Hello and welcome to the LyondellBasell teleconference. At the request of LyondellBasell, this conference is being recorded for instant replay purposes. Following today's presentation, we will conduct a question-and-answer session. [Operator Instructions]. I would now like to turn the conference over to Mr. David Kinney, Director of Investor Relations. Sir, you may begin.

Hello and welcome to LyondellBasell's fourth quarter 2017 teleconference. I am joined today by Bob Patel, our CEO and Thomas Aebischer, our CFO. Before we begin the business discussion, I would like to point out that a slide presentation accompanies today's call and is available on our website at www.lyb.com. I would also like for you to note that statements made in this call relating to matters that are not historical facts are forward-looking statements. These forward-looking statements are based upon assumptions of management, which are believed to be reasonable at the time made and are subject to significant risks and uncertainties. Actual results could differ materially from those forward-looking statements. For more detailed information about the factors that could cause our actual results to differ materially, please refer to the cautionary statements in the presentation slides and our financial reports, which are available at www.lyb.com/investorrelations. Reconciliations of non-GAAP financial measures to GAAP financial measures, together with any other applicable disclosures, including earnings release, are currently available on our website at www.lyb.com. Finally, I would like to point out that a recording of this call will be available by telephone beginning at 2:00 P.M. Eastern Time today until March 5, by calling 866-677-5199 in the United States and 203-369-3133 outside the United States. The passcode for both numbers is 6549. During today's call, we will focus on the fourth quarter and full year 2017 performance, the current environment, our near-term outlook and then we will take a little time to provide you with an update on LyondellBasell's strategic progress. Before turning the call over to Bob, I would like to call your attention to the non-cash lower of cost or market adjustments or LCM which we have discussed on past calls. As previously explained, these adjustments are related to our use of LIFO accounting and declines in prices of raw materials and finished goods inventories. While no LCM adjustments were recorded during 2017, LCM did affect results for prior years. Comments made on this call will be in regard to our underlying business results excluding the impacts of these LCM inventory charges. With that being said, I would now like to turn the call all over to Bob.

Thanks Dave. Good morning to all and thank you for taking the time to join our fourth quarter earnings call. Let's begin with slide four and review the results we delivered during the 2017 and our progress in advancing our growth strategy. During last year's fourth quarter teleconference, we described how our work in 2016 to complete both an unusually heavy maintenance schedule and 20% expansion program for our U.S. ethylene capacity would lead to higher volume in 2017. Our team overcame challenges from capacity additions in our industry and obstacles from Hurricane Harvey to deliver significant volume improvements and an 8% increase in EBITDA. Our profitability resulted in an 8.4% free cash flow yield and capital returns that exceeded the company's cost of capital by more than three times. LyondellBasell's shareholder returns in 2017 continue to surpass the strong growth of the S&P 500 and the S&P chemical index benchmarks. During our Investor Day in April of 2017, we outlined our ambitions to build on our strengths and skills by adding value through organic growth and a disciplined pursuit of inorganic opportunities. Last year, we advanced organic growth by moving forward on two major greenfield capacity additions by expanding our global reach with a third compounding plant in China and by partnering with SUEZ on a venture for plastic recycling in Europe. We improved our capabilities in readiness for growth with targeted investments in people to support increased activity for both organic project development and inorganic growth. We also applied our strengths in operational excellence to drive improved reliability at our refinery while extending our legacy technical innovation within our polymer businesses. Our strong 2017 results have a foundation in our core values which include a fundamental commitment to top-tier safety performance. Turning to slide five. Our safety performance…

