Next up, we have Albert Chao, CEO of Westlake Chemical. Albert and his team have naturally been busy over the summer with the acquisition of Axiall, I'm sure we're all eager to hear a detailed update of the transaction, as well as Albert's aspirations for the company. With that, I'll turn it over.
Thank you. Good morning, ladies and gentlemen. Thank you for being here today. Two weeks ago, on August 31st, we closed on the transaction to acquire Axiall Corporation. Axiall Corporation was a major U.S. chlor-vinyl and building products, as well as home improvement products manufacturer in North America. The business fits very well with our legacy Westlake business, being olefins and vinyls. You can see from the chart here the performer of second quarter of 2016, what a combined company look like, both from a revenue and from an EBITDA point of view. You can see the boxes, Westlake was an olefins and vinyls business, today, Westlake is still an olefins and vinyls business. We're going to explain a bit more what the Axiall acquisition strengthens our position. With the combined company, you can see those two boxes, the green the gold boxes.
The EBITDA business from the two segments will be more or less being equal. What's important is our mission statement. You can see at the bottom, that will continue to be the same. We want to pursue profitable growth, not just for top line growth, it's bottom line growth that's what's important to us. We are focused as a business we understand, namely the olefins and vinyls business. By olefins, as you know, we start from ethane to make ethylene. All of our ethylene plants today are NGL ethane capable. We start from ethane to make ethylene, the olefins side, we are integrated into polyethylene, we have a small position in the styrene business. In the vinyls business, we start from ethylene and chlorine, actually, we have now our own brine, we have our own salt.
Axiall has a lot of its power being self-generated. They have approximately 800 MW of their own power. We are integrated really from our own salt. We do buy gas. I think today, if you look at all the natural gas we buy for our cogen, for our boilers and furnaces, if you look at the natural gas equivalent in the ethane we purchase, we probably use half a BCF a day of gas equivalent. We are a major gas-focused company in the U.S. As you know, U.S. produces or consumes approximately 90 BCF a day. We are major gas impacted. Looking forward, U.S. will still be a major and low-cost gas producer in the world for many years to come. Westlake, you call it new Westlake or Westlake, will benefit from the low-cost gas position in the U.S.
We're going from our own salt, buying gas to make power, make chlorine and caustic. We go from the chlorine side to PVC, which is the major product for us. We have, we'll discuss on the second page, a large position in chlorinated derivatives as well. We also will be one of the largest vinyl-based building products and construction home improvement producer in North America. Really get into many business that Westlake has been involved in the vinyls business. We are focused in business we understand. Still the olefins to vinyls business. We do business globally where we can gain an edge. As you know that two years ago, we bought the Vinnolit business.
It's a German subsidiaries to two subsidiaries of Wacker and Hoechst, two old line German companies, and we are the leading vinyls technology licensing company in the world. We have the best technology in the world for making VCM, PVC, EDC, and also the other world's largest specialty, which is emulsion PVC manufacturer in the world. We'll discuss a little bit later about that. With the acquisition of Axiall, they also have a position joint venture in Taiwan and in India. We are new to India with our joint venture over there. Again, what's most importantly is continue to act in the financially disciplined and optimistic manner. We are investing great company after the merger, and we intend to continue to be investing great company going forward, and to maintain our financial flexibility and strengths.
We are very excited about the merger, and combined company will continue to be the number one LDPE manufacturer in North America, actually in all Americas, both North and South America. We'll be number two in PVC manufacturing capacity in North America. If you combine with our position in Germany, Vinnolit, and in China with Huasu joint venture, we'll be number three PVC manufacturer globally. In chlor-alkali, we are number three in North America. Again, combined with our chlor-alkali position in Vinnolit in Germany, we'll be number three chlor-alkali producer globally. We are a major producer in the olefins and vinyl business on a global basis, and our strategy is continue the integration and strengthening our position on a global basis when it makes sense. We also mentioned we have a large position in our building products business.
This is an area that, as you know, Westlake was involved in the pipe business. We have a small windows and fence business. With acquisition of Axiall with their Royal Building Products will be a major building home improvement and construction building products and material business, in North America. With the acquisition, Georgia Gulf, Axiall has an ongoing $100 million cost down that they were on the way to accomplish that, sometime, if not this year, early next year. As we have report to the public that we have an ongoing $100 million of synergy, and this is what we have estimated before we did acquisition. Things are only two weeks into the acquisition. Definitely finding more opportunities to increase the synergy value as we get into it. We believe the transaction will be accretive in the first year after we close.
