Huntsman Corporation (HUN) Q2 2025 Earnings Report, Transcript and Summary

Greetings, and welcome to the Huntsman Corporation Second Quarter 2025 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It's my pleasure to introduce Ivan Marcuse, Vice President of Investor Relations and Corporate Development.

Thank you, Joe, and good morning, everyone. Welcome to Huntsman's Second Quarter 2021 Earnings Call. Joining us on the call today are Peter Huntsman, Chairman, CEO and President; and Phil Lister, Executive Vice President and CFO. Yesterday, July 31, 2025, we released our earnings for the second quarter 2025 via press release and posted to our website, huntsman.com. We also posted a set of slides and detailed commentary discussing the second quarter of 2025 on our website. Peter Huntsman will provide some opening comments shortly, and we will then move to the Q&A session for the remainder of the call. During the 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 the projections or expectations. We do not plan on publicly updating or revising any forward-looking statements during the call -- 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 measures in our earnings release, which has been posted to our website at huntsman.com. I'll now turn the call over to Peter Huntsman.

Ivan, thank you very much, and thank you all for joining us. Our second quarter results were not unexpected and came in about where we thought they would. We did see a nice rebound back to what we would see as more normalized earnings from Advanced Materials, offsetting the disappointing sluggishness of construction activity and tariff uncertainty, especially in polyurethanes. As we step back and look at the macro condition, it appears that the volatility caused by tariff and trade disputes over the past few months is starting to dissipate at least as of 12 hours ago. I believe that inventories remain very low in most of our downstream supply chain, while consumer confidence seems to be muted. We look into the third quarter, we see neither reason to panic nor to be overly optimistic. However, long term, we do anticipate an improvement in construction and perhaps some gradual change as China seems to be focusing more on their overcapacity. Our focus will continue to be on our balance sheet. To this end, we will continue to be extremely prudent on spending capital beyond our normalized run rate of safety, maintenance and reliability. We remain focused on our cost structure and making sure that our business expenses are in line with market conditions and our cash generation. Our aggressive inventory and working capital focus allowed us to generate positive cash flow in the second quarter. This cost us about $25 million of EBITDA in the second quarter. This charge was offset by reduced bonus accruals and other smaller onetime benefits. This inventory impact will be less in the third quarter, again, offset by bonus accruals. As markets improve or raw materials drop in value, we want to make sure that we're in a position to take advantage as soon as possible. We will operate our business to create value over volume to the extent that we can. We continue to review our asset portfolio and engage with shareholders. The last thing we want to be doing is sitting around waiting for things to get better. Over the next few quarters, we will see usual seasonality, but also the possible influences of higher tariffs and duties for MDI coming into North American markets, a possible interest rate cut, the benefits of more of our cost reductions falling to the bottom line and hopefully, a greater focus on prices over volume. In short, we will manage our balance sheet as effectively as possible while also pushing for better P&L outcomes. With that, operator, why don't we open the line up for any questions.

[Operator Instructions] And our first question comes from the line of Kevin McCarthy with Vertical Research Partners.

Peter, would you comment on MDI utilization rates in the second quarter and how you see those progressing into the third quarter for the industry as well as Huntsman?

Yes. Much of that, Kevin, a very good question, something that we struggle with because there's not a great deal of information as to how people are running their plant and what capacity they're running their plant. Obviously, with the tariff situation and so forth with product that was coming into North America from China, that product is either being scaled back in capacity or going into other markets. We're not seeing a lot of that product, for instance, showing up in Europe, which is something that some of us feared a couple of months ago would be the case. So it really is quite a fluid question. I would say that, by and large, the industry is operating somewhere in the low to mid-80 percentile. That's going to probably be a little bit higher than that in North America, perhaps a little bit lower than that in China. But that's -- I believe that's about where we are today.

The next question comes from the line of Patrick Cunningham with Citi.

Can you give us an update on how your order books have progressed in July? I think we're hearing some mixed signals on sort of if things are stable or things are getting worse in July? And what are some of the conversations you're having from larger customers in auto and building and construction given the recent tariff implementation?