Thank you Bob and good morning to all of you. Please turn to slide eight which shows our fourth quarter and full year segment results. I am pleased to report that our Olefins & Polyolefins Europe, Asia and International segment achieved the fourth consecutive year of record EBITDA. In 2017, we show an EBITDA improvement in four of our five segments. These results will be reviewed in detail during the segment discussion. As mentioned by Bob, fourth quarter results include an $819 million one-time, non-cash tax benefit related to the passage of U.S. tax reform in December. This benefited fourth quarter results by $2.07 per share and full year results by $2.05 per share. Full year 2017 results also include a $106 million after-tax charge due to bond refinancing and the $103 million after-tax gain from the sale of our interest in the Geosel pipeline and storage system in France. Please turn to slide nine which provides a picture of our cash generation and use. During 2017, we continued strong cash generation with $5.2 billion of cash from operating activities. Our capital spending was lower than anticipated for the year due to later timing for the final investment decision for our PO/TBA plant and the classification of certain project related spending as intangible. During the first quarter of 2017, we took advantage of favorable markets and refinanced $1 billion of 5% notes due in 2019 with an equivalent amount of 3.5% bonds due in 2027. With this transaction, we also derisked refinancing risks in 2019. In the third quarter, Standard & Poor's raised LyondellBasell's senior unsecured debt to BBB+ from BBB. Our strong cash flow allows us to finish 2017 with a cash and liquid investment balance of approximately $3.4 billion, approximately $1 billion higher than the year. Turning to…

Thank you Thomas. Let's turn to slide 12. In our Olefins & Polyolefins Americas segment, fourth quarter and full year results were supported by Hurricane Harvey supply constraints and strong global markets. Fourth quarter EBITDA was $784 million, $168 million more than third quarter. For the full year, segment EBITDA was $3 billion. Relative to the third quarter, ethylene margins increased by $0.05 per pound. Despite some lingering disruption from Hurricane Harvey at our La Porte facility, our ethylene cracker operating rates remained strong during the quarter averaging 92%. 79% of our ethylene production was from ethane and approximately 87% came from NGLs. In polyolefins, combined results improved by approximately $40 million. During the quarter, our polyethylene price spread over ethylene improved by approximately 40.02 per pound. For the full year, results increased by $105 million primarily due to ethylene production volumes improving by 17% as we captured the benefits of our expanded capacity at Corpus Christi and the absence of planned maintenance. Polyolefins results declined by approximately $70 million from the prior year as polypropylene spreads declined by approximately $0.05 per pound, partially offset by an increase in polyethylene spreads by approximately $0.02 per pound. During January, IHS is forecasting a decrease in polyethylene margin with some improvement by the end of the first quarter. The U.S. Gulf Coast experienced unusually cold weather during the third week of January that caused disruptions across the industry. Our assets were also affected and we currently estimate that these disruptions will reduce LyondellBasell's first quarter results by approximately $45 million, with approximately two-thirds in O&P Americas and most of the remainder in intermediates and derivatives. In addition, we have planned maintenance on one of our two crackers at Channelview during the first and second quarter that is estimated to have a $100…

[Operator Instructions] Arun Viswanathan from RBC Capital Markets, you may go ahead.

Great. Thanks. Good morning.

Good morning Arun.

First, on your ethylene and polyethylene outlook. On slide 13, you show an excess of seven billion pounds over the next couple of years for a 2% drop in operating rates. And you also mentioned that IHS has margin declines forecasted for January. But other consultants have actually settled January flat. The industry has a $0.04 per pound increase for February. So how do you expect these declines to play out? Is it more second half of 2018 phenomenon? And is there a possibility that delays in demand upside would result in limited price to margin compression over the next couple of years?

Yes. So Arun, as we finished last year, the market still were quite balanced or tight as there was some recovery from the Harvey effort. Incrementally, the weather here in Houston in January did impact production, including ours, as I mentioned. So our sense is that the backdrop is perhaps even a little bit tighter than what folks had depicted when some of those publications came out. And if you will recall, in our third quarter earnings release, I had described that typically in a given year, given seasonality in our business, most of the growth in a year happens in the first week orders of the year. So I suspect that we are going to have pretty firm market conditions through most of this year. And we will look for perhaps some weakness in Q4 when demand seasonally declines.

Okay. Thanks. And just as a follow-up, maybe you can just discuss your strategic priorities a little bit. There was limited buyback activity, it appears, in Q4 and Thomas mentioned M&A. So what are you thinking there? What are you seeing there? Is there any kind of time frame as to what you would want to get something done? Or how is that playing out? Thanks.

