Michael Leithead: That’s helpful. And then just briefly on methanolysis plants, 2 and 3 again, Mark. If I take some of your commentary about if all goes to plan, hopefully, breaking ground, I think, by later this year, is it fair to say these plants — obviously, you’ll have a little bit of efficiency or a lot of efficiency gains from rebuilding the first plant. But is it fair to say that these plants commercially would be running something like in mid-2026 as a starting point?
Mark Costa: I know — with the schedule on now, we’re more into ’27 than ’26 for when these projects will start, if you go back to sort of our original estimates. There’s certainly efficiency and timing we’re pursuing that will allow us to build these plants more efficiently but we’re also building a lot more plants in this case, right? Because it’s not just a methanolysis point we’re building. We’re building infrastructure on our greenfield side in France. We’ve got polymer lines that we’re also building all at the same time. So when you put it all together, it just takes a certain amount of time to get it done. But the key is the markets are certainly very eager for the product. They have very significant deadlines in 2030 that they have to hit.
So we’re certainly well within making sure that we’re ramping up and helping them get to their targets. But we want to make sure we’ve really learned everything we can from Kingsport before we start the construction. And so that’s sort of that 6-, 9-month delay that’s sort of occurred from what we were originally thinking.
Operator: Our next question comes from Jeff Zekauskas of JPMorgan.
Jeff Zekauskas: I think in the Advanced Materials discussion, there was some noting of weak fourth quarter’s amount. And Asian auto production is always very strong in the fourth quarter, especially EV production. So is it the case that your EV exposure in Advanced Materials is more with domestic in European companies rather than with Chinese companies?
Mark Costa: So Jeff, when it comes to the fourth quarter, there was a lot of moving parts for AM as a segment involved in that. So on the auto side, we do have good relationships and positions with some of the Chinese EV makers as well as the Western EV makers. That has nothing to do with sort of the quarter. Auto demand was better. You’ve got to remember, performance films is a key part of that, not just interlayers, where we’re going on both EVs as well as ICE cars and our paint protection film. And so it’s only the interlayer part that really applies to your question around sort of the OEM manufacturers from an interlayer point of view. So I think that’s not a significant factor. The bigger factors were it’s just destocking continued longer than we expected in medical and packaging on the Specialty Plastics side that caused volume mix to be a little bit less than what we were projecting in October.
That was the entirety of the difference. I mean overall, the automotive market is sort of moderating a bit, as you can see from the production data in total. That has an impact but we were still growing above that market in Q4 and we’ll continue to grow above that market all year this year.
Jeff Zekauskas: I think in the original idea for the methanolysis project, you were going to spend $250 million for the project itself in Kingsport with an additional $175 million for Tritan. And I don’t know if you partly built the Tritan plant or the Tritan plant wasn’t built at all. But in the non-Titan piece, the original idea was $250 million. What did you spend? And in the future plans, I believe the estimate was $600 million to $800 million. What is the estimate now, in that what you say is that you have a good return on capital? Or you think you can work that out with your customer base? But the customer — you need to have an expectation of what the capital expenditures are in order to negotiate a level of a good return on capital. So I think originally, all of this was supposed to cost $1.8 billion. What’s the number now? Can you help us?
William McLain: Jeff, let’s start — the last update that we gave on the all programs was saying that the 3 methanolysis facilities would be approximately $2.25 billion. Obviously, Mark has also highlighted there was quite a bit of inflation since 2021. And I think that estimate is reflective of that. And every project over this time frame, including ours is at that level. Also, I would say, we’ve been able to handle the CapEx increases that had been above our estimate from a few years ago within our capital budgets that we’ve outlined and expenditures over the last couple of years. It was fully incorporated into our ’22 and ’23 spend. And I referenced earlier that we had roughly $30 million of increased depreciation expense going from 2023 to ’24 and a substantial portion of that is related to the Kingsport methanolysis facility.
That directionally gives you the magnitude. We’re going to be disciplined as we move forward, as we think about both from generating the cash flow to fund these but also on the returns. And we believe that Advance Materials, the return to growth will be accelerated by having this methanolysis facility and our renewed brands with our customers.
Mark Costa: But — there’s no question that the capital numbers — I’m sorry, just the capital numbers are up. We’re also pursuing a lot more incentives to offset some of those capital numbers. So until we get that all finalized, I don’t want to just keep updating numbers. So once we have clarity on them and the total economics as well as what we achieved with customers on the pricing premiums, we can get to fund it. We will be able to sort of give you a more clear answer on your questions. I mean the incremental $30 million of depreciation, a good portion, if not all but a good portion of that is Kingsport plants, so you guys can work out what the project costs. I’m sorry, you were saying something, Jeff?
Jeff Zekauskas: Yes. Did you partly build the Tritan facility and the Tritan expansion.
Mark Costa: Sorry, yes. We started the construction of it, the early — yes, Jeff, we started the early construction part of the Tritan line and then paused it. And we’re going to restart that as we align it with our outlook on Tritan demand which is improving a lot this quarter. So we’ll see how we judge the Tritan demand in this next quarter or when we need to get that going again to make sure we don’t short the market.
Operator: Our next question comes from John Roberts of Mizuho.
John Roberts: Are the sig tow contracts working as expected in 2024? And do you think you get to a point where the decline in sig tow volume is offset by the new products in Fibers so that the overall segment has flat to up volume?
Mark Costa: Great question. I’m a big fan of the cellulosic stream these days, John. We’ve gone through a rough patch for quite some time. It’s great to have the structural market of the tow business back to being where it was very stable and at the profit levels that allow us to reliably supply our customers. And they’re very focused on security, supply and reliability. And they placed a lot of value on us in this industry being able to provide that. So our contracts, we’re 100% contracted this year for volume and price. And so we feel good about the earnings stability we’ll have in that business. This year, as we said, it will be somewhat better than last year. And then we’ve got 90% of our contracts in place for ’25 and close to 70% in ’26.
