John McNulty: Yes. Thanks for taking my question. And Howard, again, congratulations. You’ve been a huge help over the years. So, the question would just be on the II&I segment. It came in – it looks like solidly better than kind of what you were expecting when you gave the outlook on the 2Q call. So curious what the factors were that drove it? And I guess, if we back out the operations problem, you’re kind of at a $250 million run rate in terms of EBITDA. Is that a reasonable way to think about how you start out looking at 2024?
Jim Fitterling: Yes. Good morning, John. On II&I, we obviously saw a strong demand in the energy side, which is Industrial Solutions and the mobility side, which is more the polyurethane side. Durable goods are still lower than they were in the year ago period. We also had a little bit better, because Sadara had had some lower operating rates from some maintenance time and its coming back out of that. So, I think that will continue to be positive upside. There’s price pressure, obviously on polyurethanes. We’re going to see some positive impact from the new isocyanates capacity down in Freeport, which will be there. The business also did a lot of work on their costs. So their EBITDA was up, because they’re also managing their costs.
I don’t think in fourth quarter, you’ll see any higher impact on Plaquemine unplanned event. We saw about $100 million in the third quarter, you’ll see that kind of flat to the fourth quarter. And then, the target is to try to get that asset up and running in the second quarter next year.
Operator: Thank you. Your next question comes from the line of Josh Spector of UBS. Your line is open.
Josh Spector: Yes, hi. Thanks for taking the questions. And want to echo my, congrats to Howard and definitely thank you both of you. So, I just wanted to ask on the siloxane side within PMC, made some comments on kind of some increased pressure there. I mean you’ve been under pressure in that business all year from added supply. Has anything changed in the last few months? Or is that just a reiteration of what you seen? And as you think about next year, how much did things have to improve for that business to get back to a normal healthy level?
Jim Fitterling: Yes. Good morning, Josh. Obviously, in siloxanes, there was significant new capacity in 2022 and 2023, and we expect that to moderate in 2024 and beyond. That’s put pressure on siloxanes prices, primarily in Europe or in Asia, which are at the lowest levels that they’ve been at in quite some time. They’re starting to move up, a bit in the fourth quarter, some demand related. Some obviously related to higher silicones pricing, upstream silicon metals pricing, which is kind of moving things up. But I think what you’re going to start to see, is that you’re going to have less capacity coming on and the downstream market, continues to grow at good rates, and we’ll start to absorb some of that and we’ll start to see operating rates improve ’24, ’25.
Operator: Thank you. Your next question comes from the line of Patrick Cunningham of Citigroup. Your line is open.
Patrick Cunningham: Hi. Good morning. On the long-term decarbonization strategy, given the weaker macro and what seems to be some deceleration in appetite to tackle the green transition, how do you think about the risk to public private partnerships subsidies, incentives in North America and abroad?
Jim Fitterling: Yes. Good question. Obviously, our view on the Alberta project, is we’re working in an environment that’s supportive of decarbonization. There’s a price on carbon in Canada. There’s existing carbon capture infrastructure. And there’s obviously, some investment credits for the hydrogen portion of the project. And so, those are all positive. As we mentioned, though, we have to keep in mind that this is also going to be a very low-cost asset from an ethane supply capability standpoint. So that’s why we say, our expectation is the returns will be at or above our Texas-9 cracker, which is the best project that we’ve ever had in our history. Having said that, we always have to keep our eyes wide open to what’s going on, on the incentive space.
We’re not going to build just on the back of incentives. We’ve got to make sure that we make investments that are long-term, low-cost operating investments where we have advantaged feedstocks, and we have access to market. That’s – the same thing is true when we get into circularity projects. And when we talk about our advanced and mechanical recycling projects, we’ve got to make sure that the partnerships that we have are looking long-term and where they’re going to access the waste, will they be the low-cost position and will they have the right access to market. So, we’re looking at them project-by-project. We’re absolutely convinced that our timing is right on the Alberta project. We get this one final issue nailed down with the Canadian federal government, we should have FID before the end of the year.
Operator: Thank you. Your next question comes from the line of Arun Viswanathan of RBC Capital Markets. Your line is open.
Arun Viswanathan: Great. Thanks for taking my question. I’ll add my, congrats to you, Howard, definitely a pleasure working with you over the years. I appreciate your insights. Yes, I guess I just had a question on China. Maybe you could just update us on, what you’re seeing there. Obviously, very important for most of your markets. You noted that volumes were up across the three businesses year-on-year, if you remove your merchant ethylene sales. But I guess what are you seeing in China? Maybe if you could characterize kind of polyethylene demand, maybe some impacts from – on the consumer side as well as construction that would be great? Thanks – in your outlook.
Jim Fitterling: Yes. Good question. I mean obviously, GDP growth this year is expected to be about 5%, that’s been on the back of consumer demand, and that’s really been the government’s position as consumer-driven recovery from the slowdown. Our expectation is, because of what’s going on in the housing construction markets, there will be some pressure on the government for some stimulus activity to get things moving there. Manufacturing PMI in September was up, so second consecutive month up, which is good. Automotive sales were up about 9.5% year-over-year in September. EV sales are up about 38% year-to-date. Retail sales were up 5.5% in September, and we saw a rise in the sale of closes and textiles as well as some refined oil products.
I would say one of the things that we’ve always looked at in terms of coming out of a slowdown is the price of MEG. And one of the things that drives the price of MEG, is the operating rate on the polyester plants, which are above 70% right now. We haven’t seen that in quite some time. I think it’s a little bit early to call that as the turn, but it’s something to keep an eye on. And the volume moved quarter-over-quarter are good. Packaging has held up really well. And it typically does in an economic slowdown, because of the nature of food packaging, medical packaging, day-to-day consumer nondurable items.
Operator: Thank you. Your next question comes from the line of Duffy Fischer of Goldman Sachs. Your line is open.
Duffy Fischer: Yes. Good morning, guys. In both PMC and iCube, if you could walk through, pricing you called out is down sequentially in each of the SBUs, but yet EBITDA was up in both segments sequentially. So could you walk through and just tell us like, where was the spread getting better, because raw materials were falling more than price was down? And how much of that was kind of the structural costs, that you guys are trying to take out that we would put in as kind of permanent?
Jim Fitterling: Yes. So – if you look at II&I, the Louisiana outage was obviously a headwind. And then you had some turnaround tailwinds and cost savings, about $40 million. Variable costs on the benzene and propylene side really compress there – and then equity earnings from Sadara were a little bit better. So, those were the moving parts. In PM&C, you had tailwinds of about $60 million from the turnaround in cost savings. So that’s to the positive. You had some seasonality and lower siloxane prices to the negative and we had also improved supply availability of siloxanes and some opportunistic monomer sales in the coating side of the business, acrylates were strong in the quarter. So that was – those were the things that net-net made the swing in those two segments.
