Good day, ladies and gentlemen, and welcome to the First Quarter 2011 Huntsman Corporation Earnings Call. My name is Modesta, and I will be your coordinator for today. [Operator Instructions] I would now like to turn the conference over to your host for today, Mr. Kurt Ogden, Vice President of Investor Relations. Please proceed, sir.

Thank you, Modesta, and welcome to Huntsman's First Quarter 2011 Earnings Call. Joining us on the call today are Peter Huntsman, President and CEO; and Kimo Esplin, Executive Vice President and CFO. This morning, before the market opened, we released our earnings for the first quarter 2011 via press release and posted it on our website, huntsman.com. We also posted a set of slides on our website, which we intend to use on the call this morning in the discussion of our results. During this call, 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 Securities and Exchange Commission 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. In addition, we may also refer to non-GAAP financial measures. You can find the reconciliations to the most directly comparable GAAP financial measures in our earnings release posted on our website at huntsman.com. As we refer to earnings, we will be referring to adjusted EBITDA, which is EBITDA adjusted to exclude the impact of discontinued operations, restructuring, impairment and plant-closing costs, income and expense associated with the terminated merger and related litigation, the sale of accounts receivables, acquisition-related expenses, unallocated foreign exchange gains and losses, certain legal and contract settlement costs, losses from early extinguishment of debt and losses and gains on disposition and acquisitions of businesses and assets. We focus on adjusted EBITDA from a management standpoint as we believe it is the best measure of the underlying performance of operations. And we have received feedback from many of you in the investment community that, that is how you prefer to look at our business. A reconciliation of EBITDA, adjusted EBITDA and adjusted net income or loss can be found in the appendix of our slides and in our first quarter earnings release. Let's turn Slide 2. In our earnings release this morning, we reported first quarter 2011 revenue of $2,679,000,000, adjusted EBITDA of $302 million and adjusted earnings per share of $0.47 per diluted share. Our adjusted EBITDA was $302 million in the first quarter 2011 compared to $123 million in the prior year and $219 million in the prior quarter. The improvement in earnings compared to the prior year was primarily due to increased demand and higher contribution margins. Earnings compared to the first quarter increased as a result of higher contribution margins, as well as increased demand. Peter and Kimo will provide greater insight into the improvements within our business. I will now turn the call over to Peter Huntsman, our President and CEO.

Thank you, Kurt. Let's turn to Side #3. Adjusted EBITDA for Polyurethanes division in the first quarter 2010 was $114 million. The supply/demand balance for the MDI industry has tightened significantly. We estimate the MDI industry operated in the low 90s as a percent of nameplate capacity in the first quarter. For the most part, all idle industry capacity has been restarted. Compared to the prior year, our MDI sales volumes improved across almost all sectors. In total, our year-over-year MDI sales volumes increased 9%. Improved demand was particularly strong in the insulation and automotive sectors. Approximately 40% of our MDI revenue is generated by sales related to insulation applications. We estimate that approximately 2/3 of our insulation-related sales are used in commercial applications and the other 1/3 are used in residential applications. We have been successful in increasing our average selling price for MDI and related system solutions. Average MDI product selling price increased 11% and 2% compared to the prior year and prior quarter, respectively. The sharp increase in benzene and other raw materials cost in the first quarter negatively affected our MDI margins on a sequential basis. During the first quarter and early second quarter, we announced price increases in all regions. We started the second quarter with higher margins than we started the first quarter. Demand for MTBE is very healthy particularly in Latin America where we sell most of our product. The large spread between Brent, which is a reasonable proxy for MTBE Gulf Coast prices and natural gas prices, which drives certain MTBE raw material costs have the effect of improving our contribution margins. EBITDA from PO/MTBE was very strong in the first quarter and well above historical averages. These appear to be moderating some in the second quarter. Let's turn to Slide #4.…

