LyondellBasell Industries NYSE: LYB said second-quarter earnings and margins improved sharply as disruptions tied to the Middle East conflict tightened petrochemical supply, altered trade flows and supported pricing across several of its businesses.
Chief Executive Officer Peter Vanacker said the company generated EBITDA of $2.1 billion and earnings of $4.30 per diluted share during the quarter. EBITDA more than tripled sequentially, while the company posted a 23% EBITDA margin. Vanacker said the results demonstrated the effects of LyondellBasell’s value-enhancement program and cash-improvement actions when market conditions are favorable.
“The scale and duration of the supply loss is unprecedented, and we believe that recovery time will be measured in quarters, not months,” Vanacker said of the market disruption. He said approximately 6 million tons of polyethylene capacity, or about 20% to 25% of Middle East supply, sustained damage and is not expected to restart until at least 2027.
Supply disruptions reshape trade flows
The company said the conflict affected production, feedstock availability, logistics and trade flows across petrochemical markets. Higher Asian freight rates effectively closed arbitrage routes from Asia to Europe and Central America, increasing demand for U.S. and European material, according to management.
Vanacker also highlighted an unexpected shift in China, where producers reduced imports and increased exports to Southeast Asia despite lower operating rates. Chinese polyethylene inventories declined about 30% from pre-conflict levels, he said, while local operating rates remained in the mid-70% range.
LyondellBasell expects China may need to increase imports to replenish those inventories. Management said it has not seen broad demand destruction in key end markets, with packaging demand remaining stable and healthcare and infrastructure applications continuing to grow. Housing and automotive demand remained subdued, though the company characterized those conditions as continuing rather than new headwinds.
Kim Foley, executive vice president of Olefins and Polyolefins and Trading, said the company announced a $0.10-per-pound polyethylene price increase for August amid continuing volatility. Foley said export prices and volumes increased in July, while China was no longer exporting at the pace seen in the second quarter.
Americas segment drives earnings growth
LyondellBasell’s Olefins and Polyolefins Americas segment generated EBITDA of $1.3 billion, roughly four times the level recorded in the same quarter a year earlier. Integrated polyethylene margins expanded after a $0.30-per-pound increase in April contract pricing, which Foley described as the largest increase on record. June contract prices settled $0.15 per pound lower.
North American polyethylene domestic sales volumes rose approximately 3.5% and reached their highest quarterly level since the first quarter of 2022. Polypropylene demand also increased, aided by lower imports. Segment operating rates were about 90%, while crackers ran at approximately 95%.
For the third quarter, the company expects O&P Americas operating rates of approximately 85% of nameplate capacity. The lower rate reflects planned maintenance at Clinton and Lake Charles. The Clinton turnaround began in July and is expected to last about 70 days, while the Lake Charles outage is scheduled to begin in the second half of the third quarter and continue into the fourth quarter.
The Europe, Asia and International olefins and polyolefins segment reported EBITDA of $331 million, up $337 million sequentially and its strongest quarterly result since 2021. Results included an approximately $50 million gain from the sale of European emissions credits. The segment operated at approximately 75% utilization during the quarter, with crackers at about 85% utilization.
Management expects the segment to operate at about 70% utilization in the third quarter as it aligns output with seasonal demand. Foley said prolonged low water levels on the Rhine could further affect operations.
Bayport outage limited intermediates results
The Intermediates and Derivatives segment generated EBITDA of $386 million, supported by stronger margins in several businesses. However, unplanned downtime at the company’s Bayport PO/TBA asset in Houston reduced second-quarter EBITDA by an estimated $250 million, according to Aaron Ledet, executive vice president of Intermediates and Derivatives and Enterprise Services.
Ledet said the Bayport facility was safely restarted and ramped to full rates in June. The company expects improved oxyfuels and propylene oxide derivatives volumes in the third quarter, targeting segment operating rates of about 85%.
The company said oxyfuels benefited from seasonal demand and near-record gasoline crack spreads. Ledet said approximately 40% of Russian refining capacity has been idled amid refinery disruptions associated with the Ukraine war, tightening refined-product supply. He also said 20% of global methanol capacity is supplied from the Middle East, including significant Iranian capacity that largely serves China.
Advanced Polymer Solutions posted second-quarter EBITDA of $78 million. Executive Vice President Torkel Rhenman said margins improved through pricing actions and cost optimization, while automotive demand remained stable. The segment’s first-half EBITDA rose more than 50% from the prior-year period, he said.
Portfolio actions and cash plan continue
LyondellBasell completed the divestiture of four European olefins and polyolefins assets in May and intends to close its Brindisi site by the end of 2026. Vanacker said the remaining European portfolio is centered on more advantaged operations, including crackers and integrated polyolefins assets in Wesseling, Germany, as well as PO/TBA sites in Botlek and Fos.
The company said construction of its MoReTec-1 recycling facility in Wesseling remains on schedule for startup near the end of 2027. Vanacker said most of the facility’s expected capacity has already been pre-sold through agreements with brand owners. LyondellBasell has delayed its planned MoReTec-2 project in the U.S., citing less-advanced regulation and its cash-improvement plan.
Chief Financial Officer Agustín Izquierdo said the company generated $752 million in operating cash flow during the quarter, invested $270 million in capital expenditures and returned $224 million to shareholders through dividends. Cash totaled $2.6 billion at quarter-end, while available liquidity was $7.1 billion.
- LyondellBasell maintained its 2026 capital-expenditure plan of $1.2 billion.
- The company expects sustaining capital expenditures to decline by about $100 million following the European asset divestitures.
- Management said it remains on track to deliver $500 million of incremental cash flow by the end of 2026 through lower fixed costs and capital spending.
- Headcount has been reduced by approximately 3,400 employees, or 17% of the workforce, since the beginning of last year.
Izquierdo said the company’s capital-allocation priorities remain focused on maintaining an investment-grade balance sheet, funding safe and reliable operations, paying dividends and pursuing growth investments selectively. He said the company would consider mergers and acquisitions opportunistically, but that its current priority is rebuilding the balance sheet and improving credit metrics.
About LyondellBasell Industries (NYSE:LYB)
LyondellBasell Industries N.V. NYSE: LYB is a global chemical company headquartered in Houston, Texas, that specializes in the production of polyolefins and advanced polymers. Through its extensive portfolio, the company supplies raw materials for a wide range of end markets, including packaging, automotive, construction, electronics and consumer goods. By combining proprietary process technologies with expertise in catalysts, LyondellBasell aims to deliver value-added solutions that enhance product performance and sustainability.
The company's integrated operations encompass the manufacture of olefins and polyolefins, advanced polymer products, chemical intermediates and refining activities.
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