Earnings Call: Q1 2018

May 3, 2018

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Westlake Chemical Corporation First Quarter 2018 Earnings Conference Call. During the presentation, all participants will be in a listen only As a reminder, ladies and gentlemen, this conference is being recorded today, May 3, 2018. I would now like to turn the call over to today's host, Jeff Holly, Westlake's Vice President and Treasurer. Sir, you may begin. Thank you, Sabrina. Good morning, everyone, and welcome to the Westlake Chemical Corporation first quarter 2018 conference call. I'm joined today by Albert Chao, our President and CEO Steve Bender, our Executive Vice President and Chief Financial Officer and other members of our management team. The conference call agenda will begin with Albert, who will open with a few comments regarding Westlake's performance followed by a current perspective Finally, Albert will add a few concluding Any reference to Westlake Partners is through our master limited partnership, Westlake Chemical Partners LP, and references to OpCo refer to our subsidiary, Westlake Chemical OpCo LP, who owns certain olefin assets. Today, management is going to discuss certain topics that will contain forward looking information that is based on management's beliefs, as well as assumptions made by and information currently available to management. These forward looking statements suggest predictions or expectations and thus are subject to risks or uncertainties. Actual results could differ materially based upon many factors, including the cyclical nature of the chemical industry, availability, cost and volatility of raw material, energy and utilities governmental regulatory actions and political unrest, global economic conditions, industry operating rates, the supply demand balance for Westlake products, competitive products and pricing pressures access to capital markets, technological developments and other risk factors discussed in our SEC filings. This morning Westlake issued a press release with details of our first quarter results. This document is available in the press release section of our webpage at westlake.com. A replay of today's call will be available beginning today at 2 pm Eastern Time until 11 59 pm Eastern Time on May 10, 2018. The replay may be accessed by dialing the following numbers. Domestic callers should dial 8558592056. International callers may access the replay app. 4045373406. The access code for both numbers is 768 4638. Please note that information reported on this call speaks only as of today, May 3, 2018, and therefore, you are advised that time sensitive information may no longer be accurate as of the time of any replay. I would finally advise you that this conference call is being broadcast live through an internet webcast system that can be accessed on our webpage at westlake.com. Now, I would like to turn the call over to Albert Chao. Albert? Thank you, Jeff. Good morning, ladies and gentlemen. And thank you for joining us to discuss our first quarter 2018 results. In this morning's press release, We reported quarterly net income of $287,000,000 for the first quarter of 2018, or $2.20 per diluted share. Excluding one time impact of the tax reform in the fourth quarter of 2017, This quarter's net income of $287,000,000 will be a record for Westlake. First quarter 2018 income from operations of $401,000,000 and EBITDA of $579,000,000 were also records for Westlake as we benefited from strong demand for our products and the operational improvements resulting from the investments we made in 2017 to improve the reliability of our acquired assets and catch up on deferred maintenance We continue to see solid demand for all our major products including polyethylene, caustic soda and PVC as a result of synchronized economic growth in America, Europe and Asia. Our Vinyl segment benefited from the recently rationalized European clock like capacity and curtailed production in China, both of which were driven by environmental regulations tightening global supply. The onset of new ethylene supply was a startup of a number of ethylene facilities in the U. S. Gulf Coast, reduced our purchased ethylene costs and increased our margins. Our Olefins segment continue to seize tight supply for some grades of polyethylene and good demand as the industry recovered from Hurricane Harvey. I would now like to turn our call over to Steve to provide more detail on the financial and operating results. Steve? Thank you, Robert, and good morning, everyone. I will start with discussing our consolidated financial results, followed by a detailed review of our Olefins and vinyl segment results. Let me begin with our consolidated results. This morning, we reported net income attributable to Westlake of $287,000,000 or $2.20 per diluted share for the first quarter of 2018 on net sales of $2,200,000,000. Westlake's first quarter 2018 net income increased $149,000,000 compared to the first quarter 2017 net income of $138,000,000 or $1.06 per share on sales of $1,900,000,000. First quarter 2018 record operating income of $401,000,000 increased 167,000,000 from the first quarter of 2017 operating income of $234,000,000 compared to the prior year period first quarter of 2018 benefited from higher prices and margins for our major products, higher sales volumes for caustic soda and PVC resin, lower costs associated with planned turnarounds and unplanned outages and a lower effective tax rate as a result of tax reform. 