Thanks, Peter. Let's turn to Slide 8. In the first quarter of 2011, our adjusted EBITDA increased to $302 million from $123 million in the prior year. The primary reason for the year-over-year increase was an increase in general demand and corresponding higher sales volume when you exclude the impact of the turnaround at our Port Neches, Texas facility in the first quarter of 2010. This chart shows that volumes accounted for $120 million of the improvement in earnings. Margins also improved as increased average selling price is more than compensated for the increase in raw material costs. Compared to the fourth quarter of 2010, our first quarter adjusted EBITDA increased from $219 million to $302 million. The primary reason for the sequential increase was an improvement in margins, as increased average selling prices more than compensated for the headwind of increased raw material costs. We saw an improvement in demand as sales volumes increased 5%. Our adjusted EBITDA for the 12 months exceeds $1 billion despite Polyurethanes profitability well below normalized levels, which is just starting to gain traction with operating rates in excess of 90%. Turning to Slide 9. Our year-over-year sales revenue for the first quarter increased 28% as a result of improved demand and higher average selling prices. Improvements in revenue were most notable in our “rest of the world” category, which makes up 17% of our total sales and improved 50%. This category includes emerging markets such as Central and South America and the Middle East. In Europe and North America, our largest markets, each improved 30% and 23%, respectively. Asian markets continue to grow nicely as revenues improved 18%. Our largest divisions, Polyurethanes, Performance Products and Pigments, which account for approximately 80% of our revenue recorded revenue increases of 36%, 31% and 35%, respectively.…

Thank you, Kimo. As we conclude a very positive first quarter, we continue to see the positive impact of our geographic and product diversity. At a time when crude oil appears to be moving toward historical highs, we are benefiting by having nearly 50% of our raw material purchases North American-based. Our integrated natural gas-based manufacturing will continue to allow us to access competitive North American feedstocks. With our acquisitions and capital projects in Singapore, Thailand, China, India, Saudi Arabia, we are uniquely positioned to further take advantage of fast-growing Asian markets. As I look at the industry longer term, I continue to express caution regarding the macroeconomic condition of high oil prices, stubbornly high unemployment rates and the fragility of the U.S. and European economic recoveries. However, we continue to express a high degree of confidence about our company's capacity utilization rates. These high operating rates and strong demand have allowed us to pass on rising raw material costs to our customers. We also believe that the strength of our customers and their end-use markets will allow us to take advantage of improving market conditions as we continue to see global economic growth. As I stated earlier, Hunstman had a great first quarter, and I believe that we have even better times ahead of us. With that, I'll turn the call back to Kurt.

Thank you, Peter. Modesta, that concludes our prepared remarks. Would you explain the procedure for Q&A, and then open the line for questions?

[Operator Instructions] Your first question comes from the line of Laurence Alexander with Jefferies. Laurence Alexander - Jefferies & Company, Inc.: I guess, 2 quick questions. First, are you seeing any end markets where you're seeing signs -- with beginning signs of demand destruction because of the higher prices to pass through input costs?

I, personally, Laurence, off the top of my ahead, I cannot think of any. I mean, I see some statistics that tell me some trends about consumer confidence. But I have not, on a macro basis, as I look across our businesses and even the largest segments within each of our divisions -- I'm looking for 2 areas here. Perhaps, I'm going to expand just a little bit on your question. Am I seeing areas of products replacement where because of the high price of oil, other products are moving in to replace that? I'm not seeing that, if any materiality taking place and -- or the higher prices driving end-use consumers away and so forth. We are seeing some product substitutions that are taking place, something such as with the record-high price of cotton and textile effects. You see, demand for polyester is rising because of the high cost of cotton. But again, I think that we're uniquely positioned to be able to take advantage because of our customer mix and product mix to be able to take advantage on either one of those. But to answer your question, no. I'm not seeing any material that is material at this time that -- as far as demand destruction or even product substitution is taking place. Laurence Alexander - Jefferies & Company, Inc.: And how would you characterize your M&A pipeline and, in particular, the valuations that companies are asking for in negotiations?

