And that’s been playing out now for seven, eight years, something in that range. And then, when you overlay the environmental capital that is required, if you can get new capacity permitted in a jurisdiction, certainly raises the barriers to entry and the cost recovery and earning a return on the capital is quite a different number from historical. And then finally, I would say, the importance of having regional supply, while this business has always been a regionally-driven business, I think today, with the, call it, derisking or de-coupling or regional supply security, however, you want to sort of phrase the trend, it’s pretty clear that there’s a level of sort of onshoring back to regions and an effort to try to derisk global supply chains.
And so again, this business has always been regionally driven, but I would say the emphasis on that, the importance of that has only gotten stronger. So, I think the structural dynamics here are quite different and quite compelling. And on top of those market factors, we’ve done a number of things, as I commented on in the prepared remarks, to improve the performance of our business, sort of self-help, if you will, where we’ve really driven up over a long period of time through operational excellence, our OEE performance. We always are driving our yields, making investments to drive yield. And then finally, energy recovery is really critical not only to the economics of the business, but also to our sustainability goals, if we can produce cogeneration power.
So, I think all of those self-help measures combine with the industry structure comments that I made to create a quite different-looking business. And now you’re seeing proof points play out over a very long period of time.
Chris Kapsch: That’s helpful. But just any thoughts on the [Birla] (ph) additions? And is that just keeping up with growth in certain regions? Is it helping backfill the displacement of the Russian supplies? Appreciate it. Thanks.
Sean Keohane: Yeah, sure. Sorry, Chris, forgot about that. So our view on that dates back to announcements that might be almost 10 years old and never fully acted on. So, not sure how firm that most recent announcement is when you put it in the history of prior announcements that have been made. That being said, they’re targeted in the ASEAN region. If they do come to fruition, and that is expected to be the highest growth region for tire production, and so that would certainly make sense as on the margin. Tire production is — capacity is moving into ASEAN rather than China. The need for carbon black will certainly grow there. It’s possible that there’s some backfill to the Russian supply that’s anticipated in that announcement as well. But we feel like between the growth in ASEAN and the fact that Europe does need some structural supply to backfill the Russian material, we think it should be in balance. But questions about whether or not it actually happens.
Chris Kapsch: Thank you.
Operator: Thank you. [Operator Instructions] Our next question comes from the line of Joshua Spector with UBS. Your line is now open.
James Cannon: Hey, guys, this is James Cannon for Josh. I just wanted to poke on some of the data we saw in the reinforcement market, specifically with respect to the Americas. I think the data we were tracking pointed to reinforcement or replacement tires being up 10% year-over-year. And some of the weakness that I’m sure came through in the numbers with OE tires being down about 8%. I had a hard time kind of balancing that against the minus 7% you called out in Americas. I was just wondering if you could point to anything you saw in the delta there.
Sean Keohane: Yeah. Well, I would say it’s really driven by demand in the region. Remember, this is Americas both north and south. I think south was probably a little weaker than North America, so that’s impacting here. And we also see year-end inventory adjustments made by customers as well. And we think there was definitely some of that happening. But our expectation here is that we’ll see sequential improvement in our fiscal Q2. So the March quarter here and then a return to year-over-year growth in the second half. So not particularly concerned about it. And our assessment is really driven by those factors.
James Cannon: Okay. Thank you. And then on the PC side, you called out some pretty solid volumes in the quarter. I think over the past couple you’ve had some headwinds on the pricing side. Is that starting to turn around or are you still seeing pressure there?
Sean Keohane: Yeah. So, I’m not sure that last statement was accurate. I think our comments more recently have been that margins in the segment have generally been holding up relatively well. And the biggest challenge in the segment has been volume weakness. But we definitely, on the volume side, did see some nice improvement in the quarter that was driven by specialty carbon, specialty compounds, and fumed metal oxides. So really kind of across the board. So I think that was positive to see after a pretty extended period of destocking and where we were seeing negative year-over-year comps. So, I think that’s a positive signal here. I think the timing of recovery in the segment beyond this sort of the next leg will depend, I think, on how things develop in some of our key end markets, building construction, infrastructure, consumer durable goods, things like this.
And so far, those aren’t showing any signs of inflection. So, I think we’re pleased to see that perhaps a turning point where we’re no longer seeing negative year-over-year comps, but whether or not these end markets pick up and drive the next leg of growth, we’re perhaps a bit cautious here until we get a number of months under our belt here, but definitely pleased to see the stabilization and hopefully the signs of a turn here.
James Cannon: Okay. Thank you.
