LyondellBasell Industries N.V. (LYB) Earnings Call Transcript & Summary

Well, good afternoon, everyone, and welcome back to our conference. Our next company is LyondellBasell, and we are fortunate to have Bob Patel, Chairman and CEO of LyondellBasell. Good afternoon, Bob. How are you? How was your Thanksgiving?

Good afternoon, P.J. It was very restful. It was quiet, which was perfect. How was yours?

Right. It went well. Again, quite also. Did the kids come home?

Well, only one is home. The other one is at school finishing up. He's going to graduate soon. So looking forward to that.

Congratulations.

Yes.

Well, I'm not going to introduce you formally per se. We're just going to launch into Q&A. Make it a bit more informal. Is that okay?

Okay. Perfect. Perfect.

Great. Well, Bob, thank you. This year has been weird to say the least. But what we have seen is packaging demand for polyethylene has been robust throughout and it seems that it's going to continue. Maybe until the vaccine is fully administered and things are back to normal that strength in packaging demand that we've seen should continue. I mean, what's your prognosis on that? And when do you think we return back to normal? And a part B of that question is, as we get into this vaccine administration, it's going to need a lot of medical packaging to deliver 300 vaccines and injections. And I just -- so talk about demand that you're seeing now and what do you think will happen in 2021.

Yes. Indeed, so on the packaging side, we've -- certainly, we've benefited from more people staying home, more carryout and so on. I think some of these trends, P.J., will be sticky. I think as we see a little bit more work from home in the future and a phased reopening or post vaccine, I actually think that packaging demand will be very strong through all of next year and there's some permanent uptick based on trends that will last even after the vaccine.

And do you think there is a lot of demand for medical packaging starting next year?

I think there will be, but the quantities are low. So I would not put too much weight on that being a big driver for demand growth and tonnage. It will be something. But I think what's more important is that it will be -- the packaging -- the food packaging demand will continue to grow at a very good rate. And I think some of the increase is sticky.

Great. Can we talk a little bit about ethylene supply/demand, starting on the supply side? A lot of U.S. capacity has come online or some few polyethylene plants starting up. How do you see the supply in the U.S.? And then Part B of that question, Bob, is around China. Your Bora product line just started there, [ Guangzhou ] ethylene cracker just started as well. Several more crackers starting in 2021. So how do you see the demand side of ethylene, polyethylene going into next year?

Right. So I think it's a good way to think about it is what's happening in China and what's happening everywhere else. So let's start with the latter. So if you look at the U.S., we have 2 more big projects that are still in construction that are coming, right? The Shell project, the Exxon, SABIC project down in Corpus Christi. All the other projects have been canceled or delayed now. So I think we're at the tail end of this wave of new capacity in the U.S. So recent cancellations, Formosa canceled. Their project recently -- I think CPChem have delayed a few others have announced delays. Also elsewhere in the world, we're starting to see more delays and cancellations. So I think we're at the tail end of sort of the wave of capacity as we go into the next 2 years. In China, what we see is that polyethylene supply growth is likely still not going to be enough to meet demand growth over the next 5 years. So we think actually the short position that China has will grow on a tonnage basis. So they'll need more imports incrementally as we work through the next 5 years. So I actually think that this is setting up to be somewhat of a classic cycle where CapEx is being reined in by the big oil companies, many of the international oil companies are also our national oil companies are also pulling back on Capex. So it's possible that we'll see less investment. Demand will have some above-trend growth for maybe the first year or 2 of the recovery. Because still the industrial and municipal side has not done well this year. Packaging has done well and polyethylene. So my sense is that I think we're somewhere at the bottom in operating rates and likely we climb out from here. Lastly, we have a unique window through our licensing business. And we can see that activity in China is actually slowing on the licensing side now. We're not getting as many requests for bids like we were last year or the year before. So I think there's evidence that there's some slowing in new build.

That is very interesting. So your polyethylene and polypropylene, if you were to compare the 2, it looks like polypropylene is much tighter. You're getting a price increase here in November. Can you compare what you're seeing in the 2 different plastics?

