Huntsman (HUN) Q1 2026 Earnings Transcript

Image source: The Motley Fool.

DATE

Friday, May 1, 2026 at 10 a.m. ET

CALL PARTICIPANTS

• Chairman, President, and CEO — Peter R. Huntsman
• Executive Vice President and CFO — Philip M. Lister

TAKEAWAYS

• MDI Global Capacity Utilization -- Management indicated global MDI (methylene diphenyl diisocyanate) industry operating rates are in the high 80% range, with some regions approaching 90% capacity.
• Polyurethanes Price/Mix Trend -- CEO Huntsman stated, "we have not seen a quarter-on-quarter growth in price trends since 2022," noting a material sequential improvement in Q2 pricing for North America across all products.
• European MDI Volumes -- Polyurethanes volumes in Europe increased 4%, benefiting from technical insulation, composite wood products, and adhesives, coatings, and elastomers end markets.
• Advanced Materials Segment Performance -- Huntsman described Advanced Materials as "largely what we expected a quarter ago," with ongoing recovery driven by aerospace and power demand, and profitability not significantly impacted by the Middle East conflict to date.
• PO/MTBE Joint Venture in China -- CEO Huntsman reported, "today we are probably in the low- to mid-single-digit millions of dollars of impact" for equity earnings, with margins currently supported by propylene oxide.
• Raw Material Cost Impact in Polyurethanes -- For Q2, the company projects absorbing over $100 million in additional raw material costs, expected to be fully offset by price increases.
• Performance Products EBITDA Guidance -- The company forecasted Q2 segment EBITDA of $30 million–$40 million, up from $26 million in Q1, with a $4.5 million–$5 million headwind from constrained ethylenamines JV output due to the Strait of Hormuz disruption.
• European Aniline Plant Situation -- Huntsman characterized the UK aniline plant as challenged by persistently "aesthetically high" energy prices, despite some recent easing in natural gas costs from $20 to $15.
• Pre-buying Activity -- CEO Huntsman noted pre-buying behavior "equivalent of a day or two worth of inventory," mainly in MDI, but is "managing carefully" to avoid excessive inventory build-up.
• Specialty Amines for Semiconductors -- The specialty amines capacity added for semiconductor applications is still undergoing qualifications, expected to contribute "$5-plus million" this year.

Need a quote from a Motley Fool analyst? Email pr@fool.com

RISKS

• The company remains "meaningfully below mid-cycle margins in the Polyurethanes business," with Huntsman emphasizing the need for sustained demand and raw material stability to achieve a mid-teens EBITDA margin.
• Management flagged continued uncertainty in demand sustainability for the latter half of the year, cautioning "as you start looking at the third and fourth quarter. It is just too early to start looking at those order trends."
• The UK aniline plant's economics are threatened by elevated energy prices and what Huntsman described as a "policy-driven government," resulting in continued concerns for that facility's competitiveness.
• Operations at the Saudi-based ethylenamines JV are running at "around 50%," with export disruptions through the Strait of Hormuz producing a quarterly EBITDA impact estimated at up to $5 million.

SUMMARY

Huntsman Corporation (NYSE:HUN) reported a marked sequential increase in pricing across North America and Europe, led by Polyurethanes, with price initiatives enabling offsets to rising raw material costs. Advanced Materials maintained a steady recovery trajectory, underpinned by aerospace and power markets, and segment results were largely insulated from geopolitical disruptions in the Middle East. The Performance Products segment anticipates increased second-quarter EBITDA, although continued logistical challenges in the Saudi ethylenamines JV and high energy costs in Europe remain material headwinds.

• Despite volume growth and higher operating rates, CEO Huntsman stressed that Polyurethanes margins remain short of normalized mid-teens levels, hinging on the sustainability of demand.
• Inventory levels throughout industry supply chains remain low, and management acknowledged only minimal customer pre-buying, primarily limited to one to two days' worth in MDI.
• The company is closely managing spot and contract sales to align short-term order spikes with longer-term volume commitments.
• Huntsman confirmed global MDI supply has not been materially impacted by outages in China or the Middle East, and raw material supplies for MDI remain "pretty much in line with oil" prices.

