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Lyondellbasell Industries N.V.  (NYSE:LYB)
Q3 2018 Earnings Conference Call
Oct. 30, 2018, 9:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

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'd now like to turn the conference over to Mr. David Kinney, Director of Investor Relations. Sir, you may begin.

Kevin McCarthy -- Vertical Research Partners -- Analyst

Thank you, Sue. Hello and welcome to LyondellBasell's Third Quarter 2018 Teleconference. I'm joined today by Bob Patel, our Chief Executive Officer and Thomas Aebischer, our Chief Financial Officer.

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.lyondellbasell.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, please refer to the cautionary statements in the presentation slides and our financial reports, which are available at www.lyondellbasell.com/investorrelations.

Reconciliations of non-GAAP financial measures to GAAP financial measures, together with any other applicable disclosures, including the earnings release are currently available on our website at www.lyondellbasell.com.

Finally, I would like to point out that a recording of this call will be available by telephone beginning at 11:30 AM Eastern Time today until 9:59 PM Easter Time on December 21st by calling 888-566-0748 in the United States and 203-369-3051 outside the United States. Passcode for both numbers is 1346.

During today's call, we will focus on the third quarter results, the current environment, our near-term outlook, and provide an update on our growth initiatives. That being said, I would now like to turn the call over to Bob.

Bhavesh V. Patel -- Chief Executive Officer

Alright, thank you Dave. Good day to all of you for participating around the world and thank you for joining our third quarter earnings call. Let's begin with Slide 3 and review the highlights.

During the third quarter, our company overcame headwinds from rising feedstock costs, global trade rebalancing and new industry capacity. We ran our assets well and improved on 2017 profitability in four of our six segments. Year-to-date, LyondellBasell's EBITDA is nearly $250 million higher than 2017. Third quarter diluted earnings were $2.85 per share.

Our results include $53 million of pre-tax charges associated with the acquisition of A. Schulman on August 21st. That reduced earnings by $0.11 per share. After adjusting for transaction and integration expenses from A. Schulman and gains from an asset sale in the third quarter of 2017, our quarterly results improved by $0.55 per share relative to the prior year.

During the third quarter, LyondellBasell's value-driven growth strategy achieved several milestones. We formed the world's largest compounding company with the acquisition of A. Schulman. We launched the Advanced Polymer Solutions business segment to provide focus and visibility for this new global platform. And, in Houston, we began construction of the world's largest propylene oxide and tertiary butyl alcohol plant.

We continue to evaluate a potential transaction with Braskem. At the same time, our strong cash flows enabled us to return over $700 million to shareholders during the quarter in the form of dividends and share repurchases. In short, the employees of LyondellBasell are delivering on our promise of value-driven growth through a balanced strategy of operational excellence, profitable organic expansions, accretive M&A, and generous shareholder returns.

Please turn to Slide 4, where we report our safety performance for the third quarter with combined A. Schulman results since August 21st. The drive for excellence at LyondellBasell begins with a commitment to safety and environmental performance, based on the idea that our assets, the communities in which we operate, and our more than 17,000 employees should all finish the day in the same or better condition than they were at the start of the day.

Our first communications with the A. Schulman employees that joined LyondellBasell in August consistently emphasized the importance of safe, injury-free operations. As we complete the fourth quarter, our team is recommitted to ourselves, our colleagues, and our families to finish strong in 2018 with another record year of improved safety performance.

On Slide 5, we describe the businesses that form our new Advanced Polymer Solutions business segment. APS is more than just the former A. Schulman business. This segment also includes LyondellBasell's global polypropylene compounds business from our Olefins and Polyolefins Europe, Asia and International segment to double the volume and add more than twice the EBITDA to the legacy Schulman business.

We also move nearly 1 billion pounds of premium Catalloy and Polybutene- 1 polymers from O&P's EAI and O&P Americas to complete the new APS segment. Combined with the adjusted EBITDA of approximately $200 million reported by A. Schulman, these businesses generated approximately $640 million of EBITDA during 2017.

Slide 6 provides a glimpse of how our new advanced Polymer Solutions segment extends LyondellBasell's reach into growing and attractive markets. We have grouped the Advanced Polymer Solutions segment into two business lines. The compounding & Solutions business combines LyondellBasell's existing polypropylene compounding business which is largely focused on automotive applications with A. Schulman's more diverse business lines.

Masterbatches are compounds that provide differentiated properties when combined with commodity plastics used in packaging, agriculture and durable goods applications. Engineered composites and Engineered Polymers add value for more specialized high-performance applications across a variety of industries. Specialty powders are largely used to mold toys, industrial tanks and sporting goods such as Kayaks. Performance colors provide powdered, pelletized and liquid color concentrates for the plastics industry.

The Advanced polymers business of APS consists of LyondellBasell's legacy Catalloy and polybutene-1 polymer product lines. These unique polymers can be used within APS for downstream compounding or can be sold as raw materials to third-party customers. Catalloy is a line of differentiated propylene based polymers that add value in packaging applications and construction materials such as the white membranes that are capturing and increasing share of the commercial roofing market. Polybutene-1 is a unique polymer that is used in both specialty piping and packaging applications. The Advanced Polymer Solutions segment provides both focus and visibility for LyondellBasell's new platform of profitable growth.

And now, Thomas will provide more detail on our financial highlights for the second quarter.

Thomas Aebischer -- Executive Vice President and Chief Financial Officer

Thank you, Bob, and good day to all of you. Please turn to Slide 7, which illustrates the developments of our business segments over the trailing 12 months. As Bob mentioned; four of our six segments have delivered increased profitability over 2017. Improved performance, particularly from our Intermediates and Derivatives segment more than offset compressed margins in O&P Europe, Asia and International.

During the third quarter, we were pleased to see continued strength in ethylene and polyethylene chain margins in North America where robust demand offset headwinds from higher ethane costs to support quarter-over-quarter earnings growth for our Olefins and Polyolefins Americas segment.

Our refinery ran well during the third quarter. In the coming days, we will complete our last major planned maintenance event in advance of 2019, when increased demand of low-sulfur marine fuels specified by the International Maritime Organization is predicted to bolster margins for LyondellBasell's refineries.

We were pleased to see that last week's IMO meetings in London reaffirmed the implementation plans for these new standards to reduce ship emissions. LyondellBasell's technology business delivered another quarter of outstanding results, driven by increased licensing revenue. In the first nine months of 2018 LyondellBasell announced new license agreements for nine polyethylene and polypropylene plants around the world.

During October, we announced another seven new plant licenses, bringing the year-to-date total to 60 new license agreements, the most ever in company history. The net result is that LyondellBasell's trailing 12-months EBITDA is now approximately $7.4 billion, more than $550 million higher than the same period last year.

