LyondellBasell reported a decline in profitability for the third quarter due to difficult market conditions, with a focus on safety performance and shareholder returns. The company achieved a $1.2 billion EBITDA and $1.88 earnings per share, with $670 million in cash flow from operations. Management highlighted progress on the MoReTec-1 recycling project, the APK acquisition, and plans for a staged refinery shutdown in Houston. The European asset review aims to increase exposure to cost-advantaged operations by 2025.
LyondellBasell’s third-quarter results showcased challenges in the refining and oxyfuels segments, but the company remains focused on value enhancement through strategic initiatives. The successful completion of the APK acquisition and progress on the MoReTec-1 recycling project demonstrate the company’s commitment to sustainability and innovation. With plans for a staged refinery shutdown and potential divestitures in Europe, LyondellBasell is positioning itself for long-term growth and profitability in a changing market environment. Summary:
1. The company is integrating new low-carbon and recycling technologies to achieve a $1 billion incremental EBITDA goal by 2030.
2. The refining business will be reported as discontinued operations from Q1 2025, with net cash benefits predicted for the year.
3. The O&P-Americas segment experienced strong EBITDA growth while facing challenges in European operations due to higher energy costs.
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LyondellBasell is making significant strides towards achieving its Circular & Low Carbon Solutions (CLCS) goal of $1 billion incremental EBITDA by 2030 through the integration of new low-carbon and recycling technologies. The company is leveraging feedstock flexibility and infrastructure to minimize investment requirements for new circular and renewable product lines in both Europe and North America. One key technology being utilized is MoReTec, the company’s proprietary technology for advanced, catalytic chemical recycling of mixed plastic waste into cracker feedstocks for circular polymer production.
In a strategic move, executives have confirmed that the refining business will be reported as discontinued operations starting from Q1 2025. This decision is expected to bring net cash benefits for the year, with ongoing annual site costs projected to be less than $50 million thereafter. The O&P-Americas segment, on the other hand, is experiencing strong EBITDA growth, with the strongest quarter performance since Q2 2022. High plant utilization in this segment has helped mitigate challenges faced in European operations due to higher energy costs and regulatory pressures.
Despite these challenges, the company remains focused on advancing its long-term strategy. Progress has been made on the construction of the MoReTec-1 facility in Wesseling, Germany, marking the first commercial scale plant utilizing LyondellBasell’s proprietary catalytic advanced recycling technology. The EU Innovation Fund has awarded the facility a €40 million grant, highlighting the innovative nature of the technology and demonstrating strong governmental support.
Looking ahead, management is optimistic about the potential for EBITDA growth in the North American O&P segment, while also addressing shortfalls in Q3 licensing revenue in the Technology segment. The company remains committed to driving value and innovation in the industry, with a focus on safety and sustainability as core pillars of its operations. As the company navigates market dynamics and works towards its long-term goals, stakeholders can expect continued progress and strategic initiatives to drive growth and profitability. Summary:
1. MoReTec-1, set to begin operations in 2026, will produce 50,000 metric tons per year of cracker feedstocks recycled from hard-to-recycle mixed plastic waste.
2. The MoReTec technology boasts a plastic to plastic yield of over 80%, low energy intensity, and half the carbon footprint of fossil-based feedstocks.
3. LYB plans to close its Houston refinery by 2025 and repurpose the site for a larger MoReTec unit, renewable and bio-based feedstock production, and other investments to support growth in low-carbon solutions.
In 2026, LYB is set to launch MoReTec-1, a plant that will produce cracker feedstocks from mixed plastic waste, marking a significant step towards sustainability and circular economy practices. The innovative MoReTec technology used in the plant ensures high efficiency, with a plastic to plastic yield of over 80% and significantly lower carbon footprint compared to traditional feedstocks. LYB’s commitment to profitable Circular & Low Carbon Solutions (CLCS) is evident through their ambitious target of achieving $1 billion in incremental EBITDA by 2030.
As part of their sustainability strategy, LYB plans to close its Houston refinery by the end of the first quarter of 2025, shifting focus towards investments in low-carbon feedstocks and products. The company aims to repurpose the refinery site for a second, larger MoReTec unit, renewable and bio-based feedstock production, and other strategic investments. With a robust balance sheet and strong cash generation, LYB remains well-positioned to drive growth and innovation in the sustainable materials sector, setting a benchmark for the industry. Summary:
1. Despite the impact of Hurricane Beryl, LyondellBasell’s merchant ethylene sales helped offset EBITDA losses.
2. North American polyolefins demand remains strong, with increased exports and high domestic market share.
3. The company is focusing on aligning operating rates to meet market demands and strategic objectives in various segments.
