Huntsman (NYSE:HUN) held its first-quarter earnings conference call on Friday. Below is the complete transcript from the call.
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Summary
Huntsman reported stronger than expected demand and successful price increases to offset rising costs, particularly influenced by seasonality and supply chain disruptions.
The company plans to continue managing costs and expanding margins while focusing on stable and long-term demand trends to normalize margins.
Operational performance in the first quarter was strong, with high capacity utilization rates, particularly in the MDI and polyurethanes segments.
Management expressed cautious optimism about future demand sustainability, noting potential challenges from inflationary pressures and geopolitical uncertainties.
The company is seeing positive trends in advanced materials, driven by aerospace and power sectors, and expects continued traction in these areas.
Full Transcript
OPERATOR
Greetings. Welcome to Huntsman's first quarter 2026 earnings call. This time all participants are in listen only mode. A question and answer session will follow today's formal presentation. If anyone should require operator assistance during the conference, please press Star zero from your telephone keypad. Please note this conference is being recorded at this time. I'll turn the conference over to Ivan Marcuse, Vice President of Investor Relations and Corporate Development. Thank you. You may now begin.
Ivan Marcuse (Vice President of Investor Relations and Corporate Development)
Thanks, Rob and good morning everyone. Welcome to Huntsman's first quarter 2026 earnings call. Joining us on the call today are Peter Huntsman, Chairman, CEO and President, and Phil Lister, Executive Vice President and CFO. Yesterday, April 30, 2026, we released our earnings for the first quarter 2026 via press release and posted to our website, huntsman.com. we also posted a set of slides and detailed commentary discussing the first quarter 2026 on our website. Peter Huntsman will provide some opening comments shortly and we will then move to the question and answer session for the remainder of the call. During this call, let me remind you that we may make statements about our projections or expectations for the future. All such statements are forward looking statements and while they reflect our current expectations, they involve risks and uncertainties and are not guarantees of future performance. You should review our filings with the SEC for more information regarding the factors that could cause actual results to differ materially from these projections or expectations. We do not plan on publicly updating or revising any forward looking statements during the quarter. We will also refer to non GAAP financial measures such as adjusted ebitda, adjusted net income or loss and free cash flow. You can find reconciliations to the most directly comparable GAAP financial measure in our earnings release which has been posted to our [email protected]. I'll now turn the call over to Peter Huntsman, our Chairman and President.
Peter Huntsman (Chairman, CEO and President)
Ivan thank you very much. Thank you all for taking the time to join us this morning. Before I begin my remarks about our company and recent events, I want to simply say that I hope there is a quick and peaceful resolution to the ongoing conflict in the Middle east. Over the past 40 years, I've had the opportunity to visit every country bordering the Persian Gulf with the exception of Iraq. I have always been treated warmly and fairly by the people I've encountered. I hope that my comments do not come across as being callous in any way to the suffering and fear emanating from this region. As I address the economic impact of these events to our bottom line and industry. From the first hours of this conflict, our number one commercial priority has been to increase prices enough to offset rising costs. I believe we've been successful in doing this. This will require continued communications with our customers and suppliers and also the discipline to make sure that we are not a shock absorber between raw material costs and finished product pricing. Our next priority is operating our plants in a reliable manner to make sure that we have the product to meet our demand. Our operations during the first quarter and going into the second quarter have been excellent. From a sales perspective, we're seeing stronger than expected demand going well into the second quarter. I would say that this is being brought about by three factors. Number one seasonality as we move into the second quarter and the building season resumes across North America, Europe and Asia. Number two customers who are buying ahead of the expected price increases that are being announced and number three disruptions that have been seen in certain trade flows that have impacted supply. An example of this would be some of our Malaysian customers in Europe who have become overly dependent on Chinese supplied maleic have seen a disruption in supply as raw materials and shipping costs have increased from that region. These three factors are also happening at a time when most inventory levels are very low across many supply chains. These improved order patterns are being seen as we enter into the second quarter in most of our regions and across many of our products. The obvious countervailing point to all of this is how long does it continue? I can't see order patterns that go through the month of June, but the guidance that we have shared from each division in Q2 reflect what we've seen to date today. That visibility is less clear as we look further into the quarter. I struggle to see how