4th quarter 2017 net income included a one time benefit of $591,000,000 associated with federal income tax reform. Excluding this one time benefit, our first quarter 2018 net income of $287,000,000 or $2.20 per share increased $76,000,000 from the fourth quarter 2017 net income of $211,000,000, or $1.62 per share. Our record operating income for the first quarter of 2018 of $401,000,000 increased $38,000,000 compared to 4th quarter 2017 operating income of 363,000,000 The increases in net income and operating income in the first quarter of 2018 were primarily a result of increased sales volumes and margins in our vinyls segment and lower costs associated with planned turnarounds and unplanned outages primarily offset by lower polyethylene sales volumes as we are preparing for planned turnarounds in the next several months. Now let's move on to review the performance segment reported operating income of $163,000,000, a decrease of $17,000,000 from first quarter 2017 operating income of $180,000,000. This decrease in operating income of $717,000,000, was mainly attributable to lower polyethylene sales volume and higher ethane feedstock cost, partially offset by higher polyethylene sales prices. First quarter 2018 operating income of $163,000,000 decreased $3,000,000 compared to 4th quarter 2017 operating income of $166,000,000. This decrease in operating income was primarily due to lower polyethylene sales volumes, partially offset by higher styrene sales volumes and prices. Now let's move on to the vinyls segment. First quarter 2018 vinyls income from operations of $266,000,000 increased $196,000,000 from first quarter 2017 income from operations of $70,000,000, This increase in operating income was due to higher sales prices for major products, higher sales volumes for caustic soda and PVC resin, lower feedstock cost and lower costs associated with planned turnarounds and unplanned outages compared to the prior year period. First quarter 2018 operating income of $266,000,000 increased $52,000,000 from the fourth quarter 2017 operating income of $214,000,000. This increase is a result of higher sales volumes for cost of soda, and PVC resin, higher sales prices for caustic soda, lower feedstock cost and lower costs associated with planned turnarounds and the planned outages as compared to the prior first quarter 2018 cash flows from operating activities were $225,000,000 and we invested $154,000,000 in capital expenditures. As of March 31, we had cash and cash equivalents of $851,000,000 and total debt of $3,100,000,000. In February, we redeemed $688,000,000 in long term bonds associated with the acquisition of Axial. We have also announced another redemption of $450,000,000 of debt that will be retired on May 15. Funds to redeem this debt will come from our current cash on hand. Following this redemption, we will have retired over one point $2,000,000,000 in debt since our acquisition of Axial in August 2016. Now allow me to provide some guidance for modeling purposes. For 2018, we expect capital expenditures to range from $600,000,000 to $650,000,000, which includes our normal maintenance capital expenditures, our portion of construction of the ethylene cracker being jointly built with Wotte Chemical in Lake Charles, Louisiana and long lead equipment for our chlorine, BCM and PVC expansions in Berghausen and Gander, Germany and Geismarck, Louisiana that we announced in February. With that, I'll turn the call back over to Albert to make some closing comments. Albert? Thank you, Steve. This quarter's record results demonstrated the value of our investments in the operational reliability of our facilities. While we continue to experience solid global demand for all our major product Looking forward, we believe we'll continue to benefit from globally competitive ethane natural gas in the U. S. As a result of expanded shale oil and gas drilling activity driven by higher oil prices. We expect to benefit from the favorable vinyl cycle, driven by strong global demand with limited capacity additions on the horizon. We remain focused on pursuing growth initiatives, such as our ethylene joint venture with Lotte, which has a planned startup in the first half of twenty nineteen, the £200,000,000 VCM expansions in Geismar and Gendof, and GBP 750,000,000 of PVC expansions in Burghausen and Geismar. We will continue to explore additional debottleneck opportunities and search for acquisitions that will deliver value to our shareholders. Thank you very much for listening to our earnings call this morning. Now, I'll turn the call back over to Jeff. Thank you, Albert. Before we begin taking questions, I would like to remind you that a replay of this teleconference will be available starting today at 2 pm Eastern Time. We will provide that number again at the end of the call. Sabrina, we will now take you. And the first question will come from the line of John McNulty with BMO Capital Markets. Your line is now open. Good morning. This is Pavesh Laddai on behalf of John. Good morning. Good morning. First of all, can you share your thoughts on your current position in international trade specifically with China and how some of the proposed tariffs can impact those flows or margins? Certainly, the ethylene polyethylene industry exports around 20% of our production currently and SDU capacity come on stream. We