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LyondellBasell has managed to weather the storm of Hurricane Beryl, with the additional profitability from their merchant ethylene sales helping to offset the estimated $50 million EBITDA impact. The third quarter saw a 50% increase in profitability compared to last year, reaching levels not seen since the second quarter of 2022. Despite the challenges posed by the hurricane, North American industry demand for polyolefins continues to exceed expectations, with September year-to-date sales volumes up for both polyethylene and polypropylene.
LyondellBasell’s U.S. polyethylene business boasts a strong domestic market share, with only 26% of volumes exported, resulting in minimal disruptions during a brief port strike. Looking ahead to the fourth quarter, the company anticipates softer demand and the need to minimize year-end inventories, which could constrain price increase initiatives. Additionally, higher natural gas and ethane prices are expected to pressure integrated margins. However, October North American polyethylene orders are the strongest seen so far in 2024.
While the oil market remains volatile, North American producers benefit from a favorable oil-to-gas ratio compared to other parts of the world. With a focus on aligning operating rates to meet market demands, LyondellBasell remains well-positioned as a leading producer in North America. The company’s strategic objectives in the Olefins and Polyolefins Europe, Asia and International segment are progressing, with plans for construction and acquisitions to strengthen their portfolio.
In the Intermediates and Derivatives segment, the third quarter saw a decline in EBITDA driven by raw material margin decreases for oxyfuels. Despite these challenges, LyondellBasell continues to navigate the market landscape, focusing on operational efficiency and strategic growth initiatives to drive future success. Summary:
1. Oxyfuels margins fell due to declining gasoline crack spreads and higher prices for butane raw materials.
2. Propylene Oxide & Derivatives business faced challenges from volatile prices for propylene feedstocks and volume impacts from Hurricane Beryl.
3. Despite market headwinds, Advanced Polymer Solutions segment grew through improved win rates and manufacturing efficiency.
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The recent challenges faced by LyondellBasell’s Oxyfuels margins have been attributed to declining gasoline crack spreads and slightly higher prices for butane raw materials. Additionally, their Propylene Oxide & Derivatives business encountered headwinds due to volatile prices for propylene feedstocks and volume impacts from Hurricane Beryl and planned maintenance. Although there is potential for lower interest rates to drive recovery in PO&D demand from durable goods, markets are not expected to significantly improve for the remainder of 2024.
In contrast, the Intermediate Chemicals business saw declining styrene margins due to ample market supply, but their newest PO/TBA asset ran very well during the quarter. Despite volatile fuel markets negatively impacting oxyfuels results, LyondellBasell remains optimistic about the fundamentals of this business, as their proprietary PO/TBA technology produces oxyfuels from butane at a significant discount to crude oil used in gasoline production.
Looking ahead, LyondellBasell remains well-positioned to capture opportunities from demand growth and high-cost supply rationalization. The company expects lower seasonal demand across most of their I&D businesses in the fourth quarter, with oxyfuels margins remaining low in line with seasonal norms. Despite challenges, the company’s focus on strong operations and optimization across their global footprint aims to capture market opportunities and ensure robust long-term cash conversion.
In conclusion, while the third quarter presented challenges for LyondellBasell, particularly in their Oxyfuels and Propylene Oxide & Derivatives businesses, the company’s focus on growth through improved win rates and manufacturing efficiency in the Advanced Polymer Solutions segment showcases their resilience and long-term strategic vision. As they navigate through market headwinds and seasonal demand patterns, LyondellBasell remains committed to optimizing their operations and capturing opportunities for growth in the future. – Company expects lower profitability in second half of year due to slow global growth and softer seasonal demand
– North America and Middle East polyolefins production benefitting from low natural gas prices
– Company focused on disciplined capital allocation and value enhancement program to unlock recurring annual EBITDA
In light of the lower third quarter results, the company anticipates that its profitability for the second half of the year will be lower than the first half. The impacts of slow global growth and softer seasonal demand in the fourth quarter are expected to compound these challenges. However, the company’s North America and Middle East integrated polyolefins production is positioned to benefit from low natural gas and ethane prices compared to regions with higher cost oil-based production. The company remains committed to disciplined capital allocation and working capital management, with a focus on unlocking recurring annual EBITDA through a value enhancement program. Despite the current market environment, the company is dedicated to executing its strategy and reshaping its business portfolio for sustainable future success. Summary:
– Demand is up by 6% year-to-date and 4% compared to last year.