I'll let Kimo comment on that. But again, I would say that while we see transactions that are out there, I think that from a macro sense, that Kimo mentioned in his comments, we remain very committed to making sure that we maintain a strong balance sheet and focus on debt paydown. We also, as you've seen over the course of the last year or so, have had a number of smaller acquisitions of $10 million, $20 million. We believe these are a couple of criteria that these are easily for us to -- easy for us integrate within our existing business that they are a downstream add-on where we're able to take our MDI or our amines products or what have you and further move that down and to further formulate it, or component products, value-added components. And they usually, in regions of the world where we are seeing fast-growing developing markets in India and areas that we're looking at today in South America and throughout Asia and so forth.

Yes, Laurence, as Peter said, we are really going to be interested in more bolt-on kind of acquisitions, nothing that would change the correct credit profile of the business. So we're not all -- we're not very active in the M&A market. So I don't know what would be the best source to give you that color.

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

Peter, I guess you guys have what I characterize as a very unique window on Asia given your presence there. And it seems like of all the regions, maybe that one saw the -- some decelerating growth. So could you comment a little bit about what the tightening policies have done to the business activity there and how you see that progressing through the year?

I would just say that we continue to see very robust growth taking place in Asia. I think that it is fair to say as we've said on past calls, Bob, that across the board, as we look at our Asian capacities, I'm talking about our amines capacity, our polyurethanes capacity, our TiO2 capacity, we essentially are sold out in Asia. So the growth that we're seeing in those markets are exports that are coming in from Europe and North America. As we see the European and the North American markets continue to strengthen, we will make that decision to cut exports to Asia and to supply the local markets where we have an opportunity to make more money. That is not to say that we're pulling out of the Asian markets. It's not to say also that we are not continuously upgrading our customer base with the product that we have available. But I'd be lying to you if I told you that we've got an extra 20%, 30% of vital capacity sitting around in Asia, and we're going to continue to grow the business at strong double-digit growth rates in Asia because we've got all this excess capacity. We are on the process of adding capacity in amines in Singapore. We are continuously looking to de-bottleneck our MDI capacity. We're expanding our textile manufacturing capacity throughout Asia. But having said all that, Bob, our single largest source of product going to Asia today aside from the products we produce in Asia, it is coming from the U.S. and Europe and gradually -- again, if both markets strengthen, that product will probably be staying in those markets where we can make more money.

Generally, as it relates to sort of our insight into local demand, it continues strong. We're not seeing cracks anywhere in the Chinese demand profile.

And you mentioned adding some capacity. Could you talk a little about MDI? It appears maybe you and your partners there are going on there building your own plants as opposed to do something together. Is that now a pretty decided outcome, or is there still scope for maybe doing a joint venture for your next round of MDI large-scale capacity there?

Well, BSF is definitely -- they publicly have announced they are moving forward into Yongxing. And we continue to look at various options. But our priority right now in China and MDI is the continuation of our expansion of our Caojing facility. And we fully believe that we continue be on track to expand that facility, and that is our priority with or without a partner there.

Our next question comes from the line of Jeff Zekauskas with JPMorgan. Jeffrey Zekauskas - JP Morgan Chase & Co: What was cash flow from operations in the quarter?

Give me a second there. We had negative $124 million of net cash flow from operations. Excuse me, let me just see if -- I'm looking at my Q, and I know you haven't followed it yet. No, I've got negative $74 million, excuse me. And that, what that is, Jeff, $302 million of EBITDA and then CapEx of $60 million, cash interest of $66 million, cash taxes of $5 million and changes in working capital of $245 million, getting me to a use of cash of $74 million. Jeffrey Zekauskas - JP Morgan Chase & Co: So the -- so what we would do -- if your CapEx was $60 million -- the CapEx usually isn't included from cash flow from operations, so you're giving a -- like a net use of cash for the entire quarter, is that right?

Well, I'm sorry. Yes, probably. That's how we define it. I'm sure the market may look at it differently. Jeffrey Zekauskas - JP Morgan Chase & Co: So the cash flow from operation then was really negative $14 million, is that correct?