inflationary pressures, particularly in areas reliant on imported energy like much of Asia and Europe, will not see an inevitable downward pressure later in the year as consumer spending gradually shifts towards higher prices. To what degree this occurs is yet to be seen. I am heartened to see the housing starts and durable good orders in the United States better than expected for the month of March. But I'm also keeping an eye on residential permits. A step that precedes Construction starts down 11% for the month of March. There will also be some longer term dislocation of traditional economics. If you were a producer that enjoyed discounted raw materials coming out of Venezuela, Iran and Russia a few months ago, it is likely that you're not seeing such discounts today, and I highly doubt you'll see them in the foreseeable future. Many customers are looking for closer and more secure sources of supply. Supply chains are shifting and being reassessed. I believe there will be some lasting impact for certain regions and products that may not seem too apparent today. It is simply too early to know how lasting some of these will be. In short, we are aggressively raising our prices to both cover our cost of our raw materials while also expanding margins from the trough economics that we've been experiencing for the past three years. We will continue to manage our costs and deliver these objectives on budget. We will be focused on volumes and make sure that spot buying also comes with longer term volumes and obligations. I'm glad to see the trends that we're seeing in the second quarter, but we still have a ways to go to get to our normalized margin levels. This will require stable and longer term demand trends to continue. I feel that we are in a strong position today to capitalize on such changes going forward. Thank you operator with that will open the time up for Q and A.
OPERATOR
Thank you. We'll now be conducting a question and answer session. We ask you please limit yourself to one question and one follow up. If you'd like to ask a question, please press Star one on your telephone keypad and a confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants who are using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Thank you. And our first question is from the line of Patrick Cunningham with Citi. Please proceed with your questions.
Patrick Cunningham (Equity Analyst)
Hi, good morning. In the release you talked about the potential for a more durable return to mid cycle profitability. This likely depends on both supply and demand side at this point, but can you give us the latest view on what this crisis may do in terms of supply side rationalization for MDI and polyurethanes?
Peter Huntsman (Chairman, CEO and President)
How do you see this playing out in terms of structural energy cost, pressure, feedstock availability or potential closures? At this point I don't see a great deal of structural change. As we look at mdi, I do see pressures continuing in Europe. If you're a European producer now having to put up with natural gas that's priced somewhere in the mid teens versus where we are today. I noticed in the Houston ship channel price this morning was under $2 per MMBtu. These are real material gaps and shifts. I can't help but think that there's going to be continued pressure on petrochemical producers across the board and in MDI across Europe. But having said that, I also think that there are probably some structural issues that may make Chinese exports in certain products. I won't get into exactly which products those are, but I think that they're varied across the board. If you're relying on coal as a raw material in China, you're probably doing quite well. If you're integrated into a world scale refinery and integrated system in China, you're probably doing quite well. If you're part of what they call the teapot refineries of refineries integrated into export bound chemical facilities, you may be under some cost pressures as you see some of the discounted crude products. So it's not just what we see from a competitive point of view. It's also what we see from the raw material that many of our customers and many of our competitors and the industry in general will be facing. And I think those are some of the longer term issues that we'll be dealing with even after the Strait of Hormuz hopefully opens soon here. Very helpful. And could you talk about some of the sustainability of the positive trends you're seeing in advanced materials, particularly interested in line of sight into aerospace and power order books and what that potentially means for segment profitability in 2026? I think and I don't want to get too much into our numbers as to where we planned and where we saw a lot of upside since the beginning of the war, but my CFO will start kicking me on the side here. But what we the performance we're seeing in advanced materials is largely what we expected a quarter ago. We may have seen a little bit of impetus there in pricing, but remember that business is not reliant on any one major raw material as you would see for instance in benzene going into MDI or some of the raw materials caustic and chlorine prices and so forth into some of our performance products materials. And so as you look at our advanced material section, that continues as we see as we've said now the last couple of quarters, we see the recovery continue with aerospace power, these better than GDP growth businesses. That business is just going to continue to get traction and I'm not sure the results this quarter. In the second quarter where we finished the first quarter, I'm not sure that would be materially different from where we'd be without the Gulf conflict.