INDUSTRY GLOSSARY

• MDI (Methylene Diphenyl Diisocyanate): A core chemical intermediate for polyurethane foams, adhesives, and coatings.
• PO/MTBE (Propylene Oxide/Methyl Tertiary-Butyl Ether) Joint Venture: A collaborative Chinese facility producing propylene oxide for polyurethanes and MTBE for fuel blending.
• Composite Wood Products (CWP): Engineered panels—such as particleboard or MDF—manufactured from wood fibers and adhesives, a key end market for polyurethane resins.
• ACE (Adhesives, Coatings, Elastomers): Diverse applications for polyurethane chemistry targeting construction, industrial, and specialty markets.
• Benzene: A petrochemical feedstock whose cost trend directly influences polyurethane and MDI production economics.
• Ethylenamines: Specialized amines used in performance chemicals and produced by Huntsman's Saudi joint venture affected by regional export disruptions.

Full Conference Call Transcript

Peter R. Huntsman: Ivan, thank you very much. Thank you all for taking the time to join us this morning. Before I begin my remarks about our company and recent events, I want to simply say that I hope there is a quick and peaceful resolution to the ongoing conflict in the Middle East. Over the past 40 years, I have had the opportunity to visit every country bordering the Persian Gulf with the exception of Iraq. I have always been treated warmly and fairly by the people I have encountered.

I hope that my comments do not come across as being in any way indifferent to the suffering and fear emanating from this region as I address the economic impact of these events to our bottom line and industry. From the first hours of this conflict, our number one commercial priority has been to increase prices enough to offset rising costs. I believe we have been successful in doing this. This will require continued communications with our customers and suppliers and also the discipline to make sure that we are not a shock absorber between raw material costs and finished product pricing.

Our next priority is operating our plants in a reliable manner to make sure that we have the product to meet our demand. Our operations during the first quarter and going into the second quarter have been excellent. From a sales perspective, we are seeing stronger than expected demand going well into the second quarter. I would say that this is being brought about by three factors. Number one, seasonality as we move into the second quarter and the building season resumes across North America, Europe, and Asia. Number two, customers who are buying ahead of the expected price increases that are being announced. And number three, disruptions that have been seen in certain trade flows have impacted supply.

An example of this would be some of our maleic customers in Europe who have become overly dependent on Chinese-supplied maleic and have seen a disruption in supply as raw materials and shipping costs have increased from that region. These three factors are also happening at a time when most inventory levels are very low across many supply chains. These improved order patterns are being seen as we enter into the second quarter in most of our regions and across many of our products. The obvious countervailing point to all of this is how long does it continue. I can see order patterns that go through the month of June.

The guidance that we have shared from each division in Q2 reflects what we have seen to date. Today that visibility is less clear as we look further into the quarter. I struggle to see how inflationary pressures, particularly in areas reliant on imported energy like much of Asia and Europe, will not see an inevitable downward pressure later in the year as consumer spending gradually shifts towards higher prices. To what degree this occurs is yet to be seen. I am heartened to see the housing starts and durable goods orders in the United States better than expected for the month of March.

But I am also keeping an eye on residential permits, a step that precedes construction starts, down 11% for the month of March. There will also be some longer-term dislocation of traditional economics. If you were a producer that enjoyed discounted raw materials coming out of Venezuela, Iran, and Russia a few months ago, it is likely that you are not seeing such discounts today and I highly doubt you will see them in the foreseeable future. Many customers are looking for closer and more secure sources of supply. Supply chains are shifting and being reassessed. I believe that there will be some lasting impact for certain regions and products that may not seem too apparent today.

It is simply too early to know how lasting some of these will be. In short, we are aggressively raising our prices to both cover our cost of our raw materials while also expanding margins from the trough economics we have been experiencing for the past three years. We will continue to manage our costs and deliver these objectives on budget. We will be focused on volumes and make sure that spot buying also comes with longer-term volumes and obligations. I am glad to see the trends that we are seeing in the second quarter. We still have a ways to go to get to our normalized margin levels. This will require stable and longer-term demand trends to continue.

I feel that we are in a strong position today to capitalize on such changes going forward. Thank you. Operator, with that, we will now open the call for questions.

