Greg Riddle : Let’s make the next question the last one, please.
Operator: Of course, our final question today comes from the line of P.J. Juvekar with Citi.
P.J. Juvekar : So Mark, on methanolysis, you mentioned your CapEx is up 10%, but you don’t expect a huge change in the returns you expect. Are you passing on the increased cost to your customers? And also, the plastics are cyclical. And so you — if you want to get steady returns there, are your customers willing to take the cyclicality of the plastics and volatility so that you can cap steady margins?
Mark Costa : Yes. So I think from a spread point of view, the way we’re sort of contracting into the PET market is with our — what we call our circular contracting model, going to provide steady spreads between the cost of feedstock and energy and the price of material. So from a spread point of view, we expect to have quite good stability, I think Airgas company kind of model. Demand, of course, is still subject to end market demand. So when it comes to sort of the volume, there’s always going to be some variability, but we’re going into packaging and the consumables. So the variability in that volume on an annual basis year-over-year is pretty stable, right? So I don’t have a lot of volume concerns there. When it comes to the specialty side of this circular platform, we’re not changing the end market sort of structure in both demand or how we do pricing.
We’re just adding recycled content as another dimension of differentiation to Tritan and all the other copolyesters in the cosmetics everything elsewhere selling. So we’ll still be sensitive to demand changes when it comes to the circular platform that we’ll be capturing higher margins relative to what we currently realize in these products and growing total volume quite fast, right? One of the reasons we win in the marketplace is high-value growth, driving mix upgrade against such cost leverage, right? That is very true in good times, and this will lead to much more accelerated growth from these kind of products to fixed cost leverage. But unfortunately, face downtimes like the last fourth quarter and the first quarter of this year where that mix is a headwind.
But when you look at the upside in our stock, as you get through this, not just for circular, but for just market recovery, there’s a huge mix upside for our company as you go into the back half of this year in ’24 when you think recovery is coming, which we demonstrated coming out of 2020.
P.J. Juvekar : Mark, the Airgas or the industrial gas model hasn’t really worked in plastics. What gives you confidence that this would work this time? Is it because this is such a specialty product and the consumers want it or the customers want it that you can have that kind of contract structure?
Mark Costa : Yes. So as I said, in specialty, it’s just our current model. But when it comes to the PET, that’s where the industrial gas model concept applies. And yes, it’s a unique offering, right? We’re the only large-scale company on the planet, especially in North America and Europe, who’s offering recycled content from hard recycled plastics. And when you get to the food grade industry, mechanical can’t remotely meet their needs. And someone has to plug that gap if they’re going to hit their targets, and we are way ahead of our competition in being able to provide that service. And that’s exactly what an Airgas company does to provide a service to convert a product into a highly needed input. And that’s sort of where we’re at today, and that’s our confidence as we go forward into these three projects.