OPERATOR
Our next questions are from the line of Kevin McCarthy with vertical research Partners. Please proceed with your questions.
Kevin McCarthy (Equity Analyst)
Thank you and good morning. Peter, can you speak to operating rates in MDI both for Huntsman and also what you're observing at the Industry level and related to that, you know, how are things changing post war versus pre war?
Peter Huntsman (Chairman, CEO and President)
I think that as we look at the industry in general, you're probably looking at at the low to mid-80s. And I think now from where we are, we would be in the high 80s. We're sold out completely in our Chinese operation, our US operation for the most part is sold out. Europe, as we said when we announced our first quarter earnings before the Middle east conflict, we're starting to see some green shoots there. We continue to see some opportunities in Europe and I would say that we're operating at pretty good levels across the board. There have been a number of outages and I would say short term and also planned disruptions in the industry. Not to be too unexpected. When you go have an industry that's been operating kind of at a lower probably 70, 80% for the last couple of years and now all of a sudden you see an increase in demand and pull through, you typically have operating issues. So I can't speak about the competition, but I can just say in our facilities, all three of our MDI facilities, our associates there have done a fantastic job in their operations. Thank you for that. And then secondly, I imagine your PO MTBE joint venture in China has become profitable. Maybe you can talk about what you might expect for equity earnings trajectory moving forward. Yeah, certainly in the past it's been a little bit of a drag on us. I think today we're probably in the low to mid single digit millions of dollars of impact on that business. So certainly doing better than it has been in the past. And I would hope that MTV that C factors should improve as you get more into the driving season. But there's just so much volatility right now in the whole refining chain. And what's going on with PO economics that probably be one of the murkier businesses that we have as far as looking into the future. Remember Kevin, the price of gasoline is managed differently in China than elsewhere in the world. So MTBE margins aren't what you would expect in China. Where the Chinese joint venture is making money today is on propylene oxide. And the margins that we're seeing there are over and above propylene.
OPERATOR
The next question has come from the line of Frank Mitch with Fermium Research. Please proceed with your question. That's interesting.
Frank Mitch (Equity Analyst)
So PO is doing better than MTBE in China. Thanks for that. Thanks for that enlightenment. Peter, I was wondering if you could speak to the polyurethane and MDI pricing initiatives that are underway. How that relates to underlying benzene costs. And what sort of successes are you seeing or not on that front? Well, I'd say that we're seeing a. We're certainly staying ahead of the benzene curve. Never as far ahead as I would like to see it. I'd like to see it multiple times better than what we're seeing. But I highly compliment our sales and marketing groups on their aggressiveness in making sure that we're covering our raw material costs and staying ahead of that. So, yes, both from a volumetric basis, we'll see a positive influence on it. And also margin expansion above and beyond raw materials. We should see expansion on that. All right, terrific. All right, so margin expansion. So if I think about, you know, the price mix for Huntsman, overall, it's been negative for several quarters here. Given these initiatives that you have underway, is the expectation for the full company to show, to show positive price mix
Peter Huntsman (Chairman, CEO and President)
here in two Q and hopefully beyond. Certainly in Q2, hopefully beyond. I would reinforce that as well. I mean, I, as I look at some of the pricing trends that we're seeing going to the second quarter, just to give you an idea, in North America, I'm talking about all products, all prices, so I'm not talking about any one division. But we have not seen a quarter on quarter growth in pricing trends. Unfortunately, you're right in what you said earlier. We haven't seen that since 2022. So the trends that we're seeing right now and the jump that we're seeing on a quarterly basis right now in North America, we haven't seen that in years. Now, Europe isn't too dissimilar. We've seen a few quarters here and there where we've seen some up pricing, but that's more to do because of the strength of our advanced materials business in Europe, not because of the macro trends there. So, yeah, I like where we're going into the second quarter and my only question is how sustainable is it? But it's look, it's a lot better than where we were a quarter ago.