I think that stable would probably be the best singular description of what we're seeing across the board. I mean there are some pockets here and there. Just anecdotally, I think that there are a number of truckload orders, rail, which would tell you that people are ordering just in time, which should tell you that inventories are probably lower than usual. In my personal opinion, I believe that the supply chains are pretty thin right now, people in times of uncertainty, especially where the overall energy market, the energy structure is down from where it was 6 months ago. People are probably not going to be holding a lot of inventory on the expectation that the energy costs will be coming down, chemical costs and so forth. So I think that it's very thin right now and people are kind of ordering just what they need for the next 30 days or so. But right now, I'm not seeing a pickup that would give me a great deal of optimism. Conversely, I'm not seeing a big drop-off in any one area that would give me pessimism.

Great. Very helpful. And Peter, you seem to be optimistic on potential China supply rationalization, but it seems there's still pretty healthy capacity build expectations in MDI. So where do you see this potentially having the most significant impact in terms of the key chains or what it might mean for Huntsman's earnings levels going forward?

Well, I would say that as we think about Chinese capacity and so forth, China, where you have the greatest concentration of production continues to be our most profitable market for MDI, and our business in China is performing quite well in comparison to North America and a very well in comparison to Europe. So I think that there's a combination probably of volume discipline, pricing discipline and what have you. And we're also seeing some greater trade movements and so forth. At the time -- as we look at the first 6 months of this year, we've seen Chinese imports into North America of MDI virtually stop. For some reason, we've seen imports coming in from Europe of all places increase. Now that's not offsetting each other one for one, obviously. But -- so there are some rather unusual trade patterns. But by and large, I don't think there's anything terribly surprising taking place right now.

Next question comes from the line of Jeff Zekauskas with JPMorgan.

I think earlier in the call, you said that utilization rates in polyurethanes were in the low to mid-80s. Is that where your utilization rates are?

Yes. I'm not sure that we're too dissimilar from -- they'd probably be -- we run our plant in China at pretty high rates because we've got good market demand there. The automotive sector in China continues to perform quite well and everything else is pretty stable. I wouldn't say that it's growing through the roof. Europe obviously continues to struggle. In North America, we're probably running in the mid-80s, give or take a few percentage points. So I'm not sure that we're terribly different than most of our peers.

What are your utilization rates in Europe?

Those would probably be around 80%.

The next question comes from the line of Frank Mitsch with Fermium Research.

Peter, what are your latest thoughts on the dividend?

Well, Frank, this is obviously something that our Board looks at very carefully, and they look at it not just on a quarterly basis, but we have discussions on a monthly basis. We look at the steps that we're taking around cash generation as a company, demonstrative from this last quarter. And as we look into the second half of the year, we have further steps we'll be taking on cash generation and so forth. We feel that we're in a pretty good place right now. We obviously want to be at a place where perhaps at the top of the cycle, people are saying, well, you ought to be doing more at the bottom of the cycle, people -- it probably will be on the higher end given the volatility of our portfolio. So I think that for the time being that we feel comfortable, not materially harmful to our balance sheet.

Understood. So how much longer -- given all the actions you're taking on the cash side and shoring up your balance sheet, how much longer do you think at this level of earnings, do you think -- do you feel -- how comfortable do you feel through the end of 2025? Is this a '25 decision at this level of earnings? Is it a '26 decision at this level of earnings? I mean, obviously, the assumption is, as you indicated, that near term, no reason to panic or be optimistic, but long term, you see things improving. I'm just curious as to how long you feel -- you would tolerate it at this level of earnings?

Well, I think, Frank, it's a very good question. I think that's a question with very limited visibility on earnings that we have right now, given the volatility around tariffs and pricing discipline and so forth. It is something that we will be looking at on a quarterly basis. And as we look at probably between now and the end of the year, I think that we have -- I wouldn't say that we've got a very good picture, but I think we've got a fairly decent picture as to where we are. I think a dividend is not just the short-term sign of how you feel about it, but it's also a long-term sign. And I think that if we get into -- particularly into early next year, and we see that there's another muted cycle or a global recession or a muted cycle on construction, for example, or we're in a global recession, seeing things have gotten worse and don't appear to be getting any better. I think the Board will make appropriate decisions. But at that point -- at this point, when we look at our cash generation, what we're working on, where our focus is and where we think the overall company is going, we feel that we're in a good position.

The next question comes from the line of Vincent Andrews with Morgan Stanley.

