Peter Huntsman : Yeah. I think we’re – we feel that most of the destocking – at least what we’re seeing in our men’s products we’re not that exposed to agricultural products and chemicals. So I don’t want to comment on anything on the Ag side more just out of – we’re just not exposed that much there. So I really don’t track that. But with most of our amines, as we look again, as we look at the volume improvements that we’re seeing quarter-on-quarter I think that we’ve seen the vast majority of the destocking that’s taking place there has come to an end.
Operator: Our next question is from the line of Kevin McCarthy with Vertical Research Partners. Please proceed with your question.
Kevin McCarthy : Thank you. Good morning. Peter, I wanted to come to the five goals that you outlined at the top of the conversation. And I was particularly intrigued by your fourth point of assessing the portfolio, making sure you’re the best owner for all of your assets, et cetera. Obviously, we’ve seen some significant divestitures over the last five years or so. Do you have in your mind potential to part with any businesses that are bigger than a bread box? Or — are you referring to maybe potential for more surgical changes in the portfolio? Maybe any updated thoughts on where you’d like to drive the portfolio from here would be helpful.
Peter Huntsman : Yeah. I think that we need to just continue to look at the entire portfolio. I think that we’d be a real disservice to our shareholders if we said that we want to stay exactly what we are today forever. And as we look at those areas of the business that are particularly impacted by higher energy costs in Europe, I think that we need to step back and we need to ask ourselves, how do we structure those businesses for the next five or 10 years or next 20 years, where we’re going to be in a competitive position. The markets have changed quite a bit in the last couple of years when it comes to pricing dynamics when it comes to geopolitical shifts and energy policies and so forth. And I think we’ve got to continuously ask ourselves — are we best positioned to own these assets?
Are they in the right places? Do we have the right supply agreements or even partnerships and see where we go from there. But again, I would — I think it — I think the wrong move, we came in 1 morning and said everything is perfect. And there’s no need to look — if we could trade some of our assets. And obviously, I’m not going to get into which of those assets may be. But if you could trade some of those assets for less volatile, higher-margin assets, I know that’s a lot easier said than done. But I think we probably have approved some of that over the last couple of years as we’ve divested of our textile effects in TiO2 and some of the more commoditized intermediate chemicals and so forth, oxides and glycols and so forth. We bought assets that have been put into our advanced materials, our downstream urethane spray foam businesses.
We look at those sort of changes. I’d like to see that going forward.
Kevin McCarthy : That’s really helpful. And then second, Peter, if I may, I wanted to ask about your view on China. I think you made a comment that you’re more optimistic today than you were at year-end. Year-end was not too terribly long ago. So I’m just kind of curious, is it to do with a little bit of MDI uplift that you referenced earlier? Or are you seeing other signs in China that are more encouraging to you, more green shoots. Maybe you could elaborate a little bit on the regional outlook there.
Peter Huntsman : Yeah. I’m not sure that my view necessarily have changed all that much. I always get a little bit leery when you go into Chinese New Year because it seems like you come out of it and you’re either off to the races or it seems like things shift — the New Year’s ends and things just remain target. That’s kind of what we’ve seen over the last two years or so, China is struggling through COVID and then a rather lethargic recovery in the last year. I see them coming out of this new year, just in the last week. And again, I don’t want to base a whole year on a week of demand and pricing and so forth. But I think what we’re seeing in market conditions in real time, Kevin, is we’re seeing a better rebound, if you will, after the Chinese New Year than we’ve seen over the last two or three years.
And this is kind of the China that we were used to a couple of years ago. So again, I’m not saying these guys have changed drastically, but I do think that the pickup that we’re seeing in our particular business on EVs. And as we look at some of the demand that is picking up in China, in particular, it feels like it’s real and it continues to see a gradual steady improvement.
Phil Lister : And Kevin, for context, about 15% to 20% of our sales are into China and less than 10% into property, which has obviously been the big headline coming out of China and how far that’s fallen.
Operator: Our next question comes from the line of Vincent Andrews with Morgan Stanley. Please proceed with your question.
Turner Hinrichs : Hi, this is Turner Hinrichs on for Vincent. I’m wondering if you can walk us through price cost and other considerations underlying your guide and that margins will move higher in the first quarter within Performance Products specifically?
Peter Huntsman : Yeah. I think that as we look at Performance Products, we continue to see a gradual recovery in the construction markets, that’s going to be an improvement from anhydride and the unsaturated polyester resin chain as you kind of move downstream into North America. We’ll see a volume will be higher in our men’s products as well. And that goes into everything from spray foam and we’re seeing prices are stable to improving in this business. So yeah, I think, again, Performance Products are going to see a gradual improvement. And I hope that, that builds momentum throughout the year.
Turner Hinrichs : Great. Thanks for the color. So you’ve mentioned that you anticipate stronger pricing in the first quarter in polyurethanes. Could you walk us through what you’re seeing in each region as it relates to polyurethanes pricing and what you’re expecting for underlying supply and demand?
Peter Huntsman : Well, again, some of the broader things that we’re seeing in China, I would just say that we’re seeing around $150 a ton improvement. China, unlike Europe and the U.S. will set a price out. China moves really almost on a daily basis, on your base and more commoditized polyurethanes, your downstream urethane blends and more differentiated urethanes are usually going to follow that macro movement in pricing. But as we see pricing today in China, we see that up around $150 a ton improvement over what we’ve seen in the past couple of weeks. And as we go to Europe, again, we’re out with a $250 a ton improvement in Europe. And again, when I say that, that’s not to say that you take all of our volume and put $250 a ton of that.