This is a history of Westlake's growth, if you can call that. Westlake started 30 years ago. Actually, our first sale was in September of 1986. Exactly this month is our 30 years anniversary. We started with the acquisition of LDPE business that was owned by Occidental and formerly Cities Service in Lake Charles, Louisiana, 1986. We grew both from organic means, which means building the state-of-the-art plants when we need it, like our ethylene plants, vinyl plants, chlorine plants, and through inorganic acquisitions. Our first vinyls plants, our building products plants, and Vinnolit plants in Germany, as well as now the Axiall plants. We acquire assets at the right price, at the right time, and if we need those feedstock we don't have or downstream, we build them at the right place and the right technology. We are very focused.
You can see the green bars are the capacity for olefins business. Of course, with the acquisition of Axiall, the gold bar looks much bigger. If you look at the capacity, because of inflation, we don't use the revenues. If you use capacities only for the last 29 years, all the way to 2015 before acquisition of Axiall, our compounded annual growth rate for capacity is 15.3%. If you include Axiall 2016, 30 years, the compounded annual rate is about 19% for the last 30 years. What's important, as I said earlier, is not the growth on the top line. It's really the growth on the bottom line that's important to us. This shows integration nature of Westlake's business, with Axiall as well.
You can see the green boxes are the olefins business, and we have existing about 3.6 billion pounds of ethylene capacity in three ethylene plants. We have an ongoing expansion that will be the first half of next year at Calvert City at 100 million pounds. Now with Axiall, we have an investment in a joint venture for a new ethane-based ethylene plant in Lake Charles. That we have a 10% equity position, which is about 220 million pounds, and we have the option to buy additional 40% up to 50% of this 1 million ton metric ton ethylene plant, within three years after the plant startup. We have all the way until 2021 or so to make the decision whether we want to increase our position from 10% to 50%. We have a very good position olefins business.
As we said earlier, polyethylene we are integrated and starting into the ethylene. In the vinyls business, some of the ethylene we have goes to the vinyls business. With the chlorine, Westlake's position of chlorine and legacy Axiall, we have a large position. As I said, we are the third largest chlor-alkali manufacturer in North America. With the combination of Axiall, we are the second-largest PVC manufacturer with PVC, with building products. They have a compounding business as well. As well as the chlorinated products. They are in various refrigerants, water treatment chemicals, and other chlorinated derivatives. This is a very strong position for us going forward. The polyethylene we are focused, we'll discuss later more on the LDPE side, which is focused on the food packaging. Our products supplies not only the U.S. on a global basis.
We're a leading material for the food packaging side of polyethylene which enhances the shelf life of food around the world. The vinyls business, certainly PVC goes a lot into construction, but also goes into building improvements for residential, commercial, industrial buildings. One big area is water and sewer pipe. We're one of the leading water and sewer pipe manufacturer in North America, and that brings clean water to municipalities. Now with the water treatment business that we bought with Axiall, that will increase our position in the clean water area, which is very important for us. This slide shows just the NGL, natural gas liquid feedstock. On the upper right side, you can see that on a global basis, about one-third of the global ethylene feedstock is NGL based, natural gas liquids based, and this is mainly ethane. For Westlake, we are 100% ethane capable.
We do have capability to switch into other NGLs, which is the middle of the right-hand side pie chart. We can use propane and butane and even some portion of naphtha in two of our ethylene plants. On the bottom shows we are a merchant buyer of ethylene in Europe, and European ethylene are primarily naphtha based. Our, if you say, our cost position or not, also exposed to naphtha in the European ethylene purchase. On the left-hand side, you can see all the pipelines, existing and new pipelines being built to bring the natural gas liquids from whether it's Marcellus, Utica areas in northeast of U.S., within the Bakken in the northwest of the U.S. and down to the Gulf Coast. There have been lots and lots of projects, both pipeline as well as fractionators that will bring needed ethane down to the Gulf Coast.
You may have heard even the last month or so that ExxonMobil and SABIC are looking at additional new ethylene plants, ethane-based plants on the Gulf Coast. The U.S. is blessed with shale and blessed with low cost supply of gas and its derivative of natural gas liquids. This makes Westlake much more competitive on a global basis outside of Middle East. Even Middle East now, the reason SABIC coming to the U.S. is that they are lack of low cost feedstock for their further expansions, looking the U.S. In U.S., we are blessed with a low cost gas, which means low cost ethane, low cost power. Both polyethylene and the PVC and caustic basis will be one of the lowest cost producer in the world. On this chart, pie chart on the left shows the global 2015 polyethylene.