OPERATOR
Our next questions come from the line of Hassan Ahmed with Alembic Global. Please proceed with your questions.
Hassan Ahmed (Equity Analyst)
Morning, Peter. Peter, I just wanted to revisit some of the earlier commentary around MDI supply, both as it pertains to the product as well as the feedstock. You know, I mean, there's at least one facility in Saudi Arabia that seems to be offline. And then obviously, I would imagine there would be sort of broader issues in terms of the availability and pricing of benzene as well. As methanol. So could you comment a bit about sort of, you know, operating rates for mdi, keeping in mind, you know, some of these outages as well as, you know, some of the feedstock availability issues the world may be encountering and you know, how long it may take for some of these bottlenecks, you know, if peace was declared tomorrow, to sort of be ironed out to the system.
Peter Huntsman (Chairman, CEO and President)
Yeah, I think that as we look, you made reference to a, made reference to a Middle east producer that's roughly about 4% of global capacity. So if you kind of think that the industry is operating in the low to mid-80s, that would say that we're kind of pushing the mid to upper 80s at 90% capacity utilization globally. Now, again, that's not across the board. There'll be parts that are better than that and parts that are worse than that, but just globally across the board, when you reach 90% in the MDI industry, given what people have, a stated capacity and the outages that take place on a yearly basis for maintenance and so forth, you're really in an industry that starts to strain at 90 plus percent capacity. So I mean, statistically on paper, you can see where the industry is now moving into the upper 80s in some region of the world. It's going to be again, better and worse. I've not seen or heard of any problems with the procurement of raw materials in MDI around the world. And the pricing of that raw material so far has been pretty much in line with oil. So, you know, that would tell me that there's a pretty decent supply of it that's available. But, you know, longer term, my biggest question on MDI is going to be the sustainability of the demand. Because again, previous to February 28th, I would say that I don't want to say that we were going great guns, but we're starting to see some green shoots in Europe. As we reported earlier, we were moving into the North American housing season and China was stable and in pretty decent shape. So my whole question is really around sustainability of demand as you start looking out in the third and fourth quarter. And like I said, it's just too early to start looking at those order trends.
Hassan Ahmed (Equity Analyst)
Understood. And as a follow up, you mentioned the polyurethane market in Europe, you know, obviously was volumes wise up 4%, which obviously is decent. But you know, in your prepared remarks, you obviously talked about easier compares as well, because last year you obviously had the sort of Rotterdam sort of turnaround. You know, what green shoots are you guys seeing volumes wise in Europe and, and over the last couple of quarters, obviously along EBITDA lines, it seems for the PEU business, EBITDA was negative. Have you guys currently sort of turned that around? Is it actually generating positive EBITDA now?
Peter Huntsman (Chairman, CEO and President)
Yeah. To look at your first area, I would think that CWP composite wood products in Europe is looking pretty good. Technical insulation and that would be your sandwich boards and so forth that are going into data centers, warehouses, prefabricated buildings and so forth. Your ACE business adhesions, coatings, elastomers business is doing. Again, I don't want to paint the details of going through the roof in Europe, but we're seeing some green shoots in these areas. Badly needed by the way. And so yeah, I think that's certainly is moving towards an area where we don't just want to see a positive EBITDA coming from Europe, we want to see positive cash coming out of Europe. And so, yeah, we're at that precipice and seeing things improve. And Hassan, as we sit here today, we would expect Europe to be positive from an EBITDA perspective.
OPERATOR
Next questions are from the line of Michael Sislin with Wells Fargo. Please proceed with your questions. Hey, good morning.
