Westlake Chemical Targets Up to $700 Million in 2020 Capex, Views Market Outlook with Caution Due to Coronavirus

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Researched by Industrial Info Resources (Sugar Land, Texas)--Westlake Chemical Corporation (NYSE:WLK) (Houston, Texas) executives said Tuesday they were seeing an uptick in polyvinyl chloride (PVC) and polyethylene (PE) prices as international trade tensions have begun to subside, but added they planned to take a conservative approach to the global market as a result of uncertainty regarding the impact of the coronavirus.

The company plans to allot between $650 million and $700 million this year on capital expenditures. Roughly $500 million of that amount will be spent on maintenance activities, Westlake officials said during the company's fourth-quarter earnings conference call with industry analysts. In comparison, capital expenditures for 2019 totaled $787 million.

Industrial Info is tracking more than $1 billion worth of Westlake projects in various stages of development.

Click on the image at right to view a graph showing Westlake project activity by Chemical Processing Industry sector.

Westlake reported net income of $72 million for fourth-quarter 2019, a $51 million drop compared with fourth-quarter 2018 results, largely the result of lower prices. For all of 2019, earnings were $421 million, down $575 million from 2018.

Westlake Chief Executive Officer Albert Chao said the company achieved record sales volumes last year, but economic tensions, sparked in part by the U.S.-China trade war, caused customers to hold back on purchases, leading to drops for PE, PVC and caustic soda.

The Phase One trade deal between China and the U.S., along with the passage of the United States-Mexico-Canada Agreement (USMCA), has helped to brighten the market picture, with recent price increase proposals for PE and PVC, he said.

"However, with the outbreak of the coronavirus, we are taking a conservative view of 2020 and potential impact on global industrial demand, which will be dependent on the time period it takes for the Chinese and global economy to recover from this contagion," Chao said.

During last year, Westlake added 720 million pounds in global PVC capacity, thanks to expansion projects in Geismar, Louisiana, and in Germany, Chao said. For more information on the Geismar expansion, see Industrial Info's project report and November 7, 2019, article - Westlake Chemical Remains Focused on Project Development Despite Sharp Drop in Third-Quarter Earnings.

Also last year, Westlake boosted its ownership of the 2.2 billion-pound-per-year LACC ethylene plant near Lake Charles, Louisiana, to nearly 47%, which will help keep feedstock costs low, the company said. LACC is jointly owned with Lotte Chemical (Seoul, South Korea).

For this year, the most substantial planned maintenance project involves a 60-day turnaround at Westlake's 1.6 billion-pound-per-year Petro 2 ethylene unit in Sulphur, Louisiana. The turnaround is expected to take place in September or later, said Chief Financial Officer Steve Bender. For more information, see Industrial Info's project report.

Industrial Info is tracking planned expansion and addition projects by Westlake, including the:

• Geismar, Louisiana, Vinyls Complex vinyl chloride monomer (VCM) expansion; see project report
• Plaquemine, Louisiana, PVC and VCM Plant expansion; see project report
• Calvert City, Kentucky, PVC Resins Plant unit addition; see project report.
  
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