If that's how you define it, yes. Jeffrey Zekauskas - JP Morgan Chase & Co: All right. Secondly, in terms of the Polyurethanes business. If you excluded the strength in MTBE from the fourth quarter to the first quarter, would EBITDA have grown sequentially in polyurethanes?

Yes. But let me give you a sense for PO/MTBE. I think listed C factors, year-over-year, we're probably up $0.20 a gallon, and we have roughly 215 million gallons of capacity. So call it, yes, normal -- EBITDA was higher, but on a quarterly basis, what is that? $50 million over 4 quarters, kind of $15-ish million, better than what you would have experienced last year if we hadn't had the turnaround. Just to give you the sense for the magnitude of the MTBE piece. Jeffrey Zekauskas - JP Morgan Chase & Co: Okay. In Performance Products, I always forget whether you're tolling ethylene glycol or exactly what status that has. Was profitability in ethylene glycol very important in the growth in MTBE and Performance Products? And how do you see that market through the course of the year?

So MTBE is in the Polyurethanes business. Jeffrey Zekauskas - JP Morgan Chase & Co: Yes. Right. I was switching over to Performance Products. Forgive me if I misspoke.

No, that's fine. And glycols was up year-over-year as you would expect, but it's not that meaningful. It's less than 10% of our Performance Products business. And that's on the high end. It's usually closer to 5% of the profitability of that business.

We would say, longer term, that throughout the year, that ethylene glycol should remain fairly tight. Look at the demand that is taking place in the polyester chain. And as we look at the operating capacity utilization, particularly in the Middle East, that will remain tight, at least, for the next couple of quarters here. So I think that with the low-cost Ethane advantage that we have -- I'm speaking about Huntsman, not the industry, that Huntsman has with our oxide production that will -- it continue to advantage our position in ethylene glycol. Yes, I think it's going to be a pretty good year for that product. Jeffrey Zekauskas - JP Morgan Chase & Co: Okay. And then lastly, you had really nice sequential growth in EBITDA in Advanced Materials. And I was wondering how you accomplish that because, I mean, there was some revenue growth sequentially, but the profit growth was really pretty remarkable. How did that work?

I think it's fair to say that in the fourth quarter that we had quite a few one-off charges that we're taken during that time period. And we saw quite a bit of growth and some traction that took place, margin improvement that took place in our Formulated Systems of our advanced materials. But we did have some onetime charges that affected us in the fourth quarter.

Your next question comes from the line of P.J. Juvekar with Citigroup.

This is Eric Petrie in for P.J. I have quick question in TiO2. If ore costs climbed higher, do you think prices can be passed on to your customers?

I believe that with the condition of the markets that we see today and with the ore costs that I see on the horizon of the next few quarters, I believe the simple answer is yes. That may not be in situ, where it's instantaneous. But I believe that within a quarter's time period, the rising cost of ore and energy -- remember that ore only makes up about 50% of the cost that we have of producing TiO2. So when we talk about ore and energy and other related costs, I believe that the market is such that we will be able to pass on those price increases to our customers.

Okay. And then my second question is, what is your TiO2 demand outlook in Europe where you have a strong presence?

I believe that in Europe, we're going to see continuous -- a continued gradual recovery. And again, as you look at the 2 largest end-use applications, you'd be looking at automotive, and you'd be looking at housing and construction. The automotive markets in Europe, particularly on the high end, are surprisingly robust and continue to be that way. And I think that it will be that way for a couple of quarters here. As we look at Polyurethanes and then TiO2, those 2 segments, in particular, are benefiting from a strong European automotive sector. If we look at the housing and commercial real estate in Europe, it remains quite sluggish. It has been for some years, but the remodeling and the painting sales and coating sales in Europe actually are quite decent.

[indiscernible] future.

