Duffy Fisher: Okay. And then, do you think the industry, if we roughly stay at these levels, because you talked about construction may still struggle in next year, does the industry need to do something strategic? Meaning, are people running kind of below cash breakeven do you think in some parts of the world, or is this just something we’re going to have to wait out until we get some demand rebound?
Albert Chao: I think generally speaking, if you talk about just chemical industry or…
Duffy Fisher: I’m sorry. Epoxies in general.
Albert Chao: Yes. As I said, one of the questions earlier was where we’re seeing prices. And as mentioned that prices pretty much has dropped in both U.S., European markets to meet imports. And we’re seeing the imports to start slowing down as well because of the cost pressures, oil price going up, and the economy is not great. And even companies in China are curtailing production or some of the plants are not running. So, we are seeing people are taking actions to reduce production, reduce losses all across the world. So, I think very few epoxy people we know are making any money.
Operator: Our next question comes from the line of Kevin McCarthy from Vertical Research Partners.
Kevin McCarthy: Albert, I’d appreciate your updated view of PVC resin prospects moving into 2024. The U.S. contract price seems to be trending about flat, but seems also that there’s a lot of supply length in China against the backdrop of dislocated property sector there. So, how do you see that playing out? Would you anticipate rationalization of capacity or throttling back? What is your view on PVC for next year?
Albert Chao: I think, at least the U.S. market, PVC demand was impacted by both domestic housing construction and as well as global economy. As you know, about a third of the U.S. production PVC are exported and being at that ratio for quite a while. And the U.S. has the lowest cost to produce PVC in the world. We have benefit from low-cost natural gas for generating power for making chlor-alkali and low-cost natural gas for producing ethane, which is predominant feedstock for the U.S. ethylene producers. And half of PVC is ethylene and half is chlorine. And so, we have the lowest cost producers in the world to produce PVC, and we can export anywhere in the world and compete. The issue then is margin. And China, one thing is going on is that the Chinese government are moving less and less in the carbide — about 80% of the Chinese capacities are carbide, coal-based, which is high cost and high polluting process, and the Chinese government having curtailment of any new capacities in carbide process and switching to ethylene-based PVC production, which comes at a higher cost because ethylene in China is all based on naphtha, which comes from cracking refining oil.
So the cost base is higher. And so, they are less able to compete on a global basis. So, from that sense, again, our U.S.-based producers are much better positioned to compete globally against even Chinese exports. So, at the end is the global economy and China construction activity is a big part of the Chinese economy and is really going through a recession right now. So until the construction and housing activity in China improves, you are not going to see improvements in profitability in the vinyl business in China either, which should impact the rest of the world as well.
Kevin McCarthy: Thank you for that. And then, Steve, I had maybe two housekeeping ones, for you. Apologies if I missed it. But how did the $50 million FIFO headwinds that you referenced split between your segments? And also curious, do you have any fourth quarter maintenance turnarounds planned?
Steve Bender: Yes. And so about three quarters of that is in PEM, Kevin. And your second question was — tell me again.
Kevin McCarthy: Are you planning to turn around any of your manufacturing plants in the current quarter?
Steve Bender: In the current quarter, only small activity from a maintenance level perspective. Our bigger activity will be in ‘24 when we have a ethylene turnaround in ‘24. But otherwise, in the fourth quarter, it’s really small maintenance activity not attributable to any significant turnaround levels.
