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WLK Westlake Chemical

Participants
Jeff Holy VP & Treasurer
Albert Chao President, CEO & Director
Mark Bender EVP & CFO
Aleksey Yefremov KeyBanc Capital Markets
David Begleiter Deutsche Bank
Robert Koort Goldman Sachs Group
Kevin McCarthy Vertical Research Partners
Angel Castillo Morgan Stanley
Michael Sison Wells Fargo Securities
Hassan Ahmed Alembic Global Advisors
Michael Leithead Barclays Bank
Matthew Blair Tudor, Pickering, Holt & Co.
Arun Viswanathan RBC Capital Markets
John Roberts UBS
Call transcript
Operator

Good morning, ladies and gentlemen. Thank you for standing by, and welcome to the Westlake Chemical Corporation First Quarter 2021 Earnings Conference Call. [Operator Instructions].

As a reminder, ladies and gentlemen, this conference is being recorded today, May 4, 2021. I would now like to turn the call over to today's host, Jeff Holy, Westlake's Vice President and Treasurer. Sir, you may begin.

Jeff Holy

Thank you, Daphne. Good morning, everyone, and welcome to the Westlake Chemical Corporation First Quarter 2021 Conference Call. I'm joined today by Albert Chao, our President and CEO; and Steve Bender, our Executive Vice President and Chief Financial Officer; and other members of our management team. The conference call agenda will begin with Albert, who will open with a few comments regarding Westlake's performance and a current perspective on the industry. Steve will then provide a more detailed look at our financial and operating results.

Finally, Albert will add a few concluding comments, and we'll then open the call up to questions.

During this call, we refer to ourselves as Westlake Chemical. Any reference to Westlake Partners is to our master limited partnership, Westlake Chemical Partners LP, and similar references to OpCo refer to our subsidiary, Westlake Chemical OpCo LP, which owns certain olefins facilities. 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 on many factors, including the cyclical nature of the industries in which we compete, availability, cost and volatility of raw materials, energy and utilities; governmental regulatory actions, changes in trade policy and political unrest; global economic conditions, including the impact of the coronavirus; industry operating rates; impacts of extreme weather events; the supply-demand balance for Westlake's products; competitive products and pricing pressures; access to capital markets; technological developments and other risk factors as discussed in our SEC filings. This morning, Westlake issued a press release with details of our first quarter results. This document is available in the Press Release section of our web page at westlake.com.

We have also posted a presentation on our website to review the first quarter. A replay of today's call will be available beginning today, 2 hours following the conclusion of this call. This replay may be accessed by dialing the following numbers: Domestic callers should dial 855-859-2056. International callers may access the replay at 404-537-3406 The access code for both numbers is 4677649. Please note that information reported on this call speaks only as of today, May 4, 2021, and therefore, you're advised that time-sensitive information may no longer be accurate as of the time of any replay. I would finally advise you that today's conference call is being broadcast live through an Internet webcast system that can be accessed on our web page at westlake.com.

Now I would like to turn the call over to Albert Chao. Albert?

Albert Chao

Thank you, Jeff. Good morning, everyone. We appreciate you joining us to discuss our first quarter 2021 results. In this morning's press release, we reported a strong start to the year despite the impact of a severe winter storm with net income for the first quarter of 2021 of $242 million or $1.87 per share.

Our operating income increased 154% in the first quarter of 2021 versus the first quarter of 2020, which was before the impact of the pandemic.

Before Steve goes through the financial results, Let me provide some insight into the quarter.

The first quarter of 2021 saw strong pricing for many of our products driven by robust global demand. 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 30% year-over-year increase in U.S. housing permits and associated housing starts shows the strength in residential construction activity that benefited our downstream building products business. In our Vinyls segment, with tight inventory conditions, strong demand for vinyls and production outages caused by the severe winter storm, we saw PVC resin prices steadily increased in the first quarter. The polyethylene industry also experienced tight inventory conditions due to the strong global packaging demand and domestic production outages caused by the severe winter storm. These conditions drove pricing and integrated margins in our Olefins segment. I want to take this opportunity to thank our employees for their efforts, quickly responding to the disruptions caused by the severe winter storm and fully resuming operations by the end of the first quarter. I would now like to turn our call over to Steve to provide more detail on our financial and operating results for the first quarter.