Michael Sislin (Equity Analyst)
When I take a look at your outlook for polyurethanes for 2Q margins look like they're going to improve a little bit, but not a lot. So what do you think needs to happen to get the EBITDA margins for polyurethanes at better levels going forward? And just curious what the pricing for the segment should imply for 2Q year over year?
Peter Huntsman (Chairman, CEO and President)
I think the two things that we need more than anything else are demand and raw material stability. We're projecting in the second quarter that we'll take in well in excess of around $100 million of raw material costs and we expect to offset that and get prices higher than that. But that is a, that's a tremendous amount of raw material costs that we're absorbing in one quarter. And of course, in order to have any sustainability in pricing and pull through in pricing, we've got to see the demand. So I did note in my prepared remarks a cautionary note on inflation and what inflation factors may play in Europe. But there's also, I'd say on one hand there's those inflation factors that give me concern. On the other hand, Europe has been so lethargic for so long, I can't help but think that there is pent up demand, whether it be in housing or remodeling and just industrial demand, defense rebuild and so forth across the Board. So that's going to be for the second half of the year. The single biggest variable in my opinion is going to be demand.
OPERATOR
Got it, thank you. Next questions are from the line of David Begleiter with Deutsche Bank. Please proceed with your question.
David Begleiter (Equity Analyst)
Thank you. Good morning, Peter. Just on performance products, why isn't that business a little bit stronger in Q2 given some of the strength in Malaic?
Peter Huntsman (Chairman, CEO and President)
David, that's an excellent question. And I think as we see the strength of Malaic that certainly is going to be manifest through Q2 going into Q3. A lot of our European customers on Malaic are actually buying that and negotiating purchases of that FOB Florida of our plant in Pensacola, Florida. So picking it up in the US rather than US shipping it over to Europe and taking the time and tying up working capital and so forth. So we'll see the impact of that going forward. But I'd also remind you that we also had one of our facilities in Q1 and also presumably could see some impact in Q2 where we have an ethylene amines facility, joint venture facility, which we believe is one of the lowest cost facilities in Saudi Arabia on the wrong side of the Strait of Hormuz. And so that's going to also be a little bit of a headwind in that business.
David Begleiter (Equity Analyst)
Very good. And do you have an update on your UK aniline plant, given some prior comments. Thank you.
Peter Huntsman (Chairman, CEO and President)
Again, that facility, when those comments were made, we were seeing $2022 gas in Europe and a government that was lethargic at best in concerns with it. And we were seeing import pressures that were, that were countering that. I think since that time imports have lessened a bit. We've seen gas plummet from $20 to $15. I still say that's a pathetically high number for an energy less policy driven government. So I wouldn't say that that facility is. When I look at the economics of it, I continue to be concerned. The people that work there, the reliability of that facility, the ongoing maintenance and operations and so forth. That facility are absolutely a plus. But they're having to battle some really poor energy policies.
OPERATOR
Thank you. The next questions are from the line of Vincent Andrews with Morgan Stanley. Please proceed with your questions.
Vincent Andrews (Equity Analyst)
Thank you. Just want to try to piece together a couple of the comments you made, Peter, as it relates to polyurethanes. And if I'm conflating things, please obviously correct me, but you're talking about how you've been able to get pricing ahead of benzene and we traditionally think of you having about a two month lag of benzene flowing through. And then maybe later in the year we may see some negative demand elasticity from the consumer at the end market working its way back up the supply chain. So do we think about 2Q your spreads being strong because you're ahead of that benzene and then maybe benzene catches up with you in 3Q and then we have to see how much more pricing you can get. And that I guess would be a function of demand. So are we thinking 2q and 3q may be flattish in terms of profitability in polyurethanes or do you think 3Q could actually be up a little bit? Or maybe it would be down a little bit. What's your latest thinking on that? Well, far too early to comment on Q3. Again, I believe Q3 is going to be more demand driven than anything else I do. The trends that I'm seeing today, we are staying ahead of the price on benzene. We also are picking up some volume that we see on a year to year sort of growth basis and we're going to continue to be pushing prices through. Now again, the ability to push those prices through will be predicated on macro demand and so forth. And as I get into the third quarter, and again I don't want to be overly pessimistic about that, I merely say that as right now there's, I feel there's a bit of euphoria in the industry and I love seeing it. I think it's long overdue. I hope it continues into the third and fourth quarter but a lot of that is just too early to tell on demand. Thank you. The next questions are from the line of Matthew Blair with Tudor Pickering Halt. Please receive your questions.