Operator: We will now open the call for questions. We ask you to please limit yourself to one question and one follow-up. Thank you. Our first question is from the line of Patrick David Cunningham with Citi. Please proceed with your questions.

Patrick David Cunningham: Hi, good morning. In the release, you talked about the potential for a more durable return to mid-cycle profitability. This likely depends on both supply and demand side at this point, but can you give us the latest view on what this crisis may do in terms of supply-side rationalization for MDI and polyurethanes? How do you see this playing out in terms of structural energy cost pressure, feedstock availability, or potential closures at this point?

Peter R. Huntsman: I do not see a great deal of change as we look at MDI. I do see pressures continuing in Europe. If you are a European producer now having to put up with natural gas that is priced somewhere in the mid-teens versus where we are today, I noticed in the Houston Ship Channel price this morning was under $2 per MMBtu. These are real, material gaps and shifts. I cannot help but think that there is going to be continued pressure on petrochemical producers across the board and in MDI across Europe.

Having said that, I also think that there are probably some structural issues that may make Chinese exports in certain products—I will not get into exactly which products those are, but I think that they are varied across the board. If you are relying on coal as a raw material in China, you are probably doing quite well. If you are integrated into a world-scale refinery and integrated system in China, you are probably doing quite well. If you are part of what they call the teapot collection of refineries integrated into export-bound chemical facilities, you may be under some cost pressures as you see some of the discounted crude products.

So it is not just what we see from a competitive point of view, it is also what we see from the raw material that many of our customers, many of our competitors, and the industry in general will be facing. I think those are some of the longer-term issues that we will be dealing with, even after the Strait of Hormuz hopefully opens soon here.

Patrick David Cunningham: Very helpful. And could you talk about the sustainability of the positive trends you are seeing in Advanced Materials? Particularly interested in line of sight into aerospace and power order books and what that potentially means for segment profitability in 2026?

Peter R. Huntsman: Yes. I think—and I do not want to get too much into our numbers as to where we planned and where we saw a lot of upside since the beginning of the war, or else my CFO will start kicking me. But the performance we are seeing in Advanced Materials is largely what we expected a quarter ago. We may have seen a little bit of impetus there in price, but remember that business is not reliant on any one major raw material as you would see, for instance, in benzene going into MDI or some of the raw materials—caustic and chlorine prices and so forth—into some of our Performance Products material.

And so as you look at our Advanced Materials segment, that continues, as we have said now the last couple of quarters. We see the recovery continue with aerospace and power, these better-than-GDP growth businesses, and that business is just going to continue to get traction. I am not sure the results this quarter and the second quarter, where we finished the first quarter, would be materially different from where we would be without the Gulf conflict.

Operator: Our next questions are from the line of Kevin William McCarthy with Vertical Research Partners. Please proceed with your questions.

Kevin William McCarthy: Yes, thank you and good morning. Peter, can you speak to operating rates in MDI both for Huntsman and also what you are observing at the industry level? And related to that, how are things changing post-war versus pre-war?

Peter R. Huntsman: Yes. I think that as we look at the industry in general, you are probably looking at the low to mid-80s. And I think now from where we are, we would be in the high 80s. We are sold out completely in our Chinese operation. Our U.S. operation, for the most part, is sold out. Europe, as we said when we announced our first quarter earnings before the Middle East conflict, we are starting to see some green shoots there. We continue to see some opportunities in Europe. And I would say that we are operating at pretty good levels across the board.

There have been a number of outages and, I would say, short-term and also planned disruptions in the industry. Not too unexpected when you have an industry that has been operating at probably 70%–80% for the last couple of years and now all of a sudden you see an increase in demand and pull-through. You typically have operating issues. I cannot speak about the competition, but I can just say in our facilities, all three of our MDI facilities, our associates there have done a fantastic job in their operations.

Kevin William McCarthy: Thank you for that. And then secondly, I imagine your PO/MTBE joint venture in China has become more profitable. Maybe you can talk about what you might expect for equity earnings trajectory moving forward?

