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2026.09.24 | TB | Chemicals | Ineos Styrolution US Maintenance

原标题：Ineos Styrolution – US Plant Maintenance Schedule & Organisation Structure

#chemicals

Third Bridge · 2026-09-24

Analyst-led • 11 Sep 2026

Companies: BAS DE

James Sutton (JS) Director, Corporate Reliability at Chemtrade Logistics Inc

Olly Anibaba (OA) — Third Bridge Sector Analyst

Agenda

Key Insights

Introduction

OA [00:00:08]: Welcome to Third Bridge Interview on Ineos Styrolution – US Plant Maintenance Schedule & Organisation Structure. I am Olly Anibaba, and I'll be moderating today's Interview with James Sutton, former Reliability and Maintenance Manager at Ineos Styrolution America.

James, before we start today's Interview, please state I agree or I disagree to the following statement: You understand the definition of material non-public information and agree not to disclose any such information, or any other information which is confidential, during this Interview.

JS [00:00:44]: I agree.

OA [00:00:46]: Thank you, James. Could you start with a brief introduction of your background and experience?

JS [00:00:55]: I'm Jim Sutton. I currently am the Director of Reliability for a Canadian chemical company. I worked at Ineos Styrolution across their Bayport and Texas City facilities in the capacity of the Reliability and Maintenance Engineering Manager. I'm very familiar with everything with their operations, integrations, global footprint, etc. I'm a chemical engineer by degree, but I've got well over one decade of experience in maintenance, reliability as well as operations. My career spanned operations, capital project work and reliability engineering.

Questions

[00:01:58] How would you evaluate Ineos Styrolution's US manufacturing presence and its strategic proximity to distribution channels?

JS [00:02:14]: They are very well structured from a distribution channel perspective for a lot of different products and for receiving of raw materials. They have done some consolidation and quite a bit of the consolidation has been driven a bit by the logistics aspects of things as well as some other complicating factors. For the North American side of things here, they have Altamira, Mexico, which is near a port. They have Bayport and Texas City, which are also near ports and also in the US Gulf Coast region and with pipeline raw materials as well as integrated polymer facilities. Decatur, Alabama largely gets most of their material by rail from offloading in the same US Gulf Coast area. Then in Antwerp, that's a massive integrated facility in the BASF compound over in Antwerp.

[00:03:25] How does the distribution channel set-up in the North American market impact delivery volumes and lead times across key product categories?

JS [00:03:41]: Styrene monomer is sent out by barge. They receive benzene by barge. Their raw materials are benzene and ethylene. Ethylene is pipelined into both Texas City and Bayport and benzene is offloaded via barges. The styrene monomer is sent out via pipeline from both facilities to transloading facilities, which is then loaded onto barges and then shipped to their various polymer assets. At the Bayport plant, they have an integrated ASA polymer production facility, and they do a lot of railcar loading and unloading as well as able to send it out via trucks.

Altamira, they make all products, but they have essentially tried to… Because the ASA plant in Bayport is the new one, they're making less ASA at Altamira and more of the ABS, both special and general purpose and making the polystyrene, largely consolidation over there.

[00:05:13] How would you evaluate Ineos's lead time performance vs those of its peers in the industry?

JS [00:05:21]: The lead time, I would say, is going to be the industry norm. Most of these lead times are not quick for the, I'd say, bulk materials or the intermediates, but for the speciality polymers, they will actually have faster delivery timelines due to the integration aspects of a lot of things.

OA [00:05:47]: How much faster would the timelines be for speciality polymers compared to the more traditional products?

JS [00:05:55]: I would be willing to wager that. That could… Depending upon how good their inventory management is and how much stock they're holding on hand, that could be up to 25% faster.

[00:06:11] What are your expectations regarding the turnaround timeline and associated production downtime for the Bayport single-train styrene plant and the Texas City operations over the next 18-24 months?