We have about 195 billion pounds of capacity polyethylene, the upper left-hand side chart. About 23% of the capacity globally is LDPE. On the lower left-hand side, you can see the dark blue. For Westlake, we are about 58% of our polyethylene is LDPE. Why we like LDPE, you can see the bar chart on the right, that for the last 15 years, LDPE commands a much higher margin than the other polyethylene, which is linear, low and high density. The bar chart on the right-hand side of this box shows that in the last five years, that premium continues, if not even higher, than the last 15 years average. It's important to us because we are, on this chart, this page, left-hand side, we are the largest LDPE manufacturer in North America.
You can see the bar charts on the right that it's, as I said, 58%-60% of Westlake's polyethylene is LDPE. Because of the higher margin in LDPE, we have among the highest margin for all the polyethylene business. If you can just use the average of linear low, high density, and LDPE, we have among the highest margin in the industry. Certainly, we understand capacities are being added. You can see on this chart here of our polyethylene, the blue shows LDPE, the gray is linear low, and the green is HDPE. Those are the new capacity added from 2012 all the way to 2021. We grouped together 2016 to 2021 because we don't know exactly when those plants will come up. What's important is those two lines. One is purple, one is brownish.
The brownish line shows a one times GDP growth rate, 1.5 times its GDP growth rate is purple line. What's important is that, these are the OECD estimates going forward, is that demand globally for polyethylene grows between one and one-half time GDP. Typically, in the emerging markets, they're growing at higher one and a half times. For a mature economy like U.S. is one times. You can see that if indeed the growth rates is going towards more one and a half times that going in the future, the new capacity added in North America and other parts of the world will not be sufficient to meet the demand. On this chart, want to show the global footprint for Westlake's PVC business. As I mentioned, we are the second-largest PVC manufacturer in the world after acquisition of Axiall.
We are the second-largest in North America, third-largest in the world. We have position not only the U.S. We are positioned, I mentioned earlier, that we are leading emulsion producer in Europe, and we have in Huasu, our joint venture in China. We own 95% of that. It's a leading PVC resin as well as high quality film manufacturer. Now we have a compounding position in India that will bring us into the new market, for future growth. On this chart here, just shows that, the combination makes us number 2 in PVC and number 3 in chlor-alkali in the U.S. On this chart, shows the integration. On the left, you can see that we produce chlorine and caustic. Along with ethylene, you make all the products to PVC, and then going through the building products and chlorinated products.
What's important is the pie chart on the right. The top chart shows the PVC margins change through the last cycle, probably the last 10 years. The majority of the margin within the PVC chain is in raw materials being chloralkali and ethylene. The last five years, from 2010 to 2015, still the same. That just switched from chloralkali margins to ethylene. Today it's probably somewhere in between. It's important to have your feedstock in the integrated chain. Westlake was integrated in terms of its ethylene chlorine before the acquisition of Axiall. Going forward, we'll be long eth in chlorine because of the chlorine applications and derivatives, but we are short in ethylene. This joint venture with Lotte, if we exercise our option to go to 50%, we'll only supply 50% of our needs. We have additional billion pounds needs of going forward.
We'll look for opportunities to improve our ethylene position to be integrated in the future. This chart here just shows our specialty PVC, which is emulsion, or some people call it paste resin business. We are the largest in the world, combination. Really the only of the plants. We have six plants in Europe, five in Germany and one in U.K., that makes the emulsion PVC. The applications of the products are very extensive. It doesn't really go to the construction as we know. One of the leading products are into the wallpaper, the flooring business, artificial leather. Many of the German cars, the side panels, the side of the seats are all vinyl. They look like leather, but really vinyl. More durable, and easy to clean. Also they are very big in textile coatings, as well as, tarpaulins.
A lot of the truck tarpaulins, and coverage for tents, for example, are all nylon, overlaid with PVC. I think one of the Olympic stadium in London overlay that was the top covering are all made of paste resin PVC products. It's really a very broad consumer product. It's not really focused on the construction. On this chart, it just shows the global demand for PVC in general. The blue bar shows the demand PVC. Actually, it dipped from 2008 to 2009 mainly because of the U.S. housing meltdown. Since then, the global demand PVC has regained a position to continue to grow. The brown line shows the U.S. exports. U.S. was exporting about 10%-15% of the products before the housing meltdown. Since the housing meltdown, U.S. had to export its PVC.
We are blessed with the low cost position that we're able to export. The forecast going forward, this is by IHS Chemical Consulting, that U.S. continue to export a large position, again, with our cost position and with very little capacity, PVC capacity added around the world, the U.S. with low cost position and with capacity we have, will be in a greater position to supply the world's needs. With that, I'll turn over to Steve, to go over our financials.
