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Dow Chemical raising prices due to energy

It supplies many industries, and they'll likely pass the increases on to consumers.

Better start stocking up on diapers and detergent.

Consumers hit hard in recent months by sharply higher prices for gasoline and food should prepare to start paying more for household items that contain ingredients from the Dow Chemical Co.

The Midland, Mich., company announced yesterday a price increase of up to 20 percent, starting Sunday, to offset the soaring cost of energy.

The company took the unusual step of directing blame at the nation's energy policymakers.

"For years, Washington has failed to address the issue of rising energy costs and, as a result, the country now faces a true energy crisis, one that is causing serious harm to America's manufacturing sector and all consumers of energy," Andrew Liveris, Dow Chemical's chairman and chief executive officer, said.

Dow Chemical's spiraling costs are "forcing difficult discussions with customers," he said.

The company supplies a broad swath of industries, including agriculture, appliances, automotive, building and construction, furniture, health care, housewares, paints, processed foods, and textiles/carpeting. Any sizable price jumps would likely affect almost all of them.

The price increases will be based on a product's exposure to rising costs. Dow said that it spent $8 billion on energy and hydrocarbon-based feedstock, or raw materials, in 2002, and that the expense could climb to $32 billion this year.

The company reported in April a 3 percent drop in quarterly earnings amid a 42 percent jump in energy and raw-materials costs.

Its profit margin - net income as a percentage of sales - shrank from 9.8 percent in 2005 to 7.6 percent in 2006, and to 5.4 percent last year.

Kevin McCarthy, a Banc of America Securities L.L.C. analyst, said in a note to investors that there was "a growing unwillingness among chemical producers to function as an energy shock absorber."

Price increases from major suppliers significantly affect the cost of manufacturing, said Angie Chaplin, a spokeswoman for Solo Cup Co. The Highland Park, Ill., company is a customer of Dow Chemical.

Companies and entire industries are looking for ways to share increases in the cost of doing business, said Mark Stephenson, a spokesman for chemical giant BASF Corp., of Florham Park, N.J.

Another competitor, Rohm & Haas Co., of Philadelphia, announced April 29 that, beginning this month, it would apply an indexed raw-materials and energy surcharge to products made by its Specialty Materials businesses.

The American Chemistry Council wants new supplies of natural gas - used by its members to heat and power their facilities and as a raw material - brought to market by opening access to supplies that are currently off-limits.

Dow shares rose 60 cents to close at $40.83 in trading yesterday.