JS [00:06:25]: The Bayport plant was meant to go into turnaround in 2025. They pushed that turnaround into 2026. I believe that turnaround ended in May or maybe end of May timeframe in 2026. The cycle that they have typically run at Bayport is three years. I will also say that they have worked pretty heavily to extend that turnaround cycle to four and in some cases, even five years is what they're talking about. In the next 18-24 months at Bayport, I would not expect them to have a major turnaround. If they have any downtime that's of any significant, that would likely be an unplanned outage or a result of something that has failed on the run during the campaign. For Texas City, that is essentially a swing plant. Depending upon styrene market margins and Bayport's operation, they are normally able to shut that plant down every year, and they do a lot of opportunistic maintenance during that time. Their turnaround cycle for the major work, which is their catalyst change in dehydro has also typically been on that three-year cycle. They tend to stagger the turnarounds with Bayport and Texas City. I would not anticipate that they would be doing a catalyst change in the next… That would be… They did one in 2024, so in 18 months, that would mean looking towards probably early '27, they would likely be doing a dehydro catalyst change unless they are pushed to extend that further.

OA [00:08:34]: What does opportunistic maintenance entail at the Texas City facility?

JS [00:08:46]: There's a number of pieces of equipment on the train that have, let's say, their vent gas compressors. They have three at Texas City, but two of them run in parallel and one runs in series with the two. Any downtime on those vent gas compressors is downtime of the plant. There's lots of preventative maintenance that you can do on these things. It can be as simple as changing out the oil. It can be doing instrument checkouts. You can do interlock testing. You can fix repairs that may have failed on the run, such as clamps on piping, which is quite a common one for a lot of these facilities to encounter, so making repairs to your piping. There could be different work in the ethylbenzene unit that's done for optimisation. You can have exchangers that have some level of leakage on the run that you can manage to operate with, but when you have downtime, it is opportunistic to do those repairs to regain your efficiency. You can back flush a lot of your condensers that foul with chip scale over time, and you can regain your cooling efficiency. You can afford to take down different parts of the unit if you are at lower production rates, and you can manage your inspections differently. Where you may have regulatory required inspections for vessel internals or externals, you can do all of that work opportunistically during downtime and get it out of your turnaround window, which derisks the turnaround.

[00:10:42] What are your thoughts on the mechanical integrity programme set-up and how that can be implemented at each Ineos facility?

JS [00:10:50]: I was overseeing the, I'd say, overhaul and implementation of the mechanical integrity programme at both of those plants starting in 2020. We made significant progress in, I'd say, the build-out of the inspection database, inspection schedules, the compliance. We had large issues with inspections being overdue or inspection findings not being addressed. We largely had built a solid programme for managing it on a time-based perspective. The next evolution of that is to move to a qualitative risk-based approach. This is where I think there's a lot of opportunity to extend inspection cycles, which can significantly impact your turnaround cost and complexity. That is a reduction in vessel entries. It's a reduction in how often you'd be doing that. It is a reduction in the manpower associated with all of the scaffolding, the boilermakers to bolt and unbolt, the gaskets, the materials, the minor findings that occur during these things. I think that is an opportunity to… Especially with their pressure relief valves. There are some that are just frankly being touched too often. You don't have any basis or need for it. There's good data from all of the overhauls of the PRVs that you could extend the frequency or cycle time on those.

OA [00:12:41]: By how long do you think inspection schedule should be extended? What's the potential savings in turnaround cost in quantitative terms?

JS [00:12:57]: Nominally, the turnaround cost for Bayport, I would put in… Let's call that nominally, that's a USD 35m or USD 40m turnaround. If you can reduce the scope of that, you can likely extend or move out some of these vessels that may end up being done almost every cycle to every other cycle. Now that doesn't mean you're going to halve the turnaround cost, but that does mean that there's likely an opportunity about 15% reduction, maybe 20% reduction after you're fully implemented, which would be a substantial amount.

[00:13:44] Could alternative facilities, such as Decatur, Alabama or Altamira, Mexico, help mitigate a potential drop in production output from the Bayport or Texas City sites?