Peter Huntsman (Chairman, CEO and President)
Great, thanks and good morning. Peter, I was hoping you could talk a little bit more about just underlying construction activity. One of your peers mentioned that it has been weakening. You talked about the diversion in March data between starts and permits. Are there Any trends in Q2 on construction activity that you can share? So far I would say that we're not seeing a drop off, but we're also not seeing a lot of improvement. And I think that I would say right now it certainly isn't shaping it to be a bad season for us. It's just not a lot of growth in that. So I'd say there's some stability. But I'm sorry, I probably should be saying it's either going up or it's going down, but it seems to be to be quite stable at the present. Time. That's why I say there's some, there's some decent trends on housing starts that feel pretty good. And I think in second quarter, going into the third quarter, we'll probably see 2, 3% low single digit growth in construction this year. But I'm also concerned when you see a 10% drop in one month in housing residential permits, again, that's the step before the housing start. So again, I don't want to read too much into a single quarter of data because February, both of those numbers were the complete opposite. Permits were up and starts were down. So I think we'll probably see some very gradual growth this year. Sounds good. And then I was also intrigued by your comment that you're seeing some customers that are buying ahead of expected price increases. Is this occurring in some products more than others and if so, which products? And then also on a regional basis, you know, would this be something that's more prevalent in Europe relative to the Americas? Thank you. Yeah, I would say that as we look at it, you're probably talking about two, three days on mdi. That would be the area where we probably see the most pre buying. So I'm going to just say that there's, I wouldn't say that there's a big wave of capacity that is being pulled through. I think that we're managing that very carefully as well. So when customers coming in and increasing their orders from where they were just a few weeks ago, we're discouraging that and making sure that we kind of keep an equilibrium on orders and so forth. And in other areas where people are coming in that haven't bought from us for some time on a spot basis, you know, we're seeing if we can't extend contracts from what you need over the next month or two to what you need over the next year or so, some of our performance products, customers and so forth, that may have shifted supplies to China out from Europe and the US for example. So yeah, I think on both of these demand trends we need to make sure on those that are, there's a difference between those that are spot buying, panic buying and those are just trying to buy ahead of a price increase, they all need to be managed a little bit different. Sorry, there's not one size that fits all. But right now, if there is pre buying that's taking place, I would be very worried if we were seeing what would be the equivalent of a week or two or three of pre buying taking place. I would say right now we're seeing low number of days of Inventory that is pre buying at this point.
OPERATOR
Our next questions are from the line of Jeff Sakaskis with JP Morgan. Pleased to see with your question. Thanks very much. Can you comment on how much Chinese MDI is coming into Europe?
Jeff Sakaskis (Equity Analyst)
Hasn't been all that much and I wouldn't say that it's anything out of the ordinary. It's been pretty stable with where it's been the last couple of quarters. And so it's, I would say if anything maybe it's even a little bit slightly lower than what it's averaged over the last year or so. So nothing that would be nothing that would have a material impact on the industry or pricing. There's okay, good.
Peter Huntsman (Chairman, CEO and President)
And then in performance products, can you frame the penalty from the ethylene amines joint venture being behind the straight either in the first quarter or the second quarter or for the year? And in your guide, you know you're going from. 26 million in EBITDA to an estimate of 30 to 40 in the second quarter. Why so big a jump and why is the range so wide for the second quarter?
