Say What, WSJ?

Here’s an article from today’s Wall Street Journal on companies pulling back in Europe because of the financial crisis there. It contains this passage:
Other U.S. companies retrenching because of weakness in Europe include Dow Chemical Co., which in the fourth quarter plans to idle about four million tons of production of naphtha, a material used in plastics manufacturing.
It apparently comes from this exchange in the conference call:
Brian Maguire - Goldman Sachs Group Inc., Research Division This is actually Brian Maguire on for Bob this morning. I want to follow up on the previous couple of questions on idling in Europe and Asia. You mentioned a couple million pounds could be idled. Do you expect Dow or any of the JV partners to participate in that idling or do you think that it will come more from the competition? Andrew N. Liveris More from the competition. I did actually say a couple of million tons and actually, we've identified -- you know us well when we do this, we've identified about 4 million tons of vulnerable production right now based on pure naphtha cracker plays mostly in Europe but also some in Asia.
There are a couple things wrong with the WSJ article: 1) Dow doesn’t make naphtha. Liveris was referring to naphtha-based ethylene production. 2) Liveris was speculating on what the broader industry might do, (at least in Europe and Asia) not on what Dow Chemical will do in the fourth quarter. (Dow doesn’t even have 4 million metric tons of ethylene capacity in Europe.) UPDATE: Now the WSJ story comes with a correction:
Corrections & Amplifications Dow Chemical Co. estimates other industry competitors will idle about four million tons of production of naphtha, a material used in plastics manufacturing, in the fourth quarter. A previous version of this article incorrectly said Dow Chemical plans to idle about four million tons of production of naphtha.
That's half right. It corrects the bit that is most important for Dow: that it isn't Dow capacity that would be idled. But it still implies that it is the raw material, naphtha, that is being idled, not the products, ethylene, propylene, etc. Close enough, I guess.  

Author: Alex Tullo

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  1. Even worse, any potential idling has much more to do with the relative prices of oil and natural gas than it does with European financial issues. WSJ has steadily gone downhill over the years as a source of real news.

  2. @ Chad: That is indeed true about the relative economics. This would largely be a question of Middle East and U.S. ethane versus Asian and European naphtha. Though stronger demand would mean higher prices, which would make life economical for everybody.