Peter R. Huntsman: Yes. Certainly in the past it has been a little bit of a drag on us. I think today we are probably in the low- to mid-single-digit millions of dollars of impact on that business. So certainly doing better than it has been in the past. And I would hope that MTBE, that C factor should improve as you get more into the driving season. But there is just so much volatility right now in the whole refining chain and what is going on with PO economics. That would probably be one of the murkier businesses that we have as far as looking into the future. Remember, Kevin, the price of gasoline is managed—

Philip M. Lister: —differently in China than elsewhere in the world. So MTBE margins are not what you would expect. In China, where the Chinese joint venture is making money today is on propylene oxide and the margins that we are seeing there over and above propylene.

Operator: Next questions come from the line of Frank Joseph Mitsch with Fermium Research. Please proceed with your questions.

Frank Joseph Mitsch: That is interesting. So PO is doing better than TBA/MTBE in China. Thanks for that enlightenment. Peter, I was wondering if you could speak to the polyurethane and MDI pricing initiatives that are underway, how that relates to underlying benzene costs, and what sort of successes you are seeing or not on that front?

Peter R. Huntsman: I would say that we are certainly staying ahead of the benzene curve, never as far ahead as I would like to see it. I would like to see it multiple times better than what we are seeing. But I highly compliment our sales and marketing groups on their aggressiveness in making sure that we are covering our raw material costs and staying ahead of that. So yes, both from a volumetric basis we will see a positive influence on it and also margin expansion. Above and beyond raw materials, we should see expansion on that.

Frank Joseph Mitsch: All right, terrific. So margin expansion. If I think about the price/mix for Huntsman Corporation overall, it has been negative for several quarters here. Given these initiatives that you have underway, is the expectation for the full company to show positive price/mix here in Q2 and hopefully beyond?

Peter R. Huntsman: Certainly in Q2, hopefully beyond. I would reinforce that as well. As I look at some of the pricing trends that we are seeing going into the second quarter—just to give you an idea—in North America, I am talking about all products, all prices. So I am not saying any one division, but we have not seen a quarter-on-quarter growth in price trends since 2022. So the trends that we are seeing right now and the jump that we are seeing on a quarterly basis right now in North America—we have not seen that in years now. Europe is not too dissimilar.

We have seen a few quarters here and there where we have seen some up pricing, but that is more to do with the strength of our Advanced Materials business in Europe, not because of the macro trends there. So yes, I like where we are going into the second quarter. My only question is how sustainable is it? But it is a lot better than where we were a quarter ago.

Operator: Our next questions come from the line of Hassan Ijaz Ahmed with Alembic Global. Please proceed with your question.

Hassan Ijaz Ahmed: Morning, Peter. I just wanted to revisit some of the earlier commentary around MDI supply, both as it pertains to the product as well as the feedstock. There is at least one facility in Saudi Arabia that seems to be offline, and then I would imagine there would be broader issues in terms of the availability and pricing of benzene as well as methanol. Could you comment a bit about operating rates for MDI, keeping in mind some of these outages as well as some of the feedstock availability issues the world may be encountering? And how long it may take for some of these bottlenecks—if peace was declared tomorrow—to be ironed out of the system?

Peter R. Huntsman: As we look—you made reference to a Middle East producer—that is roughly about 4% of global capacity. So if you think that the industry is operating in the low to mid-80s, that would say that we are kind of pushing the mid- to upper-80s, at 90% capacity utilization globally. Now, again, that is not across the board. There will be parts that are better than that and parts that are worse than that. But globally, across the board, when you reach 90% in the MDI industry—what people have as stated capacity and the outages that take place on a yearly basis for maintenance and so forth—really an industry that starts to strain at 90-plus percent capacity.

So, statistically, on paper, you can see where the industry is now moving into the upper 80s. In some regions of the world, it is going to be, again, better and worse. I have not seen or heard of any problems with the procurement of raw materials in MDI around the world. And the pricing of that raw material so far has been pretty much in line with oil. So that would tell me that there is a pretty decent supply of it that is available. But longer term, my biggest question on MDI is going to be the sustainability of the demand.

Because again, previous to February 28, I would say that I do not want to say that we were going great guns. We were starting to see some green shoots in Europe, as we reported earlier. We are moving into the North American housing season. And China was stable and in pretty decent shape. So my whole question is really around sustainability of demand as you start looking at the third and fourth quarter. It is just too early to start looking at those order trends.