Your next question comes from the line of Frank Mitsch with BB&T Capital Markets. Frank Mitsch - BB&T Capital Markets: Peter, what are the common themes in going through your 5 segments in terms of an outlook? I was talking about higher raw material costs. But I also heard you talk about various price increases that you've been implementing, some as early as April 1. So I was just curious, if you look at your -- the company as a whole in terms of margins, would April margins be higher, flat or lower versus the Q1 average?

I think that across the board, Frank, it's going to be not categorically in all divisions. Right, it’s going to be higher. Well, I don't think that I -- what I see in April today and the traction we're getting and prices that we've received in April, I think on average, it's going to be a bit higher. Frank Mitsch - BB&T Capital Markets: Terrific. And I noted that the year-over-year volumes contributed to most of the increase sequentially. Margins contributed to most of the increase. How are you -- where were operating company -- I think you said that MDI operating rates were in the low 90s. For the company overall, where were operating rates in Q1, roughly? And how did April shake out in terms of operating rates?

Well, as we look at Q1, and I'll just quickly go by kind of division-by-division, as we look at the TiO2, we're obviously sold out. Typically, at this time of the year, and just going from first quarter to second quarter, second quarter is your strong year for paint production and construction in TiO2. And so you are looking at first quarter, typically, you're getting into a stronger second quarter in sales. But I that in TiO2, it's going to continue to be -- we're instantly going to be it sold out. Second quarter in MDI, we continue to see strong growth globally. And I see no reason why, from what I've seen today, why MDI should not be in Polyurethanes, in general. Across the board, it should not be stronger in the second quarter than the first quarter and going up around the world. Amines and surfactants, again, I see that volume, again, gradually increasing in the second quarter. I see no reason why that should be diminishing. In Textile Effects, we move into this time of year, typically, we start seeing wool processing coming in this time of year. And I would hope that there is some relief in cotton prices as people have moved from cotton into polyester, and you see cotton prices starting to come down. I think that should be a positive sign. I am probably forgetting one of the -- in Advanced Materials, I think, again, in Advanced Materials and when the aerospace construction so forth, again, I -- we'd see that it would be gradually improving in the second quarter again so...

Frank, in 2 of our 5 divisions, we don't even track utilization rates. So Textile Effects and Advanced Materials really are not utilization rate kind of businesses. And in half of our Performance Products businesses, really, we don't look at the utilization rates. But in the capital intensive sort of utilization rate-sensitive businesses, as I think we said, in MDI, we're in the low-90% utilization rates as an industry. And I think that is probably a good number for us. Also, in PO/MTBE, that business runs full out. It's 100% utilization rate business. When you look at Pigments, I think Peter said, we're full out. So in the utilization rate-sensitive business, pretty tight.

Your next question comes from the line of Andrew Cash with UBS.

I just wanted to chat a little bit about urethanes and Textile Effects. So going back to product shortages in urethanes first, now you guys are spending substantial money on some front-end engineering work on the China plant, but no approval yet by the government. So I'm just curious if you could lay out for us what's going on with the delay in the approval process? When you might see approval there?

Well, I think that as we look at an approval in Asia, I do believe that it is coming. Andy, I wish had more control over the Chinese regulatory process. And at this time, I don't even want to speculate other than to say that I am confident that one way or another that we will see more MDI capacity from Huntsman coming into the Chinese market as soon as possible.

Is it possible that there is some staging going on? Maybe the government is trying to stage how much new capacity comes on when. Is that part of the equation?

I wouldn't want to speculate one way or the other. The Chinese are very large buyers of MDI. It's a very important component on their infrastructure and on their energy conservation program. And as you look right now, over the course of the next -- given the fact that it takes 3-plus years to engineer, procure the equipment, build a plant, start up the plant, bring full capacity into the industry, it takes that much time to bring a plant in the industry. China is going to be very short on MDI 2, 3 years down the road. They're getting short today. Its' going to get a lot worse before it gets better. So I struggle to see that there is a concerted effort within the government to hold back MDI capacity being built, but again, I'm just speculating.