believe that the majority of the added capacity will be exported. On the PVC side, over about 30% of the PVC producing in the North America and the U. S. Are exported. And on caustic side, I think over 20% of the caustic produced in the U. S. Are exported. And in the PVC side, because of our, extensive downstream building product business, we tend to export less than industry average of 30%. And in polyethylene caustic, well, we tend to export it less than the industry, but we are close to the industry export numbers. As far as China is concerned, we do not participate, a lot in the China trade. I think as a company, we are export between 1% 2% of our revenue growth in China. And that comes from potentially from U. S. Business as well as our European business. Thanks. A question on ethane. There have been a lot of discussions of massive NGL capacity coming out of the Permian And as infrastructure builds up, that keeps ethane prices low, even with all the new demand coming up, could you share your views on just of that happening? And basically your long term views on ethane prices? Certainly. You're absolutely right. There's a tremendous amount of investment going on in Permian Basin. It's result. A lot of, liquids, natural gas liquids come from both oil and gas exploration over there. And there's still a lot of ethane being rejected in the system. But as you know, there's a fair amount of new ethylene capacity coming in stream. Some has already come on stream into last year early this year. And then between this year, second half and the next year, there's also more ethylene plants coming on stream along with the export facilities. So some of the ethane demand will be increasing and absorbing some of the supply. And then finally, if I may, on the Lotage JV, is there a return on capital or an EBITDA margin floor that you would want to see for you to make that decision to act your state? Or maybe if there's ethylene margin flow we should be thinking about? Well, as we continue to assess the investment opportunity that we have there, we'll continue to look at that. We don't have a fixed number in mind, but I will tell you we'll continue to assess the opportunities that that presents to us. We'll be looking on the return on investment base on a long term basis. As you know, there are other new projects being announced to build a new ethylene plant in U. S. So I think several companies are considering U. S. As a payroll place to putting additional ethylene capacities. All right. Thanks for all the color. You're welcome. Thank you. And the next question will come from the line of Steven Byrne with Bank of America Merrill Lynch. Your line is now open. Yes, thank you. I'd like to hear your view on potential return on investment for potential new greenfield capacity in chlor alkali? Is it attractive at this point? And then to add on to that, the downstream capacity to consume those chlorine molecules in one of the derivatives? We believe you look at it integrated binos and to PDC, including ethylene, investments today's return are still not at the replacement economics yet at a reasonable return on investment. Getting closer. And with respect to your building products downstream business, is there a potential monetization of that business you might consider to extract the value out of that or to separate out that business? And would you consider something similar on the Olefins side, a downstream building products business? Steve, as we think about the business downstream of our vinyls business into PVC Building Products, we think that provides a nice integrated margin. Certainly, it's a nice, as Albert noted, a nice off take of resin into our business. And so we think it's a business that is interesting and provides nice integrated economics. And so as we think about the business, it's a meaningful business and we can think about over time providing further transparency to that business. But certainly, I would say it's a nice integrated business and we think of it as an important element of our overall business. And we would continue to think about growing that business over time because as I mentioned, it's a very good use of the integrated resin going downstream into building products. We think it's a very valuable element of our business. Thank you. The next question comes from the line of Kevin McCarthy with Vertical Research Partners. Your line is now open. Yes, good morning. In your press release, you indicate that volume in the olefins segment declined 8.6% in the first quarter on a year over year basis. Just wondering if you could speak to the extent to which unplanned outages impacted that number? And if so, what the related dollar amount impact could be? So Kevin, this is Steve. As we mentioned earlier, we've got a number of planned turnarounds in polyethylene during the course of the rest of this year and certainly we were building some inventory to deal with that plan turnaround in polyethylene. And so the impact I noted is that $17,000,000 impact as we continue to build some inventory for the planned turnaround activity later this year. Okay. Then the second question, I guess for Albert on capital deployment, your net debt's down about 9.40 $1,000,000, it looks like over the past 12 months. So folks have already asked about organic reinvestment here on the call. What do you see in the external market? How should we think about your balance sheet