Jeff Sakaskis (Equity Analyst)
As we look at the ethylene amine facility again, that facility, it was down for a couple of weeks. It's operating today. I don't want to get it's operating, let's say around 50%. And material is being trucked out to the Red Sea and also south. So we're finding some means of getting product out of there. What the impact of that is going to be and how much that we can offset through operations from our Freeport facilities. I would say that impact could be as high as 4 or $5 million for the quarter. So as we look at that spread of 30, $40 million, a lot of that is going to be based on how successful we are in getting product economically. I mean, because you're moving it out by truck, you can well imagine that's going to be quite a bit more expensive than moving than moving out by ship. So there's some variability there. I would also say that there's quite a bit of spot material that seemingly is coming, opportunities coming in malaic now how much that materializes what we're able to get. Pricing people inquiring people talking about volumes and prices versus actual orders and so forth. We'll know a lot more about that in the coming weeks. And Geoff, in terms of step up from Q1 to Q2, just as in polyurethanes, we are seeing pricing exceed the raw material increases.
Peter Huntsman (Chairman, CEO and President)
Our next question is from the line of Mike Harrison with Seaport Research partners. Please see with your questions.
OPERATOR
Hi, good morning Peter. You mentioned in the prepared remarks there that we're still meaningfully below mid cycle margins in the polyurethanes business and I was wondering if you can provide any kind of an updated view on where you think mid cycle margins could be. I'll hold off on asking you when you think you can get there, but what is the appropriate mid cycle margin level for polyurethanes? Well, I think that we're probably. I've always thought of it more on what it is that are on an EBITDA on average basis and I think that business on average ought to be a mid teen sort of a business. And how soon do I expect that to happen? As soon as possible. Sorry. Yeah, it's long overdue. And then the second question I had is just curious, I didn't see any comments about the specialty amines capacity that you've added to serve the semiconductor industry and I'm just curious how that's contributing relative to expectations and whether you expect to see some growth there given the strength in semiconductor. Yeah, we continue to see that coming online. It's going through qualifications as we've stated before, that is going to go through a qualification of usually around 9 to 12 months sometimes when there's supply disruptions and so forth on chemical products as there is right now, sometimes that can be accelerated, sometimes it slows down actually. So I think as we look in 2026 as we're building up to a normalized run rate, hopefully by the end of the year we'll probably see five plus million dollars coming from that this year.
Mike Harrison
Our next questions are from the line of Josh Spector with ubs. Please receive three questions. Yeah, hi, good morning. I wanted to see if I could just follow up on kind of the benzene MDI math in 2Q here. Just trying to think about if we say volumes are stable into 3Q, you're pricing ahead of raws in 2Q. Is that a headwind in that your RAWS are going to catch up a bit more from inventory in 3Q or are you exiting with enough price where you'd say that earnings in polyurethanes would be stable sequentially in that scenario?
Peter Huntsman (Chairman, CEO and President)
Yes, I would say that we are exiting Q2 able to stay ahead of the raw materials that we see going into Q3 and we're also working towards more price increases to come in that area. So I mean as I sit here today looking at unless there's a cataclysmic change economically, we will stay ahead of our raw material costs going into Q3. Josh Benvening just settled at 471. The point is we're ahead of that and we'll stay ahead of it.
Mike Harrison
Understood. Thank you. Our next questions are from the line of Lawrence Alexander with Jefferies. Please review through questions.