Mark Bender

Thank you, Albert, and good morning, everyone. I will start with discussing our consolidated financial results and then go into a more detailed review of our Vinyls and Olefins segment results. Westlake continue to benefit from the strong global supply-demand dynamics and a robust return of global economic activity driving demand for most of our products.

For the first quarter of 2021, we reported net income of $242 million or $1.87 per share compared to net income of $145 million for the first quarter 2020, which included a $62 million tax benefit from the CARES Act. These results are inclusive of the previously mentioned severe winter storm impact of approximately $100 million or $0.61 per share in the first quarter. The $97 million first quarter year-over-year increased net income is a result of higher sales prices and integrated margins for polyethylene and PVC and higher earnings resulting from the strong demand in our downstream building products business. Partially offsetting these increases were lost sales and lower production volumes, elevated maintenance cost, higher feedstock and natural gas fuel cost, all related to the severe winter storm as well as lower sales prices for caustic soda.

While we work quickly to get our facilities back online, our estimates for a loss margin from sales and repair expense are approximately $120 million. We incurred approximately $100 million in the first quarter of 2021 results or approximately $0.61 per share, with the remaining $20 million falling into the second quarter. Of this estimated first quarter impact of $100 million, approximately 75% was related to our Vinyls segment, with the balance affecting our Olefins segment.

First quarter 2021 net income increased by $129 million from fourth quarter 2020 net income of $113 million. The increase in net income was largely attributable to higher sales prices for polyethylene and PVC resin. Offsetting these benefits were lower caustic soda prices and higher feedstock and fuel cost.

Our utilization of the FIFO method of accounting resulted in a favorable pretax impact of approximately $55 million or $0.33 per share compared to what earnings would have been reported under the LIFO method. This is only an estimate and has not been audited.

Now let's move on to discuss the performance of our 2 segments, starting with our Vinyls segment. Throughout the first quarter, we experienced robust global demand for PVC anchored by strong global construction activity.

Our downstream building products business continued to benefit from solid residential construction and repair and remodeling demand. PVC strength was driven by broad-based end market demand, including residential construction, automotive and medical equipment.

While the severe winter storm impacted our production in the quarter, the strong demand for PVC and our downstream building products saw higher sales prices, and we benefited from strong integrated margins during the quarter.

For the first quarter of 2021, Vinyls operating income of $200 million increased $127 million from the prior year period, primarily as a result of higher sales prices and margins for PVC resin and higher sales prices and margins in our downstream building products business. This is partially offset by reduced sales volumes and lost production from the severe winter storm, lower sales prices for caustic soda and higher feedstock and fuel cost.

For the first quarter of 2021, Vinyls operating income increased $34 million from fourth quarter of 2020, primarily the result of higher sales for PVC resin and higher volumes in our downstream building products business. In our Olefins business, robust global demand for packaging and other consumer products expanded our integrated margins in polyethylene.

Our first quarter 2021 operating income of $180 million increased $118 million from the first quarter 2020, driven by strong pricing and improved demand, offset by lower sales volumes resulting from the severe winter storm.

For the first quarter 2021, Olefins operating income increased $158 million from fourth quarter of 2020, primarily due to higher sales prices and margins as well as increased sales volumes, partially offset by higher feedstock and fuel cost.

Next, let's turn our attention to the balance sheet and statement of cash flows. We generated $265 million in cash flows from operations in the first quarter 2021, resulting in total cash and cash equivalents of $1.4 billion.

First quarter 2021 capital expenditures were $141 million. We maintain a long-dated debt maturity profile with a weighted average debt maturity of 14 years, anchoring our investment-grade balance sheet.

Now to address some of your modeling questions.

We expect our effective tax rate for the full year of 2021 to be approximately 23% and a cash tax rate of approximately 19%.

As we stated in our last call, we forecast our capital expenditures for the year to be between $700 million and $800 million.

We are planning for a turnaround of our Petro II ethylene unit to begin in September of this year. This turnaround and associated outage is expected to last approximately 60 days. With that, I'll now turn the call back over to Albert to make some closing comments. Albert?

Albert Chao

Thank you, Steve.

As we look ahead, we see continuing strength in global demand in polyethylene, PVC and downstream building products driven by the solid market in residential construction, packaging, automotive and health care.