Peter, I wonder if we could talk about what you think trade finality means and what your customers think. So in other words, like can we get to a point where the trade war is somehow resolved? And what does that mean? Does it mean we have agreements with all these countries, including China, and that's it, and we all know what things are, and that's the moment where life goes on and people go back to purchasing and so forth in a normal manner? Or do you think there's always going to be some uncertainty within the current construct just because these things can keep changing. They can keep evolving or people don't abide by it. And so that we're going to -- we'll wind up staying in a more cautious purchasing and customer behavior period for a longer period of time even if there's any sort of resolution. How are you thinking about it? And what do you hear from your customers?

Well, you're asking me -- and I mean this with absolutely no disrespect, but you're asking me to get into the head of the administration presently in place, which I think is an impossible analysis. But I would say broadly that the U.S. economy and our customers, our suppliers don't -- our biggest issue is volatility. If we're going to pay higher tariffs, if they're going to be duties, if they're going to be barriers, whatever, let's figure out what they are. Let's work around them, work through them, work with them, do what we need to do. But it's just -- it's kind of like with raw material prices. I can live with $100 crude oil. I'd rather not. But I mean, we can. If we know that's going to be the new normal or something close to that. What is very difficult is when you have a market that goes from $100 to $30 to $100 and you're dealing with massive working capital changes and so forth. That's not unlike trade policies. And particularly with the long supply chains that we have around the world today, it's very volatile. Now when you look at the case of Huntsman and the impact on Huntsman, by and large, as a company, we don't move a lot of products overseas. Trade doesn't impact this company all that much, trade barriers and trade duties. With our raw material suppliers, most of our raw materials are supplied within region. And we don't hear a lot of noise from our raw material suppliers. So I think from our raw material side, no, not a big deal from ourselves, not a big deal. Now I get down to our customers. automotive completely all over the place. We look at the trade in aerospace and the impact that, that's having from one negotiation to another. You look at the supply chains that are going into the construction materials market, timber from Canada and everything. The customers, the further downstream you go, the greater volatility there is. And the closer you get to the consumer, you're going to see even greater volatility and uncertainty. So I'm not sure anybody really benefits from that volatility. And the consistent message I hear, not just in the U.S. but around the world is whatever it's going to be, let's get to that point, let's figure out what it is, and we can deal with it. And so I believe that's ultimately where we're going to be headed.

The next question comes from the line of John Roberts with Mizuho.

Peter, the prepared remarks mentioned Advanced Materials is the primary focus for bolt-on acquisitions. I don't expect that you'd be making any bolt-on acquisitions near term, but are you no longer interested in Huntsman Building Services or Huntsman Building Systems, HBS as an area long term?

Well, I think I learned from my father a long time ago, you never say never in the area of M&A. But at the same time, you do have to have a strategy. You can't just look and buy anything that is available. I think that as we look at where we want to be moving as a company, we want to be able to take advantage of adhesives. We want to be taking advantage of aerospace, lightweighting, energy conservation. And as we look at our most stable lens of our business, as we go down, we look at electronics, we look at elastomers, as we look at our adhesives, lightweighting, carbon fiber, composite materials and so those are all areas, I think, for us that we've been able to build a nice platform, and we'd like to continue to do that. Now you look at something like polyurethanes, and of course, within our polyurethane business, we have elastomers. We have some of those applications. So that are further downstream. Those businesses are the best performing parts of our polyurethane business today. So I don't want to sit here and say that we'd never do anything in polyurethanes. But if we do, it would probably be something that would complement that end of the business more so than the more volatile in commodity side of things.

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

Peter, do you expect the tariffs you now have on Chinese MDI to lead to, at some point, a new U.S. MDI plant not by you, but maybe a competitor?

Well, I can only give you -- okay, I will tell you, it will not lead to a new plant by Huntsman. I can -- at least not while I have anything to do with managing the company. But what competition decides to do, I have no idea. I personally believe that there's more than enough MDI in the world today, and we'll be just fine. But I -- if you put barriers up around the U.S. on imports, let's remember that the U.S. also exports its MDI into markets, for instance, into Latin America and into Canada and so forth. You've got -- you've also got to realize that if you're putting imported materials are going into Latin America and Canada and so forth. There's less export from the U.S. I think that a lot of people can make a mistake by just drawing a circle around the United States and somehow thinking that that's going to be this fortress of what's in the United States stays within the United States and nothing can penetrate it from Europe or any place else. Like I said, trade is a messy subject. And I don't -- I think presently, the world's got plenty of MBI capacity doesn't need anymore.