Yes. So first, I would say, Arun, I wouldn't tie the two together. As I mentioned during my prepared remarks, when we think of our cash deployment priorities and our hierarchy, share repurchases continue to be firmly a part of that plan. So maybe I will turn over to Thomas to describe some of the tactics around how we engage in our share repurchase program to better explain how we go about things. So Thomas?

Thank you, Bob. So we finished the year, obviously, very strong. We had a strong quarter. We had real strong cash generation in the fourth quarter. And as I have mentioned, the balance is $3.4 billion of cash, which actually is also very well balanced when you look at it from a business perspective. We have about 44% of our cash in Euro and 49% in U.S. dollars and very equivalent of how we are actually running the business. So we are very deliberate how we manage that position. In terms of your question on share buybacks, as Bob has mentioned it, that we have an existing program. In May 2017, we approved another 10% of share buybacks. Out of that program in 2017, we have bought back about 16% of that particular program. The intention clearly is in our next AGM to get an approval of an additional 10%. So having said all this, you also saw that in the fourth quarter, we have not had any shares purchased. But that's mainly related to the strategy. We have 10b5-1. You know how the process works. We are opportunistic and buy back opportunistically our shares. We commit on that 10b5-1 to a grid. The share price traded throughout the fourth quarter outside of that grid. That's virtually, in a nutshell, the explanation. But we are committed that this is one of the cash allocation strategic positions.

[Operator Instructions]. Steve Byrne from Bank of America, you may go ahead.

Yes. Thank you. Just wanted to drill into your views on these Chinese reforms. How much polyolefin capacity in China do you believe has been curtailed in recent months due to some of the government initiatives there?

Yes. Good morning Steve. I don't have a firm number on that. But I think there's been some impact in addition to the reduction in some of the recycling. So if you step back and look at polyethylene supply/demand growth and kind of look globally, from 2017 to 2018, we are expecting that PE capacity is probably going to grow about 5.6% on a nameplate basis and HDPE is going to grow 4.1%, which is about equivalent to its growth rate annually. So whether it's Chinese reforms, weather related issues here, I think all of it kind of nets out to very balanced market conditions for the foreseeable quarters and that we don't see this supply excess as being significant. And we are starting at very high operating rates. So I think all these things you mentioned, they all have incremental impact on that supply/demand balance.

Thank you. Our next question comes from Vincent Andrews with Morgan Stanley. You may go ahead.

Sorry. I was on mute. Thank you. Bob, I haven't heard you talk about feedstock prices, ethane, in particular and sort of what the outlook is for that as we move through 2017, maybe particularly given now that we have a nice high oil price and maybe some more associated gas production. So not to lead the witness, but what's your outlook for ethane for the year? Or maybe for next year?

Good morning Vincent. So ethane kind of followed gas prices here recently. When you step back and look at the numbers, the last number that we have they had been published in November and it had the production of ethane was kind of the order of 1.6 million barrels per day, consumption was about 1.3 million barrels per day. So we still have more ethane production than demand. And this is in a backdrop where propane and butane weren't really in the mix because they were quite expensive. So as we move through this year and as propane and butane prices moderate, I think that, combined with more ethane coming to market with new fracs and new pipelines from the Permian, we continue to believe that there's enough ethane nearby the Gulf Coast to supply the new crackers that will come online. And if anything, as you mentioned, higher oil prices will likely increase the output of ethane, especially from the Permian. So we are watching it, but we continue to believe that ethane supply will be sufficient, if not in excess, as we move through the year.

Thank you. Our next question comes from Don Carson with Susquehanna Financial. You may go ahead.

Yes. Thank you. Bob, a question on some of your growth plans. You mentioned that you are looking to secure more propylene. Can you sort of define how much you are looking to secure? And what would be the format? I notice you put a PDH plant on there. And while you have some experience running those in your joint ventures, PDH certainly hasn't been the most reliable way to source propylene lately. Would you look at another metathesis unit? Or what other options do you have on the table?