Peter Huntsman (Chairman, CEO and President)
Good morning, Peter. Do you see any end markets where, you know, your customers are indicating already that they're in pre buy mode? Good question. We're in a pre buy mode. None that are really that high. Typically this time of year you're going to get some pre buy in construction, insulation, spray foam. Business feels like there's pretty good demand and people are trying maybe to buy ahead of a curve in that business. So yeah, those would probably be the two areas. But no, again, when I, when I mentioned that earlier, it's something that we're working on very diligently and when I said that, you know, we're kind of like a day or two worth of inventory going in that I think we're, I'm not going to say that we're walking away from business. We just want to make sure we're managing that very carefully with our customers. We don't want to build up inventory nor do we want to necessarily see a built up on the customer side. But I guess I appreciate that no one wants the customers to build up inventory. But is it unusual for with this kind of spike where several companies are out publicly talking about imminent shortages and different molecules that people who may see higher prices in the future aren't trying to pull forward orders? No, I don't think that's unusual at all. I don't think that we're at a point, I mean, I'm not saying I don't wish we were, but I don't think we're at a point in MDI at this time where we're seeing shortages and people saying I can't get it. I think that there are people that are concerned as they look at their supplier, with their suppliers, with announced turnarounds that have been scheduled for multiple years that are taking place and so forth. Some of the disruptions that you're seeing in some of the energy flows and shipping flows, but I'm not seeing panic buying at this point, but I am seeing higher capacity utilization. So I think that there's an improvement in market conditions for the producers, but consumers can still get the product.
OPERATOR
The next questions are from the line of Arun Viswanathan with RBC Capital Markets. Please receive your questions. Great.
Arun Viswanathan (Equity Analyst)
Thanks for taking my question. I guess we did Hear about an outage, you know, with Wanhwa a couple days ago and maybe I can just get your thoughts on that. If you think that that could tighten up markets and then I guess maybe you were asked this question earlier, I apologize if so. But what is kind of the potential for those utilization rates to remain consistently above 90%? Do you see any permanent kind of supply activities that could arise in the next few months? Obviously it depends on duration, but of the conflict. But what are your, are your customers kind of migrating to you in the face of other supply shocks or disruptions? Is there a share gain opportunity as well?
Peter Huntsman (Chairman, CEO and President)
Thanks. Yeah, Roon, good question. I'm not sure necessarily what's happened with the competitor facility when they do have multi year closures. When I say multi year, I mean oftentimes when you do a large scale closure on a vast petrochemical site, you're renting equipment, you're planning equipment, you're planning on workforces usually 18, 24 months in advance. I mean, you know these things are coming and people are exchanging materials. I know that's happening. I've heard read that a splitter may have gone down or something. I've not read that a facility, there's been a large scale cataclysmic outage or anything like that. I think that we're probably as an industry operating in the high 80s right now depending on product flow in the Middle east that's going to be a bit volatile right now with some of these large member in China you've got single site facilities of million metric ton sites. When those go down, a site that big you will fill it globally and if they're down for an extra couple of weeks because of a problem or whatever, you'll fill it acutely on a short term basis. So we'll continue to take, I think as we look right now our facilities are operating well and we're in a position where we can be a strong and reliable supplier. Okay, thanks for that. And then the other question I had was just on the PO market, obviously there's some tightness there, but there was also a reduction of capacity by one of the suppliers recently and I know one of the other plants are down. So are you guys feeling like your own kind of procurement for the polyurethanes business is is intact or do you foresee any supply disruptions or rerouting of your supply chain that would be required? No, we don't see any disruption in our PO supply right now we've got a good supplier that plants operating and I feel that we're, you know, we're covered with that. And we've also got an excellent supply source in China as well. So I feel we're okay with that. Operator, why don't we take one more question and we'll let people get on the way. Sure.
OPERATOR
The next questions are from the line of John Roberts with Mizuho Securities. Please receive your question.
John Roberts (Equity Analyst)
Thank you. Not that it's large, but maybe your Saudi amines. JV gives some insights into the sustainability of the disruption. If we had an agreement imminent here on the Strait of Hormuz, what's the earliest you think you might be able to resume full production and export by sea?
Peter Huntsman (Chairman, CEO and President)
You're probably looking at 30 to 45 days would be my assumption on that. Again, there's going to be a bottleneck of shipping both to get there to pick product up and also shipping of product to get out. And yeah, I would say about that time, 30 to 45 days.
OPERATOR
Thank you. Thank you at this time. This will conclude today's teleconference. We thank you for your participation.
Peter Huntsman (Chairman, CEO and President)
Thank you very much.
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