As Bob mentioned, earnings grew by $0.55 per share relative to the same quarter last year. While nearly one-fourth of this improvement is due to higher earnings, nearly 70% of this earnings growth can be attributed to the reduction in our effective tax rate due to US tax reform and other tax plannings that decreased our rate by 9.2 percentage points to 17.2% in the third quarter. After excluding our beneficial second quarter tax settlements, we expect the full-year effective tax rate to be somewhat lower than our initial guidance of 21%.

On Slide 8, you can see that LyondellBasell's businesses continued to generate over $1.4 billion of cash from operating activities during the third quarter. Approximately $1.8 billion of cash was invested in August to acquire A. Schulman, and during September recalled $375 million of A. Schulman debt.

Our strong balance sheet enabled us to continue investing in our organic growth projects while returning over $700 million to shareholders in the form of dividends and share repurchases. The quarter closed with over $2 billion of cash and liquid investments on the balance sheet. With approximately $3.3 billion of unused and available credit facilities, we closed the quarter with the total liquidity in excess of $5 billion.

Now, please turn to Slide 9. The chart on the left illustrates our cash flow performance over the trailing 12-months. Over this period, LyondellBasell generated nearly $5.7 billion of cash from operating activities. This powerful cash generation has enabled our free cash flow to rise at the same time that our capital investments are also increasing. LyondellBasell's trailing 12-months free cash flow yield was 9.7% at the end of the third quarter.

Capital expenditures during the third quarter were approximately $480 million. Investment should increase during the fourth quarter as we continue to -- the construction of our Hyperzone PE facility and accelerate the activity for building our PO/TBA plant in Houston.

Our 3.9% dividend yield remains in the top quartile of all S&P 500 companies. Similar to the second quarter, we repurchased more than 3 million shares during the third quarter and finished September with 387 million shares outstanding.

With that, I will turn the call back to Bob. Thank you.

Bhavesh V. Patel -- Chief Executive Officer

Thank you, Thomas. Let's turn to Slide 10 and review our segment results. In our Olefins and Polyolefins Americas segment, third quarter EBITDA was $704 million, a $33 million increase over the second quarter. Olefins results improved by approximately $120 million compared to the second quarter, 2018, with the price of ethylene increasing approximately $0.04 per pound.

Ethylene operating rates increased during the third quarter, averaging 93%. With the completion of plant maintenance at one of our four channel -- one of our Channelview Texas crackers in the second quarter, were able to partially offset the impact of increased feedstock costs in the third quarter with propylene production from our flex units. Approximately 81% of our ethylene production was from ethane and 93% came from NGLs.

Polyethylene results decreased approximately $80 million during the third quarter, partially offsetting the improvement in olefins. Polyethylene spreads over ethylene decreased by approximately $0.06 per pound as the increase in ethylene price was coupled with the decline in polyethylene prices. Polyethylene chain margins are stable in October as an increase in polyethylene price was offset by higher ethane costs. We may see some margin recovery with the higher polyethylene prices in the fourth quarter and the recent moderation in ethane.

Please turn to Slide 11 to review the fundamentals behind the current ethane volatility. While most observers agree that ethane will be abundant in the long term, supply constraints in the recent weeks have caused prices to escalate from below $0.30 per gallon to over $0.60 per gallon. This past week, we've seen prices moderate to the low $0.30 per gallon range. This volatility is driven by an increase in ethane demand from new crackers, and exports combined with constraints in midstream pipeline and fractionation capacity.

The chart on the right illustrates our view of the US Gulf Coast ethylene -- ethane situation. The bars represent ethane demand from both Gulf Coast ethylene crackers and exports. Many of the older ethylene crackers have the capability to optimize by switching feedstocks as market conditions change.

For the years 2018 and beyond, we show this range of feedstock flexibility and the resulting impact to ethane demand. As you can see, supply and demand balances can quickly change by switching feedstocks in response to input prices, and reduced demand from ethylene crackers is rapidly reflected in lower prices for ethane. Today, many crackers continue to maximize ethane feed, but we will likely see increased utilization of feedstock flexibility as the industry navigates through this period of volatility.

We believe our view of purity ethane supply, represented by the blue line, is conservative and only considers fractionation projects that are under way. In addition to these projects, there is potential for new pipelines, expansions or additional fractionation capacity that can further improve the ethane balances.

Beyond new midstream investments and the increased utilization of alternative feedstocks, any increase in cracker maintenance downtime and the moderation of ethylene capacity additions will provide further relief over the coming quarters. Most supply and demand forecasts indicate that the current tightness in ethane should resolve by 2020.

In summary, we believe this volatility is temporary and a result of misaligned investment cycles in the petrochemical and midstream industries. The strong underlying fundamentals are supportive and there is attractive earnings growth potential as ethane supply improves, while demand growth moderates.

On Slide 12, I would like to size the potential impact of higher ethane prices and highlight how LyondellBasell's feedstock flexibility and diverse business portfolio can reduce this impact. LyondellBasell's fleet of US Gulf Coast crackers have very high feedstock flexibility. The chart on the right shows you the range of feedstocks where we can operate. As you can see, we're able to use as little as 25% ethane and as much as 65% naphtha in our feed.

Our Olefins optimization team is continuously seeking to maximize profitability across our crackers through optimization of feeds and products. We can rebalance NGL feeds within hours and switch to liquids within days to respond to changing economic conditions. Additionally, our two Midwest crackers have access to low priced Conway ethane propane mixed feeds.

During October, ethane supplied to our Midwest crackers was priced at approximately $0.13 per gallon. These crackers are not subject to the higher Gulf Coast ethane prices and continue to benefit from very strong chain margins. If you consider our last 12-months US ethylene production and subtract our low cost Midwest volumes and the Gulf Coast merchant ethylene sales that pass through the ethane increased costs, you're left with about 5.5 billion pounds of annual ethylene volume that could be impacted by higher ethane prices.

For this volume, a $0.20 per gallon change in ethane price will impact annual earnings by about $380 million. This estimate assumes we continue to crack around 80% ethane and does not take into account benefits from feedstock flexibility. Furthermore, we are assuming in this analysis that prices for ethylene derivative products such as polyethylene, styrene, ethylene, oxide and VAM do not change.

A price increase of $0.03 per pound for both polyethylene and styrene could reduce the impact by $290 million. This is another example of how LyondellBasell's diverse portfolio of businesses and assets helps to stabilize earnings during challenging market conditions and produce the resilient results that we delivered during the third quarter.

Now, please turn to Slide 13 to review the performance of our Olefins and Polyolefins Europe, Asia and International segment. During the third quarter EBITDA was $262 million, $93 million lower than the second quarter. Olefins results declined approximately $55 million. Volume decreased primarily due to planned maintenance, which began in September at our cracker in Wesseling, Germany, impacting the quarter by approximately $15 million. This maintenance will be completed in the fourth quarter and is expected to impact results by $25 million in Q4.