Okay. Just a quick one on urethane follow-up. I think there's in EUR 100 to EUR 200 per metric ton price discussions for the second quarter in Europe. You care to put any odds on that going through?

Yes. I think that we feel very confident that the vast majority of that, if not all, that was going through.

Okay. The other question about textile. If I recall correctly, I think the goal was maybe 15% kind of EBITDA margin down the road. And I think you've cut $100 million in cost, cutting about 1/3 of the workforce so forth and so on. So I was just curious when might we expect to see that business starting to turnaround? I know you mentioned the wool season. I would expect big margin improvement.

Our expectations for that business continue to be high, Andy. I think that when we talked in the past, we have always assumed, and I will continue to assume, that we will return to the sort of prerecession demand. And that's the key here, that we get back to the prerecession demand of consumer textiles and textile consumption. And when that happens, I believe that you will see a 10% to 15% EBITDA to sales sort of a margin business. I've been totally open here. I would have thought that we would have add stronger textile demand than we have today. I'm talking as an industry, not Huntsman. Because I don't think that Huntsman's doing any worse. I think we're probably doing better than the average in the textile industry. But I think that as you look at the impact over the last quarter or 2 of higher retail prices being pushed through and higher cotton prices and the changes that have taken, now I believe that there probably has been a few quarters delay in what we were hoping would be a quicker recovery on the consumer side for textiles.

And let's not minimize the impact of North American housing in this business. Often, we think about apparel, but we also think about carpets and draperies and towels and sheets, which really follow housing starts. And that business continues to be very, very difficult.

Yes. You just have to look at the furniture stocks and you could see that. So now good luck with that and good luck with all those product shortages out there.

Your next question comes from the line of Bill Hoffman with RBC Capital Markets.

I wonder, Peter, if you could talk a little bit about the Performance Products business, the Indian acquisition and your Singapore expansion. Just want to get a sense of what incrementally that might add to sort of top line growth at this point?

I think on top line growth in India, we announced that there's about $100 million of revenues that should be coming from that. And with the Singapore Polyurethane amines, as we look at that, that will be about 40,000 tons of capacity coming on and that will probably take a year, a year and a half, for that product to be sold out. And so there's probably an incremental $100 million there as well. And I believe that the Polyurethane and amines will probably end up seeing mid-upper teens sort of EBITDA to sales. And with the Indian market, that's a real scattering of end-use applications from amines to surfactants. And we're bringing products in from overseas to blend with that. But on average, we should expect the surfactants to be in the high-single digits, the amines to be in the low-double digits, probably at 10% EBITDA sort of an average there in India.

Terrific. And then my second question is just back to the MDI business. So it was sort of outside the Chinese expansion given the fact that you're operating -- you're currently in sort of low-90% range. Can you just talk about -- I mean, it feels like the business is relatively back to a steady state. Do you wait for further a more geographic economic growth here or -- are the things you can do to get a higher growth rate out of that business so over the next year or so?

I'm quite satisfied with the growth rate of MDI. I think for the last 2 years, we've seen growth, not just in Asia, but on a global basis of around 8% growth, and perhaps closer to 9% growth. And so as we look at that on a global basis, I think the opportunity for MDI, as far as I see, is not necessarily the volume growth. So that's important to us. It's the margin expansion. And I would remind you that in 2005 when we saw 100% capacity utilization rate in this industry, if you were to take those sort of EBITDA margins and put them on a per-ton basis today, 6 years later, we have our Chinese facility now is completed, and we further de-bottlenecked and brought capacity expansions and efficiencies into our other 2 MDI facilities, which you're looking at 2005 margins today of somewhere between $800 million to $1 billion EBITDA just coming out of the Polyurethanes division. So again, volume is important to us, but where we need to be focused and where we are focused over the next 2 to 3 years here is margin expansion and being able to grapple with historical high benzene prices and getting not just catching up to those, which I feel we've done in the first going into the second quarter, but further expanding margins to capture where we were a few years ago in MDI.