Sure. Well, first of all, they both feel tied today for different reasons. I mean, polypropylene, because of the hurricanes that came through, a lot of polypropylene capacity was impacted, including ours. And demand has really picked up here as we've come towards the end of the year in the U.S. In China, I actually had to ask my team to double check the numbers, and they tell me they're correct. Year-over-year demand growth in China is mid- to upper-teens percent, 15% to 17% growth year-over-year in polypropylene. In -- and in the U.S., there's actually still a bit of a decline, but a lot of supply has been impacted because of the weather that's come through. So I would say, yes, polypropylene, probably a little bit tighter than polyethylene. But polyethylene is still very tight. And recently, we've seen tightness in Europe in polyethylene as well. So here in early December, my sense is that both PP and PE are still very firm globally.

Okay. Good to know. You mentioned Europe, Bob. And you have crackers there. You have crackers in the U.S. U.S. advantage has returned. How would you compare the margins and the profitability of your crackers in Europe versus U.S.?

So they're certainly a little bit lower. So if you think about U.S. margins, they're maybe $100 per ton higher than what's in Europe. But Europe is still decent in terms of margins. And because the market is relatively tight, there are some price increase initiatives out there for polyethylene.

Good. And then coming back to the U.S., I do want to discuss the feedstock outlook. We just had Jim Teague from Enterprise on our call just here a little while ago. And there is a thought process there that oil production in the U.S. will drop because of drop in rig count, and that could pressure oil price, but people are not going to really bring up the production until you get a clear price signal. And so that means if oil were to go up, would ethane prices would also go up? Are you looking or are you building in your planning [ attempt ] to tighten up next year?

Our sense is there's enough ethane to meet the demand of the existing cracker fleet, and there's still rejection. So rejection is still somewhere north of 500,000 barrels per day. Now it's not on the Gulf Coast. It's further -- in further locations away in the mid -- in the Rockies and so on. P.J., my sense is that ethane price could be range-bound in this $0.20 to $0.25 per gallon range for some time. If there's a run-up in gas price, maybe it causes the ethane price to go up more. But I think there's -- from a supply-demand standpoint, there's enough ethane at lower oil price level, propane, others -- other feedstocks can be competitive as well. So I think there's lower likelihood of ethane staying higher for a prolonged period of time. So our kind of planning model is $0.20 to $0.25 a gallon.

Right. And do you -- are you running today when you're running close to 80% ethane? Are you running close to 0 in naphtha? How and what does the feedstock slate look like?

Yes, today, it's very little naphtha in the U.S. or a little bit of propane, but we're maximizing ethane today.

Right. And how is this -- how does that compare to Europe, where I know you have flexible crackers and you can take in a lot more LPGs?

Yes. Typically, in Europe, we do more LPGs in the summer because it's -- butane is out of the blend pool. So it tends to be cheaper. It's not heating season. So propane tends to be cheaper. And actually, today, butadiene prices globally are quite high. They've moved up very nicely. So naphtha cracking has good margins when you consider the co-product values for both propylene and butadiene are pretty good. And benzene has even moved up.

Right. Good. I forgot to mention for the audience that's listening in, if you have any questions and you listen to Bob, there is a link there. You can click that and send in your questions. They will come to my inbox, and I'll read them out at the end of the -- our discussion here. Bob, I think you did a brilliant transaction. You've just bought a synthetic cracker, buying half a cracker in -- with Bora and half a cracker in Sasol, and took no construction risk. You bought them below construction price. And the cracker, each have 6 in different part of the world. So I thought that was a brilliant transaction. Can you just talk to the background of how these transactions came through, particularly the Sasol one?

