Dow Chemical Pbb Budget

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Background Dow Chemicals is the largest, by market position, ethylene and polyethylene producer in the world – having 7% of global polyethylene capacity by year end 1995. Why then would a company in this position be interested in purchasing Petroquimica Bahia Blanca (PBB), a roughly 20 year old petrochemical plant that produces ethylene and polyethylene, which is being privatized by the Argentine government? Simply put, the PBB plant provides Dow Chemicals the opportunity to expand on their leading global market position and become the dominant polyethylene producer in Latin America. First some background on the product under consideration. Polyethylene plastic is used in many forms, from milk jugs to grocery store bags, and is produced from ethylene. Ethylene is produced from natural gas molecules called ethane or from crude oil molecules called naphtha. These molecules are sent to processing plants, crackers, which converts the molecules to ethylene, the ethylene is then sent to plants which produce different forms of polyethylene. The PBB plant contains a cracker and a high density polyethylene plant. The PBB plant acquisition would be the first step in the overall Argentina polyethylene business strategy and should be considered by Dow Chemicals for numerous reasons including corporate strategy, site location, growth potential, and current government policies in Argentina. To be successful in the polyethylene industry in Argentina, along with acquiring the PBB plant, Dow would need to take two additional actions – first, acquire two polyethylene plants from Polisur and then build a new ethylene cracker accompanied with a polyethylene plant. The acquisition of the Polisur polyethylene plants makes sense as they are sourced ethylene from the PBB plant, while construction of the new ethylene cracker and polyethylene plant would ensure production can meet
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