Westlake Corp (WLK) 2011 Q1 法說會逐字稿

Good morning, ladies and gentlemen; thank you for standing by. Welcome to the Westlake Chemical Corporation First Quarter 2011 Earnings Conference Call. (OPERATOR INSTRUCTIONS) As a reminder, ladies and gentlemen, this conference is being recorded today, May 3, 2011.

I would now like to turn the call over to today's host, Andrew Johannesen, Westlake's Vice President and Treasurer. Sir, you may begin.

Thank you. Good morning, everyone, and thank you for joining us for the Westlake Chemical Corporation First Quarter Conference Call. I am joined today by Albert Chao, our President and CEO; Steve Bender, our Senior Vice President and Chief Financial Officer, and other members of our management team.

The agenda for today will be as follows. Albert will first make a few comments regarding Westlake's performance during the first quarter, Steve will then provide you with a more detailed look at our financial and operating results. Albert will conclude with a discussion of recent developments and then we will open the call up for questions.

Today, management is going to discuss certain topics that will contain forward-looking information that is based on management's beliefs as well as assumptions made by, and information currently available to, management. These forward-looking statements suggest predictions or expectations and thus are subject to risks or uncertainties. Actual results could differ materially based upon factors including the cyclical nature of the chemical industry; availability, cost, and volatility of raw materials, energy, and utilities; governmental regulatory actions and political unrest; global economic conditions; industry operating rates; the supply/demand balance for Westlake's products; competitive products and pricing pressures; access to capital markets; technological developments; and other risk factors.

Westlake issued earlier this morning a press release with details of our quarterly financial and operating results. This document is available in the press release section of our webpage at www.westlake.com.

A replay of today's call will be available beginning two hours after completion of this call until 1.00 p.m. Eastern time on May 10, 2011. The replay may be accessed by dialing the following numbers -- domestic callers should dial 1-888-286-8010. International callers may access the replay at 617-801-6888. The access code for both numbers is 85290921.

Please note that information reported on this call speaks only as of today, May 3, 2011. And therefore you are advised that time-sensitive information may no longer be accurate as of the time of any replay.

I would finally advise you that this conference call is being broadcast live through the Internet webcast system that can be accessed on our web page at www.westlake.com. Now I'd like to turn the call over to Albert Chao.

Thank you, Andrew. Good morning, ladies and gentlemen, and thank you for joining us. In this morning's press release, we reported net income of $83.5 million, or $1.25 per diluted share, up considerably from the $0.27 per share in the first quarter of 2010.

Westlake's first quarter operating income of $141 million was the highest in the Company's history. We achieved this milestone in spite of reduced production rates at our Lake Charles, Louisiana, ethylene plant that resulted from a fire at a third party feedstock storage facility in Mont Belvieu, Texas.

Our operating margin in the first quarter of 2011 was 16.2%, up from 4.4% in the first quarter of 2010. The first quarter benefited from lower-cost ethane-based ethylene production, strong demand for polyethylene, high operating rates, a specialty-oriented polyethylene product mix, and higher export volumes for PVC resins.

The abundant supply of natural gas and natural gas liquids from shale gas production has made US ethylene derivatives globally competitive, especially versus European and Asian naphtha-based producers.

I'm pleased with the continued strong performance of our Olefin segment and the progress we are making in improving the performance of our Vinyl segment.

Now I'd like to turn the call over to Steve for review of the first quarter results, then I'll make a few closing comments before we take questions.

Thank you, Albert, and good morning, everyone. I'll begin today with a brief discussion of the consolidated financial results, followed by a more detailed discussion of our Olefins and Vinlys segment results.

Let me begin with our consolidated results. Westlake posted a first quarter net income of $83.5 million, or $1.25 per share, compared to net income of $17.6 million, or $0.27 per share, in the first quarter of 2010.

Our operating income for the first quarter was a new record of $141 million on sales of $867 million, as compared to an operating income of $34 million on sales of $778 million in the first quarter of 2010, an operating income of $137 million on sales of $795 million in the fourth quarter of 2010.