Sure. Well, so first of all, with Sasol. This idea was, first, actually conceived back in 2018. We had some guy I had some discussion with the prior CEO about this concept of us buying half, of us doing the operating, the marketing, but the timing wasn't right back then. And so we participated in the process recently that Sasol undertook. And I think in the end, P.J., I think what was attractive, I don't know what the other offers were, but I think that what was attractive from our offer was that we have a proven record in terms of operating. We know how to operate large crackers. We operate LD, LL or gas-based essentially around the world, and we have a global marketing network. So our partner, Sasol, was convinced that with our sales network around the world, we could maximize value of the output for the benefit of both partners. And so all of that came together. And for Sasol, frankly, it's a chance for them to stay in and not sell all of it at the bottom of the cycle. So as there's some improvement, perhaps the other half, they'll see a bit -- a little bit better value. So I think it was a win-win for both of us. And often with partnerships, both partners bring something that make the whole thing better. And I think that's the case here for sure. And then the background on Bora is that it was our technology. And we licensed our technology to them on polypropylene and on low-density polyethylene. And so they approached us 2 years ago and said, "Hey well, would you consider marketing some of the product?" At that point, I said to my team, "Why don't we think about participating in the investment because it's our technology?" And so the conversation ensued, and we were able to participate at a 50% equity rate. And again, with Bora, we're the 100% marketer of the polypropylene and the low-density polyethylene.

That's great.

I'm sorry. The high-density polyethylene. The high-density polyethylene. Yes.

What is fascinating is you had mentioned at your Analyst Day that Bora was built at half the cost that of the Gulf Coast, which is fascinating. What is the operating cost, OpEx? Would you -- as it -- when you look at the feedstock integrated with refinery, how does OpEx compared to your other crackers?

Very competitive. It's in the best quartile, the lowest quartile in terms of OpEx. It's of a scale where we get very good efficiency as you said, having a refinery next door, we can process some of their streams like refinery off-gas. So that's a very competitive cracker. And I'll tell you, P.J., what I've been very impressed by is our partners' operating capability. They started up this asset very smoothly. We're operating at 80% to 85% of nameplate capacity with a few little things we're working our way through. But the start-up was very smooth for such a large complex and one that was completed during COVID. So they didn't have the traditional support of all of the licensors coming in and all of that. So we have a really excellent partner in Bora.

That's great. And when I look at polyethylene business today, where do you see inventories are? Yet we hear that inventories are very low, especially at the producer level. Can you talk about inventories in China, inventories at your customer levels?

So inventories, our view is they're still low. In China, port inventories are kind of at average or below average for this time of year. And you can see that in the price level in China for polyethylene. It's continued to move up, generally speaking, polyethylene is selling for $1,200 a ton in China in December. So it's an indication of very good demand, low inventories, in a very constructive environment. Converter level, I think, especially here in the U.S., I don't think they're holding a lot of inventory because of the disruptions here with the hurricanes. I think a lot of converters were hand-to-mouth and maybe still are in the mode of replenishing. And at the producer level, I was just looking at some statistics recently, we still see 32 to 35 days of inventory right now. That's been published by ACC, so still pretty low level.

Great. And I want to talk a little bit about your new PO/TBA project. Because of COVID, it got delayed. It had cost overruns of about 1/3, so like maybe $800 million. Can you talk about the main reasons for cost overruns? And are you still convinced that this is the right project that you'll want to go ahead?

Yes. So of the $800 million, about 1/3 of it or 40% of it is just related to the delay. So had we not taken the delay, it would have been that much less. We've also -- after we FID-ed the project, some of the tariffs went into effect. So we've had to pay more for the equipment that we purchased. So that's another 20% or so of the overrun. And the remainder of the overrun was basically in the civil. We -- well we had discovery of the land that we built on was much, much softer, if you will, and we had to put more piles in essentially, which affected the cost and the schedule. So those were the big drivers. About 1/3 because of the delay, about 20% because of tariffs and us paying more for the equipment we purchased from China and the rest was civil, essentially that overran.

It is interesting that the TBA project will make MTBE, which is you have to export it all out. Given sort of EVs coming rapidly, especially now in Europe, if you hard looked at the project, alternatives and sort of downstream demand, and has that given you any pause at all?

