Inflation concerns rise as Dow Chemical signals 20% boost

Tag : Paint Chemical

So far, government statistics say that hasn't happened. Core prices— those minus food and energy — have risen just 2.3%the 12 months ended April, according to the U.S. Department ofLabor.
Nevertheless, the inflation that consumers feel the most is muchhigher. Energy alone has soared 15.9%, and the price of a barrel oflight sweet crude oil has skyrocketed 107% to $131.03. Includingfood and energy, prices are up 3.9%, the government says.
Already, says David Huether, economist for the National Associationof Manufacturers, soaring energy prices mean that the averageworker's wages have fallen, when adjusted for inflation. "If youexclude energy, real wages would be rising now," Huether says.
Midland, Mich.-based Dow said that its raw materials and energycosts have soared to $32 billion this year from $8 billion in 2002.Those costs soared 42% the past 12 months alone, Dow said.
The higher cost of energy is "putting a strain on the entire valuechain and is forcing difficult discussions with customers," Dow CEOAndrew Liveris said in a statement.
Liveris has long advocated revamping U.S. policy to encourageconservation and increase domestic energy production. "For years,Washington has failed to address the issue of rising energy costsand, as a result, the country now faces a true energy crisis,"Liveris said.
The biggest price increases from Dow will probably be inpolyethylene and polystyrene, says company spokesman Chris Huntley.Those chemicals are widely used in consumer goods, ranging frompackaging to fabrics and paints. Although the company has tried tocontain costs, "The rise in prices has been so remarkable that ouronly option is to raise prices," Huntley says.
Rohm and Haas, a Philadelphia-based specialty materials company,told paint manufacturers who buy its product that it would imposeenergy surcharges of 6% to 10% for chemicals used in paint.
The surcharges, if passed on to consumers, would add 10 to 20 centsto a gallon of paint, says Luis Fernandez, business director forthe company's paint and coating materials division.
The surcharge is likely to rise next month because it's indexed tothe price of raw materials, he said.
"When I have explained the situation to most customers, theyunderstand — it's a difficult discussion, but most customersunderstand," Fernandez says.