Well, I think, for us, very frankly, PDH would be the leading case because with the metathesis it's sort of an optimization tool that we have. And it doesn't always run full. It depends on propylene relative to ethylene price. And I think some of the challenges that you mentioned on PDH is a couple of things. One is, some of the most recent PDHs are the largest of their kind that have ever been built. So that brings complexity by itself. And much like ethylene crackers, that could take a bit of time to kind of iron out some of the bugs and work through on some of the startup issues. But the way we are kind of thinking about this is that we are a fairly significant buyer of propylene and if it's really kind of a make versus buy decision. But I see us as continuing to be a merchant buyer of propylene even if we were to build a world-scale PDH plant. And in terms of operability, that wouldn't hold us back from considering PDH. I think it's just uniqueness because of the first and second of this kind in terms of scale that are being built today.

Thank you. David Begleiter from Deutsche Bank, you may go ahead.

Thank you. Good morning. Bob, on your slide 18, detailing your cadence of new investments, I am struck by the lack of a new ethylene cracker. You only have a small expansion over the next eight years. And given your positive view of U.S. ethylene, why isn't there a greenfield ethylene cracker in the longer term horizon? Thank you.

Yes. So David, we run early with our debottlenecks and so we focused quite a bit on ethylene over the last four, five years and so really now our focus is to consume more of that ethylene internally and convert it to polyethylene. I think we are still going to be a merchant seller of ethylene, but likely less so than we are today. So when I think about sort of the opportunity set in front of us with more polyethylene potential given the amount of ethylene we have, a PDH polypropylene here, perhaps PP in Europe, continuing to execute our PO/TBA, I think we have many other high return opportunities before we would consider a new cracker. I do think at some point we will undertake the analysis on that and it's just more a matter of phasing. And also I like the fact that our organic growth program is targeting multiple value chains. So we have ethylene, polyethylene, propylene, polypropylene and propylene, PO/TBA. So it gives us some diversity, if you will, as well in terms of our growth program.

Thank you. Kevin McCarthy from Vertical Research Partners, you may go ahead.

Yes. Good morning. Bob, with regard to the refinery, each quarter improved as 2017 progressed. Meanwhile, with the reduction in tax rate, one would think that separation could result in a lower tax bill than you might have thought last time around. So in that context, can you update us on your strategic thinking as it relates to the refinery?

Yes. Good morning Kevin. Our focus has really been on improving the operation. We know we can run better and we demonstrated that last year. In fact, it was one of the few assets that ran through the hurricane even if at reduced rates. So we are firmly focused on that. We see the IMO opportunity getting closer. There's a wide-ranging set of views around how it will impact light-heavy differentials, but this is a really premier asset with significant scale and in the amount of sour crude processing capability and coking capacity we have. So we are just going to focus on running it reliably and let's see what this IMO opportunity brings. We think there's some upside. And as the year progresses and we get towards the end of the year, I think we will have even more visibility about the magnitude of that upside. So frankly, that's our focus today.

Thank you. Our next question comes from Jeff Zekauskas from JPMorgan. You may go ahead.

Thanks very much. Just have a two-part question. The first is, how much does your cash tax rate go up in 2018? And what happens to the cash tax rate in 2019? And secondly, in table 11, you isolate your pension settlement charge for the fourth quarter of 2016 of $58 million, but I think you took a charge of $20 million this quarter but you haven't isolated that as an item. Why is that?

Thanks for the question on the tax rate. So the cash tax rate, as I have said in my prepared remarks, for 2018, we expect, if you start with an ETR of 21%, the guidance we have given, the rate from that guidance of 21% will be effective tax rate on the cash tax rate we are expecting somewhere in the area of three to five percentage points higher cash tax rate. The reason why this has mainly to do with taxes into some of the European countries, especially Germany, now where we pay actual taxes now in 2018 taxes for years of 2015, 2016 and also 2017. So that's the main driver for the higher tax rate. Obviously, your question is absolutely correct. Now looking to future years, 2019 and the years beyond that, we expect the cash tax rate to be clearly below the 21%. So 2018 is an exceptional year due to the reasons I have explained and in 2019 and years thereafter, cash tax rate below the 21% of ETR. And on the pension charge, yes, that's correct. So we had a pension charge in December of 2017, also related to Germany, the reason for that charge was it's a multi-employer pension plan. And we had some of it is due to reduction of the discount rate that impacted it. And we also had pension settlement charges where we took advantage from lump-sum payments in 2016 and you have mentioned that correct amount too.