We still think that demand for MTBE will be very strong because if you think about non-OECD, it's still going to be more gasoline-oriented if you think longer term. And with EVs, perhaps Europe could go faster, but we still think there's a very large market in Asia. Let's say, ex-China, places like Indonesia, Thailand, Malaysia, I mean they're still very big markets for MTBE. And then Latin America continues to be a very attractive market. Mexico continues to be a very attractive market. So we think we can place -- we're not concerned about placing the MTBE. And I still think on balance, given where we are today, we're about 2/3 complete on the project. It's something we need to go ahead and finish and hopefully, we'll be able to deliver 10%-or-so return on the project.

Okay. Okay. Any update on your Hyperzone polyethylene? And I've seen the product. It looks fantastic. And what kind of premium would you get in Hyperzone versus regular polyethylene?

Well, so we've had a lot of teething issues. It's the first world-scale plant that we've built. I was just at the plant 2 weeks ago. I spent half a day there and walked the unit with the engineers and operators. And it's a very well built unit. The technology is very good. The -- our issues have been more mechanical and more sort of operating practice. And so we -- normally, P.J., we would have had our scientists from Italy on site here in Houston to help us. But we couldn't do that because of COVID. So a lot of the support has been remote, which has kind of delayed things and -- but the technology, I think, is going to prove out very well. We've already made multi-modal polyethylene product. We've made some blow molded parts that are exhibiting very good characteristics. So I won't quote a premium yet, but we do think that our products will not only afford or provide our customers to do lightweighting, but also we think the processability could be even better than the standard polyethylene. So we think that some of that value will come back to us as well as a result.

Great. And let's go to the APS business. That business has autoexposure. In third quarter, you saw some recovery there. What are you seeing in the fourth quarter? And what about the consumer end market there?

Yes. So auto in Asia and especially in China is booming today. We can't make enough. We're sold out on all of our lines. U.S. is very strong. And even with the rise in COVID cases, our sense is that it's unlikely we go back to a lockdown like we had in Q2. So demand is very good. Inventories are low on finished vehicles. So we expect that recovery in the U.S. to continue. European recovery has been a little bit more modest. And so I think that provides another leg up for APS when Europe fully comes back. And actually, if you think about our geographic participation for APS in automotive, Europe is the largest. So we, by far, have the most leverage to Europe. And if indeed, what you said earlier that EVs will be more likely to be adopted. Lightweighting will be important. So plastics will play a big role in electrification in Europe. And I think we're really well positioned for that. So maybe for context, I can give you a sense for earnings in APS. So if you go back to 2018, when we did the Schulman transaction, we acquired about $200 million of EBITDA. We contributed $375 million from our existing business into APS. So that's $575 million. And we've realized a little over $200 million in synergies. So I'm going to round to $800 million total. So that's the run rate contribution that we should see. Now all of that earnings from the synergies won't end up in APS because some of it is staff synergies that will get spread across the whole company. But if you just think about on the margin, we've kind of -- we should be earning $800 million and we're probably something like half that in 2020. So I think there's significant upside as the auto market recovers, and we get to more normalized levels of activity for APS.

Right. And also on -- going to switching to I&D business, it just seems like the propylene chain is a little bit stronger into propylene oxide, into urethanes, MDI, all that stuff is getting stronger with -- especially with housing, how do you see, based on your experience, and I know you know this business well. You ran it in Europe. Compared to last time, well after the financial crisis versus this time, how do you see I&D business coming back up?

Its appeal has been extremely strong in the last 90 days or so. And I think, as you said, auto and housing and even appliances, refrigerators, things like that, where there's insulation, mattresses when people buy houses. So the furniture, not just the insulation, but the furniture in new houses, all of that, we think, sets up for a very good PO chain environment going forward. And I think this recovery could be quite strong. So that -- again, P.J., I think that's why our PO/TBA project, I'm still convinced it's going to be a good project. And I know MTBE will have demand and our belief still is that in 2023, if we have conditions similar to pre COVID, we should earn incremental EBITDA of $400 million to $450 million from the new project. And we expect to finish that project in the second half of '22. So right now, our plan has full year of '23 contribution from PO/TBA project.

