Erica McLaughlin: Yeah. So, the energy was a big headwind, I would say, last year from, if you looked at fiscal 2022 to fiscal 2023, it was roughly $20 million and so that was the downward pressure. This year, I’d say we’re not seeing any meaningful difference in terms of that. Again, there’s very different contracts in different parts of the world, and in some cases we sell electricity, some cases steam, et cetera. So, it doesn’t always mirror exactly the energy markets, but this year, I’d say it’s a minimal impact year-over-year to us.
Jeff Zekauskas: Okay. And did you say what your North American volume growth has been last year and this year so far?
Erica McLaughlin: Well, last year, North America was down. If you remember, we had a good amount of destocking happening in the region. So…
Jeff Zekauskas: Yeah.
Erica McLaughlin: … in 2022, you’ll remember there were a good amount of supply chain disruptions happening and so volumes were quite strong in 2022 and we saw the destocking happening there last year. I’d say this year, as Sean noted, our expectation would be more of a flattish year in North America.
Jeff Zekauskas: Is the North American market growing in your seeding share or the North American market is flat?
Erica McLaughlin: No. I think the outlook for this year is roughly flat North America market.
Jeff Zekauskas: Okay. Great. Thank you so much.
Operator: Thank you. [Operator Instructions] One moment for our next question. And it comes from the line of Laurence I [ph] with Jefferies. Please proceed.
Dan Rizzo: Hi. This is Dan Rizzo on for Laurence. You mentioned that infrastructure is a tailwind now. I was wondering if you’re seeing any benefit from the Infrastructure Act or the CHIPS Act, if that’s helping drive growth, if that’ll help you in the future or if that’s having any effect at all?
Sean Keohane: Hi, Dan. So, I think, yes, we are seeing impact from improvements in infrastructure, again, principally in the wiring cable space, which really, if you think about what drives that, there are really two things. One is as governments and municipalities renew their grid infrastructure, which is in need of renewal. That’s one driver. And then as alternative energy gets installed, then that has to get connected to the grid. So the best example of that would be when there’s an offshore wind farm, then there have to be subsea cables that bring that power back and connect it to the grid and so that drives a demand for conductive carbons and so it is a clear trend there. With respect to — and we’re seeing that in the current results.
With respect to the — in the U.S., the Infrastructure Bill and CHIPS Act and a range of different stimulus measures there, we’re not yet seeing, I don’t think, any direct impact from that. In most cases, while there have been awards of grants, money, and incentives that are beginning to trickle, the amount of impact from that I don’t think is meaningful. Now, what should happen over the longer term here is as those investments take hold to shift the energy mix in the U.S. to more and more renewables, then you should certainly see an impact flowing through our infrastructure applications like wire and cable. And then over time, I think, you should continue to see a sustained renewal of the grid. Certainly, there are very well-publicized examples of where the grid has not been stable in parts of the U.S. and this is true in many of the mature economies and really in need of renewal.
So, we think that provides a good long-term tailwind with a bump to that long-term tailwind as alternative energy gets deployed.
Dan Rizzo: That’s very helpful. Thanks. And then my second question is around the new –kind of the battery business for EVs. I was just wondering, given the growth rate, how — I mean, what’s your capacity and is there a time and at least in the medium-term, where you think you might have to build out capacity to meet the anticipated growth over the next 10 years to 15 years or whatever it is?
Sean Keohane: Yeah. Yeah. Sure. Thanks, Dan. So, certainly, right now in batteries, what you’re seeing is that the EV demand continues to grow at a pretty healthy clip. I think, globally, it’s still somewhere this year expected to be in the 25% to 30% range. Now, most of that coming in China. I think the growth of EVs next picking up in Europe with kind of lagging in the U.S. in the early stages. But what you’re seeing this year is that, at the battery production level, that you’re seeing battery production lag EV sales and this is because there is — this is quite well reported. There’s quite a bit of inventory, battery cell inventory in the chain and until that’s worked off, I think, you will see battery production lag EV growth.
So probably the balance of this year, you’ll probably see that dynamic play out. As we look longer term in this business today, the business is heavily skewed globally, not just our business, but the battery business in general to China. They make approximately 70% to 75% of the world’s batteries. So the overwhelming majority of them. Now, over time, by the end of this decade, the expectation is that that will be more 50-50, 50% in China and about half coming outside of China in the U.S. and Europe. And so we’ll certainly be making investments to support our customers’ growth as that sort of bifurcation happens between China and the rest of the world. But we’re really pacing the investments to make sure that they’re synced up with the build out of battery plants in the U.S. and Europe.
So we’re watching that closely and managing closely with our customers to make sure we’re pacing those and syncing those up. But that’s a bit of sort of big picture of what’s happening, how we see things developing, and then over time, we would expect further capacity investments in the U.S. and Europe to support that.
Dan Rizzo: Thank you very much.
Operator: Thank you. One moment for our next question. And it comes from Jeff Zekauskas with JPMorgan. Please proceed.
Jeff Zekauskas: Thanks very much. You’ve had a positive price dynamic in North America in fiscal 2023 and I think you’re optimistic about fiscal 2024. But volumes contracted last year in North America and it seems like they’ll be flat or so this year. What makes you optimistic about your pricing dynamic and what in general is causing prices to lift in such a soft demand environment?
