Dow is delaying construction in Canada of its Path2Zero project, designed to produce 1.9mn metric tonne (t)/yr of low-carbon ethylene, until "market conditions improve", the company said today.
The company decided to delay work at its Path2Zero project site in Fort Saskatchewan, Alberta, in light of uncertainty around US tariffs and potential retaliatory tariffs by US trading partners, especially their impact on product demand, the company said Thursday on its first-quarter earnings call.
Path2Zero, designed to produce ethylene and derivatives with net-zero carbon emissions, was announced in October 2021 and was originally planned for a first-phase start-up in 2027 and a second phase in 2029.
The first phase was meant to coincide with an expected upturn in the business cycle. But tariffs have increased uncertainty to the point that Dow said it cannot be sure of a recovery in two years.
Chief executive Jim Fitterling described the current market environment as "one of the most protracted down-cycles in decades", compounded by geopolitical and macroeconomic concerns that further weigh on demand.
The Path2Zero project delay will save $600mn in 2025, accounting for 60pc of the company's plan to cut capital spending this year by $1bn from the company's original $3.5bn spending plan. The pause comes before a ramp up in construction labor and allows the company to see how tariffs effect global demand and supply chains.
"We are at a point right now where we can make this decision to have minimal impact on the project," Fitterling said. "We've done a lot of groundwork, we're finishing our engineering work, and we've got our long lead time items ordered."
Despite the delay, Dow remains committed to the project in the long-term. The project will one day capture upside in demand for targeted applications like pressure pipe, wiring cable and food packaging, the company said. When complete, the project is expected to generate approximately $1bn/yr in incremental earnings. Even with the delay, it is still likely to be the world's first integrated ethylene complex to achieve net-zero Scope 1 and 2 emissions.
To restart the project, Dow said it would have to start seeing supply and demand balances tighten. The company said it would next revisit restarting the project at the end of 2025. Without a green light by year's end, Dow said it would review a project restart "on a regular basis".
The project would triple the site's ethylene and polyethylene (PE) capacity. In total, the site would produce approximately 3.2mn t/yr of low-to-zero emissions PE and other ethylene derivatives. The first phase startup in 2027 was to have brought on 1.3mn t/yr of ethane-derived ethylene and PE, and the second phase in 2029 was to bring on an additional 600,000 t/yr of ethylene and PE. The site will also convert cracker off-gas into hydrogen to be reused as a clean fuel in the production process. The project is designed to capture CO2 emissions for storage by adjacent third-party infrastructure.