Our high-level integration extends through the value chain from natural gas liquids and other feedstocks through to consumer building products.

Our chemical operations sit on the lower end of the global cost curve, which enable us to drive long-term value throughout the business and investment cycles while meeting the needs of our end-use customers with the downstream building products business, bringing additional value. In our Vinyls segment, we see continuing strength in the PVC and downstream building products markets, driven by strong construction and other durable goods demand. In our Olefins business, end-use demand remains strong as the essential everyday products such as consumer packaging and health care are driving polyethylene demand.

With the continued emphasis on corporate stewardship, we remain vigilant with our focus in developing products and solutions for a more sustainable future while protecting and investing in our people.

As an example of our commitment to sustainability, we have introduced green caustic soda, a certified climate-friendly caustic soda, utilizing renewable energy. This product is available under the brand name GreenVin, which has a reduced CO2 impact of more than 30% compared to conventional caustic soda. We look forward to further discussing these products with you as more developments are made and furthering our commitment to transparency through our future ESG reporting. These initiatives reflect our dedication to being a dominantly and socially responsible corporate citizen. Westlake remains focused on our core tenets, namely, to protect the health and safety of our employees, deliver on our commitments to our customers, and strengthen the company in all aspects. Anchored by these values, we are confident that Westlake is well positioned to serve the growing worldwide needs of our customers while maintaining financial discipline, which, combined with the strong fundamentals of our business, enable us to deliver long-term value to our shareholders. Thank you very much for listening to our first quarter earnings call. I will now turn the call back over to Jeff.

Jeff Holy

Thank you, Albert.

Before we begin taking questions, I would like to remind you that a replay of this teleconference will be available 2 hours after the call has ended. We'll provide that number again at the end of the call. Daphne, we'll now take questions.

Operator

[Operator Instructions].

Your first question comes from the line of Arun Viswanathan with RBC Capital Markets.

Jeff Holy

Good morning, Arun. Are you there? Arun, are you on the line?

Operator

Your next question comes from the line of Alex Yefremov with KeyBanc.

Aleksey Yefremov

Your Olefins volumes were down 9.4% year-over-year in the first quarter. Do you think you could get to flat or up year-over-year volumes in the remainder of the year or maybe as soon as second quarter?

Mark Bender

Certainly, as a result, Alex, of the storms that we saw, we certainly declared force majeure on many of our products.

And so with that impact on production and impact on sales, I do expect that we'll be able to resume more normal operations, having brought units back on before the end of the first quarter as we entered the second quarter and benefit from the very strong demands we're seeing in both our Olefins and Vinyls segment.

Aleksey Yefremov

And as a follow-up on PVC, the prices have been rising pretty steadily in the last few months. How do you think about sustainability? Do you see their prices overshooting and then coming back some in the next few months? Or do you see a plateau?

Albert Chao

Yes. We see that PVC price remain to be very strong. And actually, the export price is higher than our domestic sales price.

So we believe that especially well in the second and third quarter, which are the strong quarters for construction, demand is very strong.

And so we believe that price momentum will still be there.

Operator

Next question comes from the line of David Begleiter with Deutsche Bank.

David Begleiter

Albert, if you can talk about polyethylene pricing, what you may realize in April and your thoughts on the May pricing fees that's currently out there.

Albert Chao

Certainly, I think all the trade journals are reporting that $0.07 increase in April is effective, and people are looking at potentially another $0.03 price increase in May. Time will tell.

So -- but the demand for polyethylene is still very strong. Inventories among producers and customers are still very low. And I think the export price are still higher in certain instances than the domestic large customers.

David Begleiter

Very good. And Steve, can you just talk about your CapEx this year? What are the growth projects you're looking at for this year and maybe even for next year?

Mark Bender

So David, the CapEx this year is -- the guidance is $700 million to $800 million.

And so a big portion of that is really kind of ongoing activities related to maintenance and some expansion opportunities, nothing that we've announced publicly. But we'll continue to look at some of our Gulf Coast-based vinyl opportunities and see if we can expand some of those facilities along the Gulf Coast.

Of course, we have major -- a major turnaround, as I mentioned in my prepared remarks, for one of the ethylene units starting in September.

So that'll also be a use of cash over the course of the year.

Operator

Your next question comes from the line of Bob Koort with Goldman Sachs.