Some of that will be effective March 1. Some of it will be a little bit later than that. Some of it, depending on contracts and so forth and in place, maybe more, maybe less than that $250 directionally, that’s where we see pricing going in the European market. And that’s obviously is very much needed, particularly in the European market. In the U.S. market, again, we’re seeing a number of areas with the splitter that we have in place, we see kind of more of a fragmented base in Europe. We sell a lot internally down through the Huntsman Building Solutions. We have a bunch of our product that’s on pricing formulations and so forth. We were able to pass through raw material volatility and increases. And we have some that are just on stand-alone contracts with prices that we negotiated on a quarterly or monthly basis.
But we are pushing for a broad price increase on the North American market as well in MDI.
Phil Lister : And to your question on utilization, we still expect it to be in the low 80s in the first quarter. We’re not up to the seasonal highs of construction in the second quarter. And as we said earlier, the polyurethane industry really needs to get into that 85%-plus utilization before you see a real inflection point when it comes to supply demand.
Operator: Our next questions come from the line of Mike Harrison with Seaport Research Partners. Please proceed with your question.
Mike Harrison : Hi, good morning. You noted that you were maybe seeing some additional opportunities to improve the cost base. And I was just curious, are those additional actions that could be taking place above and beyond the $60 million worth of incremental savings that are part of the restructuring program that’s been in place for several quarters? Or were you just saying that there’s still some actions that you need to take in order to achieve those incremental savings?
Phil Lister : Yeah, Mike, it’s Phil. I think we’ve guided to approximately $60 million year-on-year. That includes some of the actions that we’ll be taking during the course of this year. We are looking at manufacturing efficiency. And honestly, outside of just the cost base, we’re looking at working capital as well. I think we’re cognizant that in any recovery, working capital, there should typically be an outflow when it comes to cash. And I think there’s some more work for us to be done, particularly around inventory days where we can offset some of that. We’ll also continue to finish up our European restructuring project as well as a small amount to do there as well. And quite frankly, we’re still going to make sure that we’re offsetting about $50 million to $60 million of inflation every single year.
Mike Harrison : All right. And then the other question I had is on the MIRALON product line in this pilot plant that’s coming online in the next few quarters. Can you talk about the level of interest that you’re getting from potential customers? And I guess what needs to happen from a commercial or offtake standpoint before you decide to move forward with construction on that larger scale facility. And then the second piece of that is I apologize if you’ve already said this, but what could the cost of that 5,000 ton MIRALON facility look like?
Peter Huntsman : Well, the 30-ton facility, which would be the largest facility of its type is producing the carbon nanotube product. This will be the largest facility in the world. We believe we have a very competitive cost basis. And the key to this is the lower you can get the cost, the more applications you can get into. We’re presently working right now with everything from concrete to car tires, EV batteries and in structural products. Right now, we’re able to sell as much as we’re able to make of the product, but the product right now to cover the cost of going to very high-end applications into satellites and NASA applications and so forth. As you come up with larger scale capacities, we’re going to be able to widen the product availability, the value and the number of applications that go into.
The next phase of that expansion will be taking place next year. We believe that we’ll be starting up the 30-ton reactor. We’ll be starting it before sometime in the middle part of this year. And we feel that we should have sufficient data from that to initiate the larger expansion, which will be in 2025. At that point, I think that we’re — that next expansion really is what I would consider to be a commercial size reactor that if you want to go larger than that, you’re just putting in multiple reactors of that size. So really coming, I think, to the end of the next year or two of being able to see the product being able to qualify the material and then being able to mass produce the material at economics that should make this a very — hopefully, a very successful add-on to the rest of the business.
Phil Lister : In terms of cost, Mike, think about all of that investment that Peter described, the 30 ton the 5-kiloton in the tens of millions, maybe $30 million to $40 million. It’s all contained within the capital program that we’ve outlined and contained within the $200 million that we’ve guided for this year’s capital program.
Operator: Our next question is from the line of Frank Mitsch with Fermium Research. Please proceed with your question.
Frank Mitsch : Thanks so much. And good morning. Peter, I want to come back to the comment on Performance Products where you indicated that you anticipate a gradual improvement. As I look at that sector, the decline over the past several quarters has been — wasn’t gradual. It was fairly significant. And in fact, the volume declines were pretty horrific between the period of third quarter ’22. And third quarter ’23, we got back to relatively breakeven here in the fourth quarter. So the question is, obviously, a lot of that has to be destocked. If we’re back to a period of underlying demand, why would we not see these double-digit declines on volumes flipped to being double-digit increases on volumes and so forth. Can you help me understand gradual versus something more significant in terms of recovery?
Peter Huntsman : Yeah. I think that as we look at the amount of restocking that is taking place, I believe that when we go back and we look at where the markets were a little over a year ago, we were having a very difficult time fulfilling customer orders. And I think customers, when we started to work through the bottlenecks, customers have very high inventories of our product in their supply chains. And I think that was really across the board, we had trouble getting blowing agents and for our building solutions, our spray foam. We had trouble producing enough in means. When you saw that the boom ringing effect of the economy post-COVID. I think that there was — the supply chains built up too much inventory and there was a concern that there wasn’t going to be enough production that wasn’t going to be the logistics were not in place and pricing was going to go through the roof.
And a lot of our customers almost across the board whether it was an oriented strand board or particle boards or insulation materials, amines, whatever. I think they built unnecessarily large amounts of inventory. Now when the markets turned, I think that it turned certainly more suddenly and took longer to de-inventory than all of us anticipated or maybe some of us didn’t anticipated the sort of a drawdown. I don’t think so. I mean, I would look across the entire chemical industry. We all hit about the same magnitude at the same time. Maybe off a quarter here and there. Now does the market bounce back at the same magnitude that it came down, I don’t believe that it does because I don’t think most people today are worried about where they’re going to be getting product next quarter, they’re seeing prices gradually improving.
