Operator: Thank you. Your next question comes from the line of Frank Mitch from Fermium. Your line is open.
Frank Mitch: Thank you, Howard, hi congrats. Thanks for all the help and friendship over years and certainly looking forward to your next chapter. This – the third quarter was the third quarter in a row of sequentially higher volumes. I was wondering what your expectations are as we finish the year and into 2024? Is this a trend that we can continue to see?
Jim Fitterling: Yes. Good morning, Frank, I think on volumes in P&SP, I would still be positive around what we see on polyethylene demand in all the regions, I also mentioned telecommunications and the fact that we’ve seen a lot of demand in infrastructure, data centers, et cetera. And so, the wire and cable business is one which is very positive. I would say Industrial Solutions will be limited a bit in fourth quarter, because of the outage in Plaquemine. But the demand – other than that, the demand is there once that plant is back up and running. In PM&C, for Consumer Solutions for coatings, you’re going to see fourth quarter slowdown, which we typically see with architectural coatings. But other than that, the silicones downstream demand has been holding up pretty well.
This is the first quarter that we’ve seen core, underlying volumes in all three segments better year-over-year. I mean, if you take away merchant ethylene sales in the third quarter, because we were – we had the cracker down in St. Charles, the underlying downstream demand for all three segments was better in the third quarter than it was last year. That’s the first time we can say that in several years. So, I’m optimistic with that. We can see the automotive strike resolved, I think we’ll see a tick up in that demand as well. China continues to be good. We saw a good quarter-over-quarter demand in China in P&SP, slightly up in polyurethanes quarter-over-quarter, up in Consumer Solutions. And flat to just slightly down in the other two.
Operator: Thank you. Your next question comes from the line of Mike Sison of Wells Fargo. Your line is open.
Unidentified Analyst: Hi. This is Richard on for Mike. I was just wondering to follow-up on that, if you could give us some color on where your operating rates are across your segments. Where do you see them for the industry, specifically for polyethylene? And how should we think about the potential improvement in EBITDA, if we do get a stronger demand environment next year, and you can ramp those operating rates up to optimal levels? Thank you.
Jim Fitterling: Yes. Just taking a look at – I’ll take a look at it both by segments, but I think you also have to take a look at it by regions. In P&SP, you’re going to see operating rates substantially north of 80%. And obviously, when you think about Canada, the U.S. Gulf Coast, Argentina, our Middle East assets, all cost advantaged positions, even Terneuzen and Tarragona were Pro-Nap spreads of greater than $100 – $120 a tonight. That advantages them versus their competition within Europe. So, I think you’ll see all those operating rates continue to be strong. And we’re not building inventory. We’re obviously able to meet that and move into the export market. Where you see things a little bit softer, obviously, construction-related segments, so in polyurethanes, which has a pretty heavy European footprint.
We see lower operating rates there. We see that as well even on the Gulf Coast. Industrial Solutions, operating rates have been good. Our own issue in Plaquemine is the thing that has that capacity out. And then in Consumer Solutions, on silicones, we tend to see good operating rates in the quarter above 80%. And if you take a look at PM&C, those are slightly down, because of the typical year-end slowdown in demand in coatings. So all in all, I feel good that we’re positioned to be able to ramp up, to meet demand as it comes up. Our cost advantaged regions are continuing to run strong, as you would expect. And we’re watching closely for the demand signals that will pull us into 2024.
Operator: Thank you. Your next question comes from the line of Kevin McCarthy of Vertical Research Partners. Your line is open.
Kevin McCarthy: Yes, good morning. Jim, I’d appreciate your outlook for Dow’s construction-facing businesses heading into 2024. Some of the companies that we cover are pointing to meaningful benefits from infrastructure and reshoring-related investments, basically fiscal stimulus. On the other hand, we’ve got rising rates, and that typically has a chilling effect. So, how do you see those countervailing trends netting out for Dow and affecting the way you’re planning for the future?
Jim Fitterling: Yes. Good morning, Kevin. The things we watch on construction, obviously, on commercial construction just the completion rates on existing builds and the permit work that’s going on new builds. I would say this has been a relatively strong year on commercial because there have been a lot of projects that were in flight. We’re starting to see, obviously, some tick up in applications for pyramids on residential for the noncommercial side of things, which is good. But I think as long as there’s a question out there on rates and will rates continue to rise, that’s going to put a lid on what we’ll see on residential construction. In terms of infrastructure, we are seeing some movement in that space. I would say the biggest rate-limiting step on infrastructure is permitting.
So, the speed at which people can get permits, whether that’s for – it could be for pipelines. It could be for transmission cabling, you name it, but there could be some limitations there, and we keep an eye on that. Overall, I feel good about the fact that we’re moving through the toughest phase of it right now. And if we could see some positive growth come back in the construction markets in China and the U.S., that will be a nice upside for us in ’24.
Operator: Thank you. Your next question comes from the line of Steve Byrne of Bank of America. Your line is open.
Steve Byrne: Yes. Thank you. The inventory chart you have on Slide 6 is intriguing. What I’m curious about is, for each of your businesses, do you have a view as to how much your customers have destocked your products relative to their end market demand. And thus, how much of this sequential decline that you’ve seen 12, 15 months is destocking versus just end market underlying demand weakness. You showed some sequential improvement, in each of your businesses in the third quarter. Is that just destocking coming to an end? Or do you think that this is really some firming demand by your customers?
Jim Fitterling: Good morning, Steve, it’s a good question. Obviously, we get industry data that we published on the chart that you see there. When it comes to downstream when we get into the consumer brands and the retailer space, we have to go on reported data that we clean out of their public reports. But just a few things to keep in mind. We know in the auto sector, for example, that with the OEMs. It’s been pretty much hand to mouth, because there have been other rate-limiting steps like the ability, to get computer chips. We haven’t seen a big restocking with the OEMs. We’ve seen the OEMs continuing to run, because they want to be in a position to ramp up when the strikes get settled. So, I would say, I don’t feel like there’s a lot of restocking going on there.
I would say on the consumer brands and the pharma companies lately seen them, obviously, watching inventory levels. I don’t get any sense of any stocking or big destocking going on there. I think it’s running more to meet demand. And then, the other thing we take a look at is obviously what’s going on with the construction segments, as I just mentioned. But it’s a little bit harder. It’s a little bit fuzzier when we get into the downstream. We don’t have as much published data to rely on. So, we look more at PMI. We look more at retail sales. We look more at, what they comment on in their public filings.
Operator: Thank you. Your next question comes from the line of John McNulty of BMO Capital Markets. Your line is open.
