Major PE producer Dow cited a shift toward AI-driven cost-cutting as it announced thousands of global layoffs and reported a loss of $2.4 billion for the year.
CEO Jim Fitterling and Chief Operating Officer Karen Carter also pointed to drivers including poor margins for production, along with a 2% year-on-year decrease in fourth-quarter volumes from the packaging and specialty plastics division, during an earnings call Jan. 28.
Still, Q4 volumes were 1% higher than in Q3, despite taking place during the seasonally low demand period. Carter noted that November sales volumes were the highest of 2025, and she reiterated that PE demand continues to grow more rapidly than GDP. The company has pointed to the latter metric in numerous recent earnings calls to defend its continued capacity expansions for feedstock ethylene and PE production, including a facility in Freeport, Texas, that started up in 2025.
North American producers have invested heavily in vast new capacity over the past 15 or more years, to take advantage of abundant natural gas that is more efficient to process than the crude oil used in most of the world, providing better yields of feedstock ethylene. The volumes were largely intended for export to Asia and Europe to capture growing demand in China and developing countries.
Despite an increase of nearly 8% for export volumes in 2025, export demand has been lower than expected for several years, leaving more volumes in the US and pressuring PE prices down.
Inexpensive and oversupplied PE has caused myriad issues for recyclers, as customers opt for the less expensive virgin resin to maintain their own profit margins. Recyclers have little wiggle room, as their labor and energy costs remain constant or even rise.
Fitterling said 30% to 40% of the company’s packaging sector volumes from its North American plants are currently exported. Looking ahead, the company will consider the cost position – historically a significant discount to oil-derived PE but threatened by low crude oil prices – as well as whether Dow’s North American products are available in other regions.
“Obviously, there’s a lot of shifts coming with all the trade talks, with all the geopolitical tensions that are going on, but from our viewpoint, long-term the Americas are going to be advantaged from a gas cost position,” he said, adding that the company plans to “maximize” its investments in the Americas.
H1 demand to keep steady amid consumer pessimism
Looking ahead, the company expects global PE packaging supply and demand fundamentals to remain stable through first-half 2026, and is looking for improvement in the construction sector as interest rate cuts gain traction. However, this week the US Federal Reserve announced it was keeping its key interest rate unchanged, after three cuts in 2025 intended to slow the pace of inflation.
And although executives said consumer confidence had improved slightly, this week the measure collapsed to a 12-year low – below even pandemic-era levels. The lack of consumer confidence is weighing on demand particularly for durable goods, though electronics sales are among retail areas showing resilient consumer spending, Dow said.
“Demand in some of the higher volume markets has been where things are soft,” Fitterling said.
Pricing driven by maintenance activity, feedstock costs
The executives indicated optimism for successful price increase initiatives to start 2026, with Fitterling citing declining PE inventories at the end of 2025 as a support.
In addition, he said the company plans to conduct maintenance at one of its steam crackers in Louisiana, which will limit supply of feedstock ethylene and support higher pricing along the value chain. Ethylene prices typically reflect supply availability – whether steam crackers are running or not – and PE prices largely reflect ethylene price movements along with demand levels.
As for upstream ethane, used to feed steam crackers, Fitterling acknowledged growing competition for natural gas – which can be used both to generate power and as chemical feedstock – as AI implementation and data centers rapidly increase energy consumption. However, he said this very dynamic would encourage gas extraction, helping to balance supply with demand and to stabilize costs for natural gas liquids including ethane, propane and butane.
Fitterling said Dow expects margins for PE production to improve despite recent poor weather conditions, which can increase costs due to weather-related shutdowns, logistical snags and other issues. The company’s headquarters are located in Michigan and many of its production assets are along the Gulf Coast. Both regions experienced an unusually harsh winter storm in January with heavy snow and colder-than-average temperatures.
Layoffs ahead for 13% of global headcount
The company also announced layoffs of 4,500 roles, representing 13% of its global workforce, as well as a decrease in third-party roles and resources. Streamlining efforts will employ automation and AI to help lower costs and improve efficiency, the executives said in explaining the new “Transform to Outperform” cost-cutting initiative.
“Geopolitical dynamics, rapid advances in AI and automation and economic volatility require new breakthrough approaches, greater agility and continued technological adoption,” Fitterling said.
“This work builds on our track record of taking proactive measures to help Dow, and it represents a fundamental change in how we will operate and serve our customers. We believe this will strengthen our long-term competitive position through every part of the economic cycle.”