– Capacity utilization is above 85%.
– Exports are up by 11%.
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The recent data on demand for chemicals has shown a promising increase, with a 6% rise year-to-date and a 4% increase compared to the previous year. Capacity utilization in the industry is also strong, standing above 85%. Additionally, exports have seen a significant uptick, with an 11% increase noted. This positive trend in demand has been attributed to good performance in October, as highlighted by industry experts like Kim Foley.
There is cautious optimism regarding the potential for price increases to go through, as discussions on the matter are currently ongoing. Analysts like Jeff Zekauskas from JPMorgan have raised questions about the normalized EBITDA of the U.S. and European business, considering factors like capacity additions in Asia and higher energy prices in Europe. Executives like Michael McMurray have acknowledged that the earnings power in Europe may be lower due to these factors.
Looking ahead, industry leaders like Peter Vanacker emphasize the importance of considering macroeconomic factors such as China’s stimulus and the EU’s regulatory environment when forecasting future market trends. The industry is undergoing a transformation, with a shift towards renewable and circular solutions being a key focus. Investments in technologies like APK’s solution-based recycling are seen as vital for meeting the demands of brand owners and OEMs in the future. Overall, the industry is navigating a changing landscape, with a focus on sustainability and innovation driving strategic decisions. Summary:
1. The company’s asset strategy and investments are based on growing demand, especially in relation to upgrading capacities through hydrotreaters and MoReTec technology.
2. The investment in advanced circular product lines leverages existing infrastructure and focuses on waste sorting and advanced chemical recycling to reduce carbon emissions.
3. European restructuring efforts are underway to address overcapacity in the region, with plans to potentially sell or restructure sites to optimize operations and increase cost-advantaged assets.
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LyondellBasell is strategically aligning its asset strategy and investments with the growing demand for its products, particularly through the expansion of upgrading capacities using hydrotreaters and MoReTec technology. The company’s focus is on leveraging existing infrastructure to invest in advanced circular product lines that prioritize waste sorting and advanced chemical recycling to reduce carbon emissions and increase sustainability.
In response to the European chemical market’s overcapacity, LyondellBasell has initiated restructuring efforts to optimize operations. With plans to potentially sell or restructure sites, the company aims to increase its portfolio of cost-advantaged assets by exiting non-strategic operations and focusing on renewable and recycled products. This strategic shift is aimed at improving operational efficiency and sustainability in line with market demands.
The company’s approach to investment in new technologies and market opportunities reflects a commitment to long-term growth and profitability. By adapting to changing market dynamics and leveraging existing assets, LyondellBasell is positioning itself for success in a rapidly evolving industry landscape. Summary:
1. The discussion with analysts focused on the growth potential of O&P-Americas in 2025, emphasizing the importance of increasing demand in the PE market and the impact of lower gasoline cracks on the oxyfuels business.
2. The company is in the process of transitioning away from the Refining business, with plans to make an important step in the investment cycle for the MoReTec-2 project in Houston by the first quarter of next year.
3. The European review of assets aims to create value by potentially selling off non-core assets that are not performing as well, with a focus on finding good owners for these assets.
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In a recent earnings call, Peter Vanacker, CEO of O&P-Americas, discussed the growth potential of the company in 2025 with analysts. The key focus was on the importance of increasing demand in the polyethylene (PE) market and the impact of lower gasoline cracks on the oxyfuels business. Despite challenges such as the ongoing crisis in Europe and slow growth in China, the company remains optimistic about the future.
One significant development highlighted during the call was the company’s decision to exit the Refining business next year. This transition is part of a strategic move to streamline operations and focus on more profitable ventures. Additionally, plans for the MoReTec-2 project in Houston are progressing, with an important step in the investment cycle expected to be made in the first quarter of next year, leading to a final investment decision in 2026.
The European review of assets was also a topic of discussion, with Vanacker emphasizing that the assets being considered for sale are not underperforming but could potentially find better owners. The company is looking to create value by optimizing its asset portfolio and focusing on investments in regions like the Middle East, where they have had success in the past.
Overall, the company’s strategic moves and focus on growth opportunities in key markets indicate a positive outlook for O&P-Americas in the coming years. While challenges remain, the company’s commitment to making bold decisions and pursuing new ventures positions them well for future success.