Bill, and let me remind you that over 1/2 of our MDI is consumed in systems. And so there's a lot of innovation going on in this business. It's just not MDI component sales and waiting for utilization rates to strengthen. There is a lot of value added product that's going on out there that we're adding value to these molecules.

And Kimo, can you grow that -- I mean, like -- is there a growth rate on that, that percent your sending in new Systems at this point in time that you want to talk about?

Well, it's going about the same as the industry, generally. But it's more value added, higher margins, much more stable kind of business. And it's a real focus of our systems houses that are scattered throughout the world.

We should know, I mean, this is not just in Polyurethanes. If you look at amines, I think that over the last 2 to 3 years, we have tried to change this business the most. It's not necessarily adding more tonnage of capacity, but how do you take MDI, how do you take basic amines and surfactants? How do you take both liquid resins and formulate those further downstream? And I hope that this becomes -- this has been apparent to people following our company is to, how do you add value to the molecule further downstream? How do we diversify and differentiate ourselves from the competition? I don't want to be competing on MDI molecules with 6 or 7 other competitors out there. I'd like to be producing a product that only 1 or 2 people in the world can produce, now where you have real leverage in specifications, in pricing and product formulation and technology and that really, as we look at Huntsman over the next couple of years, that needs to be our uniqueness. It's what we can bring technology into our innovation and creativity and to fast-growing markets and throughout Asia and also in mature markets in the U.S. and Europe.

Terrific. It's certainly given you a lot of momentum at this point.

Your next question comes from the line of Dan Chandra with DW Investment Management.

I was just wondering if you could look in your pigments, it seems that you guys are in a real sweet spot. Your selling price is going up. You're sold out, but your ore costs are going up. And you guys have said that your raw materials more than offset that. Would you expect to see margin improvement expansion over the next coming -- several coming quarters? And could you comment on what your thoughts are on the duration of the cycle?

This is Kimo. Let me just take up margin sequentially and remind you of some things that Peter mentioned in his remarks. We saw ore prices really rise at the beginning of the year, say, January 1. And with our inventory average costing system, you really won't see those ore costs come through until the second quarter. And so we really didn't really see that in the P&L, if you will. Having said that, prices have risen as well. So you will not see, I don't believe, sequentially, all of the price increases that are effective the first of the second quarter flow through to the bottom line. You're still going to see some noise of price increases from earlier on in the year on the P&L.

And I would just say, as far as the duration of the cycle, I'm quite bullish as far as the entire TiO2 industry for the long term largely because of 3 issues here. Number one is that there's still the one of the largest consumers around the world of TiO2 product, obviously, paint, is U.S. North American housing construction. And that continues to languish. We really have not moved much off the floor. And that's not going to continue forever. I mean, there's going to continue to be an improvement on the coming years in the housing market and the automotive markets in North America. So I look at the overall demand, and it does not appear globally that we are operating anywhere close to peak sort of consumption. I don't see a bubble in housing or automotive or the large consumers of TiO2s that are out there right now. Secondly, as I look at TiO2 capacity, if Huntsman right now could wave a wand and all of a sudden, we could build a 150,000 metric ton facility that could come on tomorrow, is there a sufficient ore supply in the industry today to supply that facility? If I were to build, say that about ethylene, if I were to say that about Polypropylene, if I were to say that about most chemicals, yes. There's plenty of raw materials. I'm not sure that there is enough ore out there to supply right now, today, a world-scale facility that could come onto the market. So if I look at the second area, if I look the ore supply, I believe that there is sufficient ore to satisfy the needs of the industry today. And I believe that Huntsman is well situated in the coming years and the longer-term contracts that we…

Your next question comes from the line of Mike Straka [ph] with [indiscernible].

I'm sorry, it's Long Acher [ph]. Real quickly on TiO2, these facilities for the last, let's call it 5, 10 years, barely ran at 90%, maybe they ran below 90% -- it was below 90%. Now within the last year or so, you shut down capacity, these facilities are running at close to 100% as you said. Can you just comment on the preparation or what you think the possibility of outages might be and price spikes that you might benefit from? Just because from what I understand, the TiO2 process is very intense on the facility. The facilities are very -- the process is highly corrosive, let's say. And the plants run very hard and so there's a possibility of outages. Could you just talk a little bit about that?