Got it. And just one more on aerospace. We are seeing production rates increase. I know there's a mix for you guys with wide-body versus narrow-body. But when do you expect the stronger build rate cycle to impact your business specifically?

I think it will probably be in the next -- within the next couple of quarters, next 3, 4, 5 quarters. The reason that you've got to make sure that you understand the difference between deliveries and build rate. And when an airline says that we're delivering 8 airplanes, for example, without getting into any particular airline, how many of those airplanes have been sitting already built and have been sitting on the tarmac waiting for FAA or European inspections and certification. How many are planes that were built months or quarters ago? And how many of those planes were built this month. And so when you say that there are 8 planes that are being delivered, I want to make sure that we're focused on the build rate versus the delivery rate. I like to see the delivery rate up because the airlines need to move inventory. You go up to the Boeing field, you can just look at it on Google Earth. They've got literally scores of 777Xs, the next generation of planes that aren't even flying yet. They've got scores of these things that have been sitting there for years waiting for federal certification. So -- and that's going to be an important application for our materials when that plane is being fully built. But you're going to have to clear out a lot of stock before you get to what I would consider to be a normalized run rate. So sorry, it's a laborious answer, but there is a difference between number of planes that are delivered and the number of planes that are manufactured, and the inventory of those planes that are sitting about waiting to be finished, certified and sent to a customer.

The next question comes from the line of Salvator Tiano with Bank of America.

So firstly, I want to go to the closure of the maleic anhydride facility in Europe. And just if you can tell us a little bit about how -- what was your process and how things unfolded there, mostly because when you started the strategic review, you mentioned that you explicitly undertook this action because you received unsolicited interest in the facility. So what happened, I guess, in the meantime and you decided to shut it down instead?

Well, we originally looked to see if there would be a better owner of that facility than us. And we looked at options of selling it. We looked at options of keeping it. We reviewed -- I think we reviewed every option imaginable. The last thing you ever want to do is be in a position where you're having to close an asset. And when we looked at the reliability of that facility and the cost of that facility, the lack of competitiveness in the European market, we determined that the facility was unsellable, and we made the decision to shut it down. Not our preferred decision, obviously, but one that we felt we have no alternative given the overall market conditions and so forth that were there.

And so we recognize that for maleic, 85% of the cost of maleic is butane, that's going back into the high energy costs, which exist in Europe, and we don't see those materially changing going forward and hence, the decision that Peter outlined.

Perfect. And if I may ask about the future of your European footprint, not on a little bit more downstream polyurethanes, but on the core MDI Rotterdam facility. I mean, there's a bunch of PO shutdowns, a number of them more likely to come as well. So at what point do you think that European demand may permanently be impaired for MDI and there may not be enough demand for your own facilities there?

I think that we have either the lowest or among the lowest production sites in Europe. And I believe that, that site is going to be competitive relative to other European producers for some years to come. I would be -- if we get to a point where we can't justify the operations of our European facility, I think that there'll probably be other facilities that will come to that conclusion before we do. However, we do continue to look at all of our operating costs there. We look at our operating viability. And -- but I see longer term, as I see today, that's a very limited vision. But as I see today, that's a site that we're going to continue to operate. And it's a segment of the market in polyurethanes that we're going to continue to feed.

The next question comes from the line of Josh Spector with UBS.

I wanted to ask in Advanced Materials, you cited power and industrial markets helping lift the EBITDA in the quarter. Curious how much of that you'd frame as structural improvement? It seems like maybe that's the case in power versus pull forward some cyclicality there and what's being baked into 3Q?

I think what we saw in second quarter was a more normalized run rate rather than a onetime basis. And as you continue to see power, I think, will continue to be a very stable platform. I think aerospace is going to continue to improve as the build rates start stabilizing more given my earlier comments and so forth. Again, that's not to say that you won't see a bit of volatility, but certainly nothing like what we see in the other divisions. So I'd say that as you look at second quarter, as we look into the third quarter, as we said in our prepared remarks, you'll see a little bit of seasonality. This is largely a European business. And Europeans have a tendency to take a few days off in August. And so you might see a bit of impact on that.