Thank you very much, Albert. This next slide. There we go. I thought I'd spend just a few minutes talking about our disciplined investment culture. You've seen that in action with our acquisition of Axiall. Strong balance sheet that we have. Even after the acquisition of Axiall, you'll see that we still have a very strong balance sheet. Allows us to take opportunities to grow the business as we march forward. Of course, the advantaged structure that Albert talked about in terms of the integration. A key element of our philosophy is the prudent investment in capital and at the right time and the right stage of the cycle, and to build that integration model that Albert talked about. That allows us to therefore, to be able to get the efficient return on that investment as we go through the cycle.
On this chart that I've shown that we've made a very significant number of investments over the last half a dozen or so years. You can see that we've invested over $6 billion in capital to integrate the business and to grow the business, Albert said, not necessarily to get bigger, but to become more stable in terms of the earnings stream and to be very profitable on the bottom line. That really is the focus, that integration drives stability of earnings, gives us that dedicated offtake at each stage of production, and provides an ability to capture the margin as it moves back and forth across the chain. As you think about the investments we've made and the acquisitions that we've made, you can see that we've continued to build on a very strong balance sheet.
This chart shows that we, over a long period of time, I've gone all the way back to 2006, it's going back a number of years showing where we stand in terms of the capital structure versus our industry peers. On the far right end of this chart, you can see that we've continued to maintain a very strong capital base, even after investing the capital necessary to close the Axiall transaction. I think the implications here for you should be quite clear, that we have ample ability to fund and continue to grow the business, and we have the patience and the opportunity and the discipline to invest at the right stage to be able to generate that return on investment. With the capital base that we have, you can see the agencies still keep us strongly investment-grade rated.
Certainly, as we march forward, the cash flow that we have that comes out of the business will continue to be focused at continuing to grow the business and de-lever the business as we see our opportunities march forward, but still have an opportunity to invest at the right stage and in the right set of products. The disciplined approach that Albert talked about in spending and the competitive factors he talked to in terms of as we built the business over the last 30 years, provide us an opportunity to provide and continue to drive value for all the investors. Here I've shown a series of metrics, ROA, ROCE, and EBITDA margin. You can see that against our peer set, that we outperform all those peers irrespective of which time period and which metric you choose to use.
Again, I attribute that largely to the drivers that Albert spoke to. A focus in bottom-line growth, expanding that clear integration across the chain, the advantage that we have in the products and the feedstocks, as well as the mix of assets that we have, both the specialties and the polyethylene, as well in our vinyls business. I thought on this slide I'd spend just a few minutes and talk about the formation that we created in 2014 of the Master Limited Partnership. We took our ethylene assets and dropped them into an operating company, and from there, continued to drop those into the MLP. That MLP allows us to have a very cost-effective form of equity capital to be able to continue to grow and fund the business as we march forward.
You can see here that we have just a little over 13% of the operating company dropped into the Master Limited Partnership, so we have significant and ample opportunity to continue to fund and grow this MLP as we march forward, give this tremendous financial firepower at a very cost advantage position to be able to grow and fund opportunities as we march forward. You can see here that what we have is a number of levers to be able to continue to grow the Master Limited Partnership. Of course, drop-down opportunities, which we took opportunities in 2015. Organic growth opportunities to grow the footprint, and we did that over the last several years, completing a recent expansion in 2016. As Albert mentioned, we have an ethylene expansion plan for 2017, which will be advantaged for the partnership. Acquisition opportunities.
As a result of acquiring the Axiall assets, we acquired an interest in an ethylene asset. This is the Lotte joint venture that Albert mentioned. This allows us to continue to put those assets into the venture over time to continue to grow that distribution, which is that low double-digit growth rate. Of course, the contract structure that we have provides a stable, predictable cash flow base since we have 95% of the revenue streams are tied to Westlake's offtake arrangement with a very small 5% exposure to the ethylene margin business. Again, four levers of growth and an ability to continue that trajectory of growth and distributions. I think to just summarize here, what I've done here on this chart is really outline the growth that you've seen in terms of organic growth and acquisition growth.
All that growth is designed to grow the bottom line. Size is not as important to us, but profitability is. You can see here, as we've gone forward to integrate the chain of the businesses through organic growth or acquisition growth, we've continued to grow the bottom-line value of the business to benefit the investors who are focused and really seeing a very integrated story and a very strong growth story on a bottom-line basis. Thought I'd pause here. We've got a few minutes to then take questions. I thought I'd invite Albert up to the mic, see if there are any questions from the audience.