Yes. Most of these -- most TiO2 plant are a single, maybe a dual-line facility. So when you have an operating upset within the facility, the entire facility usually comes down. The entire facility will feel the impact. This isn't a -- something like, if I we're thinking of our amines facilities where you have multiple terrains and one terrain can go down or one reactor can go down, you continue to operate other reactors. Typically, I have 1 or 2 kilns in the TiO2 plant, or 1 or 2 reactors, and that's it. I would just say that I'm not going to speculate on which plants or what impact the plant coming down, but the average age in this industry of TiO2 facilities has got to be counted in the decades, not years. And as you look at that, you're at that point where you are putting more and more money and time into maintenance, typically T&Is or scheduled maintenance turnarounds are -- occur more often, will take longer. And you're pressing up against the metallurgy, and you're pressing up the wear rates of pieces equipment, frankly, that you've never operated for this amount of time. So that's not to say that these facilities are all susceptible to falling apart. So that is a byproduct of our facilities that are at the age of the TiO2 facilities.

Do you have a view at all if one facility around the globe went down because of -- for let's call it 3 months, how that might impact pricing of TiO2 into the marketplace?

That would depend on the size of the facility in question. But, yes, it would have an impact. When you're operating in the high-90s, mid-90% capacity utilization, which is where I believe we are. I don't believe that the TiO2 plant can run necessarily at 100% nameplate capacity. You don't -- it's just not designed, it's just not susceptible to what you see in other chemical processes. So one facility, 40,000-, 50,000-ton facility coming down for a couple months, and that's not an unrealistic time frame that you pointed out. You will see, probably, a force majeure sort of an environment that would about through pricing and supply.

And is there one major facility that was down as a result of the Japanese earthquake, is that correct?

Yes. It was pretty small. I think it was 60,000 tons.

Your final question today comes from the line of Gregg Goodnight with UBS.

A question on your methane dioxide capacity, just to do a spot check here. I believe you have about 550,000 tons of global capacity. Is that correct?

Right.

Okay. And one of your competitors reported yesterday, and they were successfully able to operate over 100% rates. Could you sort of benchmark where you think your operating rates are going to be this year? And then comment on any possible incremental expansions at any of your facilities you might be able to execute fairly quickly.

Gregg, nameplate capacity is kind of a funny thing in this industry because generally, nobody operates above nameplate because these plants usually require turnarounds through a year. And on an average, they will run at sort of maximum 96%, 97% utilization rates. So when we say 550, that truly is a nameplate capacity, and you would expect, again, use that 95% rate. We'll be full out at 95% of that.

And any de-bottlenecks you might be able to pull off in the near term?

There's real small, 1% kind of opportunities over the next 18 to 24 months. And we think that's typical in the industry, but nothing significant.

Okay. Actually, and could you update us on your German molecan [ph] hydride expansion? It was supposed to start up in the first half of this year. How is that coming? And will it be sold out in the near-term?

That facility is coming online, and I'm not sure that it will be filled out as it comes online. But we believe that it will be one of the most competitive facilities, globally, and then we'll be moving a lot of volume to that facility and taking advantage of that lower cost.

We think that will be consolidated beginning the second quarter for financial purposes. And we think the EBITDA impact of that will be around $20 million.

Okay. Last question, Kimo, you're showing on the Page 4 of your release, a sales mix of negative 17% in Polyurethanes. Can you just qualitatively describe what that mix is?

It's just the mix between MDI urethanes at PO/MTBE, which is a lower-valued product, suggesting that we had higher sales of PO/MTBE in the quarter, but that was a mix issue as opposed to a price. Both MTBE, PO and MDI prices rose, but we sold more PO/MTBE.

Okay, got it. I should have been able to figure that out.

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect. Have a great day.