and capital availability versus what see on the M and A front at this point? Certainly, as we reported, we had a $650,000,000 capital program going on. Trying to finishing the ethylene joint venture. We have a low key. And as you know, we also have an option to buy up to 50% of that JV within 3 years of the plan starter. So certainly those are capital needs going forward if we like to choose to exercise the option. We have ongoing expansions, as we mentioned, in Burkhausen, in Germany, Gindorf in the U. S. And we're looking for further bottleneck opportunities. Naturally, we always look for opportunities our acquisitions, in the olefins and vinyls business, and we'll continue to explore those. And as Steve mentioned, The Building Products business is over $1,000,000,000 revenue out of our total revenue of about $8,000,000,000. In this area we want to grow that business as well. So we are constantly looking for opportunities to add value to our shareholders. And lastly, if I may, you referenced the benefit from ethylene monomer in light of your current short position there, how should we think about your procurement there in terms of spot versus contract mix and benefits going forward? Certainly. We buy a mixture as you expect that we have at it some of those contracts from EXHEL and we buy a mixture between spot and contract, but we are benefiting from the lower ethylene prices both in spot and contract. And hence, we are enjoying the we are the 2nd largest ethylene buyer in the U. S. And we're enjoying the lower ethylene prices. Okay. Thank you very much. You're welcome. Thank you. The next question will come the line of Neil Kumar with Morgan Stanley. Given the widening price spread between membrane and diaphragm costs, do you see the possibility of customer switching to diaphragm costs Well, certainly every customer wish to minimize their costs and those customers that can use diaphragm would enjoy using diaphragm. Okay. And then I guess just a follow-up on ethylene What is your outlook on ethylene prices in the second half of the year? And do you see the recent weakness in ethylene prices leading to lower PVC prices? Yes. Personally, I think the current ethylene price is reasonably low. I think due to various reasons. I think more of the reason is the derivative plants, which were built along with the new capacities are not operating at a full rate. So if you not absorb the ethylene, we do not anticipate ethylene to be that low for a long time. And I think IHS is forecasting ethylene price spot price go back again 2nd half. You're welcome. Thank you. And the next question will come from the line of PJ Juvekar with Citi. Your line is now open. Yes. Hi. Good morning. Good morning, Philippe. You are 1,800,000,000 short on ethylene. And ethylene has been dropping quite rapidly. Since first quarter, more in second quarter, how much benefit did you get in the first quarter And your ethylene prices went up, but there should have been an offset from falling ethylene. So can you quantify that ethylene benefit? So P. J, as I think about the benefit here, as you know, when I think about our olefins benefit or excuse me, our olefins situation in ethylene, it's looking at ethane all the way out to polyethylene. And so in that segment of the business, we're really integrated So the benefit that we see is really in our vinyls business. And as Albert noted, we're the 2nd largest buyer of ethylene in the North American market buying over £1,800,000,000 to £1,900,000,000 currently a year. And given that, that business remains strong, we continue to see the benefits accruing really to our vinyls business. And we're looking forward to the ability to really capture that value in ethylene in our vinyls chain. And any benefit on that of loads of cost could sell, which in inventory and then it comes out afterwards. Okay. Thank you. And what's happening to polyethylene? Do you what are inventories with converters And do you think converters are holding back today in anticipation of new capacity starting up? Certainly, everybody likes to buy low prices. And then actually people are surprised that we had a $0.10 a pound price increase after the hurricanes last year. And people saw that over $0.10 would go away and did not. And, actually, we had price increases, in February of $0.04 a pound. And I think partly it's a good demand in the U. S, but also partly due to good demand globally and partly due to higher crude oil prices. As you know, most of the ethylene plants in Asia and Europe and Latin America are based on NAFLAC crackers. And as crude oil prices have jumped from $30, $40 a barrel today, the WTI, sorry, brand is, what, $32 a barrel the cost of NASA, crackling is going up and hence polyethylene prices stay high globally. And hence, U. S. Polyethylene price also has not come down as people thought it will be. Thank you. And just quickly on the aluminum market, with the tariffs that have been proposed, on aluminum, how does that impact your caustic market? Any thoughts there? Thank you. Certainly, I think the we'll see the impact globally of the tariffs on aluminum, but people still need aluminum and, people will pay the lowest prices we can people can. And I think negotiation is still going on between the various countries and the U. S. Government. So as we said, coffee demand is still quite strong and caustic prices in Europe, I think they had a 100 dollars, a ton