Great. And let's turn to refining. I know that's been a tough business and a little bit of consternation for investors. Margins have come -- 2-1-1 margins have come below. I think 3Q was below $8 per barrel. Refinery, I think you said will be running at 80% in 4Q. When do we expect, I guess, miles driven have been coming back slowly. They are maybe down 20% from last year, I think. But when do you think that utilization could continue to improve? And I think with that, refineries do a margin realization has been weak compared to the benchmark. So can you just discuss those issues?

Sure. So first of all, when you think about us as a company and you think about our leverage to the recovery, the nearest sort of source of the earnings improvement will come from industrial and auto. And then the fuel side, sometime, let's say, middle of next year, we should see a benefit, not only in oxyfuels, but in refining as well. And then the latter part of the recovery will be when jet travel kind of gets back to something more normal. So let me talk about the refining margin. So typically, P.J., the MAYA 2-1-1, kind of an okay market, it should be upper teens, 18%, 19%, and as you said, we've been running more like 8%. Part of that is because the light/heavy differential has been really hit hard, right? So there's hardly any differential. That may or may not recover because we need more sour crude supply in the market. So let's say that, that doesn't come back, but the product side as demand recovers does come back. I think that the refinery in an environment where the product side comes back, should be able to earn $100 million to $200 million of EBITDA without the light/heavy differential recovering, okay? And compared to $200 million, $300 million of loss in the kind of environment that we're in today. So that's a pretty big swing. And then if we see more sour crude supply or less sweet crude or light crude, then we could see the differential open, which would help as well. I mean, normalized, we used to think that the refinery should earn $400 million of EBITDA annually. But that requires the light/heavy differential to also kind of get back to where it was. So if you think about the first leg of this recovery, we could go from losses of $300 million, let's say, to perhaps EBITDA of $100 million to $200 million without heavy differential recovery. And then on the oxyfuel side, just for a frame of reference, typically, we are $400 million to $450 million of EBITDA annually in that business in kind of a mid-cycle kind of scenario. This year, we're going to be basically breakeven. So that's another leg of the recovery we should see next year when miles driven gets back to something more normal, closer to pre-COVID.

Right. And obviously, it's not a good time to do any transactions in the refinery right now, multiples are lower. Have you -- somebody asked me recently, is there like an asset exchange or things like that, that you could potentially do with somebody who is interested in the refinery, who has some petrochemical assets?

Well, it could be that that's possible. But I think kind of relative valuation today, as you say, it's a bit -- it's kind of the bottom of the cycle. It's a difficult time to transact. Kind of longer term, P.J., I think if you look at our refinery at 270,000 barrels a day, very complex. Has a lot of coking capacity. It's on the Houston Ship Channel. This is an asset that's going to continue to run for a long time to come. I think that the greatest value this refinery can generate is if it were part of the refining system, where it could be optimized where crude purchasing could be optimized, where products could be optimized across a system of refineries. But I think the asset itself, scale, complexity and location. It's one of the best, I think. It just needs to be part of the system.

Right. Sure, sure. Just like your ethylene crackers.

Exactly.

I want to come back to sustainability and ESG where I know you've shown a lot of leadership in that area. You released your sustainability report in September to eliminate plastic waste and address climate change. With the new government in Washington, could that get accelerated, those efforts?

Quite possibly. And especially on the recycling front, we would welcome that, frankly. I mean, I think having more impetus for collecting the plastic waste and recovering and reusing it, kind of getting the value out today, a lot of it goes into landfill. And so rather than go to landfill, if we could recover it and recycle it, it would be good for everybody, we think. The challenge, P.J., is that the economics of landfill are far better than the economics of recycling in the U.S., right? So essentially, the value of recycled polymers has to increase. Now we've seen that in Europe where we -- we're in many cases, selling recycled polyethylene and polypropylene for prices greater than virgin because brand owners have made commitments for X amount of recycled content. And in the end, if you and I pay $0.02 or $0.03 more for a bottle of shampoo, we won't notice it, right? I have some window cleaners outside. So there's a bit of noise. Sorry about that.