JS [00:14:00]: It depends what specific products. The Bayport facility produces styrene monomer. They also produce ethylbenzene and sell a little bit of that into fuel blending and stuff like that. Then the ASA plant is the new big polymer asset they've built on the backside of that facility. Decatur is not capable of making anything except general purpose polystyrene. They take styrene monomer in and they make general purpose polystyrene. They are not able to make up a shortfall in demand of the styrene monomer supply. That's only going to come from either Bayport or Texas City in the US footprint. Altamira is… Again, it's only a polymer facility. They don't make styrene monomer. They consume it. If Bayport or Texas City go down, there's no way to make up that styrene monomer production capacity within an Ineos asset. They have to go to the market and buy spot styrene monomer. No, there isn't a way for those products to be made up for capacity. Now if you talk about the polymer side of things, if Altamira goes down, Bayport can still make the ASA. Largely, they're only making the ASA at Bayport. They've cut that production at Altamira. Then Altamira can make all of the different polymers. They can make SAN, they can make GPPS, they can make ABS and they can make ASA. Altamira can back up all the polymer plants, except for, I believe, some of the higher speciality grades of ASA, which I believe will only come from Bayport.

[00:15:52] What capacity utilisation rate must Texas City and Bayport maintain to stay above break-even EBITDA?

JS [00:16:00]: That all depends on the margin that you're getting on styrene monomer. If you assume a USD 0.07 per pound styrene monomer, you need to essentially be running them roughly at 70-75% asset utilisation to break-even at their current variable and fixed costs. However, with styrene monomer margins, they're heavily pressured by Chinese supply. Styrene monomer has been overbuilt in China, and they have begun exporting as of a couple of years ago. It was the first time that China was actually an overproducer in selling styrene on to the spot market and no longer consuming it. They have actually been selling their styrene monomer at negative margins on the open market while continuing to run their plants. That makes it a very challenging dynamic for a producer in North America to compete with. When you have competitors that don't need to make money, that's a very challenging place to be.

[00:17:31] How do the Bayport and Texas City plants' cash costs compare to low-cost Asian imports?

JS [00:17:39]: I would say from a true, if you look at cost of production, there is a massive advantage to the Bayport and Texas City facilities. They have pipeline ethylene. They have a massive… Ethylene, when you look at it for the Asian suppliers of styrene monomer, that is their largest cost. The benzene price that is paid by the US Gulf Coast for Bayport to Texas City is going to be the same price that they're paying for the Asian spot market. The real benefit to the US Gulf Coast styrene monomer production is the ethylene price from the raw material perspective. Also have the benefit of fairly cheap natural gas because it is a large energy-consuming process with their steam generation, but largely, the most massive advantage is the ethylene advantage and their scale. These are larger plants than a lot of the ones in Asia. What had been expected for a long time, and I don't know if it's really taken place is consolidation of the more expensive assets in Asia, shutting (audio distort 18.59) cost the plants down due to the overbuild in China.

[00:19:08] What do you think of Ineos's top-level KPIs and how they are used to compare facilities to one another?

JS [00:19:17]: Ineos has this process that they call site comparison metrics or psychometrics. This is, I'd say, a management tool that Ineos applies to try to benchmark all the different facilities against each other. It's done on some dimensions that are perhaps a little bit obtuse to some, but the general philosophy that Ineos takes with pretty much everything is be enormously mindful and tight on cost. I'll give you an example of something that you would not normally consider to be a top-level KPI. How many employees on site have a cell phone contract paid by the company? How many vehicles are on site? That includes a lot of larger facilities, you're going to have people running around in golf carts or mules to get from different areas of the plant to the maintenance shop to the equipment, etc. All those things are tracked. I would say they're more material ones for comparison that they look at. Those metrics are what they would consider indicators, indicators of a culture that is or isn't being tight on cost. That's what they're using to say, okay, you don't really want to be on… When they're comparing you against all the different facilities within Ineos, you don't want to be on that side of the graph. That is the high bar chart, which is I've got a lot of cell phone contracts and only so many people, that's a bad place to be. You always want to be driving towards not being the outlier there.