Makes sense. And if I could ask quickly for Phil. You had a $7 million benefit in Performance Products from what appeared to be an accrual reversal or something of that sort. Was that expected in 2Q? And is there anything else like that to call out in the 3Q?

No. And that was a reversal a loss contingency accrual related to our U.S. operations, Josh, that we had in Performance Products. I think we've called out as well in the second quarter that we did take a negative impact from asset utilization related to the reductions in our inventory. That was offset by the release of our bonus accruals as we've obviously reassessed our bonus accruals for the year. As you move into quarter 3, I think each of those 3 items will roughly balance themselves out, and you won't have a significant impact between Q2 and Q3 related to those.

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

Peter, when you think about China, they talked about involution. Is there a good amount of capacity there that could or maybe should be looked at and maybe taken out that could help the supply-demand situation we're in now?

Very good question. I think China is -- I've heard more in the last 30 days and having been in the last couple of 2, 3 weeks ago, more discussion in country, certainly than I hear out of country about the government looking at overcapacity, looking at older facilities. As I look at the MDI situation in China, most -- every facility in MDI in China is -- it's not only very good technology, but it's also some of the largest scale -- largest, best integrated facilities that are integrated all the way up to energy production, aniline production, coal production, all the way down through the line. So I think that there will be a number of closures that will take place in the chemical industry over the next year, 2 or 3. I do not believe that, that will be the case for MDI, particularly if you compare the competitiveness of those facilities with 30-, 40-, 50-year- old facilities that are operating in Europe that are subscale and having to struggle with much higher raw material costs and supply chain costs and so forth.

Mike, one area we are looking at is our joint venture in China on PO/MTBE has been significantly under pressure. It could be that over the coming years, there could be some of the older MTBE producing facilities that come out, but that will be over a number of years.

Got it. And then maybe a longer-term question, Peter. It's -- we've been in this trough for quite some time, and maybe it takes a little bit longer to get to a higher EBITDA number for the company. But do you still feel good that there is pretty good upside in EBITDA to a mid-cycle longer term? And how do you sort of think about getting there? What needs to happen?

No, I think that as you look at it, we always like to go back and look at past cycles and say that we're repeating -- we certainly can repeat the cycles, but the reasoning that goes behind the cycles, whether it's an active war, whether it's energy volatility, whether it's an implosion or an explosion, 2 different things in the housing market, the number of unsold homes today are almost where they were in 2007 and '08, but for completely different reasons. And therefore, I think that the outcome of this cycle will -- the timing of it and the reasoning behind that outcome will be completely different. As you look at the other thing that's unique about this cycle is that we've got kind of 3 major economic blocks in the world, and all 3 of those are being hit for different reasons. The U.S. around, in my opinion, at least as it relates to this segment of the chemical industry, it's largely around interest rates and affordable housing. And I believe that, that is something that will be addressed, can be addressed. And it could happen very -- I'm not going to say overnight, but if interest rates -- if you saw a meaningful change in interest rates, something that economists, "the experts" have now been talking about for what, 3, 4 years, I think you could see quite a rapid recovery in North America. And that would, I think, take us to normalized levels of MDI, again, not over the course of a quarter, but certainly over the course of a year or something where you're getting much closer to a normalized rate. As I look to China, in the excess capacity that they have in China and the ability to stimulate consumer spending in China, largely from the rebound of an implosion that took place in their housing markets, again, for completely different reasons than what we saw in the United States and what we're seeing in the United States. They're now in probably their fourth going to their fifth year of what I would consider to be a lack of consumer confidence being driven largely by the implosion that you saw in housing value and overcapacity that was built to some degree to try to counteract the economic benefits of that housing issue. I think longer term, China is going to continue to be a very competitive place. I have a very competitive energy. They've got a vibrant work, well-educated workforce. And I think that China recovers. Europe is going to continue to be in an area of volatility, but it will find -- look, Europe is just not going to disappear. It will find its areas of competitiveness, whether it's in aerospace, whether it's in electronics, whether it's in renewable energy and so forth. And they'll continue to benefit. There'll be a lot of economic dislocation from Europe as they de-industrialize. A lot of that will end up in North America, the Middle East or in China. And so there'll be this reselling, but I don't see the tide coming back at the same -- for the same reason at the same time in all regions. But of course, you will see a recovery, and you will see for new capacity to be built in this industry to feed future demand, you're going to have to see higher prices, higher margins, and that will precipitate a cycle and a cyclical return. And that element of recovery has always been the same in past recoveries as to the reason why you see the recovery. So sorry, that was a long rambling answer. But yes, I believe that there will be a recovery. I think that we get back to those normalized levels probably in the U.S. and in China sooner than in Europe. And I see no reason why we wouldn't be able to do that. And then when we do that, we'll have an even more competitive cost structure, that will return even more to the bottom line. We've learned how to operate the company at a lower cost and lower inventory, stronger working capital discipline. We've got further downstream capacities that are filling out in Geismar, Louisiana, new capacities and catalysts and so forth that have been built and completed and now going into market in Performance Products and chip cleaning technology and so forth and Performance Products coming into the market. So not only will we see the recovery, but we'll also see some new opportunities from past investments to capitalize on that.

