Dow Chemical (NYSE:DOW) Increasing Capacity of Ethylene Crackers

Goldman Sachs (NYSE:GS) says they're raising their price target on Dow Chemical (NYSE:DOW), citing increasing their existing ethylene crackers to crack more ethane, moving them away from propane.

They estimate this will increase ethane consumption over the next two to three years from a range of 20 percent to 30 percent.

Goldman said investors need to know these things about the change:

"1) this is NOT an expansion of DOW’s ethylene capacity; 2) DOW could save $225mn/year ($0.15/share) by shifting to ethane; 3) DOW’s move signals mgmt’s confidence in the sustainability of North America’s feedstock advantage; 4) a 35k barrels/day increase in ethane demand (est. impact from DOW’s move) 3 years from now is manageable; 5) a JV between DOW and a midstream company to build additional fractionation capacity could come online in time to feed DOW’s needs."

Goldman maintains their "Neutral" rating on Dow, which was trading at $33.07, falling by $0.17, or 0.51 percent as of 11:50 AM EST. Dow raised their price target on them from $34 to $36.