Peter Huntsman: Well, as we look at the October numbers, we’re not going to get into splicing. It’s a good question, but we’re not going to get into splicing our monthly performance. But as we look at the demand across the board here, I certainly can say that October was a bad month. What we typically see at the end of the quarter, Frank, is customers will come to us, and these are larger customers, not the mom-and-pops, but the large OEMs are going to the automotive industry and so forth. And they’ll typically come in a normal year, midway through December, and say, we’re done for the year. And usually, a week or 2 before that, they’ll start canceling orders and so forth. And we’ll see that the fourth quarter ends rather suddenly, not on December 31, but usually sometime in the month of December.
It’s usually not that dramatic, but it’s pretty close to that. So you really don’t see the results of December and October. Typically, the business doesn’t move all that much in a month or 2. Fourth quarter, it does. And what we’ve heard from customers, we’ve not seen it yet in the order patterns. What we’ve heard is that there’s going to be an earlier shutdown this year that we’re going to — you hear from customers just anecdotally, they’re going to be shutting down earlier this year. They’re going to be taking the last 2 or 3 weeks off, then they’re going to be reducing inventory. Now you hear that anecdotally and it’s just — I don’t know, that’s why I started about 3 or 4 months ago. It’s really tough for us, a company this size to just put on the brakes, say, we’re going to reduce inventory starting this next week because everything is on the road, everything’s on the water, everything’s in the railcar.
So we anticipate fourth quarter, there’s going to be inventory reduction. And if that starts at the beginning of December versus the middle of December, frankly, that’s going to have quite a bearing on our bottom line. So I wanted to just spell out in my comments, even though we’re into the fourth quarter, even though we’re starting to see the order patterns as they develop through the quarter, it still is a bit too early to say definitively where we’re going to be.
Phil Lister: Frank, if you’re looking to bridge between the 136 we just did and the midpoint of that range, you can think about half of it being price costs. We’ve talked about what’s gone on with the benzene market and the natural gas market. Overall, we did indicate that our China joint venture PO/MTBE, that EBITDA is going to come down between Q3 to Q4 by about $10 million. And then the balance of it will be the seasonality and the inventory of the customer and that Peter has talked about.
Frank Mitsch : That’s very helpful. But you know there’s a school of thought out there, and I’m curious as to where you fall in this is that we have been hearing incessantly about destocking since the third quarter of ’22. And so there’s a school of thought out there that the destock is — has got to be near an end. And therefore, the sort of seasonality in the fourth quarter in terms of companies rightsizing their inventories, et cetera, may not be as dramatic this year. It seems to me that you’re not buying into that thesis that you still believe there’s more destocking that needs to occur. Is that correct?
Peter Huntsman: I personally — and Frank, I don’t want the headlines to start Peter Huntsman’s the ultimate pessimist. But no, I do think that that’s — I do think that’s correct. I do think that there’s going to be year-end destocking. And as I talk to customers and so forth, I don’t think it’s going to be cataclysmic but I do think it’s going to happen. I would also just note that I’ve been somewhat befuddled by what you said earlier about how do you get destocking that takes place for 6 quarters in a row. Is there that much inventory in the system? And no, there isn’t that much inventory in the system, I don’t believe. I think that it’s really a combination of falling demand and of inventory. And I think some of the — when we perhaps saw falling demand and how quickly that demand was falling in housing in some of these other areas, I think that we took that as inventory destocking because demand was down and the statistics look like it ought to be okay.
But as you look back on it, I think what we’ve seen over the last 1.5 years is really a combination of massive destocking of inventory and a real fall off when you look at areas like housing, building materials and so forth. Let’s remember going into 2022 and going into even the beginning of this year in a lot of areas, we saw very large inventory builds because of the supply chain constraints that we saw at the beginning of 2022. There were a lot of customers that were sitting on not just our inventory, but a lot of customers’ inventories, and they were sitting on their own inventory. I look at some of our OSB customers and OEMs and so forth. They typically will deal with 20 to 30 days of inventory. Some of these companies had 60, 90 days’ worth of inventory, and we may not see that because they’re not holding 90 days of MDI inventory, but they’re holding 90 days of some other inventory that they’ve got to work through before they can start buying ours again.
So I think it was just really a combination of issues. But Frank, I do share your view that whether it’s demand or inventory, I think that we’re really very, very close to the end of that road.
Operator: Our next questions come from the line of Mike Harrison with Seaport Research Partners.
Mike Harrison : So the next logical question is maybe on your expectations for destocking as we get into next year. Do you think we’re in a situation where we see a gradual recovery in order patterns? Or could we see a situation where customers are going to need to rapidly bring production back up, rapidly accelerate orders to meet seasonal demand pick up in the spring? Is that something that we could be seeing about to unfold here?
Peter Huntsman: I’m not going to anticipate that just because it’s tough to have the underlying data to justify it. But I do think that if people are getting low on inventory, which I think the market is, I don’t think that it’s a whole lot to stood the herd, if you will, whether it’s a single shot of lightning or in this case, maybe just a rattlesnake somewhere on ground. And once — when somebody starts moving very quickly to replenish inventory, you start to see people coming to us, and I need some more inventory. And what we’re running at 55%, 60% capacity of the single facility, and it’s going to take us a couple of weeks to recalibrate the plant and to keep — to have the production to be able to fill the inventory. All of a sudden, you’ve got shortages and also people are publishing their shortages, prices are going up and everybody kind of crowded through the door at the same time.
And that’s usually — and it’s usually over something that is miniscule as a single operator somewhere around the world having a plant problem, a raw material going up, not that there’s anything going unusually wrong in the Middle East right now. But what would happen if something were to take or get sick or whatever. Also, when people see crude prices going up for whatever reason, that means my raw material prices next month going to go up. And all of a sudden, I’m going back and I can’t get the product that I thought I could get. I do think that a number of chemical companies are also operating their facilities, calibrating their facilities around today’s demand, not the demand of a recovery, but around today’s demand. So I think you take all of those things together, and I think that it does put us in a position where you could see a more sudden knee-jerk recovery than a kind of a longer sustained recovery.
Mike Harrison : All right. That’s very helpful. And then my other questions on the spray foam opportunity in international markets. Maybe give us an update on the kind of progress that you’re making with spray foam insulation in Europe and in China?
