For instance, as The Wall Street Journal noted on Friday, steelmaker Nucor Corporation (NYSE:NUE) is reacting to the lower gas prices by constructing a Louisiana plant on the precise site where it dismantled another one nine years ago. The reason for the company’s new building project? Obviously, it’s the plummeting of U.S. gas prices. Just five years ago they were above $12 per million BTUs, or nearly quadruple today’s level.
But there are contending interests baring down on one another there. Dow, which is moving forward with, among other facilities, a new ethylene production plant at its operation in Freeport, Texas, is concerned about the negative changes that LNG would mean for its own economics.
As you likely know, Cheniere Energy, Inc. (NYSEMKT:LNG) has gained permission to build an LNG-processing plant on the Gulf Coast that is expected to become operational within a couple of years. At the same time, plans to participate in an LNG ramp-up were recently announced by a Kinder Morgan Inc (NYSE:KMI) and partnership.
Flawed, misleading, and outdated
As Liveris said, however, in response to an end-of-year Department of Energy report on LNG:
The report…on LNG exports is flawed, misleading and based on outdated, inaccurate, and incomplete economic data….The report also fails to consider the tremendous competitive advantage that affordable, abundant domestic natural gas offers to the nation. Instead, the report offers the baffling conclusion that the U.S. would be better off using its domestic natural gas advantage to fuel growth and jobs in other regions versus strengthening the U.S. economy through manufacturing and benefiting consumers with lower energy costs.
So the “gas battle” that I recently projected for the U.S. clearly is imminent. It appears that that Dow Chemical will be in the thick of it. And given the contretemps’ potential effects on our nation’s economy, I urge Fools to watch the progress carefully.
The Foolish bottom line
Similarly, given the tussle being waged with global economic softness by Dow and other chemical companies, Fools would be well advised to simply monitor the company until its skies begin to brighten. That assessment likely fits with the 62% of the analysts following the company who rate it a hold.
The article Dow Chemical Battles Economy, Preps for LNG Skirmish originally appeared on Fool.com and is written by David Lee Smith.
Fool contributor David Lee Smith has no position in any stocks mentioned. The Motley Fool recommends Kinder Morgan and Nucor. The Motley Fool owns shares of Kinder Morgan.
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