Olefin margins also declined in third quarter, as increases in feedstock costs outpaced an increase in the olefin prices. Combined polyolefin results decreased approximately $45 million. Polyolefin demand followed typical seasonal declines during the third quarter and polypropylene margins have decreased following increases in the price of propylene.

Joint-venture equity income increased by $15 million. The chart on the lower left indicates that European polyethylene chain margin in the third quarter of 2018 were approximately $0.21 per pound, a similar level to the average seen five years ago in the region for the full year of 2013. European polypropylene margins have also declined, reaching approximately $0.2 per pound in the third quarter of 2018.

Minimal industry investment has resulted in a slight improvement in polypropylene margins compared to the average for 2013. Annualizing the third quarter 2018 profitability from our O&P EAI segment produces a much higher result when we realized than what we realized in 2013. After adjusting for historical profitability from businesses that were moved to our new APS segment, O&P EAI is now generating EBITDA at an annual rate that is more than $500 million higher than five years ago.

Our restructuring efforts for this segment in the early years of this decade and an improved market for polypropylene are producing sustainable earnings improvements for LyondellBasell. During October, European markets for polymers remain pressured with sluggish demand growth and ample supply.

Market pressure is expected to continue during the fourth quarter with typically lower seasonal demand. Low water levels on the Rhine are also causing disruptions for petrochemical transportation and production in Germany that could counter these trends and lead to tighter market conditions.

On Slide 14, let's take a look at our Intermediates and Derivatives segment. Third quarter EBITDA was $504 million, a reduction of $138 million from the prior quarter. While the high number of red arrows in the chart on the upper right clearly indicates a decline, you might recall that we are following a record setting second quarter.

We continue to be very pleased with the margins and business performance of this segment. Planned maintenance on one of our Propylene Oxide plants in Bayport Texas impacted third quarter results by approximately $20 million. This maintenance will be completed in November and is expected to impact fourth quarter results by approximately $25 million. PO and derivatives results declined approximately $50 million. Volumes were lower due to planned and unplanned downtime and we also experienced a seasonal decline in margins.

Intermediate Chemicals results fell by approximately $35 million compared to the second quarter, primarily due to a $0.04 per pound decrease in styrene margins. Lower seasonal margins in the third quarter drove a decline in oxyfuels and related products of $55 million.

During October, oxyfuels margins declined with weaker gasoline demand. Margins for styrene and methanol are also expected to moderate as new methanol capacity fully enters the market and styrene capacity returns, following industry maintenance downtime.

Turning to Slide 15, let's review the results of our Advanced Polymer Solutions segment. As I mentioned, we complete -- we completed the acquisition of A. Schulman on August 21st and the results from the new product lines are included from that point forward. Thus, comparisons of underlying business drivers for the second quarter are related to the LyondellBasell legacy product lines of polypropylene compounds, Catalloy and polybutene-1.

EBITDA decreased by $51 million compared to the second quarter. Transaction and integration costs related to the acquisition were approximately $49 million during the third quarter of 2018. Results for both Compounding & Solutions and Advanced Polymers were relatively unchanged versus the second quarter. The addition of new product lines from the acquisition offset seasonal volume and margin declines for polypropylene compounds.

Our integration of A. Schulman is going very well. Of the $49 million of cost assigned to the segment during the quarter, approximately 60% were related to the integration and 40% to the transaction. As of the end of the third quarter, we have focused on reducing redundancies to capture cost synergies at an annual rate of $32 million. We are well on track to reach our target of $150 million in cost-based synergies within two years.

The chart on the lower right provides a good example of one of the attractive and growing markets found in our Advanced Polymer Solutions segment. As I mentioned earlier, Catalloy is a line of differentiated propylene-based polymers that can be used in packaging, compounding or in construction materials such as the white commercial roofing membranes that we see in a photograph on Slide 6.

Polyolefin roofing membranes are becoming the preferred solution for commercial roofing and growing at an annual rate of 7% per year, due to their durability, cost savings and energy efficiency. The unique and desirable properties of LyondellBasell's Catalloy polymers provides an advantage for commercial roofing applications and our sales volumes in this market have outpaced the industry and have grown by 9% over recent years. We look forward to sharing more examples of the products and customer solutions that are -- that are driving growth for our new Advanced Polymer Solutions segment in future calls.

Now, let's move to Slide 16 for a discussion of our Refining segment. Third quarter EBITDA was $84 million, a $20 million decline from the second quarter. Crude throughput at the refinery averaged 232,000 barrels per day, with planned maintenance beginning in September that impacted EBITDA approximately $20 million. This maintenance will be completed in November and is expected to impact fourth quarter results by $45 million.

While the Maya 2-1-1 crack spread decreased by more than $4 per barrel when compared to the second quarter, our refinery benefited from margin improvements driven by favorable Canadian crude oil prices relative to the Maya price. During October, we continued the safe execution of our planned maintenance at the refinery. Margins are moderating with declining Maya 2-1-1 crack spreads, driven by length in gasoline inventories as the summer driving season ends.

On the Slide 17, I would like to review the drivers that could fuel LyondellBasell's earnings growth over the next 12 months. These are no longer distant promises. These are opportunities that we focused on during the third quarter and we'll continue to advance during the coming months.

The completion of the A. Schulman acquisition is improving our vertical integration and expanding our reach in the growing and attractive markets. Our integration management office is rapidly driving integration and capturing synergies. The start-up of our Hyperzone polyethylene capacity in 2019 will meet the rising demand and favorable markets for high-density polyethylene to improve our capture of integrated chain margins.

Our Intermediates and Derivatives team has diligently driven structural improvements within their business, which continues to benefit from favorable market conditions. Our team at the Houston Refinery has delivered six consecutive quarters of highly reliable operations with improved margins. And going forward, our Refinery is well positioned to benefit from new regulations for marine fuels during the latter half of next year.

Turning to Slide 18, let me summarize this quarter's highlights. During the third quarter, our company delivered year-over-year and year-to-date EBITDA improvements in four of our business segments. We overcame the challenges of new industry capacity and rising feedstock costs, increased third quarter profitability for our O&P Americas segment. Over the past 12 months, our company generated approximately $5.7 billion of cash from operating activities that contributed to funding for our increased capital investment, paying a top quartile dividend, completing over $800 million in share repurchases, and completing the acquisition of A. Schulman.

We have built the world's largest plastics compounding business. We're progressing on the integration that will capture significant synergies in this new segment. We've advanced on the construction of our new polyethylene and PO/TBA capacity and we're continuing to evaluate the Braskem opportunity. Our global portfolio of businesses provides confidence in our ability to remain resilient, flexible and advantaged in this environment.

Going forward, we look forward to the safe and timely completion of our fourth quarter plant maintenance that will allow us to capture this advantage during 2019 and beyond.

With that said, we're now pleased to take your questions.

Questions and Answers:

Operator

Thank you. (Operator Instructions) The first question is from Robert Koort with Goldman Sachs. You may go ahead.