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

Peter and Phil. Just wanted to stick to the theme of a recovery, however far it is. In your prepared remarks, on the polyurethane side of things, you mentioned that sequentially, volumes were up around 3%. And typically, Q1 to Q2, you see an 8% to 10% sort of uptick in volumes. So I'm just trying to get a sense of how far below normal volume levels are we just to get a better sense of as and when that recovery happens, how much higher these volumes can actually go?

Yes. I think that for the most part, when we look -- when we take out kind of onetime contracts and business that we won in the second quarter, you're probably looking at somewhere between 5% and 8% that I would say is kind of missing in the numbers. And that typically is around housing and construction. We saw an incredibly anemic housing and construction market this year. I don't think we've seen anything like this since COVID and since The Great Recession before that. So there's -- I think there's a great deal of uncertainty around people wanting to commit to what is usually the largest purchase in their lifetime during times of market volatility and uncertainty and also with higher interest rates. So I'm very hopeful that those markets will recover early this next year, and we'll be in a much stronger position this next year. But we definitely -- the single biggest impact in the second quarter that was -- that I think -- I'm not going to say surprised us because we were talking about this on our last call, but was the other lack of seasonality that we typically see at this time around construction.

Understood. Very helpful. And as a follow-up, I mean, again, in the prepared remarks for polyurethanes, you guys talked about how through the course of the quarter, you saw a more intense competitive environment in Europe. And I guess you mentioned driven by domestic producers. So can you just expand on that? And do you see any sort of resolution around that in the near term as well?

Unfortunately, I don't see a great deal of resolution around that. We push very aggressively in the second quarter as we did in the first quarter, as we did in the quarter previous to that, for better, higher pricing margin expansion in Europe. And the -- I believe that I can't -- again, I don't know what the decision of our competitors are, but it seems like people are putting volume over value and they're moving volume at any price sort of a thing. So surprisingly, in Europe, that is today our highest cost urethane production in the world and our lowest value of MDI in the world. So you kind of got -- both sides are hitting you.

So what do we do, Hassan? We continue to focus on the announcements we made, getting our cost base correct and all of the activities that we're doing, including closing some of our facilities there and then work within the competitive environment that's existing.

Yes, 85%, 90% of our cost reductions right now across the company are focused in this market.

The next question comes from the line of Aleksey Yefremov with KeyBanc Capital Markets.

Peter, I was hoping you could deconstruct for us Polyurethanes segment price declines of 5% year-over-year this quarter. I mean you just talked about Europe, but was this the sole reason for this decline? Were other regions particularly bad or good? And also from the perspective of just polymeric MDI versus systems, were these thesis better or worse than the 5%?

Yes. I think that we did see a price fall from the first going into the second quarter. We started off the second quarter, the beginning of the second quarter, particularly in China, where we've gone from about RMB 18,000, RMB 18,500 down to about RMB 15,000. So was that 20% -- 15%, 20% drop in price from the end of the first quarter going into the beginning of the second quarter. We came out of that quarter with stabilization, a bit of an increase through the quarter and stabilization as we look into the third quarter. I think that we're hoping that we'll see some price increases in China with that stabilization getting better. In the U.S. and Europe, we're just seeing some very competitive pricing dynamics in place. A lot of people chasing little volume.