Thank you. Our next question comes from Jim Sheehan with SunTrust. You may go ahead.

Thank you. Moving to EAI, can you talk about how MTO dynamics are impacting you in China and I guess also in intermediates and derivatives? And related to that, could you talk about the naphtha price outlook and your use of advantaged feedstocks in Europe going forward?

Yes. So good morning Jim. On MTO, certainly, given where global operating rates have been in ethylene, MTO continues to be the last increment of supply for Asia and therefore for the rest of the world. And you can see that evidenced in ethylene prices over in Asia. And to the extent that there's a delta between that and naphtha based cost, it certainly affords EAI a reasonable margin in terms of ethylene. And you rightly point out the tie to our intermediates business. As there's a call on the methanol, we see methanol values rise and margins rise. So there's a dual benefit for the MTO being in the money. As we look into 2018, our sense is, given that operating rates are so high that during seasonally strong periods, likely MTO is still going to be needed in a very meaningful way. And so I would expect that continue.

Thank you. P.J. Juvekar from Citi, you may go ahead.

Yes. Hi. Good morning.

Good morning P.J.

Bob, on slide 13, you show your effective operating rates remaining close to 95% through 2020. My question is, can the global system run at 95% effective rate day-in and day-out, given the age of the plants, et cetera when we just saw that temperatures dropped in the Gulf Coast and the six plants went down? So where do you think global system can run sustainably? Thank you.

Yes. Thank you, P.J. I think at these levels, it's been difficult to sustain. And as you think about new, very large crackers starting up, much like I described with PDH, there's a lot of challenge in the ramp-up. They are very, very capable companies who have undertaken these expansions, but they are very complex process units. And so I suspect, as we have seen in the past when operating rates have been this high or stayed this high, markets are very sensitive to small unplanned outages as there's not enough margin. So I think the consequence is, first of all, MTO will be needed more consistently. Secondly, you could see a propensity for ethylene prices to rise when there's some unplanned downtime. And so we will just kind of have to watch that. But that's been our point the last couple of years that we don't really see a large drop in the operating rates. And when you are in the mid-90s like we are today, even if you are at 93% for a year, during seasonal peak periods, you are actually running in the upper 90s. So we consider that to be a very tight market.

Thank you. Our next question comes from Frank Mitsch with Wells Fargo Securities. You may go ahead.

Good morning gentlemen.

Good morning.

I wanted to follow-up on the share buyback. I just wanted to make sure that I was understanding this correctly. So you set up a 10b5-1 plan so that you can buy back stock regardless if you were in possession of material nonpublic information. And it was predicated on where the share prices were trading. And you set that price at a level where you were interested in buying the stock was lower than where the shares were trading throughout Q4. And so that's why there was no shares bought back during the quarter?

Well, so Frank, what we do is we, Thomas and I, sit together and we kind of look at where the current share price is, what's our expectation for cash flow and we set up a grid that, again, allows us to accomplish our objective of being opportunistic. And then we let that run its course. And then again, as we are doing currently, we are evaluating the next 10b5 plan. So yes, generally, you are correct.

And our next question comes from Aleksey Yefremov from Nomura Instinet. You may go ahead.

Thank you. Good morning everyone. Bob, you mentioned that CapEx would have about $3 billion through 2022 per year. So you are starting with $2.4 billion this year. How do you imagine the ramp? And as a second part of this question, does this $3 billion average assume that most or all of the projects on the slide 18 actually get executed?

Yes. So the ramp will be in 2019 will be pretty close to $3 billion and in 2020 will be at $3 billion or a little above. It assumes most of those projects go forward, yes. And what drives that number today is our PO/TBA project is a fairly significant investment. So as we get into the construction and sort of the peak of the spending for that project, which will be 2019 and 2020, that drives those numbers. And then you will see those come off in 2021 even though we are going to continue with these other projects. The PO/TBA project by itself is pretty significant.