The first quarter was negatively impacted by approximately $6 million, or $0.06 per share, due to higher operating costs resulting from the reduction in ethylene operating rates in Lake Charles due to the outage of the feedstock storage facility in Mont Belvieu.

Sales for the first quarter 2011 were up significantly over the same period in 2010 as a result of higher prices for all of the Company's major products. First quarter 2011 operating income was higher than fourth quarter 2010 operating income primarily due to the improvement in Vinyl segment performance resulting from higher PVC domestic and export sales volumes and prices as well as higher prices for caustics.

As you know, our utilization of FIFO inventory accounting impacts earnings differently than the use of LIFO accounting. During the first quarter of 2011, our earnings were positively impacted by $0.06 per share due to our use of FIFO method accounting to value our finished goods inventories when compared to the LIFO inventory valuation method as a result of rising feedstock costs. Please bear in mind that this calculation is only an estimate and has not been audited.

Now turning to our segment analysis, let me start with the Olefin segment. The Olefin segment reported operating income of $145 million on sales of $605 million during the first quarter of 2011, compared to an operating income of $155 million on sales of $564 million in the fourth quarter of 2010. These results include the $6 million negative impact I mentioned earlier. That was the result of higher costs from reduced operating rates of our ethylene units at Lake Charles caused by the feedstock storage facility fire at Mont Belvieu.

Polyethylene demand remained strong in the first quarter and sales volume increased over the fourth quarter of 2010. Ethylene prices increased in the first quarter due to continuing strong derivative demand, a number of unplanned industry outages of ethylene units, higher ethane costs, and rising naphtha-based ethylene prices in overseas markets. Polyethylene producers responded with polyethylene price increases totaling $0.05 per pound in the first quarter.

The operating income of $145 million in the first quarter was substantially higher than the $58 million reported in the first quarter of 2010 as a result of higher integrated margins in olefins products.

As to current pricing trends, polyethylene producers have implemented a price increase of $0.06 a pound as of April 1, and are in the process of implementing an additional $0.05 on May 1 as a result of these factors.

Now turning to the Vinyl segment -- the Vinyl segment reported a loss from operations of $3 million in the first quarter, which was a significant improvement over the loss of $15 million reported in the first quarter of 2010, and the loss of $12 million reported in the fourth quarter of 2010.

Vinyl segment sales grew to $262 million in the first quarter of 2011, an increase of 23% over the $213 million in sales reported in the first quarter of 2010 and an increase of 13% over the $232 million reported in the fourth quarter of 2010.

Vinyl segment revenue increased as a result of significantly stronger sales volumes for PVC resins, driven by continued strong export sales and an increase in caustic sales prices and volumes.

PVC industry export sales remained strong in the first quarter due to low-cost ethylene and low power costs in North America.

The PVC industry implemented a $0.03 per pound increase in the first quarter to partially offset increases in feedstock costs. Currently, in the second quarter, the PVC industry has implemented a further price increase of $0.03 a pound as of April 1 and is in the process of implementing a $0.05 a pound price increase as of May 1 to offset higher feedstock costs and move domestic prices closer to the current level of export prices.

Caustic volumes and prices rose in the first quarter of 2011 as a result of strong demand and export. Industry caustic prices have risen over 70% since the first quarter of 2010 due to strong demand. Currently, the industry is in the process of implementing a $60 per ton increase effective April 1, and several major suppliers have recently announced an additional price increase of $50 per ton to be implemented in the second quarter.

As we announced last quarter, beginning in May, we will perform a scheduled maintenance turnaround at our Calvert City, Kentucky, facility, which occurs approximately every five years. The ethylene and VCM plants will be down for about two weeks, while the chlor-alkali and PVC plants will be down for shorter durations. The estimated financial impact of this turnaround in the second quarter will be approximately $15 million, or $0.15 per share.

Now turning to the balance sheet and summarized statements of cash flow, we generated $41 million in cash from operating activities during the first quarter and spent $29 million on capital expenditures. Our estimate for the full year of 2011 capital expenditures is between $190 million and $215 million.