Hassan Ijaz Ahmed: Understood. And as a follow-up, you mentioned the polyurethane market in Europe. Volumes-wise it was up 4%, which is decent. But in your prepared remarks, you talked about easier comps as well because last year you had the Rotterdam turnaround. What green shoots are you seeing volumes-wise in Europe? And over the last couple of quarters, along EBITDA lines, it seems for the PU business it was negative. Have you currently turned that around? Is it generating positive EBITDA now?

Peter R. Huntsman: To your first area, I would think that CWP—composite wood products—in Europe is looking pretty good. Technical insulation—and that would be your sandwich boards and so forth that are going into data centers, warehouses, prefabricated buildings, and so forth. Your ACE business—adhesives, coatings, elastomers—is doing... Again, I do not want to paint the details of going through the roof in Europe, but we are seeing some green shoots in these areas—badly needed, by the way. And so I think that certainly is moving towards an area where we do not just want to see a positive EBITDA coming from Europe, we want to see positive cash coming out of Europe.

And so yes, we are at that precipice and seeing things improve. And, Hassan, as we sit here today, we would expect Europe to be positive from an EBITDA perspective.

Operator: Next questions are from the line of Michael Joseph Sison with Wells Fargo. Please proceed with your question.

Michael Joseph Sison: Hey, good morning. When I take a look at your outlook for Polyurethanes for Q2, margins look like they are going to improve a little bit, but not a lot. What do you think needs to happen to get the EBITDA margins for Polyurethanes to better levels going forward? And just curious what the pricing for the segment should imply for Q2 year over year?

Peter R. Huntsman: I think the two things that we need more than anything else are demand and raw material stability. We are projecting in the second quarter that we will take in well in excess of around $100 million of raw material costs. We expect to offset that and get prices higher than that. But that is a tremendous amount of raw material costs that we are absorbing in one quarter. And, of course, in order to have any sustainability in pricing and pull-through pricing, we have got to see the demand. I did note in my prepared remarks a cautionary note on inflation and what inflation factors may play in Europe.

But there is also—I would say on one hand, there are those inflation factors that give me concern. On the other hand, Europe has been so lethargic for so long I cannot help but think that there is pent-up demand—whether it be in housing or remodeling and just industrial demand, defense rebuild, and so forth across the board. That is going to be, for the second half of the year, the single biggest variable in my opinion: demand.

Michael Joseph Sison: Got it. Thank you.

Operator: Next questions are from the line of David L. Begleiter with Deutsche Bank. Please proceed with your question.

David L. Begleiter: Thank you. Good morning. Just on Performance Products, why is that business a little bit stronger in Q2 given some of the strength in maleic?

Peter R. Huntsman: Dave, that is an excellent question. As we see the strength in maleic, that certainly is going to be manifest through Q2 going into Q3. A lot of our European customers on maleic are actually buying that and negotiating purchases FOB Florida, so out of our plant in Pensacola, Florida—picking it up in the U.S. rather than us shipping it over to Europe and taking the time and tying up working capital and so forth. So we will see the impact of that going forward.

But I would also remind you that we had one of our facilities in Q1—and also presumably could see some impact in Q2—where we have an ethylenamine joint venture facility, which we believe is one of the lowest-cost facilities in Saudi Arabia, on the wrong side of the Strait of Hormuz. And so that is going to also be a little bit of a headwind in that business.

David L. Begleiter: Very good. And do you have an update on your UK aniline plant, given some prior comments?

Peter R. Huntsman: Yes. Again, that facility—when those comments were made—we were seeing $20–$22 gas in Europe and a government that was lethargic at best in concerns with it. And we were seeing import pressures that were countering that. I think since that time, imports have lessened a bit. We have seen gas plummet from $20 to $15. I still say that is an aesthetically high number for an energy-less, policy-driven government. And so I would not say that facility—when I look at the economics of it, I continue to be concerned. The people that work there, the reliability of that facility, the ongoing maintenance and operations and so forth at that facility are absolutely A-plus.

But they are having to battle some really poor energy policies.

David L. Begleiter: Thank you.

Operator: The next questions are from the line of Vincent Stephen Andrews with Morgan Stanley. Please proceed with your questions.

