Dow Chemical to Raise Prices by 20%

Inflation, what inflation?

Dow Chemical (DOW) today announced it was raising prices on ALL products by 20%.

The company is getting crushed by higher energy, transportation and commodity costs and has to pass along these costs in order to maintain its margins. Will customers buy less as a result?

From Bloomberg:

The increases are needed after a 42 percent jump in first- quarter spending on raw materials and energy, Chief Executive Officer Andrew Liveris said today in a statement. The increases take effect on June 1, Midland, Michigan-based Dow said.

Dow, which makes 3,200 products from Styrofoam insulation to pesticides and plastics, is trying to pass on higher costs amid company forecasts that spending on energy and hydrocarbon-based ingredients will climb to $32 billion this year, a fourfold increase from 2002. The rising costs are symptoms of a “true energy crisis” caused in part by the U.S. government’s lack of a comprehensive policy, Liveris said.

The energy costs are finally working their way through the system.

As I have written here before, the chemical sector is the nation’s building block. Their products are in all of our products. If they’re increasing their prices by 20%, what will their end users do?

Kimberly-Clark (KMB), manufacturer of Huggies diapers, Kleenex, and toilet paper (among other things) just announced they were raising prices by 10% to 12% effective this summer. Last February, they raised prices on these products by about 5%.

That’s a 15% increase in just the last six months. The company said they have NOT seen consumers flee to generic brands (not yet.)

Inflation? What inflation?