Aleksey, if you were looking at the 5% year-on-year, which I think you are in our press release on polyurethanes, you go back to this time last year, it was about RMB 18,000 for polymeric. And today, we're at about that sort of RMB 15,000, RMB 16,000. So you've seen a drop of 10% to 15%. So it's mostly in the polymeric area. You would have had some pressure on system prices, some on MDI variance. But in general, the move that you've seen is polymeric MDI related.

And here, in the past, said that it's hard to move U.S. MDI demand offshore or at least it could be tariff-related repercussions. Can you update us on this view? Have you seen any demand maybe move to Mexico, Canada or it's been pretty steady?

Yes. So Aleksey, I think you're asking about the trade flows there and whether some product instead of coming into the United States moves into Mexico or into Canada. Look, I think -- yes, I think we've said if you look through the first sort of 6 months of the year, clearly, the imports coming into the U.S. are considerably lower. There will be some which would have gone into the Canadian business, into the lumber business there. A little bit into Mexico. Mexico is not an enormous market here at all and mainly driven by automotive and furniture actually, where in general, you have to spec in. As we said in our earlier remarks, what we've been watching is that whilst the imports have dropped off from China. The European imports into the U.S. have actually increased in that time. And that, coupled with a lower demand environment, those 3 elements combined have led to a pricing environment, which is relatively stable rather than, say, the increases that I think the industry had hoped for.

Yes. Aleksey, my apologies. Your call was kind of breaking in and out and Phil coming from the U.K. is used to listening to the Scotts and Irish and so forth. So he's better at stuff like this.

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

Just wanted to ask about 2 things. So first off, I understand that, obviously, Huntsman, it's not the view that the world needs another MDI plant, especially under your leadership, Peter. But I guess others may not necessarily feel that way. Is there anything else that potentially -- what's kind of the pushing point when others kind of get to the same conclusion that you do? And maybe if you could frame that, whether it be cost per ton or pricing or anything like that? And then similarly, on epoxies in your Advanced Materials business, there's been some exits by others in the BLR market. Does that affect your sourcing at all? Or what can you share there?

Yes. Well, I think that on the BLR side, I'll take that first. On the BLR side, I think that we've got plenty of suppliers. We have seen some higher cost facilities that have cut back or slowed down. There's plenty of BLR on the market, and I wouldn't be -- I wouldn't assume that, that's going to impact our earnings on our Advanced Materials at all, the few that have exited. On MDI capacity, I just -- Arun, I simply can't imagine what takes place in a boardroom when people decide they're going to take $1 billion, $2 billion and invest it in something that's going to take 5, 7 years to build in a product that we're swimming in today. I don't know, maybe they got a crystal ball as to where we're going to be in the decade from now, but I guess I can see the rationale that the Chinese have had over the last couple of decades as they wanted to become more independent, self-sufficient. I get that. But I look at the growth rates and so forth across Europe and North America and even China today, I just don't see any justification for that. So I can't speak to the rationale that would go into a decision like that.

And Arun, I think there's a reality none of the Western manufacturers as far as we know, have announced any new capacity, major capacity additions and major plants. There may have been some debottlenecking, but nothing from a major new plant perspective.

Right. But I guess I'm just curious, would they and yourselves get to a place here where that utilization rate remaining in the low 80s or high 70s is just not acceptable and would force some closures? Do you foresee that happening? And would it make sense for you guys as well? I appear not, I guess not just given your position on the cost curve, but do you foresee any supply takeout materializing that way?

Yes. I would -- I believe that there are some very high-cost facilities in Europe, but that's just from information that I read publicly, I would have thought that would have happened before now, but it hasn't. Chemical facilities, by and large, are very expensive to shut down. In Europe, it's very problematic when you have to deal with government authorities and so forth. I was going to give into my own experience, but I won't. We don't have time. But it's -- particularly in Europe, it's expensive. And particularly in sites where you've got 4 or 5 other chemical companies that are dependent on your operations, you're dependent on their operations and you may be able to or want to shut down, but you've got 15-, 20-year supply agreements and offtake agreements and shared site costs and so forth. So yes, a lot of these, it's a tough and very expensive decision to just simply walk away. But I think you're at that point where I can't imagine they're not companies today that are looking at those economics and decisions.