increase at the first quarter, and they still have, I don't know, about 5 years, a ton increase in April. So demand is strong, globally and, we're enjoying our industries are enjoying benefit. Thank you. You're welcome. Thank you. And the next question comes from the line of Jim Sheehan with SunTrust. Your line is now open. Thank you. So on caustic soda pricing, the index went up $35 this month, do you expect to have more pricing traction in the second quarter for caustic soda? Yes, we are, I think the industry announced close to $100 a ton of price increase this year, and we are getting a large share of that. I think most of the price increases will go through. IHS is forecasting after the $105 a term short term price increase. The rest of the year will be flat. We will see if that is the case or not. Thank you. And did you guys have any FIFO accounting impacts positive or negative during the quarter Jim, it was really small this quarter, not material. Thank you. You're welcome. Thank you. And the next question comes from line of Hassan Ahmed with Alembic Global. Your line is now open. Good morning, Albert and Steve. Good morning, Chris. Quick question around, just moving away from the net, the whole sort of notion of the 2nd wave of capacity build out here in the U. S. I mean, since the time that the initiative announced started coming out. Obviously, it seems at least, rhetorically speaking, the world's changed quite a bit. A lot of noise around trade wars, on the more sort of concrete side of things. We've obviously seen energy pricing going up, steel pricing going up, potential, as I said earlier, uncertainty about trade flows and the like. What are your guys' views about you know, the sort of 2018 through 2022, 2023 time period now with all this noise around us. I mean on the margin, are you seeing that this uncertainty is making people rethink, investing in capacity build outs in the U. S. But that's a very good question, Hassan. I think your source with better than mine seems to be so such a global study of our industry. But I think that the economy globally is doing very well. I think that, as I said, it's synchronized growth around the world, even though interest rate is moving somewhat higher from 0, I think, and unemployment in the U. S. And globally is growing. We see shortage of qualified labels, both in the U. S. And Europe and even some part of Asia. So If we see strong demand and people are still lifting from poverty levels to the middle class, both in China and in India and the demand for, material goods are increasing people moving from rural area And we don't see, and U. S. By far has the lowest feedstock cost both from the big stuff for oil and gas as well as power. Our co offline business is really power driven, and we have all sorts So U. S. Has a very competitive position from a cost point of view. And if global demand continue to grow, and with some inflation, our capital investments are getting more expensive. So people who have assets and can generate high operating rates will benefit from from a lower cost and good prices. Understood. Understood. Now as a follow-up, Albert, again, kind of stick into this theme of these trade related issues as well as the feedstock side that you mentioned in your comments. Recently, there seems to be some decoupling between the price of crude oil and propane. And then taking back to the next step or level, included in the Chinese tariffs list, were tariffs on the import of propane. And as we all know, obviously, a lot of propane exports coming out of the U. S. Due to Asia, China, in particular, So we just like to hear your views on what you think has caused this decoupling between recent decoupling between between crude and propane? Do you think these trade related issues are playing a role in that? And alongside that, how should we think about the interplay between sort of ethane and propane and this sort of an environment? That's a very good question. I think the, along with the increase in production, oil, gas out of Permian Basin, especially we said, as well as ethane we produced, well, also all the propane we produce, and propane compared to oil is still much easier to to, it's a female product, easy to ship and global demand for propane, both for fuel and for PDH are increasing. So if China wants to have a tariff on that, they can buy it from Middle East and U. S. Supply to other parts of the world. So I don't see the Chinese tariffs have much impact on global demand for propane. Perfect. Thank you so much, Albert. You're welcome. Thank you. And the next question will come from the line of Arun Viswanathan from RBC Capital Markets. Hey guys, good morning. A couple of questions on the, I guess, dynamics you're seeing in the market. We've noticed some softness creep into Asian polyethylene prices. But the industry, I guess here in North America does have an increase on the table for May after a flat March and maybe even April. What do you think the likelihood that may increases are successful in polyethylene? And then in PVC, Similarly, we're going into kind of the spring building season, which could increase capacity and supply. So how do you feel about the dynamics for PVC price increases as well? Thanks. Certainly, on the PVC side, I know some of the analysts are saying that with a lower ethylene cost in the U. S, the PVC price should come down and so on and so forth. But PDC, as I