Robert Koort -- Goldman Sachs -- Analyst

Thanks very much. Good morning.

Bhavesh V. Patel -- Chief Executive Officer

Good morning.

Robert Koort -- Goldman Sachs -- Analyst

Bob, the ethane flexibility slide you showed is quite interesting, and you mentioned you've got pretty quick ability to switch. I'm curious, in light of when ethane get up to $0.60, can you give us your spread across those different input molecules what you use ethane, the propane-butanes and the naphtha?

Bhavesh V. Patel -- Chief Executive Officer

Well. So we -- as I mentioned in my prepared remarks, we can change very quickly and in some cases, we were able to switch to liquids very quickly, Channelview and Corpus Christi are our most flexible crackers and that's where we tend to focus on pushing more liquids. So I don't have the exact numbers with me at that point in time what we did, but we did start to move where we could, quickly.

Robert Koort -- Goldman Sachs -- Analyst

And did you adjusted -- I noticed in your interesting slide about the industry flexibility, you referred back to 10 years ago, seem like there's been a wave of conversions are upgrading to ethane feedstock ability. Are you pretty confident that most of those, and then I guess speaking from your own assets, that you can go back to where you were 10 years ago in terms of liquids processing capability?

Bhavesh V. Patel -- Chief Executive Officer

Yes. In our case, certainly we've accounted for our ability to process the co-products from heavier feeds and we've retained all that capability; again, primarily at Channelview. So -- and we did our best estimate of the rest of the industry and took into account what capacity was converted versus what account -- which part of the capacity was made more flexible.

Robert Koort -- Goldman Sachs -- Analyst

Great, thanks for the help.

Operator

Thank you. The next question is from Steve Byrne with Bank of America. You may go ahead.

Steve Byrne -- Bank of America -- Analyst

Yes, thank you. Bob, I was wondering if you have the ability to crack Y-grade if there is a surplus of it with not enough fractionation capacity. Can you crack Y-grade or do you have downstream limitations on recurring that methane?

Bhavesh V. Patel -- Chief Executive Officer

Yes. So Steve, we do -- we do have capability of cracking Y-grade and in fact we're working on increasing that capability and we're able to make some relatively low-cost investments and increase our flexibility to crack Y-grade and we're working on that right now.

Steve Byrne -- Bank of America -- Analyst

Interesting. And then a quick one on all the media attention on recycled plastic and so forth, do you see that as just kind of peripheral noise or are you hearing it from your plastics customers where they have a meaningful interest in increasing the blend of recycled plastic into their product that could create a pull?

Bhavesh V. Patel -- Chief Executive Officer

I think, Steve, the area of plastic waste and sustainability is continuing to get more interest and rightfully so. But I think it will take time for the infrastructure to develop and the capability to develop to increase recycling. As you know we have a joint venture with SUEZ in the Netherlands, what we call QCP, and that's very much that.

It's a platform that eventually we will grow to have more recycled content. But if you step back and think about plastics demand growth, demand growth for plastics is still growing at a multiple of GDP. So to the extent that there is more recycled content, I still think the growth story is in place for plastics.

Steve Byrne -- Bank of America -- Analyst

Thank you.

Operator

Thank you. The next question is from Jeff Zekauskas with JP Morgan. You may go ahead.

Jeff Zekauskas -- JP Morgan -- Analyst

Thanks very much. Ethane has come down quite a lot, Bob, recently; do you think that that has to do with different crackers being turned around or do you think that the industry is already switching over to other feedstocks? And so what that did is that it lessened demand for ethane and brought the price down? How do you diagnose the price change?

Bhavesh V. Patel -- Chief Executive Officer

Yes, good morning, Jeff. Slide 11 in our presentation really shows how balanced the market is on ethane and when we reach this sort of balance between supply and demand, small shifts in supply or demand tend to make the price dynamic. And I think what's happened in the recent weeks is that there has been some planned maintenance on some fairly large ethane crackers. There's been some switching to other feedstock.

So I expect that for the next few quarters, we're going to see this sort of dynamic pricing on ethane. When some of these crackers return, you could see ethane price rise again. And that's why we wanted to size the impact to LyondellBasell on a large change in ethane, if it were to be sustained an entire year. And what you see is, given our portfolio of crackers and given our two Midwest crackers, the impact to us is not as great as one might think before flexibility-based mitigation.

So if we just continue to crack a lot of ethane, we've sized the impact on page 12. If we flex to other feeds, then the impact would be less. So I think we're going to see ebbs and flows through next year. We'll have turnaround season again in the spring. So likely that will reduce ethane demand, and in the meantime, more fractionation capacity is coming in '19, more pipeline capacity is being built. So we're going to go through a period of sort of timing of when feedstock is built out and when new consumptive capacity comes down.

Jeff Zekauskas -- JP Morgan -- Analyst

So given that, there seems to be some switching to probably naphtha. When you think about propylene values for next year, do you think propylene will be a little bit looser in 2019 than it was in 2018, given feedstock switches and other considerations?

Bhavesh V. Patel -- Chief Executive Officer

Possibly, but it will be episodic I think right, because as feeds change, it won't be consistently well supplied. So I think ultimately, Jeff, what changes the propylene situation is, as new PDHs are built, those are sort of structural increases in supply. And to your point about naphtha, there is actually also a switching to propane and butane and there are more LPGs coming from West Texas down the Y-grade line. So there is a lot of propane and butane on the Gulf Coast.

Jeff Zekauskas -- JP Morgan -- Analyst

Okay, good. Thank you so much.

Operator

Thank you. And the next question is from Frank Mitsch with Fermium Research. You may go ahead.

Frank Mitsch -- Fermium Research -- Analyst

Thank you and good morning, gentlemen. Well I'm guessing a little less as stressful this third quarter than where we were a year ago with Harvey. I wanted to -- I wanted to ask about Braskem. When do you think you're going to have a decision there? And obviously, I'm wondering if that might also play a role in your pace of buybacks here in Q4 with the market turmoil? Can you add a little color as to what investors might be able to expect in terms of M&A versus buyback and kind of the timing on that?

Bhavesh V. Patel -- Chief Executive Officer

So, Frank, we're still -- we're continuing to work diligently and thoughtfully through our analysis around the Braskem transaction. There is really no timing to report at this point. We're continuing our work and thinking around shareholder value creation. And so as we -- as we consider buybacks -- to me, those are sort of independent decisions today and whatever it is we decide in terms of our allocation of capital, we're aiming to create shareholder value. So stay tuned.

Frank Mitsch -- Fermium Research -- Analyst

All right, great. So, the decisions are kind of independent at this point, fair enough. And then also, I was struck by the title and the discussion on Slide 17, tangible earnings growth over the next 12 months. Obviously there's some debate out there as to what happens on margins on the Olefin, Polyolefin side of things. Should we be interpreting that statement to say that you're anticipating EBITDA over the next 12 months to be higher than EBITDA over the previous 12 months?

