In Risky Move, Dow To Enter Russian Market

Dow Chemical (DOW) is looking for a Russian partner to construct a petrochemical plant in Russia.

Gazprom has been indicated as a possible partner in the plant construction. DOW representatives note that Russia currently produces less ethylene than any of Dow Chemical's plants around the world. Last year, Dow's turnover in Russia and CIS countries totaled $530 million. Current rates of growth of the Company's Russian business exceed 30%.

In January, DOW started up its first ever production facility in Russia. The plant, located at Kryukovo, outside Moscow, will produce STYROFOAM™ brand extruded polystyrene [XPS] insulation boards for Dow Building Solutions, one of Dow’s market-facing business units.

Now, doing business with Russia has proven to be a bit risky, but for 30% growth, there is a price to do it. Not only that, but to be the first there with a major facility would be a major coup.

In Q3 DOW, has said they will produce a "white paper" on the progress and outlooks for their multitude of JVs around the world. This is a much anticipated event and it will be a huge catalyst for the company and by default, its stock price. It will detail expected future earnings from the JVs going forward. On another note, a birdy tells me to look for another dividend increase or an additional share repurchase announcement around the same time.

The end of the current "commodity cycle" is expected to be around the turn of the century and typically in the past, DOW has seen earning plummet during these times. It is no coincidence the the huge JVs in Saudi Arabia and Brazil are scheduled to come on line at that time to counter the expected earnings fall.

Disclosure: Author is long DOW.