On April 5, we announced our plans to expand our ethane-based ethylene crackers in Lake Charles as well as evaluate the conversion of our ethylene plant in Calvert City from propane to ethane and evaluate other expansion options at Calvert City.

Our cash balance, including restricted cash, was $794 million and our total debt was $765 million at the end of the quarter. If you net our cash balance against our outstanding debt, our debt-to-equity ratio is a negative 1.8%. Obviously, we have significant financial flexibility and we will continue to seek out projects and business opportunities that increase our total shareholder return while maintaining a solid financial footing.

Now I'll turn the call back over to Albert to make some comments. Albert?

Thanks, Steve. Our outlook for the industry is positive as we continue to see strong demand for polyethylene and strong export demand for PVC. With the strong polyethylene demand, industry has been able to raise prices in the face of rising feedstock costs.

Continued strong export market for PVC has supported industry price increases, moving domestic prices closer to current export prices.

As Steve just mentioned, we recently announced expansion plans that will result in the Company being fully integrated in our ethylene requirements. These ethylene expansions, the construction of our chlor-alkali plant at Geisman, Louisiana, and our possible conversion of the propane cracker to ethane at Calvert City underscore our commitment to increased the integration of our businesses, lower our costs, and reflect our belief that the shale gas reserves in the US will benefit our industry for many years to come.

These new investments, our growth prospects, and our strong balance sheet give us confidence as we look forward to the future and seek opportunities to increase shareholder value.

Thank you very much. Now let me turn the call over to Andrew Johannesen.

Thank you, Albert. Before we begin taking questions, I would like to remind you that a replay of this teleconference will be available starting two hours after we conclude the call. We will provide that number again at the end of the call.

(OPERATOR INSTRUCTIONS) James Sheehan, Deutsche Bank.

Hi, good morning.

Good morning.

Good morning.

Very good performance in vinyls this quarter; it was very nearly break-even. Do you anticipate this segment being profitable for the rest of the year?

We certainly will strive to make it profitable.

Could you also give us a sense of what your operating rate was in polyethylene during the quarter? You had the issues with the feedstocks lowering your operating rate. Were you closer to the industry average there? Or just give a little more color on that?

Certainly. The polyethylene operating rates were not affected by our ethylene plant issue in the first quarter. We had inventory and we purchased ethylene, so were able to run the plant at (inaudible).

Okay. Finally, just on-- your comment on styrene volume increases. What kind of end uses are driving your improved volumes in styrene monomer, and do you view those trends as being sustainable?

Well, the biggest market for styrene is still in the polyethylene and ABS markets, and those markets have benefited from the high propylene price in the polypropylene market. So we believe that with high propylene and polypropylene prices, the styrenics should do pretty good going forward.

Thank you very much.

You're welcome.

Frank Mitsch, BB&T.

Good morning, Albert, and congratulations on a record quarter.

Thank you, Frank.

I was wondering -- you mentioned raw materials rising. I was wondering, as things stand today, what would be the average increase in the second quarter versus the first quarter on polyethylene production from a raw material perspective? How much of a negative impact would a higher [rozz] be Q2 versus Q1 as things stand today, roughly?

Well, we are only the first part of May. The ethane price has come up the last week or two in the (inaudible) of more higher moves. But as you heard that we have polyethylene prices increase of $0.06 increments implemented in April and another $0.05 for May, so we hope that the polyethylene price increases will offset the feedstock price increases.

Albert, it sounds to me that it would be more than offset rather than just offsetting. Is that fair?

Well, it depends on whether -- how and when we implement the $0.05 a pound price increases in May.

All right; terrific. And then, can you comment on inventory levels with you versus the industry in the PVC, on the Vinyl side of the business? How do inventory levels stand there?

We believe the inventory level is pretty low. As you know, there's a large demand for PVC on a global basis, especially in Asia, and there's a big variance between export price of PVC and domestic price. So inventory in the industry's low and we're going into a turnaround so our inventory's low, also.

All right, great. And then lastly, you commented on the larger amount of PVC sales going into the export market. Can you comment on your expectations in the second quarter -- will you be diverting some more of the PVC from the export markets into your domestic pipes business or do you better net back than -- is that overall profitability still in the export market versus the pipe market? How does that dynamic play out?

Well, as we have said, the US construction market, which is mainly the market for the pipe business, is still quite weak. So other than supplying the domestic PVC needs, the rest of the industry's PVC has been going to the export market. We don't see that changing very much.

All right. So order of magnitude -- are we talking 30% or so of your PVC going into the export market?

I think we follow fairly close to the industry's averages, yes.

All right, terrific. Thank you.

You're welcome.

Don Carson, Susquehanna Financial.

Yes, thank you. A couple of questions. First, on the caustics side. I know you're using industry benchmark pricing but you're only showing about a $19 sequential improvement in caustic realizations. I'm just wondering, was the $40 January initiative -- did you get any of that in the quarter, or is that more destined for second quarter? Because I'm just wondering, between that and the $60 price increase, how much that caustic could go up this quarter?

And then on the flip side, on chlorine -- how much do you expect your price to go up this quarter? I know there's a $60 industry initiative there.

Right. In the caustics side, the $40 has been implemented and we are in the process of implementing the additional $60 and $50 going up.

On the chlorine side, certainly we will be seeing a price increase versus the first quarter, but I think the chlorine price increase is still somewhat moderate.

Okay. So you'd be paying less than the $60 in chlorine -- so would you expect your caustic realizations to be up by $60 to $80 or so, or does it take a little longer to roll?

It will take a few months to implement the full -- the price increases.

Okay. And then secondly, just a question on your advantaged polyethylene position. Just the spread of low density over linear low -- I know we saw some narrowing in Europe as [Polameri] came back on line in mid-April. What did you see in Q1 in terms of that spread? Did it grow? And what are you seeing in Q2?

We think it's stabilizing in Q1, and we believe that it will stabilize in Q2 as well.

And so, what is that level -- about $0.12, $0.14, or so?

Depending on the grade, between $0.10 and $0.12.

Thank you.

You're welcome.

Kevin McCarthy, Bank of America.

Good morning; this is Alex Yefremov for Kevin. Albert, what is the current spread between domestic and export PVC prices in inducing best [prec of close] if the April and May price increases are implemented in the US?

I think that even after the May increase, the export prices is still higher than the domestic price.

Okay, great; thank you. On PVC as well, your volumes in the first quarter were pretty high. Do you think you could -- your typical seasonality in the second quarter would be as strong as usual or a little bit less than usual, given that Q1 was already strong?

I think for the industry Q1 was pretty strong; the second quarter should be equally strong. And for Westlake, it was our turnaround; we will have -- somewhat be less than the first quarter.

Okay, thank you. And finally, on polyethylene exports -- do you see higher competition in export markets given that inventories in Asia appear to be high?

Well, in the industry would be -- have foreseen some impact on a short-term basis. I think there's some inventory adjustment in Asia. On Westlake exports, very little polyethylene as compared with industry.

Okay, thank you.

You're welcome.

Andy Cash, UBS.

Hi. Those ethylene inventory numbers aren't reported very often, so I was just wondering, from your perspective, since you're a real buyer, what's your view of what's going on with inventories? And given the price of ethane pushing $0.85, $0.90 a gallon, what's your expectation for the price changes in the future?

Yes. Certainly when you have prices going up like that, it reflects inventory as well. So we believe that the increased demand for ethane has driven up the demand for ethylene (inaudible) ethane and inventory has come down. But as you see that propane has been almost as competitive as ethane, so we think there's some movement from ethane to propane. So the supply-demand will adjust.

Okay, so you think the ethane price is going to level out here?

We hope so. It's been going down. You have fractionation capacity coming on line the second half of the year and next year, so that would provide more supply of ethane to the market.

Now, some of your competitors are looking to put together some real long-term contracts in ethane and trying to tap into Marcellus. I'm just curious -- what percentage of your ethane today is merchant market purchase, and are you looking at some sort of way to beef up that -- secure supply, secure price, in the long run?

Yes. So currently we have long-term suppliers of ethane. And as to Marcellus, time will tell what deal's available and what pipeline's available.

My question was, what percentage of your ethane is merchant market now?

We buy 100% from merchant market.

Okay, 100%. But long term, some of your competitors are talking about trying to put together long-term contracts that put the price of ethane close to natural gas. Did you guys have something in the works there? Do you think there's something possible there? Or are you just planning on remain merchant market?

Well certainly, we are talking -- we have many, many long-term suppliers and we are talking with our suppliers, just like our competitors.

Okay. Just a final question, Albert. The banks are starting to -- looks like they're starting to lend a little money. They're doing these ARMs again -- 3% for the next few years. Do you think that that portends a little greater demand for large-diameter pipe or PVC domestically, or can you tell?

Well, certainly we are one of the largest large-diameter pipe producers in the US so we'll benefit when the demand increases.

But you're not seeing it right now?

The large-diameter PVC pipe is still the better part of the PVC pipe business.

And you're not seeing any pickup year over year on domestic demand?

Small increases, but not material.

Okay, it [is a] low. Thanks, Albert.

In the pipe business, generally; yes.

All right, thanks.

You're welcome.

Jeff Zekaukas, JP Morgan.

Hi; good morning.

Good morning.

In listening to, I guess, the conversations of Dow, and I guess the announcements of Chevron Phillips, there are all kinds of plant crackers going up in the latter part of the decade. Is Westlake interested in participating by way of equity ownership in any of those crackers, or ones that are yet to be announced? Does that make sense for the Company?

Well certainly we look at opportunities all the time, whether they are expansions or any other opportunity, as they come. We have announced our expansion program for our Lake Charles ethylene plant and looking at converting our Calvert City propane cracker to ethane cracker. And we are looking and will be looking at all opportunities as they arise.

I guess what I'm trying to say is, in principle, is Westlake opposed to having a minority position in one of these entities? Is that something that you might contemplate, or it's really something that you don't contemplate?

No, we would contemplate. As you know, you don't do ethylene for ethylene only -- you really look at downstream. And a lot of these announcements have not announced what kind of downstream derivatives market they're going into. And our strategy always has been to be integrated in our businesses with our merchant ethylene seller in any big way historically in our business.

So currently there's a very wide gap between the price of ethane and the price of natural gas. And people have all kinds of ideas about the amount of ethane expansion that there will be over the next couple of years. And there's all kinds of de-bottlenecking and expansion that's been announced. In your opinion, Albert, do you think that the price of ethane will converge closer to the price of natural gas over the next two or three years, or you think it's just too hard to tell and too unpredictable?

Well Jeff, we believe that the price of ethane would converge, at least from today, to closer to natural gas prices. And this is not just our belief; it's held by many consultants in the industry. As we've said, there are new [fractionates] capacities coming up and there's more new shale gas drillings going on. So at least for the next three or four years, there'll be plenty of ethane coming on. And time will tell when any major new ethylene plants are built. And that's four or five years, six years, down the road. So time will tell what will happen.

And then lastly, in your vinyls business, excluding the benefits that you might get of higher prices, is there a way that you can allocate the PVC you produce in order to raise your financial returns? Or pretty much, are you happy with the kind of integration, or the pattern of integration, that you have, and what you're really waiting for is a change in the pricing of the market to lift your profitability?

Yes, I think that as we said earlier, in the past conference calls, we are very happy with the vinyls business. The business has picked up more in export markets and we're still waiting for the US market. We're not counting on the US market.

And what we lack is feedstock supply to our PVC business -- that's ethylene and vinyl. And we are doing something about it with our new chlor-alkali plant under construction and our plant expansion happening. I think with those, there will be quite good business going forward.

Okay; thank you very much.

You're welcome.

(OPERATOR INSTRUCTIONS) Bob Koort, Goldman Sachs.

Thanks; good morning.

Good morning.

Obviously, quite a few questions about access to this ethane and what happens with pricing on the horizon. Albert, you mentioned you've talked to several people, or players, in the industry. What are the range of outcomes or structures that you might pursue when it comes to securing that ethane relative to merchant purchases today?

Well, I think there's a very large so-called merchant market on the Gulf Coast, especially now with shale gas production out of Eagle Ford and other shales that have pipelines to the Gulf Coast. What is lacking of supplies from Marcellus in terms of Gulf Coast is pipeline, and there are several discussions going on whether by the marine option or pipeline to the Gulf Coast. So those discussion are going on with industry players and suppliers of ethane.

And do you sense -- I mean, the ethane extraction margins are at unprecedented lofty levels. Is there a willingness of the fractionaters to have long-term price contracts or margin pass-throughs? Or that very unlikely?

I think all the above. I believe that natural gas -- because of the abundance of shale, the natural gas prices, forward prices, are still much -- on the (inaudible) crude and oil base is much lower. So we believe long-term basis, there'll be plenty of natural gas in the US at relatively attractive prices.

And for the liquid producer, they will want to get the profits above natural gas prices. So they would extract the ethane and deliver ethane to -- its only use is for -- outside of burning for fuel is for the ethylene industry. So we believe that more and more ethane will be supplied to the market and pipelines will be built and infrastructure will be built.

And Albert, do you worry -- it's harder to find an ethylene producer that's not going to do some expansion on an ethane basis. Do you worry about making sure you get your fair share? Or based on that prior comment, do you think we'll be so sufficiently long that there won't be a concern about availability?

Well, this is a very dynamic market, and supply and demand fix the price. I don't think people would plants without having a feeling of supply -- and expansion. In our case, we are really having expansions to meet our ethylene requirements. And so with this issue of feedstock, the issue of derivatives -- where do the products go to? And in our case, we have the de-bottlenecks that would replace our ethylene purchase and capture the margins. So we are more comfortable than people who are building new plants and finding new derivative markets to sell.

Okay, thanks.

You're welcome.

Jon Evans, Edmonds.

Can you just talk a little bit about, on the PVC side, instead of taking your vinyls and turning it into PVC pipe, since the international market is much better, can you talk a little bit about just exporting those?

Sure. I don't want to mis-communicate. There's no export of PVC pipe.

Right.

The pipe market serves the domestic US construction market and the export we're talking about is export of PVC resins.

Sure. But you have the choice to turn it into pipe or just to leave it as resin. Why wouldn't you export as much as possible right now since it's higher and then you wouldn't spend the cost to turn it into pipe and it would make your resin business become profitable, I assume?

You are absolutely right. I think the industry's doing that. As a result, the pipe price is going up also in the US.

Got it. So can you just help us -- as you're in April -- and maybe you don't want to talk about this. How much of your business in April did you export versus making the pipe? And do you think that's going to continue to increase?

Yes, I think the first quarter, the industry, we believe, exported about 30-odd % of its total PVC production is exported. And I think the pipe -- you cannot create demand for pipe; you cannot export them. So you only sell the pipe that the domestic market requires, which is not a whole lot today.

Okay. And then the last question, following up. Because of GGC's force majeure in that business, have you seen the domestic market tighten up even more? And can you just talk a little bit about where you're running from a utilization on your extrusion of making pipe?

Okay, let's talk about the resin side. Certainly with the demand for export and the domestic issues you mentioned, that's why the price increase now is being implemented and there's further announcement of price increases going forward -- for PVC resin. For pipe, as I said, we cannot create demand; the demand is there. And because of the higher domestic and higher export price of PVC resin, pipe price is going up in the US as well.

And you didn't say anything about your utilization, so -- I mean, I'm sure that's like a tradeoff you do every day between pipe or exporting resin. So where are you from kind of capacity utilization on making pipe, roughly, now?

Oh, it's low; it's low.

Thank you.

(OPERATOR INSTRUCTIONS) Andy Cash.

Yes, Albert. In terms of PVC export market, I mean, it's been driven with the cheap ethane relative to oil; and I'd say coal as well. But demand outside the US does continue, especially in China. And given your connections in and around China, I'm just curious, what do you believe's going on there in terms of PV's peak demand? There's things you read about, you hear about -- the directed economy's trying to slow down and rates are going up. Just, what are you hearing over there and how do you think demand's going to hold up?

Right. I think PVC is one of the largest commodity polymers used it the world. And the capacity additions in the world are mainly in the US and some China, as you said, from coal, and the quality of Chinese PVC is much inferior to the ethylene-based PVC. So as the global demand for PVC increases, the US is the best place to supply that supply.

And unfortunately, with the tsunami in Japan, a big part of the Japanese chlor-alkali line PVC business was impacted by that. And it's still ongoing with the shortage of electricity in Japan. So that compounded the demand for PVC around the world.

I mean, we've heard of the coal-based producers of PVC in China, maybe half of them are buying coal and the other half are integrated back to coal. So the guys that are buying -- coal's so expensive they're not running their plants now. I mean, is that what you're hearing? Is that part of the reason why export is so strong now?

You're absolutely right, yes. And the Chinese government has publicly said they don't like to have the high-energy-consuming and high-polluting industries. And also mercury issues. The coal PVC manufacturing used mercury catalysts and the Chinese want to phase out the mercury usage.

So those plants that were operating that have now been closed -- do you think they'll ever come back again? Or you think they're permanently shut down?

Well, it's difficult to tell things in China, what things might happening the future. Hopefully it will stay down; we don't know.

Okay. Thanks, Albert.

You're welcome.

Bill [Seconder], Serengeti.

Hey, Albert. A quick question on these price increases that you guys are seeing. So for you to be able to push through this $0.03 price increase in PVC in April, and potentially another $0.05, what kind of price increases do you need on the pipe side and what are you seeing?

Certainly, Bill. I think the pipe uses about -- every pound of pipe is 90% of PVC -- 0.9. So there should be a commensurate increase in pipe side.

Thank you.

You're welcome.

Jon Evans.

Albert, can you just talk a little bit about from the standpoint what you're hearing coming out of Japan with the disaster? And do you think they'll start to be an exporter again of PVC or is that more a 2012 kind of issue?

Yes, we read that some chlor-alkali plants will start up -- one of the ethylene plants will start up some time for the second quarter or third quarter, and time will tell whether they need to start up and replenish inventory before they export.

Okay, thank you.

You're welcome.

Robert Reitzes, BroadArch Capital.

Hi, Albert. Just two questions, one on caustic and one on PVC. The one question on caustics -- there have been a couple of people that have announced price increases of $50 a ton. Do you guys intend to participate in that? What do you think of that? And then I have a question on PVC.

Certainly we support the price increases because the market is able to absorb -- import prices from Asia have gone up a lot for caustic as well. So I think that with the recovery in the US economy, the market is able to support these prices increases.

And the question on PVC -- there was a $0.05 price increase that was announced effective May 1, and from what I gather, there's a $0.06 to $0.08 price differential between US domestic prices and export prices. Do you think that either export prices will come down or US prices will go up to meet -- to close that differential?

We believe US prices will go up to meet the differential.

Okay, thank you.

You're welcome.

At this time, the Q&A session ahs ended. Are there any closing remarks?

Thank you again for participating in today's call. We hope you will join us again for our next conference call to discuss our second quarter 2011 results.

Thank you for participating in today's Westlake Chemical Corporation First Quarter Earnings Conference Call. As a reminder, this call will be available for replay beginning two hours after the call has ended and may be accessed until 1.00 p.m. 1.00 p.m. Eastern Standard time on Tuesday, May 10, 2011. The replay can be accessed by calling the following numbers -- domestic callers should dial 1-888-286-8010. International callers may access the replay at 617-801-6888. The access code for both dial-in numbers is 85290921. Thank you, and have a great day.