Bhavesh V. Patel -- Chief Executive Officer

Well, what we're trying to indicate there is just sources of earnings growth. We haven't netted against Polyolefins market conditions. But I think clearly our I&D businesses had a step up in earnings this year. We, at the last earnings call talked about a 15% or so increase that's sort of structural in our business in I&D compared to our prior run rate.

Refinery is running better. We think second half of next year, there will be some fuel switching as IMO starts to take hold and people get ready for March of 2020. And our new polyethylene plant in the second half of next year will consume ethylene today that essentially is selling near its costs. So those are what we think meaningful sources of earnings growth next year.

Frank Mitsch -- Fermium Research -- Analyst

All right, very helpful. Thank you.

Operator

Thank you, the next question is from Alex Yefremov Nomura Instinet. You may go ahead.

Aleksey Yefremov -- Nomura Instinet -- Analyst

Thank you. Good morning, everyone. Bob, European polypropylene margins declined meaningfully this year and US polypropylene margins held up pretty well. What, in your view, explains this difference and where do these regions are likely to converge? Is Europe likely to improve or US decline?

Bhavesh V. Patel -- Chief Executive Officer

Well, I think Alex, globally, polypropylene is still very constructive. There is -- operating rates are still relatively high. I think in Europe, as we've had in years past typically in the summer season we see seasonality because the vacation periods are longer and often converters shutdown for periods of time. Demand growth is a little bit slower this year in Europe, so we think that partly also contributes. But if I step back and look at the global situation in polypropylene, I think polypropylene still looks to us to be very balanced, tight for the coming year or so, and so we would expect that polypropylene should hold up pretty well.

Aleksey Yefremov -- Nomura Instinet -- Analyst

Thank you. And as a follow-up on polypropylene, you've indicated that you are looking at some polypropylene capacity projects in US and Europe and also PDH. Have you moved sort of the likelihood of those projects higher or lower over the last six to nine months or so?

Bhavesh V. Patel -- Chief Executive Officer

Well, we're still working through our early engineering assessments. Frankly we're thinking through -- on the Gulf Coast locations, which location will be better given propylene supply and we've had a few other things going on in the company. So we're still working through it and we think that polypropylene is an area where we'd like to continue to invest.

Aleksey Yefremov -- Nomura Instinet -- Analyst

Understood, thank you.

Operator

Thank you. The next question is from PJ Juvekar with Citi. You may go ahead.

PJ Juvekar -- Citi -- Analyst

Yes, hi, good morning, Bob.

Bhavesh V. Patel -- Chief Executive Officer

Good morning.

PJ Juvekar -- Citi -- Analyst

You know, with ban on single-use plastic bags in many large cities around the world, do you see that end market for polyethylene coming under pressure? In other words, historically people have assumed a GDP multiplier of 1.3 times or 1.4 times on polyethylene. Do you think that comes under pressure in the future?

Bhavesh V. Patel -- Chief Executive Officer

Well, PJ, it's not a large part of the overall polyethylene market and -- so segment by segment, there are different drivers, but if I kind of step back and think about polyethylene demand growth, it's more about food packaging, polyethylene pipe and some other sort of durable goods where I think polyethylene demand will continue to be driven.

With respect to the single-use bags, some parts of the world have mandated thicker bags that can be reused. So ironically if that were the case, then more polyethylene would be consumed because the bags are thicker and I can tell you, when I lived in the Netherlands, we used to buy those thicker bags and reuse them. So I don't know that demand really sort of goes away for those bags, it just make -- it converts to other forms of packaging.

PJ Juvekar -- Citi -- Analyst

Okay, thank you for that. And secondly, what are your views on the second wave of these ethylene crackers in the US, in light of this volatility in ethylene? Do these companies say that this is a tense situation, would be resolved by the time this crackers come online so they'll continue to build or do you think they get -- sort of get pushed out because of this situation?

Bhavesh V. Patel -- Chief Executive Officer

Well, it's difficult for me to predict what others may do. But certainly for us, we think through our long-term supply and essentially the returns that we can earn on new investment and we want to see more of the fractionation capacity and more pipeline capacity investments actually come to fruition before we would consider further ethylene investment in the US.

Now, we're a bit uniquely placed because we've already invested in ethylene earlier in the decade and our focus for the coming three, four years is really about now investing in derivatives to consume the ethylene that we've already expanded. But -- no, I would imagine that this volatility and impact on the global cost curve should be a part of the equation as new investments are contemplated.

PJ Juvekar -- Citi -- Analyst

Okay, thank you very much.

Operator

Thank you. The next question is from Vincent Andrews with Morgan Stanley. You may go ahead.

Vincent Andrews -- Morgan Stanley -- Analyst

Thanks and good morning everyone. Just on US polyethylene, we saw a surprising sort of price decrease in August and then we had the ethane spike in September and then got the price back. And now there are, I believe, nominations for both October which is almost over and November. So could you just sort of reconcile what's going on in the US market with that surprise decrease and now the increases and maybe contrast it to some of the weakness we're seeing in the Asian PE markets? Thanks.

Bhavesh V. Patel -- Chief Executive Officer

Yeah. Well, I mean it's difficult to predict here what -- how prices will evolve but the increases and decreases, Vincent, to me say that the market is relatively balanced and in the face of a significant cost push, there was some increase that went through in the market and I suspect that as we look at operating rates globally, not a lot will change. Even though there is new capacity coming, demand is growing as well and we've gone through this in prior earnings call slides where we've shown operating rates are still 90%-plus and so I suspect that prices will be dynamic based on how cost develop as well.

Vincent Andrews -- Morgan Stanley -- Analyst

Okay. And maybe just on that, this whole ethane things seem to come -- we all seem to get blindsided by the analysts and producers alike. As you guys did your sort of look back on what's happened over the past three months, what do you think the blind spot was for everyone that we didn't see that big spike coming?

Bhavesh V. Patel -- Chief Executive Officer

Yeah, that's great question Vincent. I think the thing that many of us miss was the fact that ethane was being rejected in the Permian in favor of more propane and butane moving on the Y-grade capacity -- line capacity that's already there. In the past, we were of the mind that the Y-grade that comes from West Texas is very rich in ethane and it's been wetter and wetter as time has gone on.

But when that ethane got rejected, the composition of the Y-grade that came to Bellevue had less ethane. And I think that's what we didn't see and you can imagine, from a mid-stream gas processor perspective, by rejecting some ethane they can actually move more Y-grade in total out of the gas pool. So I think that's the part we -- that we probably missed.

Vincent Andrews -- Morgan Stanley -- Analyst

Okay, thanks very much guys.

Bhavesh V. Patel -- Chief Executive Officer

Thank you.

Operator

Thank you. The next question is from John McNulty with BMO Capital Markets. You may go ahead.