Robert Koort

Looking at the balance sheet, and obviously, you're in a real nice spot for both your main businesses. But I would guess maybe valuations in the space or -- well, don't know. I guess I'm asking, how do you feel about inorganic opportunity in this environment where you've got quite a bit of firepower to use?

Mark Bender

So Bob, we certainly have always had a very active dialogue with firms that have opportunities in the space, whether they're divisions or individual plants or businesses.

And so we always look at kind of long-term value propositions that come forth.

And so whether it's times where there's attractive pricing or more frothy pricing, we tend to take a more pragmatic longer-term view and look at a cycle average in terms of the value proposition. And certainly, our focus has been that way and continues to be that way.

So we'll continue to look for opportunities to grow the business, both organically through expansion, but also through acquisition and make a kind of a thoughtful look over a cycle of average valuation to make sure that it's got the return potential that we think that it should.

Robert Koort

And Albert, you mentioned the green caustic soda. I'm curious, is that an effort to credential-ize your own ESG ambitions? Or is it something where you can charge a higher price for that product?

Albert Chao

I would like to do both, of course.

Operator

Your next question comes from the line of Kevin McCarthy with Vertical Research.

Kevin McCarthy

Would you comment on the trends you're seeing in the downstream building products business? And specifically, are you able to increase prices and margins in that business relative to the strength in PVC resin?

Albert Chao

So Kevin, it has been, as we noted, a strong demand in building materials.

And so certainly, in the position that we hold, a large position in exterior products such as siding, trim, pipe fittings, and PVC compounds.

And so we've seen strength across that space. Certainly, as we see increases in resin, we attempt to pass those through downstream so that we can continue to see growth in value.

And so over the course of this quarter, we have seen an increase in value proposition as we pass that through.

Kevin McCarthy

Okay. And then secondly, Albert, you mentioned the strength of export prices as it relates to the PVC market. Can you talk a little bit about how you see international trade dynamics developing moving forward? We sometimes look at India as an important market. And sadly, India's, I think, dislocated right now due to the severity of the COVID situation.

So how do you see export pricing evolving and also export volumes as the U.S. industry rates continue to recover from Uri?

Albert Chao

Certainly, U.S., I think, is the largest exporter of PVC around the world because of our strength in feedstock availability and competitive big store in ethane, in power, produce chlor-alkali and a big sustained caustic market. And as you may know, there's very little new capacity being added in the last 2 years and very little capacity being added -- announced around the world for new PVC capacity.

So the rest of the world are relying on U.S. to provide export PVC to their -- to meet their demand. And as you said, India is a big example.

I think they are one of the largest importing country of PVC in the world. And the demand continues to grow, and many governments are stimulating construction, provide affordable housing to its people, and PVC is one of the best products in exterior and interior of houses.

So we expect demand to continue to grow. And with the low capacity added around the world, I think for the long term, the business, the vinyl and construction business should be quite good going forward.

Operator

Up next is Angel Castillo with Morgan Stanley.

Angel Castillo

Just wanted to expand a little bit more on, Albert, I think you talked about tight inventory conditions in both PE and PVC. I was wondering if you could talk about where do you kind of see those problems versus history? And how long do you think that will take to kind of normalize through the year?

Albert Chao

Sure. Well, as Steve -- in our discussion earlier is that I think there's a huge ramp-up in prices, not only because of the demand, but also because of the severe winter storm this year and last year with hurricanes and also with various outages.

And so the market is very tight. Manufacturing auto plants are running as much as they can to meet the customer demand globally and the U.S. industry has curtailed export to help the domestic -- to meet domestic demand. But if you look at the consultants of journals, they are projecting an after -- multiple double-digit increases of prices last year and this year.

I think June of last year, almost every month, there's a price increase, and there must be a slowdown in the price increase or decrease. It could happen.

I think the 60-odd cents a pound in the U.S. And as we speak, has come down the 40s.

So that will help reduce some of the pressures for polymer manufacturers. But I think the fundamental demand, as said earlier, the second and third quarter, historically are the 2 strongest quarters of the year for volume and for pricing. And we foresee, this year will be similar from this sense.

Angel Castillo

That's very helpful. And Steve, I was hoping you could, I guess, give us a little bit more color on the corporate line. That look to be a little bit larger this quarter.