Thank you. Our next question comes from Hassan Ahmed from Alembic Global. You may go ahead.

Good morning Bob.

Good morning.

Obviously, we have seen propane prices going up recently. And obviously, they have taken up propylene prices as well. So my question to you is, on the naphtha-based ethylene margin side of it, do you see this being a sustainable sort of boost for naphtha-based ethylene margins, number one? And number two, how should we also think about this as an input for you guys on the polypropylene side of things?

So first of all, Hassan, I think part of the driver for the polypropylene price increase has been some of the challenges on startup of a couple of very large PDH units here and one of those companies is a merchant seller of propylene. So I think that's been a pretty significant driver of propylene prices in the very near term. Propane prices coming up certainly contributed to some of that. I think propylene, as it has been recently, will continue to be somewhat dynamic in terms of price. And it doesn't really affect our thinking in terms of our new polypropylene plant because if you think about if we do build PDH and we are thinking about propane to polypropylene essentially and if I think around the propane side of that equation with the Permian ramping up, more ethane, more NGLs, we think there's going to be lots of propane. And we think that the PDH-based polypropylene can be economical here in the U.S.

Thank you. Our next question comes from Duffy Fischer from Barclays. You may go ahead.

Yes. Good morning. A question just around the M&A opportunity. The projects you show come in somewhere around four to five times EBITDA. You guys trade a little bit over seven. It doesn't look like there's anything in the market that would kind of sell in the private market anywhere close to that. So if you do a deal, what should we expect to see from an EBITDA multiple? And then would it be higher than where you trade then with synergies you get lower? Or do you think you can actually buy stuff that's cheaper than your multiple currently?

Duffy, the ultimate goal is about value creation for the long term. And I know those words are easily said. But look, I will tell you, we are focused on that. When we think about whatever it might be and we think about synergies, we think about cost, operational synergies. And I will tell you very frankly, we are well positioned today with our cash position, with the balance sheet and so on. I don't feel that we have to go do something right now. You are going to see us continue to be patient, be value minded and think about how do we apply our strengths to create value. And the kind of position we have today, it affords us a lot of flexibility going into whatever sort of market environment exists. So I don't feel the urge that we have got to go out and do something because we have all this flexibility. And I don't think you should expect that that is going to change anytime soon. We will again be very value-minded.

Thank you. Jonas Oxgaard from Bernstein, you may go ahead.

Hi. Good morning guys.

Good morning.

Bob, you were talking about the supply, but can you talk a little bit on the demand side? It looked like demand was surprisingly strong last year and now with the impact of Chinese recycling, it looks even stronger. What are you seeing in the marketplace? And how are you thinking about it for the next year or two?

Jonas, we are seeing very good demand at the moment. And if you think about last year, especially in the U.S. with first of all, in polyethylene in a tight market had a very, very strong year because of more onshore oil and gas drilling and so on. Industry exports actually declined significantly in 2017 from the U.S. And certainly for our company, they declined dramatically. So if you assume that global demand for high-density polyethylene, for example, grows at 4%. Typically, given that there's a lot of packaging and things that are more nondurable in nature, I actually think that there's a potential for even higher growth catching up from last year's constrained environment from a supply standpoint. And from the U.S., because we had to cut back so much on exports, I think getting back to more traditional or more recent averages on exports in the U.S., that creates demand for U.S. based production. So I am quite constructive. And as I cited some of those statistics, supply growth for high-density polyethylene is about 4%, 2017 to 2018 and demand growth, I think, should be at least that. So I think we are going to see pretty good conditions.

Thank you. Our next question comes from John Roberts with UBS. You may go ahead, sir.

Thanks. Bob, the next wave of shale-based chemical investments, whether in the olefin or methanol chains has a number of projects that have been sitting on the shelves. Do you think the current expensing of CapEx that begins next year will cause some acceleration in the groundbreaking of the projects industry-wide? Or do the lead times required and engineering constraints just make that unlikely?