They have indicator metrics that they use to challenge the teams to do better. Then they have the more hard-dollar ones. One of the, I'd say, top-level metrics that gets reviewed all the time is the maintenance plus capital over replacement asset value. Very standard industry metric, I will tell you that they are incredibly aggressive with how they set that target. They look for all of their plants to be spending no more than 1.5% of maintenance and CAPEX over replacement asset value. I think the reality is most of their plants are not hitting that, but still setting that target and that benchmark, it has definitely pressured them to be in a fairly close to best-in-class area for that spend. Some of the other metrics that they will look at is the total headcount, and they'll do this based on department. They'll look at how many operators do you have, how many engineers do you have? How many maintenance craftsmen do you have? They'll look at both from an in-house and a nested contractor perspective. Very tight on headcount, very tight on fixed cost and very mindful of where they are benchmarking on the total fixed cost relative to the asset value.

[00:22:54] Following recent footprint rationalisation, such as the Channahon facility closure, what percentage of Ineos's US Gulf CAPEX might be allocated towards debottlenecking, energy efficiency and yield optimisation vs standard maintenance?

JS [00:23:12]: By far and in large, the way that Ineos breaks its capital down is into what they call licence to operate, sustenance or growth. The vast, vast, vast majority of it goes into that sustenance bucket. The growth capital would be things that you're talking about for energy optimisations, yield improvements, expansions, etc, those I have not seen historically get a lot of attention. These plants are actually low-cost plants when their equipment is in working order and they're being operated properly, which is, again, two qualifiers that I would not say are entirely current for the situation at the plants. Bayport, for example, operated with an exchanger or two exchangers in the dehydro section that are incredibly critical to production of styrene monomer, and it makes a material difference. There's something they call a steam-to-oil ratio. This is essentially how much steam are you using to how much oil. They were operating in excess of 1.3, 1.4, 1.5 when optimal is actually 1.1. With the leak in that exchanger, that was the driver of essentially why that steam-to-oil was so high.

Now with a lot of repairs made to the dehydro section, they should be able to get it back to that design intent and operate it there. There's a considerable amount of optimisation that they can do across their distillation towers and units, but the primary thing for Bayport and Texas City is when they are down, it is incredibly costly. Their most significant opportunity from both a fixed and variable cost is stay running. The optimisations are the tweaks on the edges. That's why most of their capital ends up going into what you call sustenance. It's reliability spend. It's stuff that is breaking or has broken and needs to be replaced so that they can get back to the design intent. I will tell you the catalyst that's used in ethylbenzene and dehydro is very expensive. It is also very critical to the performance of the units and the yields, the dehydro catalysts in particular. They are constantly working with different vendors, BASF and Clariant to get to the next-generation catalyst and continuing to refine it. All of them have different performance and different breaking curves and different experiences over the run.

Some of it comes down to the catalyst manufacturer. There's been a lot of focus and concerted effort in the past few years to actually get more involved with the manufacturing process of that catalyst because they found issues with how it performs in dehydro that are coming from not necessarily the formulation, but more about how the catalyst production process went. Did they get bags that were not optimal for its surface morphology and all the different aspects. I'm not a catalyst expert, but all the different ways that this thing cokes up or loses its impregnated potassium and all those different elements that are critical to facilitating the reaction.

[00:27:23] Are the Bayport and Texas City plants facing any other risks, whether operational or related to obsolescence?