Oh, is that what it is?

Yes.

It sounded like a dog. And then the question that I had, you mentioned about recycling plastic and how difficult it is to recycle. How do we change that in the U.S.? What can be done? I know you have the Alliance to End Plastic Waste. Recycling is one part, but I know you have worked on molecular recycling and all. Like can you just talk about mechanical versus molecular recycling and how do we see that happening?

Sure. So in the U.S., I mean, I think what -- and for -- to incent more mechanical recycling, I think the value has to -- value has to go up. And the collection has to get better. Some sorting capability also has to improve. That's going to be very important. Molecular recycling, I think is the game changer long term because you don't have to have sorting. If it comes from hydrocarbon, it can go back to hydrocarbon. And so to that end, we have a pilot plant at our research facility in Italy where we're -- we have a demonstration unit essentially for this molecular recycling. I could imagine that by the middle of the decade, we're ready to build of -- a world-scale molecular recycling plant in Europe. Europe likely is a better candidate first because the sorting and collection has already kind of been getting to be in place. We don't need the sorting so much, but the collection we do and you have naphtha crackers in Europe. So that feedstock that's created from this molecular recycling, it's more suited for naphtha crackers, not for light crackers. So I could see that happening in Europe in the middle of the decade at scale.

Interesting. And what would -- I know it's in early stages, but does molecular recycling involve pyrolysis? And is that cost-effective to compete with PCR?

It can be. Absolutely. And the key is to not move the waste around. We have to locate these plants close to big urban centers where there's a lot of waste to be processed. I -- well part of what hurts recycling economics is when you take waste and you ship it long distances. That adds cost.

Interesting. And I mean, you guys have been very disciplined with CapEx and working capital management. You've done a great job there. You improved your free cash flow by $1 billion. How does CapEx ramp up? And if working capital needs go up next year, what do -- what should we expect on free cash flow?

So this year, P.J., with all the actions that we took early in the year to reduce CapEx and reduce working capital, we accelerated some of our cost-reduction programs. This year, we will generate surplus cash flow above and beyond dividend, interest expense, CapEx. It -- so next year, even with some modest increase in working capital, we think if conditions largely stay where they are today, even for the whole year next year, we will be -- we'll have a little bit of surplus cash flow. Now likely second half will present some recovery and margins and volume should be better. So we think next year, again, dividend is well covered. Then if you look longer term, CapEx is going to be about $2 billion for the next 4 years. We don't plan to increase CapEx beyond that level. If you recall at Investor Day, we had projected that we would get to that level in '23. We're basically there this year. We're going to be under $2 billion this year and we'll be about $2 billion for the next 3 to 4 years. So that's the CapEx side. The earnings side is now going to start to benefit from the Sasol JV. We'll get earnings next year. Bora, the Schulman integration, Hyperzone and some other small projects. So I think we're really coming into a period now where free cash flow should ramp up independent of the fuels recovery. The fuels recovery we'll add to that even more. But I think we're really well positioned to hold CapEx at $2 billion. Earnings should increase even in a flat economic environment because we have more assets next year. And that all positions us to generate more cash flow. And in the early phase, we want to delever and get our rating back up to a solid BBB rating. And then we could resume buybacks at that point.

Great. And Bob, I know you think countercyclically. I know you're in a cyclical business, but you think countercyclically. In 2016 and '17, you refused to get into the cracking business. And those were peak margins. Now at the bottom, you're getting into this, I call them low-risk synthetic way to get into cracking business. How do you think of -- given you're that mindset, how do you think about M&A? And is this like the new modus operandi for you to do these sort of joint ventures in the future?