Yes. So John, it's a great question and one that I have been asked in different forums. I can't speculate what others will do, but I will tell you how we are thinking about it. I continue to encourage my team to think about the investment logic and sort of why we would build something. And I think tax reform, it might add to returns. It's not the reason to undertake organic growth because it could change frankly. And as you rightly point out, the cycle is somewhat long in terms of building. So from LyondellBasell standpoint and from my standpoint, there's got to be solid investment logic and we would think about undertaking this investment in the prior tax regime or in the new one. And so we will have to see how that plays out. But even if some of the capital spending increases, we are probably looking at five years from now or so before we see capacity hit the market.

[Operator Instructions]. Our next question comes from Bob Koort with Goldman Sachs. You may go ahead, sir.

Thanks very much. I appreciate you guys going long to get the questions in. Bob, your large North American peer opined yesterday that maybe this Chinese recycling ban wasn't really going to affect virgin PE growth rates and that scrap might end up somewhere else and get reprocessed. Have you seen any impact from that at all or do you think it's not really that relevant in the grand scheme of things?

Well, I think, Bob, in the near term, we haven't seen anything, but I do think that some of it will get dislocated and move to other countries. But that takes time and there's a bit of a space or a lag in between what's happened in terms of regulations in China and where that product shows up. The other thing I would mention is that, I think globally there's more scrutiny on the quality of recycled resins. So I think it probably provides some tailwind here in the next 12 to 18 months until that ends up somewhere else or a part of it does. And that's the period where we are seeing more capacity. So I think directionally, it probably still helps us.

Yes. Bob, I think you have to consider that the recycling industry in China took nearly a decade to build up. And so that won't happen overnight somewhere else. Thanks.

Thank you. Our next question comes from Matthew Blair with Tudor, Pickering, Holt. You may go ahead.

Hi. Good morning. I just wanted to gauge your interest in the idea of ethylene exports out of the U.S. Your long ethylene and U.S. ethylene trades at a discount to other regions. So I guess, how do you weigh the advantages of a long-term shipping commitment for ethylene versus the option of building out more ethylene derivative capacity?

Yes. Good morning Matthew. And I am sure you are referencing the announcement that came out earlier in the week. I think generally, from an industry standpoint, I kind of look at it as, it's another derivative that's being built for ethylene. So I think that's directionally good. For our company, we would see a terminal like that as being opportunistic. And we might engage through the stock market to do some of that. Today, I don't know that we would participate on a structural basis in something like that. Our focus is on supplying some of our strategic ethylene customers here in the U.S. and directionally building out more polyethylene capacity.

Thank you. And our last question comes from Laurence Alexander with Jefferies. You may go ahead, sir.

This is Dan Rizzo, on for Laurence. The opportunity you guys mentioned in compounding, are you planning solutions for specific models? And can these compounds be applied to other end-markets?

Yes. So on the compounding, our focus has been in auto, in polypropylene compounding and generally, the direction is for lightweighting of vehicles. And we sit with OEMs and we discuss what's possible. And that's been our focus. And if you think about it, we are able to then develop polypropylene and catalysts that enable the compounds which lightweight vehicles. So that's our focus. I do think, to your point, that that methodology can translate to other segments and our capability is certainly there.

Thank you. This concludes the question-and-answer portion of today's conference. It would be my pleasure to turn the conference back over to Mr. Bob Patel for any closing comments. Thank you, sir.

All right. Well, thank you, again, for all the great questions. Let me offer a few closing remarks. I hope what you see today is that our strategy and approach remains focused and consistent. Markets are tighter than we anticipated as we enter 2018 in a good position to accommodate the capacity additions across our industry. At LyondellBasell, our focus is, first and foremost, on safe, reliable, cost efficient operations. That earns our position as a supplier of choice for our customers for today and tomorrow. We are building out our organic growth pipeline, as I described. We are targeting multiple value chains. And our next investment will start up in the middle of next year in 2018. We are working diligently to pursue value driven growth for you, our owners. So thank you very much for your interest and we look forward talking to you again soon.

Thank you. And this concludes today's conference call. You may go ahead and disconnect at this time. Thank you for your participation.