JS [00:27:31]: They are operating some fairly large and obsolete rotating equipment, particularly at the Bayport site. I've mentioned the vent gas compressors before. They do not have, I'd say, adequate protections against some process disruptions that can occur to these things. Before I left, we had deployed a protection, some interlocks and some different instrumentation protections as well as restoring our spares, and that includes the rotating assemblies and seals and bearings and things. However, those machines are incredibly old. It's a few layers of consolidation with all the different rotating equipment vendors that have occurred there. There are Dresser-Rand compressors that are now repaired by Siemens and the knowledge base is depleting for people who know the intricacies of these machines and have the ability to actually work on them. They're very, very sole-sourced on a lot of these assets, and you can extrapolate that to a lot of their pumps. They'll have some more standard API or ANSI pumps that are still readily available for a lot of the routine stuff, the Flowserves, the Durcos, etc, but their steam turbines and pretty much any of their larger rotating machinery, you can almost guarantee that it's obsolete. The site doesn't have all the documentation that they would need to go to different outside vendors for repairs. They're quite, I'd say, beholden to just a few vendors to support those assets.

[00:29:48] Given the removal of a significant volume of polystyrene production capacity with the Channahon facility closure, what impact might this have on oversupply conditions and margin recovery for Ineos?

JS [00:30:01]: I don't see that as having a great effect. I think this is more of a demand-driven shutdown, not a consolidation effort. The general purpose polystyrene is the lowest margin product that they produce. Where is the supply coming from? It's coming from China. It's being done, as I mentioned, not necessarily at fair market price. That is part of why I think Channahon was logical to shut down. They had higher production costs than Decatur and Altamira. The trend is that the demand is continuing to reduce, mixed with the oversupply from the Asian capacity build-out.

OA [00:30:57]: What realistic unit cost savings can be achieved through operational efficiency initiatives at the Texas City and Bayport facilities?

JS [00:31:09]: They both have some fairly substantial opportunity when you look at energy yields and variable costs. I would put it in the range of 10%, maybe even 15% from an optimisation perspective across all the different pieces that we've talked about here. This is optimising your fixed costs, optimising… The big ones in truth are in the variable cost budget. When you really look at how these plants operate, it's making sure that your yields are optimised, you're taking care of your catalyst on the run, you're not using too much steam and you're being mindful of all your other raw material costs that you have.

[00:31:58] How do the current margin conditions impact the hurdle rate for future maintenance CAPEX?

JS [00:32:03]: It's a big problem. It turns it into a bit of a cash crunch for them. In general, you think, extending a turnaround cycle, that's a good thing. In the case that they've been operating under… I don't know that that is a good thing. What they're doing it is almost out of necessity from a need to produce cash to meet the targets that are set by Ineos Capital to return money essentially to the federation here. When you look at it from an optimised view, the catalyst change-outs actually pay for themselves on an even more frequent basis than three years. What I mean to say is, over time, the catalyst degrades. You lose performance with it. This is just a fact of how these units run. Now you can manage that degradation by operating correctly and you want to follow the catalyst curve down with it. When you look at from a yield loss and the variable margin impact of the catalyst degradation, it actually makes sense to do catalyst changes more often than on that three-year cycle.

As I mentioned earlier, they've been looking to extend that three-year cycle to a four-year cycle to a five-year cycle. The reason for that is, is because they can't afford to spend the money to shut the plant down and do the turnaround. They're trying to defer that maintenance and capital spend, even though it comes at a total operating cost from a variable margin perspective. That's all because they are so compressed on the margins. They're not producing enough money to afford to do things that are good long-term investments. They're making these decisions on a short-term view, even though the long term, if you optimise the cycle would look very different.

[00:34:29] Could you outline Ineos's vertically integrated business model in the US? How does the company source the essential feedstocks necessary for manufacturing high-performance styrenic materials?

JS [00:34:49]: I mentioned the big ones here. They're benzene and ethylene. Then obviously, you got natural gas to produce your steam, but talking about benzene and ethylene, ethylene is fed to Bayport and Texas City via pipeline. They have it coming primarily from their Ineos partner, Ineos Chocolate Bayou, which is an O&P company. Separate Ineos entity, but that is their primary source and preferred supplier for ethylene. They also have same pipeline but just different let-down stations from Shell and Motiva for the Bayport facility. For Texas City, I believe they have Motiva only, not Shell, as their backup supplier. Then for benzene, it's barge benzene. They have contracts for long-term benzene and from Texas City, they also get it from the refinery down there, direct fed, but the barge benzene is at market price essentially. They have some long-term contracts set up, but they get a lot of it at spot prices. They try and manage that so they can optimise their price point.

