LyondellBasell Industries N.V. — 2024 Q1

Steve, I mean, thanks for your question. This is Peter. It was a bit difficult, I mean, to understand the line was breaking up. But you were asking for our level of demand on the renewable side of polyethylene as well as if it is cost plus or not.

Good question, Patrick. And of course, we are very pleased that we see that the situation is changing in Europe. Of course, as you alluded to and as we said in the prepared remarks, held by discontinuity because of the issues in the Red Sea.

I think the only thing that I would add, Peter, is we continue to see strength in packaging, which you alluded to in our prepared remarks. And none of us can predict what's going to happen with the supply chains, and so long as that threat is out there, I think we'll continue to see more nearshoring.

And another topic that I want to point out is everybody has noticed that now in Europe, there is consolidation announcements in the market. So if you do the back-of-the-envelope calculation of, in total, now the 3 announcements that have been made, then we're talking about approximately 1.5 million tons of ethylene capacity, that in, let's say, relatively short term should disappear in the market.

Let me take the latter part of your question. Very good question, as usual, Frank. The latter part, I mean around our assets. You rightfully said, we took a very early step when the industry was not undertaking any steps yet, by rationalizing our polypropylene facility to 1 line in the southern part of Italy, in Brindisi. Of course, we've always said that we continue to look at all the different assets that we have in Europe, taking into consideration that we have flexible assets in Europe compared to some other assets that are still there in the industry that are not flexible, that are subscale, that were dealing with high costs, that we have a quite good position with our assets if you look at the cash cost curve in Europe.

I think I want to go back to the first part of Frank's question, just so I answer that. As many of you saw in the prepared remarks and the releases this morning, our first quarter North American olefins and polyolefins would operate at our crackers at about 75%. So you asked the question about operating rates for global OPAM. I would say OPAM or global O&P-Americas as well as global, Europe, Asia and International are both at 85% in the second half -- or the second quarter of the year.

Thank you, Matthew. Before I hand over to Kim, let me point out that we are, of course, very pleased to see that domestic demand in the United States has improved by 5% versus Q4 last year. Reminding everybody that this is the strongest quarter since Q3 2022.

So Peter, I think what I would add to that, and it's hidden throughout our messaging today, is that domestic demand, as you mentioned, is up, export demand is up. Just to put numbers to your comment around year-on-year. Year-on-year PE exports out of North America are up 27%. So the new capacity that's now online is absolutely being exported around the world. Those channels to market are open. We're involved in all of those. And we're very optimistic now that we have our cracker back up in Corpus Christi, that we're going to be able to fulfill all those channels.

And a couple of points that I also want to outline here, if you look at days on hand and PE, it went down from Q4 to Q1, I mean, from 42 to 40. So you see there as well domestic demand going up, export sales, the topics, I mean, also that Kim highlighted. So we saw also that the capacity utilization [industry] despite, I mean, that we saw a lot of additional capacity being brought online, and we believe that most of that capacity is now producing, maybe a couple of exemptions there with some technical issues, but there is not a lot of major capacities in the United States that still need to come online. So we saw capacity utilization actually moving up to around 90% in PE in the United States.

Let me go I mean to your first question, [ Josh ]. Indeed, as you rightfully pointed out, even if we have seen a little bit of an uptick in demand in China, I would make the case that everybody is bleeding. Margins are not where they need to be. Naphtha is expensive.

Second question, I think the easiest way to explain that is it's an optimization. You're going to look at what margin you have on your domestic demand, you're going to look at your incremental cost of production to export, and you're going to make the right optimization across our assets?

Let me go first, and then I hand over to Michael. Of course, I mean, we continue to be very pleased with our VEP program, the acceptance in the organization, the value that we have been able to create last year that we continue to see being created this year. We are very well on track, as I said, to reach or exceed our targets on the VEP for this year.

Yes, Josh, and maybe just a few more comments in regards to cost. I think we have a pretty good reputation for operating lean, which we think actually gives us an advantage versus others. When times are good, we actually continue to be disciplined. Quite frankly, in 2023, I think underlying cost control was strong. SG&A as a percent of sales totaled 3.8%, despite revenue and cost headwinds. We also made investments in our footprint when we started up PO/TBA in circularity, as you noted, and VEP, and some capability building across the enterprise. And clearly, inflation was a significant headwind last year.

And our portfolio management, of course, helps with that. I mean, as you know, we're almost, I mean, at the point of closing the divestiture of ethylene oxide and derivatives. And we're almost closed at closing our NATPET joint venture, and that triggers then, of course, also soon after that, a final investment decision to expand with an additional line with newer technology. So these things all work together, is what I wanted to highlight.

Thank you, Hassan. Good question. As you alluded to, I mean, in Saudi Arabia, we have lots of activities ongoing, not just with the existing joint ventures, but then, of course, also with the NATPET joint venture and then the next step with the investment.

Yes. And maybe, Hassan, I'd say a couple more things. I think clearly, just looking back upon the last 2 years we've been much more active from a portfolio management perspective, both on bringing things in, but also jettisoning things where there are better owners. But I don't think it's appropriate for us as to comment on a specific transaction?

Thank you, Kevin, for your very good question. Generally spoken, we continue to be very confident that we can reach what we have said a bit more than 1 year ago on C&LCS, but also on the overall targets that we had put out there, $0.5 billion on C&LCS 2027, and additional profitability. We are making very good progress, I mean, with the entire family. You saw that one particular slide, I mean, doubling the volumes, very good margins that we are generating for the entire family.

Vincent, it's Michael. Yes. Well, I'd probably answer the question in 2 ways. I think for the second quarter, it should be relatively stable. But I hope things actually get better in the second half when we consume a bit. But that said, I don't expect us to consume anything that's material?

Yes. Thank you, everybody. Very good questions. But of course, I was missing a little bit questions around our propylene oxide business, our Oxyfuels business, and our APS business.