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Plastics prices can keep rising as Dow sees demand continuing to outstrip supply

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The big price increases that helped boost Dow Inc.’s second-quarter earnings are likely to continue, as the plastics and chemical said Thursday that it expects pent-up demand to keep outstripping supply in the coming months.

“[S]trong consumer demand trends continue in retail, housing and the manufacturing sectors, and inventory levels remain low across most of our value chains. We expect these dynamics to continue to support price trends in the third quarter as the industry continues to work to fulfill pent-up demand.” — Chief Financial Officer Howard Ungerleider

Ungerleider’s comment, according to a FactSet transcript, was made during Dow’s post-earnings conference call with analysts. It comes amid growing concerns that a recent spike in inflation may last, despite the Federal Reserve’s call that it’ll fade by year end.

Earlier Thursday, Dow reported second-quarter profit and revenue that rose above expectations, as local price soared 53% while volume increased 9%.

Pricing increased 70% in Dow’s packaging and specialty plastics business segment, rose 53% in industrial intermediates and infrastructure and grew 16% in performance materials and coatings.

Also read: Harley-Davidson fights inflation with 2% surcharge, but that’s not quite enough.

Read more: Worries of ‘rampant’ inflation leads two analysts to abandon their buy rating on Conagra’s stock.

The stock edged up 0.1% in midday trading, reversing an earlier intraday loss of as much as 2.9%. The stock has gained 7.7% year to date, while the SPDR Materials Select Sector exchange-traded fund has advanced 11.8% and the Dow Jones Industrial Average has climbed 13.4%.

Chief Executive Jim Fitterling said the global economy should continue to improve off the post-COVID-19 trough, which should keep demand “robust.” At the same time, he expects supply to remain “tight,” as the strong demand hasn’t allowed the company to increase supply.

“[O]ur outlook is that the demand here and around the world continues to be strong,” Fitterling said, as he responded to an analyst question regarding polyethylene prices. “I don’t think you’ll see a chance for us to build any inventory through the third quarter.”

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