[00:36:26] How does Ineos's procurement structure for ethylene and benzene insulate netback margins from regional feedstock spot volatility?

JS [00:36:38]: They are partially insulated, but I would not say fully. They essentially receive ethylene from Ineos O&P roughly at market price. It has a slight discount, but it's really more of a volume-based discount. It's almost a guaranteed type of contract agreement for primary supply there. Essentially, they're getting ethylene pretty much at market price. The benefit is that they're getting ethylene at a very low-cost point by being in the Gulf Coast region where we've got a lot of crackers. The benzene prices, refinery benzene is cheap. A lot of their benzene that they get on barges actually comes from Africa. That's really the open market and the way they're managing this is really trying to understand the total global demand of benzene and they have people that sit in their commercial team that this is their only job is to essentially buy spot benzene and make sure that they're managing the contracts well and understanding the dynamics that are happening and feeding that back in so that they can modulate the demand or the production rather of the styrene monomer to not run out.

OA [00:38:08]: Could internal pipeline connections and intercompany transfer pricing buffer working capital during severe margin squeeze?

JS [00:38:18]: I have not seen them do that. All the Ineos businesses operate as essentially separate entities with some loose, I'd say, partnerships between them. They are not ever going to do something that is clearly against the total… They're not going to do something that is obviously conflicting with making Ineos Group profits, but there's not a concerted partnership or effort to manage that from a total Ineos umbrella optimised point. That does not happen from what I've seen.

OA [00:39:13]: What level of cost savings in freight and handling could be realised by relying on an in-house feedstock supply?

JS [00:39:21]: I have to imagine it's large. I don't know the numbers for that one, but my sense is just because of the nature of how fragmented all these groups are and how high the raw material and logistics costs are, there has to be at least 10% on that.

[00:39:44] What is the mode of transport that Ineos typically relies on – rail or truck? How does that impact transportation costs?

JS [00:39:51]: Rail has been, I'd say, the primary for a lot of the… They get acrylonitrile in railcars to go to Bayport, which is part of the process there for the ASA plant. For the raw materials that are the large ones here, ethylene is pipeline and benzene is barged. Then for rail is how they handle a lot of their polymers. There's really not a more efficient way to do it until you get down to the distribution level then it goes on trucks.

[00:40:35] How often does pipe maintenance take place, and what impact does it have on ethylene supply to critical facilities?

JS [00:40:43]: There's backup pipelines. There hasn't been historically a major impact. Ineos O&P did have a deflagration at a station a couple of years ago. That partially disrupted, but all that really did… The two pipelines that they have that are redundant, one is just smaller than the other. They weren't able to feed full rate to both plants, but they were still able to supply, I think, roughly 65% of full rate. The makeup from the alternative suppliers was adequate to meet whatever demand was.

[00:41:24] What is your assessment of Ineos's price positioning across its four styrenic pellet categories in the US, and which segments demonstrate lower customer price sensitivity?

JS [00:41:34]: Bayport is by far the most cost-effective facility. It's one of the largest styrene monomer plants in the world. They've built maybe a couple that are larger. I'm not sure, but it's essentially at that scale of it's huge. It's got pipeline ethylene, and it's got an integrated polymer plant with it now. When you look at all those aspects of it, this thing is set up to be a very low-cost facility. Texas City is not quite in that state. It's an older plant. It's not as large. Its technology is slightly different. It doesn't have the same optimal yields or energy usages, but it is still a very competitive plant. It will still serve a very important purpose as both backup and as a swing plant.

OA [00:42:37]: What are your thoughts on Ineos's price position in the market compared to competitors? In which segments are we seeing more price sensitivity from customers?