Vincent Stephen Andrews: Thank you. I want to try to piece together a couple of the comments you made, Peter, as it relates to Polyurethanes. You talked about how you have been able to get pricing ahead of benzene, and we traditionally think of you having about a two-month lag of benzene flowing through. And then maybe later in the year, we may see some negative demand elasticity from the consumer at the end market working its way back up the supply chain. So do we think about Q2, your spreads being strong because you are ahead of that benzene, and then maybe benzene catches up with you in Q3?

And then we have to see how much more pricing you can get—that, I guess, would be a function of demand. So are we thinking Q2 and Q3 may be flattish in terms of profitability in Polyurethanes? Do you think Q3 could actually be up a little bit, or maybe it would be down a little bit? What is your latest thinking on that?

Peter R. Huntsman: Far too early to comment on Q3. Again, I believe Q3 is going to be more demand-driven than anything else. The trends that I am seeing today—we are staying ahead of the price on benzene. We also are picking up some volume that we see on a year-to-year sort of growth basis. And we are going to continue to be pushing prices through. Now again, the ability to push those prices through will be predicated on macro demand. As I get into the third quarter—and again, I do not want to be overly pessimistic about that—I merely say that right now I feel there is a bit of euphoria in the industry, and I love seeing it.

I think it was long overdue. I hope it continues into the third and fourth quarter. But a lot of that is just too early to tell on demand.

Vincent Stephen Andrews: Thank you.

Operator: The next questions are from the line of Matthew Blair with Tudor, Pickering, Holt. Please proceed with your questions.

Matthew Blair: Great, thanks, and good morning, Peter. Hoping you could talk a little bit more about underlying construction activity. One of your peers mentioned that it has been weakening. You talked about the divergence in March data between starts and permits. Are there any trends in Q2 on construction activity that you can share so far?

Peter R. Huntsman: I would say that we are not seeing a drop-off, but we are also not seeing a lot of improvement. I would say right now it certainly is not shaping up to be a bad season for us. It is just not a lot of growth.

Matthew Blair: So I would say, yes, there is some stability. But—

Peter R. Huntsman: I am sorry, I probably should be saying it is going up or it is going down, but it seems to be quite stable at the present time. That is why I say there are some decent trends on housing starts that feel pretty good. I think in the second quarter going into the third quarter, we will probably see 2%–3% low single-digit growth in construction this year. But I am also concerned when you see a 10% drop in one month in housing residential permits—again, that is the step before the housing starts.

I do not want to read too much into a single quarter of data because in February both of those numbers were the complete opposite—permits were up and starts were down. So I think we will probably see some very gradual growth this year.

Matthew Blair: Sounds good. And then I was also intrigued by your comment that you are seeing some customers that are buying ahead of expected price increases. Is this occurring in some products more than others? And if so, which products? And then also on a regional basis, would this be something that is more prevalent in Europe relative to the Americas?

Peter R. Huntsman: I would say that as we look at it, you are probably talking about two to three days on MDI. That would be the area where we would probably see the most pre-buying. I would not say that there is a big wave of capacity that is being pulled through. I think that we are managing that very carefully as well. When customers come in and increase their orders from where they were just a few weeks ago, we are discouraging that and making sure that we keep an equilibrium on orders and so forth.

In other areas where people are coming in that have not bought from us for some time on a spot basis, we are seeing if we can extend contracts from what you need over the next month or two to what you need over the next year or so. Some of our Performance Products customers, and so forth, may have shifted supplies to China out from Europe and the U.S., for example. On both of these demand trends, we need to make sure—there is a difference between those that are spot buying, panic buying, and those that are just trying to buy ahead of a price increase. They all need to be managed a little bit differently.

If there is pre-buying that is taking place, I would be very worried if we were seeing what would be the equivalent of a week or two or three of pre-buying taking place. I would say right now we are seeing a low number of days of inventory that is pre-buying at this point.

Operator: Our next questions are from the line of Jeffrey John Zekauskas with JPMorgan. Please proceed with your question.

Jeffrey John Zekauskas: Thanks very much. Can you comment on how much Chinese MDI is coming into Europe?

Peter R. Huntsman: There has not been all that much, and I would not say anything out of the ordinary. It has been pretty stable. It is worse than the last couple of quarters, and so I would say, if anything, maybe it is even slightly lower than what it has averaged over the last year or so. Nothing that would have a material impact on the industry or pricing there.