Well, I think these 2 are very unique opportunities. In the future, if we can bring our capabilities or our technology to create value, then we will. We would be open to that. I think the key is low-risk opportunities to create value. That's how we should be thinking about it. Unlikely, that organic growth fits into that. I don't -- I still don't see us doing a big cracker project. Likely, this PO/TBA project will be our last big project for some time. Now we could build polyethylene, but I don't consider that to be a large project, right? So polyethylene plants are kind of about $1 billion to build. And we'll have surplus ethylene. In fact, we have enough ethylene over the next decade to build 2 world-scale polyethylene plants. But we're not in a rush. In the next 2, 3 years. I really want to focus on maximizing free cash flow, pay down debt, be very opportunistic if we can find other opportunities like we did with Sasol. But I don't expect that. I mean, I think it's all about harvesting over the next 2, 3 years. And we'll keep our head up to see if we find a similar opportunity like Sasol, but it's few and far between, I would say.

I understand. Yes. I'm going to take some questions from the audience here. I've got a few questions here.

Okay.

Sorry, this is -- yes, here. You and your team have stated that your credit rating goal is mid-BBB as a floor, inclusive of M&A. S&P cut your rating to BBB- stable following the Sasol announcement. To be clear, no one is going to forge you a strategic standpoint, given the attractive economics of Sasol, but can you discuss your current thoughts around the credit rating as well as status of your relationship and understanding with the credit -- with the rating agencies? Long question, but you got the question?

Yes. Yes, I got it. Yes. So indeed, our target is to be a strong BBB-sort-of-rated company. I think that gives us flexibility to do M&A through cycles and so on. Our understanding with rating agencies is that we would prioritize debt repayment in the near term. And we were still very much committed to doing that. And I think we could start doing some of that as early as next year, depending on how things play out. So that's still where we are, investment-grade through the cycle. And on average, we want to be a solid BBB-rated company. So we have flexibility.

Okay. We're almost out of time, and I am going to take 2 more questions.

Okay.

This one is -- I think it's a near-term question. The $0.05 price increase for October got pushed out to November. Do you see that price increase happening this year?

Yes. I mean, I think today, it feels like markets are still tight. There's still discussion about the $0.05 increase. We'll just have to see how feedstocks play out and I don't think it's off the table. I can tell you, it's -- field is tight enough out there, but for us, it's not off the table. I think we want to see how things play out.

Okay. And I can see here one more question, and we'll make this the last one. But this question relates to the cost curve. Are CTO and MTO plant still at the high cost? Their -- looks like their costs have not come down. It should read. Do you see any closures of the CTO or MTO plants?

So MTO plants are at the high end of the cost curve still. CTO, it's all about the CapEx. The OpEx is actually quite low because the coal price is quite low. I don't see closures necessarily of MTO. CTO maybe, if there's a real push in China to -- around the environment, then I think you could see some CTO come off-line but now that they're built, I'm not -- I wouldn't plan for that. I think MTO will continue to be swing capacity, but I don't think it will be permanently shut.

So Bob, I think we're at the end of our time. I was wondering what your -- what are your plans for holidays?

Very quiet. I haven't left Houston since the end of February. It's -- in some ways, it's been great not to have to travel, but missing my team globally. So it's kind of pros and cons, but very quiet. Stay home. Hopefully, play a little golf, exercise and get some downtime. I'm looking forward to a little bit of quiet time. It's been a very busy year for us. With Bora, the Sasol deal, the changes in the PO/TBA project and dealing with the pandemic. It's been an incredibly intense year, but our team has performed really well. I'm proud of everybody in the company for how we've all come together and done our best and I think the results speak for themselves.

Great. Well, thank you. I know you're a big workout guy, so good luck with your runs and your golf.

Thank you.

And I wish you a good holiday season, and thank you. Thanks for your time today.

Thank you. My pleasure. Good to see you, P.J. Happy holidays to you as well. Take care. Bye.

Good to see you. Thank you. Yes, bye.