Dow Inc.
Materials · Commodity Chemicals
Structural: Largest US ethylene/polyethylene producer with integrated Gulf Coast cracker footprint advantaged by cheap shale-gas (ethane) feedstock versus naphtha-based Asian/European peers. Three-segment mix (P&SP ~55% of sales, II&I ~25%, PM&C ~20%) gives commodity-cycle leverage plus specialty silicones/coatings ballast.
~$2B Path2Zero net-zero Alberta cracker under construction (first net-zero scope 1+2 site, FID 2023, startup mid-decade) - capex-heavy but long-dated cost-curve play.
(1) Polyethylene supply rationalization - high-cost European/Asian capacity shutting on energy costs tightens global S/D into 2026-27; (2) US ethane feedstock spread vs naphtha persists, structurally widens Gulf Coast EBITDA per ton; (3) Datacenter/AI buildout pulls silicones (thermal management, encapsulants) + dielectric coatings - small but high-margin pull-through for PM&C; (4) ~6% dividend yield with payout covered through-cycle; (5) Cyclical bottom - if industrial PMI inflects, operating leverage on fixed-cost cracker base is meaningful.
(1) Polyethylene chain margins near trough - no catalyst to inflect until 2027 supply rationalization actually clears; (2) China self-sufficiency build-out (coal-to-olefins + new naphtha crackers) caps export pricing; (3) Path2Zero capex stretches balance sheet - net debt rising while EBITDA compresses; (4) Auto/construction demand soft, packaging volumes flat - no end-market tailwind; (5) Dividend coverage tightens if 2026 trough deepens - payout ratio risk.
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