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Dow (DOW) Invests in Ethylene Cracker & Derivatives Project

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Dow, Inc.’s (DOW - Free Report) board has given the green light for its Fort Saskatchewan Path2Zero initiative, marking a significant milestone in the company's commitment to building the world's inaugural net-zero Scope 1 and 2 emissions-integrated ethylene cracker and derivatives facility in Alberta, Canada.

The $6.5-billion project, excluding government incentives and subsidies, encompasses the construction of a new ethylene cracker, a 2-million MTA polyethylene capacity expansion and retrofitting the existing cracker to achieve net-zero Scope 1 and 2 emissions. Anticipated to generate $1 billion in EBITDA growth annually throughout the economic cycle, the project is set to decarbonize 20% of Dow's global ethylene capacity.

This strategic investment positions Dow to meet escalating demand in lucrative markets such as packaging, infrastructure and hygiene, with additional potential gains from the commercialization of low and zero-emission products. Leveraging Dow's track record in successfully executing substantial projects, such as the TX-9 cracker in Freeport, TX, the initiative emphasizes superior capital intensity, conversion cost efficiency and low emissions intensity.

Scheduled for construction commencement in 2024, the project's capacity additions will unfold in phases. The initial phase is slated to commence operations in 2027, contributing around 1,285 KTA of ethylene and polyethylene capacity. The subsequent phase is set to begin operations in 2029, adding 600 KTA of capacity.

To attain net-zero Scope 1 and 2 emissions, the Fort Saskatchewan Path2Zero project will deploy Linde's air separation and autothermal reformer technology. This will convert the site's cracker off-gas into hydrogen, serving as a clean fuel for the site's furnaces. Additionally, carbon dioxide emissions will be captured and stored. The technology will reduce nearly 1 million MTA of CO2e while offsetting all emissions from the new capacity.

Dow Inc. Price and Consensus


Dow Inc. Price and Consensus

Dow Inc. price-consensus-chart | Dow Inc. Quote


The selection of the Fort Saskatchewan location for Dow's groundbreaking initiative was driven by Western Canada's cost-competitive natural gas and ethane, crucial for ethylene production, positioning the site to become one of Dow's most globally cost-competitive at full capacity. The region's access to existing CO2 transportation and storage infrastructure aligns with the project's decarbonization objectives, complemented by Dow's more than 60-year presence in the community and a skilled workforce. Moreover, Canadian, Alberta and Fort Saskatchewan governments are offering subsidies and incentives to spur innovation in low-emission manufacturing, with the project being the inaugural participant in Canada's new ITC program.

Dow's investment leverages investment totaling around $2 billion from third-party companies for circular hydrogen, CO2 capture and essential infrastructure assets. Linde will serve as Dow's industrial gas partner, providing clean hydrogen and nitrogen, Fluor is engaged in front-end engineering and design, Wolf Midstream will manage CO2 transportation and Ravago will oversee third-party logistics for finished products.

Dow’s shares have gained 1.4% in the past year compared with the industry's 15% fall in the same period.

Zacks Investment Research
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Zacks Rank & Key Picks

Dow currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the Basic Materials space are Axalta Coating Systems Ltd. (AXTA - Free Report) , sporting a Zacks Rank #1 (Strong Buy), and The Andersons Inc. (ANDE - Free Report) and Alamos Gold Inc. (AGI - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The consensus estimate for AXTA’s current year earnings is pegged at $1.58, indicating year-over-year growth of 6.8%. AXTA beat the Zacks Consensus Estimate in three of the last four quarters and missed one, with the average earnings surprise being 6.67%. The company’s shares have rallied 15.2% in the past year.

The Zacks Consensus Estimate for ANDE’s current-year earnings has been revised upward by 5.1% in the past 60 days. Andersons beat the Zacks Consensus Estimate in each of the last four quarters. It delivered a trailing four-quarter earnings surprise of 32.8% on average. ANDE’s shares have rallied around 29.2 % in a year.

The consensus estimate for Alamos’ current fiscal year earnings is pegged at 53 cents, indicating year-over-year growth of 89.3%. AGI beat the Zacks Consensus Estimate in all of the last four quarters, with the average earnings surprise being 25.6%. The company’s shares have increased 50.2% in the past year.

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