The next question comes from the line of Mike Harrison with Seaport Research Partners.

I wanted to see if you could give us some color, Peter, on the comments that we're seeing European MDI being imported into North American markets. Can you just explain what's driving that? And do you expect that to persist into the second half?

I've got to be honest with you. I can't imagine in my wildest dreams why somebody would do that. But again, I don't sit in the boardroom of -- I don't say I'm mocking the question. It's a very good question. You can imagine you're taking some of the most high-cost MDI produced in the world and shipping it, paying the cost of duties and everything else. I don't know. I don't know why somebody would do that, but it's being done. So that's the market.

No, I actually print up the printed remarks, and I wrote down WTS next to that comment that you made in the remarks there.

Yes. I've written that more than once.

My other question is just on the MTBE joint venture. You said there was a loss in the second quarter. Is any improvement expected to materialize in the second half? Maybe just give some color on what you're seeing in terms of MTBE margin dynamics.

I think typically, MTBE does its best in the driving season, which is usually the end of the first quarter, second quarter through the third quarter and gasoline blends, octane values and the cost of raw materials. It's -- and again, I think I have a very good knowledge of MTBE in markets where they're going for the next 24 to 48 hours. I would say between now and the end of the year, it's going to be a struggle to see it get much better.

The next question comes from the line of Laurence Alexander with Jefferies.

This is Kevin Estok on for Laurence. So you guys touched on the rate cycle a bit, but I just want to delve into that a little bit. I guess just wondering like from an amount of rate cuts, I guess, how much do you expect it would take to basically turn the construction and consumer durable end markets a bit? Like -- so would you say like maybe it would take 75 basis points in 2025, maybe 75 in the first half of 2026, maybe causing some green shoots in construction by the back half of '26 and then consumer durables at 2027 at best?

Monetary policies really are not my area of expertise. I'll probably defer to Phil on that. But I would just say that it's probably two issues. It's not just how much is taking place, but also the direction in which it appears to be going. If you see a small rate cut of 25 bps, I'm not sure that's going to catalyze the economy. But if that's going to be the first of 2 or 3 expected rate cuts coming, I think that, that could be a very substantial catalyst. But at this point, there's just not a whole lot of visibility that the Fed is giving.

And a key impact that we always watch is -- you've got the Fed funds rate, but what's that doing for longer-term yields and then ultimately, how is that feeding into the mortgage rates themselves. And we've seen a bit of a disconnect, as we know, between where 10-year yields currently sit. So we're looking at all those factors. They all need to come down and then get some greater stimulation in construction and move from there.

And operator, I think we're getting near the top of the hour. So why don't we take one more question?

Yes, sir. The next question comes from the line of Aaron Rosenthal with JPMorgan.

Just wanted to quickly touch on the balance sheet again. I guess it looks like there was additional funding on the revolver during the quarter, I guess, despite the better cash flow result and acknowledging the commentary thus far on the dividend and the balance sheet. I guess, maybe is it just fair to assume that any maybe potential cash shortfall in the second half of the year would be plugged by additional revolver borrowings? Or are there any other considerations, I guess, currently being entertained perhaps issuing new debt to shore up liquidity at some point this year?

Yes, Aaron, it's Phil. Thanks for the question. Thanks for being on the call. No, we're not looking at any new debt issuance in the second half of the year. I think you're probably aware of where we sit from a maturity standpoint, which is our revolver matures in May of 2027. We've got our securitization facilities as well. And then our longer-term bond maturities are '29, '31, '34, which is helpful, frankly, in the current trough environment overall. Look, on a cash flow basis, last 12 months, we generated $150 million. We did bring in $40 million from our Chinese joint venture liquidation. So theoretically, over the last 12 months, we covered the $170 million of dividend. We'll focus on our cash-generating activities in the second half of the year here and manage everything accordingly. We recognize where we are from a credit rating perspective, and we'll manage within the sub-investment grade rating category that we are.

All right. Thanks, Joe. We can end the call now.

Thank you. This concludes today's conference. You may disconnect your lines at this time. Enjoy the rest of your day.