Bhavesh Lodaya -- BMO Capital Markets -- Analyst

Hi, this is Bhavesh Lodaya for John. So, one more on the ethane and on the US ethane advantage as such, so -- which we have enjoyed for quite many years for now. So while you may see flex economics come into play, it's also more likely that that comes into play when ethane rises significantly from here. So are we going to enter a period where the entire NGL barrel kind of like raises in value and what does that do for the US ethane advantage as you look forward the next few years?

Bhavesh V. Patel -- Chief Executive Officer

Yes, I think it's really -- the ethane advantage still looks very durable to us because it's based on a view that there is an abundance of ethane supply. So what we're seeing today is just a little bit of mismatch in timing of new cracker capacity for ethane consumption and new fractionation and pipeline that brings ethane to market. So we view this very much as temporary and we think that the US will continue to enjoy some advantage over the long-term.

The thing that certainly our company is watching is the degree of that advantage and how that might result in investment returns for new capacity. So in the early days in our company, we made a conscious choice to not convert to ethane cracking. We retained our flexibility and we concentrated it around a couple of our crackers and I think that will serve us well as we manage through a dynamic market environment like we have today.

Bhavesh Lodaya -- BMO Capital Markets -- Analyst

Okay. And then one on the technology segment, some impressive wins with new licenses there and we are also seeing a very strong first nine months compared to previous year. Can you share what the break-up is between the catalysts and the licensing revenues and how sticky are some of these earnings?

Bhavesh V. Patel -- Chief Executive Officer

Yeah. So first of all, as we license technologies, the catalyst sales go with it. So the catalyst revenue and earnings tends to be more consistent and growing. The licensing can be cyclical based on investment cycles, but at the moment we're seeing quite a bit of interest in our technology, especially in Asia and there has been some shift in the licensing landscape for Polyolefins as well which has worked to our benefit.

So -- and ultimately, I think the investment that's occurring around the world speaks to the confidence in plastics demand growth at greater than GDP levels. So we're quite -- we're quite optimistic about our technology segment and we continue to invest in new catalyst capacity. As we sell new licenses, we anticipate that we'll be selling more catalyst over time as well.

Bhavesh Lodaya -- BMO Capital Markets -- Analyst

Thank you.

Bhavesh V. Patel -- Chief Executive Officer

Thank you.

Operator

Thank you. The next question is from Kevin McCarthy with Vertical Research Partners. You may go ahead.

Kevin McCarthy -- Vertical Research Partners -- Analyst

Good morning. Bob, as you survey your portfolio, are you witnessing a normal demand pattern, from a seasonal perspective, across your major product lines in October, and to the extent you have visibility into November? Or are there areas, either by product line or geography where destocking is more pronounced than you would normally expect from a seasonal point of view?

Bhavesh V. Patel -- Chief Executive Officer

Yeah, Kevin, good morning. We see very typical demand here in the fall. Europe is slightly weaker, I would say. But otherwise, the rest of the world we see demand being quite good and we're running our assets extremely hard around the world.

Kevin McCarthy -- Vertical Research Partners -- Analyst

And then, just a follow-up on the technology licensing activity, obviously, impressive results there. Do you think that you can go higher in 2019 from an investment cycle perspective in polypropylene plants for example or not?

Bhavesh V. Patel -- Chief Executive Officer

No, I mean at -- the rate at which we're doing licenses today is quite high. So, just to sustain these rates gives us great earnings potential as we go forward. Again, typically, we see the catalyst income from a license four or five years later. And when we do these -- when we sign these licenses, there are progress payments that occur over three, four years. So there is kind of a -- there is a tail of earnings that come and so there's been a meaningful step up here and I think we can -- we can certainly continue this level for next year.

Kevin McCarthy -- Vertical Research Partners -- Analyst

Understood, thanks very much.

Bhavesh V. Patel -- Chief Executive Officer

Thank you.

Operator

Thank you. The next question comes from David Begleiter with Deutsche Bank. You may go ahead.

David Begleiter -- Deutsche Bank -- Analyst

Thank you, good morning. Bob, just on ethane in 2019, how are you thinking about prices both on an absolute level as well as a relative level relative to its fuel value?

Bhavesh V. Patel -- Chief Executive Officer

Yeah. Well, David, I've been saying for quite a long time that ethane is going to trade overtime $0.07 to $0.10 over its fuel value. Given that supply and demand are much more balanced today on ethane than they have been in the past few years, we could see that price over fuel value increase. I do think that it's going to be -- it's going to move around depending on turnaround season.

So, in the spring, when there are turnarounds and less ethane consumption, then prices could moderate. New fractionation capacity is coming. I think it's estimated to be online sometime around the middle of next year and new Y-grade pipeline. So it'll be dynamic. But I think given that our overall thesis is there is lots of propane, there is lot of butane and if some of the ethane that's being rejected today in the Permian, if it ends up -- coming back into the pipe and coming down to Bellevue, then we just need 50,00,000 barrels a day more of ethane to change the supply demand balance and so -- so I think it'll be dynamic and companies like us, we just need to make sure that we're looking at economics weekly as we do and shift our feed to make -- maximize profitability.

David Begleiter -- Deutsche Bank -- Analyst

Very good, and just on Braskem, how do the recent Brazilian election results impact or affect your thinking on Braskem?

Bhavesh V. Patel -- Chief Executive Officer

Well, I read everything that you read about the new President and so -- I mean, for now we're very much focused on the fundamentals and value creation potential. And so, as I said earlier, we're working through the analysis and thinking through the value proposition.

David Begleiter -- Deutsche Bank -- Analyst

thank you.

Bhavesh V. Patel -- Chief Executive Officer

Thank you.

Operator

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

Duffy Fischer -- Barclays -- Analyst

Yeah, good morning fellows.

Bhavesh V. Patel -- Chief Executive Officer

Good morning.

Duffy Fischer -- Barclays -- Analyst

Question just -- you had mentioned that spot ethylene is close to cash breakeven with Indorama about to start up a cracker where they'll back out some spot purchases that they've done historically. Do you think you'll be able to continue to run full out or will you actually have to run at lower operating rates do you think until you get your Polyolefins absorption online later next year.

Bhavesh V. Patel -- Chief Executive Officer

Yeah, Duffy, I expect that we'll continue to run pretty full. I don't expect us to slow down on ethylene.

Duffy Fischer -- Barclays -- Analyst

Okay. And then just one more on Braskem, for the majority of the dance -- at least that we've been privy to kind of know about with Braskem your stock price was circa $110 a share. Now that it's $90, does that change the way you look at Braskem or your share value is disconnected, in your mind, from the value of Braskem?

Bhavesh V. Patel -- Chief Executive Officer

Well, look, I mean, again it's really about long-term value creation in a transaction like this. And so we're firmly focused on -- just like we did with Schulman, thinking through how we can create value with something like this. So, our -- it hasn't changed and as you can see, as evidenced by the third quarter, we've had still significant amount of share buyback. So nothing has really changed in my mind.