JS [00:42:53]: Okay. Styrene monomer is sold at market price. Bayport can produce more efficiently than any other styrene monomer plant in North America. Texas City is not quite there, but is probably one of the more efficient ones, especially when you consider American Styrenics [sic] or some of the competitors there, they're just not able to produce the same variable cost. Now for the polymer side of things, the polystyrene, I don't believe has any real structural advantage relative to competitors. It's going to be fairly much the same. I think with the consolidation of shutting down Addyston, shutting down Channahon, shutting down Sarnia, it eliminates a whole bunch of rail fleet that probably was on the books for them. Their variable cost probably goes down a little bit, but I would say that's going to be one of the ones that they're not going to be the low-cost producer in. For ASA, that's a speciality polymer and they've made a world-scale facility. That I would imagine they have a cost advantage on for ABS likely as well, given Altamira is a fairly low-cost producer. I think the SAN piece of it, I don't know that there's any particular advantage. I imagine that will be fairly similar to the GPPS situation.

[00:44:47] How effective are existing cost pass-through agreements in periods of raw material price spikes, especially given ongoing competitive pressure from lower-cost foreign imports?

JS [00:45:01]: They're fairly effective. Pretty much all of the contracts… Ineos, their strategy has always been to set up longer-term contracts. They balance this… They want to have 70% of it on a long-term agreement and then they'll handle 30% or 20% on spot. Their long-term agreements pretty much all have raw material pricing components built into them. That pass-through mechanism is pretty efficient. The challenge that you can get is with major swings, you can get COSA losses. Depending upon when you bought your raws at vs whether you're building inventory or depleting inventory, you can be on either side of that COSA. The hope is that that equals out, but there were years where COSA losses were in the 20s and 30s and 40s [sic] of millions of dollars to the company. For a company who's getting squeezed on EBITDA, that's a massive consideration for how much cash that you're actually producing. They're not insulated entirely from those, but they do have the mechanism to pass through the costs to their customers effectively.

OA [00:46:42]: How does that translate to gross margin generation per annum, given the particular product category and the cost pass-through mechanism?

JS [00:46:57]: At Ineos Styrolution, they want to make around their boom years were USD 1.1bn-1.2bn. I'd say a more normal year for them was USD 500m in EBITDA. When you look at their ability to pass through or not pass through or suffer COSA losses, you could call that in the 10% range of total EBITDA.

[00:47:32] Across Ineos Group's chemical and polymer divisions, what key opportunities exist for corporate and operational consolidation?

JS [00:47:46]: I think there's massive opportunity when you look at some of the functional support that is just so common across all these plants that they don't take advantage of. If you look at procurement, it is all decentralised. You will have, I'd say, the common top-level rules and requirements, but you do not have the same effectiveness to leverage category managers across different asset classes or equipment types or vendors. You don't get preferred pricing, you don't get preferred service. You don't necessarily have a good feedback mechanism when you do have vendors who are either performing or not performing. Their procurement aspect seems like that's an obvious one that you would want to better centralise. They do collaborate a little bit, but I'd say it's a lot more ad hoc and a lot more driven by the specific individuals rather than a management structure, if you will. The supply chain and finance piece of it, again, that seems like an obvious one to me, where you could certainly reduce your headcount if you centralise this and standardise your processes as well as, again, leveraging better pricing, better contracts, use the scale because essentially, you have a bunch of mid-size companies that are all operating independently.

If you add them all up, that now makes you a BASF or a Dow or an Exxon. I am very aware of how different the response and preferred pricing that you get with those vendors are when you have that scale behind you. I think the functional aspects seem to be the ones that make the most sense to centralise to me. I will tell you that that is a very unpopular opinion with the owner. Jim Ratcliffe is very against that. He really likes having everything decentralised. That is how he's set up his business. The guy has made a lot of money doing it. Maybe he's on to something, but it just seems like there's some very obvious inefficiencies that have been built into the way that he's bought and integrated different facilities. Operationally, I don't know that there's a lot of opportunity. I think you're going to need dedicated plant operations and process engineers and Ineos already runs pretty lean in that regard. Maintenance and reliability, probably some opportunity to, I'd say, improve your efficiency and your standardisation and improve the effectiveness of that, but again, I would put it in the operational space where not a ton of opportunity on headcount reduction.