So curious if there's -- if you could break that up for us?

Mark Bender

I'm sorry, you broke up as you were asking your question. Can you repeat that again?

Angel Castillo

Yes.

Sorry about that.

On the corporate line, I was hoping you could give us a little bit more detail.

I think it was $30 million this quarter, so it looked a little bit larger than previous quarters.

So curious what drove that?

Mark Bender

Yes. A lot of that is really just kind of intercompany eliminations that you see that go on as a result of exchanging ethylene between the 2 segments.

Operator

Your next question comes from the line of Mike Sison with Wells Fargo.

Michael Sison

Your EBITDA margins in Q1 for Olefin's 40%, pretty impressive. When I look back to history, '14 to '17, were similar at those high levels.

So just curious if you think this is a level that can be sustained, obviously, not every quarter, but on average for the year and maybe beyond 2021. And could this be a good string of good profitability for that segment for the next couple of years?

Albert Chao

Yes. Actually, you know that we are a net buyer of, I think, we buy over 1 billion pounds of ethylene a year.

So actually, low ethylene prices is better for us, so long the product prices is separate from the feedstock. And hence, we reported our earnings was impacted by high feedstock and fuel prices last quarter. 2018 was the high of -- historical high EBITDA for Westlake. And at that time, oil prices were still, I think, about in the $60s a barrel. And today, we're talking about a similar brand and WTI in the $60 range.

So I think that's a reasonable price globally for crude oil. And then if demand keeps on improving with the vaccination process improving around the world and with all the stimulus that only the U.S. and other countries are bumping into the system, I think demand for products will be quite good. And hence, the margin should be pretty good. But we don't expect the margin to -- for ethylene or polyethylene to stay as high like in the 2017 or '16 range.

Michael Sison

Understood. And then for vinyls though, when you take a look at the consultants outlook, they do expect ECU margins to stay pretty high through this year and next year. Should you see a record year in -- obviously, you're going to see a record year in '21. But how do you think that holds up beyond '21 when you look at the consultants' forecast for '22 and beyond?

Mark Bender

Well, Mike, when you think about the outlook, I think the outlook is reflective of what we've seen most recently in terms of demand growth in construction activities worldwide and the pull on chlorine. Therefore, going into PVC, you're seeing signs of a more even start in manufacturing. But of course, we're all watchful at countries like India and others that are still struggling to get on their feet from a manufacturing perspective.

So as we think about the outlook for our Vinyls overall segment, we remain constructive in terms of the demand for worldwide residential and repair and remodeling activities pulling on PVC. But also, I'm cognizant that we really are beginning to see some improvement in caustic, really, from that manufacturing pull, if you will.

So we have -- do have a constructive outlook for the rest of '21.

Albert Chao

I'd just like to add also that caustic soda prices have been quite weak and that's because of the global recession from the pandemic. And as the global economy recovers, industrial production recovers, we expect the caustic demand will increase and pricing should improve as well.

Operator

Your next question comes from the line of Hassan Ahmed with Alembic Global.

Hassan Ahmed

First question around polyethylene as it relates to the back half of this year.

As you mentioned, sort of, in one of your answers to a question earlier that you have industry consultants looking for some moderation or maybe even sort of weakening in pricing in the back half of this year. I mean, it just seems that there are a bunch of crosscurrents. And I'd love to hear how you're thinking about those cross currents. Because you have a pretty heavy turnaround season in Q2 and Q3.

You have an inventory rebuild that's required because of Uri, right? You have orders that need to be backfilled because of a variety of force majeures, right? And above and beyond all of that, it seems demand continues to remain very strong.

So my question is, pricing will do what pricing will do. But what are your perceptions about Q3 and Q4 effective utilization rates for polyethylene?

Albert Chao

That's a good question. But you're absolutely right. Usually, again, even for polyethylene, the second and third quarter, usually, are the stronger quarter of the year. And also, those time also is the time for turnaround. And you have -- and as we talk about, we have our ethylene plant turning around in September as well this year.

So you have that. And then you have the global weather, Europe and rest of the world recover from the pandemic or they go into a third or fourth wave, and all these have impacts on global supply-demand. But as we speak, as I said earlier, inventory is very low among producers. We're trying to build back inventory. Among consumers, inventory is very low also.