Duffy Fischer -- Barclays -- Analyst

Okay, thank you, guys.

Bhavesh V. Patel -- Chief Executive Officer

Thank you.

Operator

Thank you. The next question is from Jim Sheehan with SunTrust. You may go ahead.

James Sheehan -- SunTrust Robinson Humphrey -- Analyst

Good morning. Can you talk about the Rhine River impact? You said that this could tighten up some product changes for you. What about your ability to either obtain raw materials or ship products or supply raw materials to property tenants in Wesseling and things like that? Do you see any downside risks?

Bhavesh V. Patel -- Chief Executive Officer

Yes, Jim. So our European team is hard at work in managing through the low Rhine levels. And we do see some very modest downside risk in our EAI segment as a result of the low Rhine level. So, just on an output basis and not considering any increase in product prices, we could see in Q4, $30 million to $40 million of impact across the quarter if this situation continues and we don't get rain over there. So it's pretty modest and we've had one of our crackers down for turnarounds. So that actually reduces the impact.

Our larger cracker at Wesseling is down for turnaround and will be coming up in November. So as we bring that up, really our consideration will be, can we bring it up to full rate or do we bring it up to a little bit lower than full rate? So that maybe helps you size the Ryan river impact, it's quite modest.

James Sheehan -- SunTrust Robinson Humphrey -- Analyst

Terrific. And on IMO 2020, are you confident that the EPA will not be able to delay this process or reduce enforcement of the standard?

Bhavesh V. Patel -- Chief Executive Officer

Well, it's difficult to predict what regulatory agencies may do, but it seems to me that there is a lot of momentum around the world around this -- this change in regulation and many ship owners have acknowledged that this will happen. So the only thing we can do is make sure that we're prepared to run our refinery at full rates and given that we're just finishing our maintenance on the crude unit and the coker -- one of the two coker units at our refinery, we're set up for virtually no plant maintenance in the second half of '19 through 2020. So I think we're really well positioned to take advantage of whatever IMO turns out to be. And frankly, I think it's degrees of upside.

James Sheehan -- SunTrust Robinson Humphrey -- Analyst

Thank you.

Operator

Thank you. The next question is from Arun Viswanathan with RBC Capital Markets. You may go ahead.

Arun Viswanathan -- RBC Capital Markets -- Analyst

Great, thanks, good morning. Just a question on I&D, the business has been performing very well in 2018. Do you see that business kind of moderating in coming years back to $1.6 million or $1.7 billion in annual EBITDA or do you see a trajectory toward $2 billion kind of continuing? Thanks.

Bhavesh V. Patel -- Chief Executive Officer

Well, so the run rate, if you look back before last -- before this year, our run rates been above $1.5 billion plus or minus, and I've talked about a 15% to 20% step up at structural and I think that's how you ought to be thinking about it; off of the $1.5 billion number. And then there is some seasonality, as you know, with our Oxyfuels business that put some seasonality in that segment. But over an entire year, a 15% to 20% step up over the $1.5 billion is, I think, a good basis going forward.

Arun Viswanathan -- RBC Capital Markets -- Analyst

Great, thanks. And just on polypropylene, maybe you can just give us your assessment of supply demand? There hasn't really been a lot of new supply added. I mean, what's your view on whether the market could bear something like that or your own footprint? Thanks.

Bhavesh V. Patel -- Chief Executive Officer

Yes. So polypropylene, I mean in the US, there's not a lot of new capacity coming in the next 12 months to 18 months or 15 months let's say. There is a few debottlenecks here and there, including we have a couple of small ones that we are implementing now. I think in the absence of new capacity and demand growing at 3%, 4% a year in the US, the market looks to be very solid in the US globally. It seems that operating rates are still going to be quite high and around the world demand growth for polypropylene has been extremely strong and especially in the Far East, in China. So I expect polypropylene to be a very constructive business going forward.

Arun Viswanathan -- RBC Capital Markets -- Analyst

Thanks.

Operator

Thank you. The next question comes from Hassan Ahmed with Alembic Global Advisors. You may go ahead.

Hassan Ahmed -- Alembic Global Advisors -- Analyst

Good morning Bob.

Bhavesh V. Patel -- Chief Executive Officer

Good morning Hassan.

Hassan Ahmed -- Alembic Global Advisors -- Analyst

Bob, a two-part question on Braskem. First, obviously you talked a bit about Brazil and the Brazilian elections and the like, but obviously there has been a government change in Mexico as well. And at least recently, I've been reading more and more articles pertaining to the Mexico contract that you know it's below market, they may reconsider that contract.

So first part of the question is, how does that sort of go into your calculus about the deal and then the second part is, obviously valuations have come down tremendously across the board, but certain product areas have been hit harder you know, like polyurethanes in particular. So, how are you thinking about other deals as well above and beyond Braskem, in light of some of these valuation moves?

Bhavesh V. Patel -- Chief Executive Officer

Yes, good question. So we're -- first of all on Braskem, I just kind of I repeat what I said earlier, we're working through our analysis and obviously thinking through the Mexican situation is part of our analysis and so we'll work through that, but it's a fairly new asset that they have down there. So we consider that as well.

As far as other alternatives just it's -- we just need to work through kind of one opportunity at a time and think through value creation. So we're quite -- we're very focused on understanding the various aspects that have been raised on this call and things that you read and being thoughtful about how we can create value for our shareholders.

Hassan Ahmed -- Alembic Global Advisors -- Analyst

Understood. Now as follow up, Bob, you know on the China pollution side of things, again sort of mixed messages out there, you know some people sort of talking about how regulation is going to move from federal to provincial levels and that may sort of make things a bit more relaxed meaning thereby that maybe capacity comes back online. But then the flipside of that is that people are talking about the 2+26 being expanded to 11 more cities so what are you guys seeing on the ground there? How do you see that in terms of influx of new capacity or further curtailments?

Bhavesh V. Patel -- Chief Executive Officer

Well I think, directionally, environmental pressure will continue in China and there will be some ebb and flow in terms of news. But I think directionally, there is a move toward reducing coal and improving air quality in China and I don't think that changes. So -- hence more methanol being consumed for olefins, I mean, that will -- is just cleaner than coal-based olefins. So we could see that and some naphtha crackers, I suppose, but I don't see the environmental pressures easing. I think, over time, they'll continue to get more stringent, as the rest of the world is.

Hassan Ahmed -- Alembic Global Advisors -- Analyst

Very helpful, Bob. Thanks so much.

Bhavesh V. Patel -- Chief Executive Officer

Alright, thank you.

Operator

Thank you. The next question comes from John Roberts with UBS. You may go ahead.