said earlier, 30 percent of PVC produced in the U. S. Are exported. It's really a global product. And we're seeing the after the Chinese New Year, PVC price has come down a bit in Asia, but the recent week or so, the prices return and the demand of PVC is strong globally. So we'll see whether people think that PVC price will come down a bit in, I think, May, I should be looking at a penny of pound drop in May will happen or not. On the polyethylene side, as we said earlier, with the new capacity coming on stream, people thought price will come down. And instead, we had a price increase in February. The $0.03 a pound that we announced for March implementation didn't happen. And the industry, some of the industry players push it to April or May. Again, some of the industry analysts are saying that they expect prices for polyethylene to drop, in May or June. And as we see that some selective polyethylene inventory in the U. S. Is still quite low. So we're seeing a different dynamics and depending on the grades or polyethylene you have. So time will tell what happened to the price movement of each of these grades. Thanks. And on the ECU margin side, looks like, you know, caustic has gone up $35 again in April and another $15 realized on chlorine. What's how should we think about how that impacts your ECU margins through the rest of the year, understanding that you're not really selling merchant chlorine, but maybe you can just give us a comment on caustic as well. Yes, I think caustic and chlorine, as we said, the both pricing moved up And I don't think we have received the full price increase yet in caustic. So over the years, we'll, we believe that order price increase announced will be realized. And so it's chlorine, and this is the high season for chlorine products, including water treatment, for the next few quarters. And as industry, we should it would have benefited from the increase in demand as well as prices. Thanks. Thank you. The next question will come from the line of Bob Koort with Goldman Sachs. Your line is now open. Good morning. This is Dylan Campbell on for Bob. Good morning. Previously, you mentioned that we are not quite at reinvestment economics, but getting closer for chlor alkali and vinyls. I'm just curious kind of what capital costs you're assuming to build greenfield across that chain? And then generally what the timeframe it would take to build that capacity? Yes. I think typically it will take, from the initial planning for it and plan coming up will be at least 3 to 4 years for a large integrated site And, there's so many plans that we're going to comment on all the reinvestment, capital costs, but they're substantial. Got it. And last quarter you raised guidance for Axial synergies of $250,000,000. What run rate were you guys at in the first quarter of 2018? No, when I think of the savings, the numbers that we've been talking about have actually dollars achieved, what I call in pocket, not so much a run rate. And so given the 250 guidance that we've given for the year, we'll continue to work on that incremental one incremental $80,000,000. And as you can imagine, we continue to focus on that every day as we want to achieve that our objective is to achieve as much of that as quick as to have, but we haven't given a specific run rate. Thank you. And the next question will come from the line of David Begleiter with Deutsche Bank. Your line is now open. Albert, looking a little bit longer term, there's been some discussion about the IMO 2020 sulfur regulations. That might lead to actually increased naphtha production and hence lower naphtha prices beyond 2020. How do you think about that? And do you concur with that view? Yes, I think that is the position people are taking and they'll be more, not that available. And I don't know exactly how much more naphtha is available, but in the U. S, I think it's still a preferred feedstock. I don't think Naphtha will make much enrolled into the feedstock in the U. S. And overseas, depending on what crack is available. If there's no new crack, no new naphtha cracker build, even though you have cheaper feedstock, we're not going to consume won't happen. Very good. And just on styrene, were you surprised by the recent announcement of a study to look at new starting capacity by another producer in the United States? Certainly, interestingly, our STyme model plan was started in 1992, and that's the newest Cyme plant in the U. S. And, because of the lack of new investment, today's starting business doing quite well and the operating rates running very high. So if you look at return, replacement economics, the numbers we should justify. The question is, how long would the starting, markets be that good. And I know there are plants have been building Asia. Thank you. You're welcome. Thank you. And the next question will come from the line of Alex Yefremov with Nomura Instinet. Your line is now open. Thank you. Good morning, everyone. Albert, you were discussing debottlenecking opportunities that you haven't announced yet. Are those debottlenecking opportunities potentially larger than the recent ones that you announced? And what potentially the timeline for those? Well, we're continuing to, really, assess the returns on these. As Eric noted, if we continue to debottleneck recognize those have to be justified on export economics. And so we want to make sure that we have a very good handle on not only