So you have that dynamic. And then you have the high export price and you have even the freight shipping costs that some of the people talk about whether people can export products to the U.S. and for the future. And the freight container shipping cost is very high now. It went -- was very high. It went down and came back again.

So all these different crosscurrent that you said will be affecting prices. In the end, it's really supply demand and export price. If the actual price starts coming down, then you have more chance of slowing down in prices in the U.S.. And people talk about from the June of last year until now, there's almost $0.40 to $0.50 a pound price increase. And you would think that sometime and point, there will be a reduction of those prices somewhat. But I think everybody expects that even after some price reduction, it's still much higher than average of 2020 or even 2019.

So the margins are expected to be much to be much to improved compared with last 2 years.

Hassan Ahmed

Very helpful. Very helpful, Albert. And as a follow-up on chloro-vinyls, again, a bit of a unique product, I guess, these days where there's pretty much hardly any supply on the horizon, right? And like you said, it seems we're in the early innings of an up cycle. Demand is looking pretty good. And no one seems to be talking about, with this as a backdrop, the sort of discussed sort of infrastructure, there's almost $2 trillion. In an undersupplied market where demand is good, supply/demand is already tight. How do you see -- whatever form this infrastructure they'll take, how do you see that impacting global utilization rates, call it, beyond '21?

Albert Chao

Yes. That's a very good question.

I think so long the U.S. global economic conditions improve, and I think people expect that beyond '21, '22, '23, the global GDP growth will go back to the normal trend line. And if we -- with the lack of new capacity being added, I think it should be -- bode well for the existing producers, but you don't know. And with the global warming, unfortunately, last year, we had a hurricane, we had the freeze. What the natural disasters will impact production, we don't know. Hopefully, not very much. But the forecast for this year, at least, the Gulf Coast hurricane index has -- expect to be higher than normal than average. Hopefully, with less damage than last year's.

Operator

Up next is Mike Leithead with Barclays.

Michael Leithead

First question, Albert, I think in your comments in the earnings release, one focus area you mentioned was furthering your chain integration. And other than being short a bit of ethylene, it seems like Westlake is already fairly integrated.

So curious how you're thinking about furthering that integration, whether it's either adding more ethylene or furthering the downstream pole of building products.

If you could just talk about how you're thinking about your current asset footprint and where there might be gaps you're looking to fill over time.

Albert Chao

Certainly. Yes, you're absolutely right that we are -- as mentioned earlier, we are one of the largest buyers of ethylene in the U.S., over 1 billion pounds. And as our demand for PVC grows, our ethylene demand further increase.

So integration on that area will be helpful. And downstream, we have a pretty sizable downstream building products based primarily, not all of it, primarily on PVC. And we explained as the demand for building products is really strong, and we are finally above the 50-year average for new home construction in the U.S. for the first few months of this year.

So we expect that trend to continue.

And so the building products demand will increase. And hence, we are looking, as Steve mentioned, we are adding capacities.

We haven't announced any big capacity expansions, but small price increases to meet the needs, growing needs of our customers.

Michael Leithead

Great. That's helpful. And then maybe for my second question, just a follow-on to, I think, Kevin's recent question about the export market.

So for PE and for PVC, how should we think about Westlake's domestic versus export mix today, just given some of the market disruptions?

Albert Chao

Totally. In PVC, because of our integration of downstream, we turn to export less than the U.S. domestic. Historically, over the last few -- the last 10 years, after the housing meltdown in 2008, U.S. being exporting PVC around 30%, 35% a year. And that rate has come down a lot last quarter because the lack of supply. And the polyethylene industry, with all the expansions we had the last 5, 6 years, I think exporting close to 40% of its production. And Westlake, because of our emphasis on low density polyethylene, our export proportion is much lower than industries. And again, because of the lack of supply in the last few quarters, our export portion has come down a lot.

Operator

Your next question comes from the line of Matthew Blair with Tudor, Pickering and Holt.

Matthew Blair

I was hoping you could share more details on this green caustic soda initiative. How exactly are you reducing the CO2? What share of your caustic production could be green? Do these CO2 benefits flow into other products like PVC? And then should we think about this as like higher upfront costs? Or would this be higher, like, OpEx on your end?

Albert Chao

Yes, they are buying renewable power.