Jeffrey John Zekauskas: Okay, good. And then in Performance Products, can you frame the penalty from the ethylenamines joint venture being behind the Strait—either in the first quarter or the second quarter or for the year? And in your guide, you are going from $26 million in EBITDA to an estimate of $30 million to $40 million in the second quarter. Why so big a jump? Why is the range so wide for the second quarter?

Peter R. Huntsman: As we look at the ethylenamine facility, again, that facility was down for a couple of weeks. It is operating today. I do not want to get too specific—it is operating, let us say, around 50%. Material is being trucked out to the Red Sea and also south. So we are finding some means of getting product out of there. What the impact of that is going to be, and how much we can offset through operations from our Freeport facilities, I would say that impact could be as high as $4.5 million–$5 million for the quarter.

As we look at that spread of $30 million–$40 million, a lot of that is going to be based on how successful we are in getting product economically. Because you are moving it out by truck, you can well imagine that is going to be quite a bit more expensive than moving it out by ship. So there is some variability there. I would also say that there is quite a bit of spot material—seemingly opportunities coming in maleic. How much that materializes, what we are able to get in pricing—people inquiring, people talking about volumes and prices versus actual orders and so forth—we will know a lot more about that in the coming weeks.

Philip M. Lister: And Jeff, in terms of the step-up from Q1 to Q2, just as in Polyurethanes, we are seeing pricing exceed the raw material increases.

Operator: Our next question is from the line of Michael Joseph Harrison with Seaport Research Partners. Please proceed with your questions.

Michael Joseph Harrison: Hi, good morning. Peter, you mentioned in the prepared remarks that we are still meaningfully below mid-cycle margins in the Polyurethanes business. I was wondering if you can provide any kind of an updated view on where you think mid-cycle margins could be—I will hold off on asking you when you think you can get there. What is the appropriate mid-cycle margin level for Polyurethanes?

Peter R. Huntsman: I have always thought of it more on what it is on an EBITDA-on-average basis. I think that business, on average, to be a mid-teens sort of business. And how soon do I expect that to happen? As soon as possible. Sorry. It is long overdue.

Michael Joseph Harrison: And then the second question I had is—I did not see any comment about the specialty amines capacity that you have added to serve the semiconductor industry. I am just curious how that is contributing relative to expectations and whether you expect to see some growth there given the strength in semiconductor?

Peter R. Huntsman: Yes. We continue to see that coming online. It is going through qualifications. As we have stated before, that is going to go through a qualification of usually around nine to twelve months. Sometimes when there are supply disruptions and so forth on chemical products—as there are right now—sometimes that can be accelerated; sometimes it slows down, actually. I think as we look in 2026, as we are building up to a normalized run rate—hopefully by the end of the year—we will probably see $5-plus million coming from that this year.

Operator: Our next questions are from the line of Joshua David Spector with UBS. Please proceed with your question.

Joshua David Spector: Yes, hi, good morning. I wanted to see if I could just follow up on the benzene/MDI math in Q2 here. If we say volumes are stable into Q3, you are pricing ahead of raws in Q2. Is that a headwind in that your raws are going to catch up a bit more from inventory in Q3? Or are you exiting with enough price where you would say that earnings in Polyurethanes would be stable sequentially in that scenario?

Peter R. Huntsman: I would say that we are exiting Q2 able to stay ahead of the raw materials that we see going into Q3. And we are also working towards more price increases to come in that area. Unless there is a cataclysmic change economically, we will stay ahead of our raw material costs going into Q3.

Philip M. Lister: And Josh, benzene just settled at $4.71. The point is we are ahead of that, and we will stay ahead of it.

Joshua David Spector: Understood. Thank you.

Operator: Our next questions are from the line of Laurence Alexander with Jefferies. Please proceed with your question.

Laurence Alexander: Good morning, Peter. Do you see any end markets where your customers are indicating already that they are in pre-buy mode?

Peter R. Huntsman: Good question. None that are really that high. Typically, this time of year, you are going to get some pre-buy in construction. Insulation and spray foam business feels like it is in pretty good demand and people are trying maybe to buy ahead of a curve in that business. Those would probably be the two areas. But when I mentioned earlier it is something that we are working on very diligently—when I said that we are at kind of a day or two worth of inventory going in—that is what I meant. I am not going to say that we are walking away from business; we just want to make sure we are managing that very carefully with our customers.

