LyondellBasell Industries NV Earnings Call Nuggets: Resin Prices and Skepticism About Build Rates

LyondellBasell Industries NV (NYSE:LYB) recently reported its fourth quarter earnings and discussed the following topics in its earnings conference call.

Resin Prices

Chris Nocella – RBC Capital Markets: There has been some pile since the price increases recently, but broadly prices have kind of trended in line with olefins. So I’m just wondering what type of demand in the operating environment would you need to see for your resin prices to move a little bit higher and the olefins prices to capture some margin in that part of a change.

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James L. Gallogly – CEO: Chris, we’re seeing nickel looks like in January there is more price increases on the table for later month. One of the things that we’re seeing very clearly in the market right now is due to the beginning of the turnaround season and some operating issues that a couple of our competitors spot prices are really, very, very strong right now. In certain instances that, causes us not to turn out ethylene into polyethylene. We sell that and to supply that at a premium that’s causing there to be a bit of a shortage in resin supply and because of that we are able to push price increases. So all of these things have a balancing effect and we are seeing prices increase in both olefins and polyethylene at this moment.

Chris Nocella – RBC Capital Markets: Can you just walk us through the puts and takes of the recent margin increases in propylene price as it flows through your portfolio? Now that you have gone past the derivative areas but just how do you look at that?

James L. Gallogly – CEO: Yes. Propylene prices have been coming up. As you know we do make a fair amount of propylene and that’s been good for us. It has put some pressure on our polypropylene business. There is usually a lag in getting that pushed through the market and our propylene oxide business there is also a bit of a lag but remember that a lot of those are contracts that are indexed and so we will pick that up in fairly short order again in those contracts. So there is some impact on this. Generally it’s a pretty neutral thing.

Skepticism About Build Rates

Robert Koort – Goldman Sachs: Jim I think in the past you have talked about some skepticism about build rates with some of the new capacity in the U.S. and as your – in your role as a licensor you have a good look. Can you give us an update on what you have seen there?

James L. Gallogly – CEO: At this time point in time you don’t see a lot of people out there trying to license polyolefin plants. We have heard of a few things that are out there on the horizon but they are out there in the distance a bit. They are usually related to PDH unit in the polypropylene. We will see if all of those projects happen. I’m a bit more skeptical the most on this propane advantage, it’s very, very strong right now but as you know propane unlike ethane can be put on a boat. Over time there will be more propane export here in the United States. You see people putting those export facilities in place even this year with some expected expansion over the next couple of years. The E&P guys simply are not going to sit here and let propane prices advantage downstream users so much without taking action. So I think some of those projects won’t go forward that have been announced. On the ethylene side, there have been a lot of announcements. I think there’s a reasonable number of those projects that will go forward, but we will see about some of the more recently announced ones whether they will actually happen. We continue to steady our condo cracker but our strategy has been pretty clear, we are going to work shape our deep bottlenecks and get that capacity up very, very soon. As you know we are talking 2014 to a look forward. We will talk more on Investor Day about our Channelview and Corpus Christi assets, but I think you will see some very, very interesting strong return projects there. We will beat the competition getting that ethylene to market.

Robert Koort – Goldman Sachs: Have you sensed any willingness, increased willingness of the midstream guys to sell your fixed-price ethane, I know they’ve started selling fixed-price gas deals. Is there any chance that could happen?

James L. Gallogly – CEO: Right now, there seems to be no reason for us to look at that. The prompt barrels are readily available; inventories are very high on ethane. So we are feeling very good about our position at this point in time.