Maybe you get some benefits of the network effect and could reduce your third-party spend, utilising the internal network better. On the capital side, I think there would be a benefit to integration to having a more standard and centralised capital project engineering team because essentially all the sites have their own right now. I've seen how they operate, and they're not efficient. If you wanted to spend better, I would look at that for sure. That's a big lever there. That one may be a bit more complicated to centralise in an effective manner vs finance, for instance, or procurement, but it would definitely be a worthwhile one.

[00:52:02] Why might it be more difficult to centralise the engineering team?

JS [00:52:07]: It's very challenging to balance priorities and also with capital engineering, there is some site-level nuance and specific considerations. Not everybody is going to have things that are built to the same design standard. You're not always going to have the right engagement with the right people at the site, and that can cause some real rework type of issues. I would say when you remove project engineers from the facility that they're working at, I just think that there's something lost in the effectiveness to manage and have the oversight that's required there to really manage cost effectively.

OA [00:52:55]: Do you think it would require retraining the engineering team?

JS [00:53:03]: I think there's a whole opportunity with… The structure doesn't have large engineering teams at any of these sites, so they're third-partying a lot of them. What does that mean? That means that if I go to a Worley or some other Fluor or KBR, I have to pay for all of their overhead a number of times at each facility. If I can centralise this, maybe now I could have primaries and backups and make them compete against each other in a more meaningful way and drop my price point down and also hold them accountable to meeting my internal requirements and quality expectations. When you have it all decentralised, you're really very dependent upon the people and a lot less on the structure and the system behind it.

[00:54:06] What potential run-rate cost synergies would you expect from asset consolidations? How should we assess the upfront cash cost required to achieve the structural savings?

JS [00:54:18]: I don't think that there's a lot more consolidation that they're going to be able to do with Ineos Styrolution. If the GPPS demand continues to go down, Decatur will be shut down, but you're looking at a fairly thin asset base at that point if you're going to take those two facilities offline. Bayport will be last man standing here would be my expectation. Altamira is fairly low-cost, but is beholden to the market demands on several of the different polymers. Yes, I don't think that they're going to intentionally spend capital to further consolidate. I think it will be a demand-driven shutdown consolidation.

[00:55:28] How can Ineos Group adjust its management style to navigate prolonged cyclical downturns without compromising operational reliability and environmental compliance?

JS [00:55:40]: I think they're in a tough spot. They demand a lot of their people. They run lean. I do think that the entire industry is suffering a bit right now. I think that they have a lot of people who are still a employee of Ineos, frankly, for lack of better options. When that cycle turns, which it will eventually turn, I suspect they're going to lose a lot of people because they do not pay top dollar at most of their facilities, and they haven't been paying bonuses out for a couple of years running. I think that exodus is going to be very painful for them. How do they change that management style? I think they have to come to grips with that at some point here. They've never been a very people-driven company. It's a very top-down company. I would say they're a very technical company. They have a bunch of smart people working there, but I think they're missing that human element a little bit. It may come back to be a problem for them. I don't think it's an immediate thing, but I think in 3-5 years, I think it's going to be a big problem for them.

[00:57:06] Do you have any closing remarks on Ineos or the wider industry?

JS [00:57:15]: I think the Ineos companies are clearly in a bit of trouble here. They've siphoned off a lot of cash out of their businesses that could have been reinvested. I think that's going bite them.

OA [00:57:35]: Thank you for those closing remarks. That just about brings us to the end of today's Interview. Once again, thank you for taking the time out to speak with me today, and I hope you enjoy the rest of your day.

JS [00:57:47]: All right. Thanks. Bye.

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