John Roberts -- UBS -- Analyst

Thank you. We started with ethane maybe we'll finish with ethane here. But on Slide 11 again, in 2019, Bob, you have the supply line above the minimum. In mid-year, doesn't the supply line kind of touch the minimum after we get a couple more crackers starting up? And then, in the upper right hand corner, you got $0.25 to $0.60 a gallon, which is the historical range. But I think ethane even at $1 a gallon still export polyethylene is still breakeven. So do you think, if we get tighter in mid-2019, we could spike above $0.60?

Bhavesh V. Patel -- Chief Executive Officer

Yes, first of all, I don't know about the dollar analysis. I'll have to -- I have to get my team to look at that. But it depends on oil price and depends on naphtha prices; a lot of factors. It's difficult, as you can imagine, to forecast a spike or to predict. I mean, I suppose you could see spikes but they're very much just of that, they are spikes, and they come back down.

I think one thing you've seen over the past few weeks and even years past that this industry and the cracker fleet in the US does exert its flexibility when needed. And we, as a company, certainly are well positioned to do that as I mentioned earlier in response to one of the other questions that we're also increasing our ability to crack Y grade. So I think that will be another dimension of flexibility that we'll continue to enhance and our two crackers at Channelview and the Corpus Christi cracker are extremely well positioned to be flexible, given proximity to Eagle Ford.

And then, when you think about our Midwest crackers, that's almost 2.5 billion pounds of ethylene that is unaffected by ethane price on the Gulf Coast and enjoys a significant advantage. So, I think that the line sort of touching the blue part or not, we're going to have next year new crackers start up and new fractionation and new pipeline capacity as well.

So there will be -- the price will be a bit more dynamic next year, but again I step back and think about the overall supply of ethane and I think it's abundant. If even a little bit less gets rejected and comes down the pipe Bellevue; that could change the equation very quickly.

John Roberts -- UBS -- Analyst

Okay, thank you.

Bhavesh V. Patel -- Chief Executive Officer

Thank you.

Operator

Thank you. The next question comes from Laurence Alexander with Jefferies. You may go ahead.

Laurence Alexander -- Jefferies -- Analyst

I have two quick ones. Given the sort of the discussions or the way you're seeing the IMO impact play out for the refining industry, would you be open to reconsidering structures for the refining asset and sort of treating it as a non-core asset.

And secondly, how do you see Lyondell's role in the micro plastics debate? I mean, do you want to be at the forefront or is it more going to be, see how the regulatory landscape shifts and then grow the recycling side of the business accordingly?

Bhavesh V. Patel -- Chief Executive Officer

Yes, so two very different questions. On the refinery, Laurence, our view hasn't changed. Our focus has been on running the refinery better and better and I think we've demonstrated now with six quarters of really great operating performance, which we expect to continue. We've been positioning ourselves for IMO by completing our maintenance so that we can run essentially full in '19 and '20.

And so, I think we're really well positioned to capture value from IMO and we are not really detracted from that, if you will. And so that's going to be -- continue to be our focus and we'll think through how best to capture that value. So, really nothing further to add in terms of the refinery.

In terms of micro plastics, and perhaps if I could broaden that to plastic waste, I think really one of the best ways a company like ours can influence what happens and how we engage is through the various associations around the world, like American Chemistry Council (inaudible) and there is a lot of work going on through industry associations to engage in essentially ending plastic waste and thinking through, over the long, term how we can increase circularity. So stay tuned, I think there will be some definitive sort of things that will come out as we go through the next couple of quarters. But I think this is best done, from our perspective, through the industry associations which we participate in and have leadership positions on in many cases.

Laurence Alexander -- Jefferies -- Analyst

Thank you.

Operator

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

Matthew Blair -- Tudor, Pickering, Holt & Co. -- Analyst

Hey, Bob. It looks like in refining; you outperformed some of your Gulf Coast peers in the quarter. You mentioned you saw some benefits from heavy Canadian barrels, which we estimate are approximately 15% to 20% of your crude slate. Could you talk about any potential efforts to increase WCS runs further, whether that'd be by -- maybe crude by rail or whether you're looking at additional pipeline commitments on some of these new Canadian pipeline?

Bhavesh V. Patel -- Chief Executive Officer

Yeah. So on -- Matthew on Canadian crude, we've really maximized what we can do on Canadian crude. Maybe incrementally something around crude by rail, but I would not expect a meaningful change in the amount of Canadian crude we're cracking. And as you, I'm sure, know those pipelines are on allocation. So we really can't get more allocation. But we are maximizing and I think over time, we hope that that will impact Maya pricing and bring that back into balance.

Matthew Blair -- Tudor, Pickering, Holt & Co. -- Analyst

Sounds good, and then in I&D you mentioned the PO results were off $50 million. I think $20 million of that was due to the turnaround. I guess the remaining $30 million or so, is that due to the market slowing? And is that an issue perhaps with just slower demand growth from potentially weaker housing market?

Bhavesh V. Patel -- Chief Executive Officer

No, nothing structural there. That's just ebbs and flow of the market, nothing structural to read into that.

Matthew Blair -- Tudor, Pickering, Holt & Co. -- Analyst

Got it. Thank you.

Bhavesh V. Patel -- Chief Executive Officer

Okay, all right, well thank you. Well, let me offer a few closing remarks. Thank you for all of your patience as we run over a little bit. So as we look ahead from Q4 and into 2019, while we've talked a lot about ethane on this call, and we know it'll be dynamic next year. For LyondellBasell we do see meaningful sources of new earnings from our A. Schulman acquisition, our new polyethylene plant, step up in I&D earnings, IMO impacts in the second half of the year. I think a lot of these sources of earnings growth can offset potential impacts from new PE capacity and ethane. So we look forward to updating you on that as well as all of our growth initiatives on the next call.

So thank you very much. Have a great day and we're adjourned.

Operator

That concludes today's conference. Thank you all for participating. You may disconnect at this time.

Duration: 74t minutes

Call participants:

Kevin McCarthy -- Vertical Research Partners -- Analyst

Bhavesh V. Patel -- Chief Executive Officer

Thomas Aebischer -- Executive Vice President and Chief Financial Officer

Robert Koort -- Goldman Sachs -- Analyst

Steve Byrne -- Bank of America -- Analyst

Jeff Zekauskas -- JP Morgan -- Analyst

Frank Mitsch -- Fermium Research -- Analyst

Aleksey Yefremov -- Nomura Instinet -- Analyst

PJ Juvekar -- Citi -- Analyst

Vincent Andrews -- Morgan Stanley -- Analyst

Bhavesh Lodaya -- BMO Capital Markets -- Analyst

David Begleiter -- Deutsche Bank -- Analyst

Duffy Fischer -- Barclays -- Analyst

James Sheehan -- SunTrust Robinson Humphrey -- Analyst

Arun Viswanathan -- RBC Capital Markets -- Analyst

Hassan Ahmed -- Alembic Global Advisors -- Analyst

John Roberts -- UBS -- Analyst

Laurence Alexander -- Jefferies -- Analyst

Matthew Blair -- Tudor, Pickering, Holt & Co. -- Analyst

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