We do not want to build up inventory, nor do we want to see it built up on the customer side.

Laurence Alexander: I appreciate that no one wants customers to build up inventory, but is it unusual with this kind of spike—where several companies are out publicly talking about imminent shortages in different molecules—that people who may see higher prices in the future are not trying to pull forward orders?

Peter R. Huntsman: I do not think that is unusual at all. I do not think that we are at a point—I do not wish we were—but I do not think we are at a point in MDI at this time where we are seeing shortages and people saying, “I cannot get it.” I think that there are people that are concerned as they look at their suppliers with announced turnarounds that have been scheduled for multiple years that are taking place, and so forth. Some of the disruptions that you are seeing in some of the energy flows and shipping flows. But I am not seeing panic buying at this point. I am seeing higher capacity utilization.

I think that there is an improvement in market conditions for the producers. But consumers can still get the product.

Operator: The next questions are from the line of Arun Shankar Viswanathan with RBC Capital Markets. Please proceed with your question.

Arun Shankar Viswanathan: Great, thanks for taking my question. We did hear about an outage with Wanhua a couple of days ago. Maybe I can just get your thoughts on that—if you think that could tighten up markets. And what is the potential for those utilization rates to remain consistently above 90%? Do you see any permanent supply activities that could arise in the next few months? Obviously it depends on duration of the conflict. Are your customers migrating to you in the face of other supply shocks or disruptions? Is there a share gain opportunity?

Peter R. Huntsman: Good question. I am not sure necessarily what has happened with the competitor facility. When they do have multi-year closures—when I say multi-year, I mean oftentimes when you do a large-scale closure on a vast petrochemical site—you are renting equipment, you are planning on workforces, usually 18–24 months in advance. You know these things are coming and people are exchanging materials. I know that is happening. I have heard or read that a splitter may have gone down or something; I have not read that a facility—there has been a large-scale cataclysmic outage or anything like that.

I think that we are probably, as an industry, operating in the high 80s right now depending on product flow in the Middle East. That is a bit volatile right now. Remember in China, you have single-site facilities of a million metric tons. When those go down—on a site that big—you will feel it globally. If they are down for an extra couple of weeks because of a problem, you will feel it acutely on a short-term basis. Our facilities are operating well, and we are in a position where we can be a strong and reliable supplier.

Arun Shankar Viswanathan: Thanks for that. And the other question I had was on the PO market. There is some tightness there, and there was also a reduction of capacity by one of the suppliers and I know one of the other plants is down. Are you feeling like your own procurement for the Polyurethanes business is intact, or do you foresee any supply disruptions or rerouting of your supply chain that would be required?

Peter R. Huntsman: No, we do not see any disruption in our PO right now. We have a good supplier. That plant is operating, and I feel that we are covered with that. We have also got an excellent supply source in China as well. So I feel we are okay with that. Operator, why do we not take one more question and we will let people get on their way?

Operator: Sure. The next questions are from the line of John Ezekiel Roberts with Mizuho Securities. Please proceed with your question.

John Ezekiel Roberts: Thank you. Not that it is large, but maybe your Saudi amines JV gives some insights into the sustainability of the disruption. If we had an agreement imminent here on the Strait of Hormuz, what is the earliest you think you might be able to resume full production and export by sea?

Peter R. Huntsman: You are probably looking at 30 to 45 days would be my assumption on that. Again, there is going to be a bottleneck of shipping—both to get there to pick product up and also shipping product to get out. So I would say about that time—30 to 45 days.

John Ezekiel Roberts: Great. Thank you.

Peter R. Huntsman: Thank you.

Operator: At this time, this will conclude today's teleconference. We thank you for your participation. Thank you very much. You may now disconnect your lines at this time and have a wonderful day.

This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. Parts of this article were created using Large Language Models (LLMs) based on The Motley Fool's insights and investing approach. It has been reviewed by our AI quality control systems. Since LLMs cannot (currently) own stocks, it has no positions in any of the stocks mentioned. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.

The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.