July 1 (Bloomberg) -- Dow Chemical Co., the largest U.S. chemical maker, is permanently closing three Louisiana factories that make ethylene and derivatives to meet cost-reduction targets following the acquisition of Rohm & Haas Co.

Facilities that will be closed include an ethylene plant, an ethylene oxide and ethylene glycol production unit, and a factory that makes ethylene dichloride and vinyl chloride monomer, Midland, Michigan-based Dow said today in a statement. The company will take a second-quarter charge of about $700 million, which includes the elimination of 2,500 jobs, spokesman Bob Plishka said.

Chief Executive Officer Andrew Liveris is cutting a total of 10,000 jobs as part of an April 30 plan to reduce costs by $2.5 billion after acquiring specialty-chemicals producer Rohm & Haas in April. Ethylene makers need to shut 10 million metric tons, or 8 percent, of capacity to tighten supply as Middle East-based companies such as Saudi Aramco boost output, said Brian Ames, the Dow global business director of the hydrocarbon- monomers business.

“Dow is not wasting any time in reacting to persistent global weakness in the demand for basic chemicals,” Carol Levenson, a Chicago-based analyst at Gimme Credit, said today in a report. “This round of plant closures could be interpreted as an anti ‘green shoots’ data point.”

Dow fell 16 cents, or 1 percent to $15.98 at 4:15 p.m. in New York Stock Exchange composite trading. The shares have gained 5.9 percent this year.

Impairment Charges

The second-quarter charge, aimed at saving $100 million a year, includes costs to shut plants and eliminate jobs as well as impairment charges related to the sale of some Texas assets that must be divested to comply with antitrust approval of the Rohm & Haas purchase, Plishka said. The charges will total $600 million to $750 million, Dow said today in a separate filing.

Dow is the world’s largest maker of ethylene, which is primarily used to make plastics such as polyethylene.

Plant closings implemented since late last year will reduce Dow’s consumption of ethylene by 30 percent on the U.S. Gulf Coast and bring the company’s demand in line with internal production, the company said. Dow won’t need to buy ethylene after closing the ethylene plant, which is in Hahnville, Louisiana, and is the company’s smallest in the U.S., Ames said.

New ethylene plants in the Middle East and East Asia will add 26 million tons of capacity in the three years through mid- 2011 to about 130 million tons of existing capacity, Ames said. Demand has declined by 5 million tons this year, he said.

Margins have turned negative for many ethylene producers outside the U.S. and Middle East that use oil-based naphtha rather than natural gas-based ethane or propane, Ames said. Dow won’t need to close any other ethylene plants in the U.S. or Europe because all the remaining facilities are among the lowest-cost producers in the industry, he said.

To contact the reporter on this story: Jack Kaskey in New York at jkaskey@bloomberg.net.

Last Updated: July 1, 2009 16:41 EDT