chemicals and plastics to manufacture products.

Dow says it is trying to survive. Competitors such as Philadelphia-based Rohm & Haas Co. and Dallas-based Celanese Corp. also have recently raised prices for their customers.

"We have to get them back to reinvestment levels where we can continue to build our business and to be there for the future," said Dow spokesman Chris Huntley.

The chemical maker's profit margins shrank from 9.8% in 2005 to 7.6% in 2006, and to 5.4% last year. During the 12-month period that ended March 31, the margin narrowed to 5.1%, according to research firm Capital IQ.

The company said it was also adding a freight surcharge for North American customers of $300 per shipment by truck and $600 by rail effective Aug. 1. Those surcharges will spread to other regions this year.

Dow would not say if more price hikes are imminent.

Dow shares fell $1.04, or 2.8%, to $36.58. Shares also declined for competitors such as Celanese, Rohm & Haas, DuPont Co. and Sigma-Aldrich Corp.

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