As you know, power in Europe, the combinations of fossil fuel, including coal and natural gas and everything else. And by renewing power, the CO2 content is much lower, and hence, the 30% reduction in CO2 and the caustic product produced. And takes quite a while to get certification for that process in Europe. And we hope to introduce more green-friendly environment-friendly products as we go throughout the year. And we are trying to provide lower CO2 products to our customers and to reduce our own manufacturing emissions of CO2 in every way we can.

Matthew Blair

Terrific. And What kind of ECU operates are you at currently? And does the -- I guess, if you're below max operates, does the $70 per ton caustic price increase in April incentivize you to run harder?

Albert Chao

Yes.

We are running plants because of the freeze. It's impacted a lot.

So we are running our plants to meet the demand of our customers. And unfortunately, because of the freeze, we're still under allocation. And hopefully, we're able to lift the allocation very soon in the near future. And many of our industry competitors are also having freeze and other problems.

So I think most companies are running as hard they can to meet their customers' needs.

Operator

Your next question comes from the line of Arun Viswanathan with RBC Capital Markets.

Arun Viswanathan

Sorry about that earlier. I hope you're all well. Congrats on the strong start here.

So I guess a couple of things.

So first off, the chlorine side seems very tight. We're hearing issues about availability of chlorine, especially through the summer. I know there's a water treatment season coming up.

So are you at all concerned about servicing demand on chlorine? And then secondarily, caustic, we are seeing some price uplift now. How long do you expect that to continue, I guess? And what's your outlook for both sides of the ECU molecule?

Albert Chao

Yes.

You're right that the whole bundles chain is -- demand is strong. because, also, the freeze, as I said earlier, many plants in the U.S. have been impacted. And most of our chlor-alkali plants in the industry along the Gulf Coast, so we'll have our impact on that. And because of the strong demand for PVC, hence, the chlorine is very tight. And there's several price announcement being made.

On the caustic side, as the economy recovers, cost is also improving. And not only the U.S., international caustic prices in Asia and Europe are improving as well because of the strong demand and recovery of the industrial production around the world.

So we have raised our prices -- announced price increases, and we're getting a large share of the price increase we announced.

Arun Viswanathan

Great. And then I guess, also on PVC, ethylene, I guess, did kind of see a little bit of a spike because of the storm. Prices may be receding here. But obviously, demand is very strong.

So do you expect PVC price increases that you gained earlier to roll back here? Or do you think there's potential that you continue to hold on to a lot of that?

Albert Chao

Yes.

As we have discussed earlier, we have a series of price increases since June of last year as the economy recovered from the pandemic. And demand is strong. Inventory is very low under allocation, and we are -- export prices is higher than domestic price.

So those dynamics still exist today. And there's a further announcement of price increases for May. And we are still in the early part of May.

And so the demand is very strong and the pricing, it'll be what it is going forward, supply/demand and export price, export demand as well.

Operator

[Operator Instructions]. Up next is John Roberts with UBS.

John Roberts

Did you resell any electricity or ethane or anything else to help offset the storm impact?

Mark Bender

So John, yes, we did. But the relative impact during that period was relatively small.

John Roberts

Okay. And then, Albert, you mentioned the turnaround coming up in September.

You've had a lot of downtime over the past 12 months. Were you able to accelerate any maintenance or anything into those unplanned downtimes that, maybe on average over the next couple of years, will have the low average maintenance expense and turnaround impact?

Albert Chao

Yes. We did what we could.

As you know, the turnaround, you have to have all the parts, the labor and the jigs and everything else ready for a major turnaround.

So we did what we could during the time period. But I think our turnaround schedule still go through. And hopefully, as you said, we can reduce a few days here and there but not material.

Mark Bender

Yes, John, just to add to my comments, we operate in Louisiana, which is a regulated market.

And so there are some limitations in terms of our ability to have some upside on any resale into the market.

Operator

At this time, The Q&A session has now ended. Are there any closing remarks?

Jeff Holy

Thank you again for participating in today's call. We hope you'll join us again for our next conference call to discuss our second quarter 2021 results.

Operator

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 2 hours after the call has ended and may be accessed until 11:59 p.m. Eastern Time on Tuesday, May 11, 2021. The replay can be accessed by calling the following numbers: Domestic callers should dial 855-859-2056. International callers may access the replay at 404-537-3406. The access code for both numbers is 4677649.