the capital costs, but also the turn. And as you know, we're very focused on a return for any investment that we make. So we're continuing to study this we want to make very comfortably sure that we can get the kind of returns if we choose to move forward with any expansions in debottlenecks. I guess is it fair to characterize those as incremental debottlenecks? Yes, Yes, they would be. As you can see, we've already announced some and we're continuing to study others, but it's really, as I noted earlier in my comment, it's a return focus. We want to make sure we have the right returns for any capital we deploy. Thanks, Steve. If I can follow-up again about reinvestment economics question. If I got it right, Albert, you were talking about the chain that includes ethylene PBC or vinyls and chlor alkali, if we were to look at just vinyls plus chlor alkali was ethylene being purchased do you think the returns are there to for a project like that currently at current prices? Well, it's a, the BCM PVC, if you're looking at power plants associated with chlor alkali, we don't believe that even without the ethylene, the economics there yet. Thank Our next question will come from the line of Matthew Blair with Tudor, Pickering, Holt. Your line is now open. Hey, good morning Albert and Steve. Good morning, Matthew. I was hoping to talk about some of the dynamics in building products. It seems like demand should be pretty good here. Just given some of the housing start numbers that we've seen. But then I think there could be the potential for elevated costs, just given that I think a large percentage of that product is trucked out and we've seen a lot of reports on elevated trucking costs. So Could you just talk about the interplay there? And maybe just directionally, are you seeing higher building products margins now than a year ago? Certainly, the building products demand has increased over a year ago. By the way, building products not only for associated with new builds, also with replacement refurbishment, so that's for both sides. And because of the cold winter, I think the season for builders for new homes has been delayed somewhat. And I think getting back to the high season now, I think that, as I said, absolutely right, trucking costs, most of the building products are shipped by trucks, the lack of truck availability and higher trucking costs will increase the cost of the products and also with new build, the lack of ability of labor to build new homes also is an issue. So there are headwinds from that side. On the other hand, the demand, the 50 year average demand for residential units is 1,500,000 units. And 2006 were 2,300,000 units and now we're still going between 1,200,000,001,300,000. So we're below the 58 average and meanwhile, 50 years, the U. S. Population has increased from the average. So we think the demand is there and, it just takes time to get the U. S. Home buildings to get back to the normal run rate. Great. Thank you. And then, the $15 price increase in chlorine, Albert, in your opinion, what are the main drivers there? Is that really coming from PVC demand? Or are you seeing elevated demand in other chlorine derivatives? Yes, both. I think demand both in the U. S. And overseas, demand for chlorine products increased. And the pro plowing price hasn't really changed for a long time. And I think the $15 should be a straightforward increase. Understood. Thank you. You're welcome. Thank you. And our next question will come from the line of John Roberts with UBS. Your line is now open. There's been a lot of discussion about vinyl and caustic capacity curtailments in China with all the new environmental rules. But at the IHS conference recently, they talked about a number of new carbide based plants that will start up over the next few years because they were permitted in before the new rules and grandfathered in. So do you think production of vinyl and caustic in China those up over the next few years, which I think is what IHS was looking for. Do you think it's going to be more flat or even down, which I think is kind of what people had been talking about? That's a good question. You're right. Some of those plants, which are permitted in the construction before the the inventory will go through, but, they will replace some of the older smaller plants, which still are running higher cost plants. So we'll time will tell whether the net net production in China will be flat or grow a little bit. We expect to grow a little bit. Because Chinese demand is still growing very fast and, global demand, India is a huge market, and Middle East, and many parts of the world. And really there's no new capacity added. So even with the Chinese capacity added, it will not be sufficient to need the demand increase on a global basis. At this time, the question and answer session has now ended. Are there any closing remarks? Thank you again for participating in today's call. We hope you'll join us again for our next conference call this to discuss First Quarter Earnings Conference Call. As a reminder, this call will be available for replay beginning 2 hours after the call has ended. And may be accessed until 11:59 pm Eastern Time on Thursday, May 10, 2018. The replay can be accessed by calling the following numbers. Domestic callers should dial 8558592056. International callers may access the replay at 4045373406. The access code for both numbers is 7684638.