Albert, I'll just start it off. Can you just give us a brief update of what you've seen in the near term in both the PE and the PVC cycles? Then also over the next three to five years, there's obviously a fairly heavy debate among investors on what they're seeing specifically on the supply side. Can you just give us an update on your own view and any kind of key differentiating factors of your view versus where you expect IHS and the investment community to be?
Sure. Right now, there's a $0.05 a pound price increase that's being passed through to the polyethylene business for September. Some of the industry players, including Westlake, have announced another further $0.04 a pound price increase for October. We believe that the $0.05 will go through, we're in September now, this year because some of the customers are raising their finished film prices to their customers as well successfully. That will go through, and we'll see whether the $0.04 will go through October or not. Global demand is quite strong for polyethylene. Despite what people think about the economy in the U.S. and globally are doing okay. I won't say it's well on all pistons going, but it's doing quite well. On the PVC business, there's a $0.04 a pound price increase going in for October.
Partially because of the ethylene price, some of the spot ethylene price with the disruptions in some of the turnaround going on, planned and unplanned, ethylene spot price come up high as $0.39, $0.40 a pound. The PVC producers out of the four we have today, two are not integrated in PVC in ethylene. There's a cost push to push the PVC price going up as well. Time will tell in October how much of the $0.04 will go through. We head into winter as well. On a longer term basis, I said earlier, there's more capacities, about 40% of ethylene capacity added from 2017 all the way to 2021. A lot of that 60% of U.S., maybe global ethylene goes to polyethylene. I think the same ratio would be about 40% of polyethylene capacity added in North America.
If you look today, U.S. exports about 20% of its ethylene derivatives and polyethylene being 60%, it's about 20% of polyethylene is being exported. If you add in the 40%, you're saying, "Wait, you cannot absorb that internally," which is true. We think that most of those capacity additions will be exported. Luckily that U.S. is blessed with low-cost feedstock. Today, ethane selling at BTU value gas price. Suddenly there's ethane export be going on through pipeline and through ship, and there's new capacity of ethylene plants being built. The forecast by IHS and other industry consultants are seeing the ethane price should not be selling on a Gulf Coast at BTU value, which we agree will go up. Even looking at price going up still, ethane will be competitive outside the Middle East with rest of the world in oil.
The $54 question is, what do you think oil price will be? Not this year, not next year, five years from now, 10 years from now. When you build these ethylene plants, billions of dollars, you don't build them for one year or five years. You build for next 20 years. It's your view on what oil price is going to be. The other alternatives to ethane really is oil, naphtha. The fact that people like SABIC and ExxonMobil are looking at building further ethylene plants in the U.S., it shows that the smartest and biggest guys in the world in the business wants to invest in the U.S. going forward. If you are patient, long-term base, I'm sure when the 40% come up, whichever months they come up in the next few years, there'll be hiccups in our margins.
It takes some time for the global to absorb the capacity and depend on which year, how many plants come out. I think if you're looking at long-term basis, which Westlake is a long-term player in the industry, that we feel a very good position going forward, Richard.
Albert, have any sense of what the outcome will be from the MLP issues with the IRS?
I'll let experts talk about it.
Get the expert to talk for a moment.
Well, I wish I had that clarity of foresight, but I will tell you that there is going to be a conference this week, actually in D.C. The MLP Association has their annual conference Thursday and Friday this week. The keynote speakers over the lunch on Thursday will actually be Kurt Wilson, who is actually the project leader on this initiative and his counterpart from U.S. Treasury. I think they've been very clear that they've been working on this initiative for some time, and because of, and speaking with them, because of a number of other initiatives that have gotten in the way, specifically Section 385, which is really the inversion regs, have slowed them releasing these down. I think they'll speak to that later this week. We'll let them speak in terms of exactly where they are.
I think they've worked diligently, and I am hopeful that we get something out of them reasonably soon. We'll have more clarity later this week.
Just one other question, Albert, on the operations. Has the Olin Dow issues, does that have any effect on how they operate their chlorine businesses? Do you have any observations on them versus yourselves?
Well, you should ask Olin for that. We don't have a good idea on what is going on in Olin and Dow. They have, I'm sure, a lot of relationships since they bought the assets from Dow. Before, I heard that before Dow bought Rohm and Haas, 40% of Dow's products touches chlorine or caustic. There's a lot of relationship between those two companies. In terms of Axiall, we bought a company stand alone. They are selling merchant products. We don't have those intercompany relationship that-
Right.
That Olin and Dow has.
Thank you.
With that, I think we'll wrap it up. Thank you both.
Thank you very much.
Thank you very much.