Lyondell Basell 2Q15 Earnings Call Notes

Demand for polyolefins has been pretty strong around the world

“I mean at this point we still see demand as being relatively strong. Arun, as you know when we have periods of macro volatility, oil price going up or down, it does impact sentiment. And so there are many inventory cycles that we see throughout the year. But if you step back from that demand has grown through the first half year over year in polyolefins globally in the 3% to 4% range. And the U.S. demand growth has been quite strong as has Asia. Europe I would argue has been constrained in Q2 because of less supply. So we’re generally constructive on demand for the remainder of the year.”

The industry did not have to operate at capacity when the economy was weak, but then as the dollar strengthened, European plants were asked to produce more, which led to more downtime

“When you think about Europe, the last two years, three years have been very difficult years. And it was not really a call on all of the capacity for most of the industry. Now we’ve been running more differentially in terms of operating rates over there. My sense is that since reliability was not at a premium, perhaps some of the maintenance were delayed. And so as demand became stronger this year with the weaker euro and some infrastructure spending coming back in Europe, the units didn’t respond to the higher call on demand. So will that continue? Difficult to say. But my sense is that the units in Europe especially probably weren’t prepared to run at very high rates. In our case – as you know I was over there for a few years, and we maintained our assets to run at full rates. And in fact we did run at full rates for the past two years.”

It’s possible that there will be more investment in crackers, but it takes a long time to realize that investment

“It’s possible. But you have to remember that investment in crackers takes a long time to realize, even if it is maintenance of existing crackers. Because if it’s – if they have to order long lead equipment, it takes months, maybe a year to get some of the equipment in. And then they have to take a fairly substantial outage. So I suspect that if that were to happen structurally, we wouldn’t see a shift until next year some time.”