Westlake Chemical Enjoys Rebound in Building Materials Demand

Researched by Industrial Info Resources (Sugar Land, Texas)--Westlake Chemical (NYSE:WLK) (Houston, Texas) estimates that Winter Storm Uri, which struck Texas and Louisiana in February, will take a $120 million bite from its pocketbook. But the vinyls and polyolefins company nonetheless reported a 67% increase in first-quarter profits in comparison with the same period of 2020, as it rides a wave of strong polyvinyl chloride (PVC) prices and demand for downstream building products.

Industrial Info is tracking more than $1 billion in project activity by Westlake.

Click on the image at right to view a graph showing Westlake Chemical's project activity being tracked by Industrial Info.

The company saw $100 million in repair expenses and lost sales revenue due to the winter storm in the first quarter, and expects to record another $20 million hit from the storm in the second quarter. Westlake said it fully resumed operations by the end of the first quarter. For more information, see February 25, 2021, article - Texas, Louisiana Petchem Recovery Will Take Weeks After Winter Blast.

Still, profits for the just-ended quarter were $242 million, up from $145 million in the year-earlier quarter. First-quarter 2021 income from operations for Westlake's Vinyls segment totaled $200 million, a $127 million jump from first-quarter 2020. First-quarter 2021 income from operations for the Olefins segment amounted to $180 million, a $118 million increase from a year earlier.

"The first quarter of 2021 saw strong pricing for many of our products, driven by robust global demand," Chief Executive Officer Albert Chao said during Westlake's first-quarter earnings conference call with industry analysts on Tuesday. "The strength in demand for polyethylene and PVC resulting from the global economic rebound in 2020 was driven by an increase in worldwide packaging consumption and construction activities."

The company has benefited from a 30% year-over-year increase in U.S. housing permits and associated housing starts, Chao said, with new home construction above the 50-year average for the first few months of this year. A rebound in automotive manufacturing and continued demand for medical equipment also point to better times ahead.

However, Westlake is keeping a close eye on markets in India, which has seen an explosion in COVID-19 cases in recent weeks. Chao said the U.S. is the world's largest PVC exporter and India is one of the world's largest PVC importers.

Westlake also is monitoring tight supplies of chlorine, which is used in the production of PVC.

The company expects capital expenditures to run between $700 million and $800 million this year. Last year at this time, Westlake had cut planned capital expenditures from its originally planned $650 million-$700 million to $500 million-$550 million amid reduced demand for some products and the loss of feedstock cost advantages due to the drastic drop in oil prices.

One of the big-ticket items that Westlake postponed last year was a 60-to-90-day maintenance turnaround at its 1.6 billion-pound-per-year Petro II ethylene unit in Lake Charles, Louisiana. The major turnaround now is scheduled to begin in September this year. Subscribers to Industrial Info's Global Market Intelligence (GMI) Chemical Processing Project Database can click here for a detailed report.

Westlake continues to evaluate the potential for a future expansion at its Geismar Vinyls Complex in Louisiana to increase its vinyl chloride monomer (VCM) capacity. The VCM plant currently produces 550 million pounds per year. The company also is evaluating options to increase production capacity at its Calvert City PVC Resins Plant in Kentucky, which now has a capacity of 1.1 million pounds per year. Subscribers to Industrial Info's Chemical Processing Project Database can see detailed reports for the Geismar VCM and Calvert City PVC projects.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn.