US Huntsman expects PU to take Q1 hit from higher benzene costs

11 February 2014 17:42  [Source: ICIS news]

US Huntsman expects PU to take Q1 hit from higher benzene costsHOUSTON (ICIS)--US Huntsman expects its polyurethanes business to take a hit because of rising benzene costs, the company's CEO said on Tuesday.

Benzene is a feedstock for methyl di-p-phenylene isocyanate (MDI), which is used to make polyurethanes (PU), particularly rigid-foam material.

Huntsman makes MDI, and it consumes more than 200m gal/year of benzene, said CEO Peter Huntsman, who made his comments during a Q4 earnings conference call.

In January alone, benzene prices rose 16% versus the average for all of the fourth quarter, he said. In all, benzene costs have risen by 70 cents/gal versus the Q4 average, he said.

To offset higher benzene costs, the company has proposed MDI price increases, Huntsman said. However, there is typically a 60-90 day lag.

As a result, the first quarter for the PU division should be less than Q1 2013 in terms of earnings before interest, tax, depreciation and amortisation (EBITDA), Huntsman said.

Looking ahead, benzene prices should fall by the end of the first quarter, he said.

It is difficult to predict how benzene prices will ultimately play out in the first quarter, said Kimo Esplin, Huntsman's chief financial officer.

However, if benzene does preserve its 70 cent/gal increase and Huntsman's pricing does lag by 60 days, then the company could face a $20m temporary headwind in the first quarter, Esplin said.

By: Al Greenwood
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