August 4, 2021

Port of LA Update

In the eye of the congestion storm: Q&A with Port of LA’s Gene Seroka

Southern California gateway still clogged as wave of peak-season cargo looms

Greg Miller, Senior Editor Follow on Twitter Tuesday, August 3, 2021 6 minutes read

Peak season, for all practical purposes, is here. There are once again 25 or more container ships at anchor in San Pedro Bay off the ports of Los Angeles and Long Beach. Rail lines UP and BNSF were so backed up that they recently throttled container flows from Southern California to Chicago.

With no end in sight, how can West Coast ports handle the ongoing flood of imports?

To answer that question, American Shipper interviewed Gene Seroka, executive director of the Port of Los Angeles, on Wednesday. Following is an edited version of that conversion:

AMERICAN SHIPPER: There’s a parade of ships now headed from Asia to California. With peak season cargo coming in and new trans-Pacific services and extra loaders, is there any way for Los Angeles to squeeze out more productivity on the land side and dig out of this? Or does normalcy have to wait for imports to abate?

SEROKA: “The railroads are full. The warehouses are full. Port terminals are full. Ships are coming in and waiting to get worked. The factories are behind in orders. This incredible demand has got everybody in the entire value chain just clipping out at levels we never could have imagined — and it’s still not enough.

“We’ve still got so much cargo coming in. We were on the phone with a big retailer this morning and they said that they’re still going to need another year to get inventories up to a level they think is appropriate.

“Something’s got to ease. We’ve got 23 vessels scheduled to come into both ports over the next three days. That’s pretty high. We’ve now got 25 ships at anchor for both ports, 17 of which are directed to LA.

“But, for example, if we suddenly got a break in the warehouse system and a bunch of cargo was pushed out after being put in 53-foot boxes, we could have an immediate release valve on these terminals. One overnight run of 60,000 containers makes us look very, very different tomorrow than we do right now.”

AMERICAN SHIPPER: There have been several times when the number of ships at anchor dropped by 10 or more over a single weekend. Is that part of the strategy?

SEROKA: “Yes, it has been preprogrammed and planned. One of the things that’s difficult is getting the trucker community aligned with those additional gates and work times. Because these guys and ladies have the 11-hour federal mandate of work plus extra rest time. So, we’ve got to be in real synchronicity with these folks to say, ‘Hey, look, we’re going to be able to move a ton of cargo out on Saturday, Saturday night, Sunday, Sunday night. Can you have the power available?’ And they may forgo a little bit of work on Thursday and Friday, for example.”

AMERICAN SHIPPER: You just mentioned warehouses as a possible release valve. You’re implying more can be done at warehouses productivity-wise?

SEROKA: “Absolutely. It works on either end. If ships slow down for a week coming in, we could push out some of this cargo. There would be a little bit of a flow issue to direct the trucks and trains, but at least it would put a dent into the anchorages. Conversely, a similar outcome — maybe even with faster results — would be at the warehouses. You’ve got 2 billion square feet of space. If you were suddenly able to push out 53-foot domestic boxes at an abnormal pace — because these guys are only open from 8 to 5 — but if you added night shifts and weekend shifts, we could really release the air out of these terminals and get this port in better shape to welcome that next vessel.”

AMERICAN SHIPPER: There has been a shortage of job applicants across the country, in many different industries. How much is this a factor, not just in the warehouses, but across the entire land-based logistics system?

SEROKA: “I’ll break it down into three areas. The ILWU [longshore union] rank and file has been on the job between five and a half and six days a week since the pandemic began. We’ve added about 1,000 longshoremen and women during this process and it could be more. The employers and the union have to agree on those numbers within the collective-bargaining agreement, but if we can get more workers out there, even better in my view.

“On the trucking side, we’ve got about 18,000 truckers registered individually to do business at this port, only half of which call at the port at least once a week. With these terminals super-full with containers, that slows down truck times. Because we’re not getting four turns a day, we’re only getting two, we need more drivers and you still have half the population you can recruit into this business. How quickly individual companies and independent contractors want to [resume work at the port] remains the question.

“On the third segment, the warehousing guys, that’s been hit or miss all throughout COVID. You’ve got physical distancing and the teams that work in warehouses are now smaller and working farther apart. With stimulus, some may have forgone working in warehouses because those checks took care of the needs of them and their families. Now bringing them back are things like rent abatements and eviction moratoriums and unemployment benefits starting to wane and expire. So, you may see more people in the [warehouse labor] market.”

AMERICAN SHIPPER: There have also been huge challenges on the rail side. You reported in mid-June that Los Angeles’ on-dock rail time was still 12 days, not far from its peak earlier in the year. Then, in July, UP suspended Southern California-Chicago service for a week and BNSF rationed service for two weeks. How has that affected the port?

SEROKA: “That was a very difficult decision — pausing trains from Los Angeles/Long Beach to Chicago — and I think it had to be done. I talk to the senior guys and ladies at both companies, regularly, if not daily. What I learned from UP was that at the time that decision was made, they had 25 miles worth of trains sitting outside of Joliet. Lo and behold, very shortly thereafter, BNSF had 22 miles of trains sitting outside that facility.

“They are facing some of the same difficulties that we do here in LA. Their dwell time for containers, once a train gets discharged, was three times as long as it used to be, pre-pandemic, pre-surge. The expectation is that their customers come in within the day and pick up their boxes. It was going to three-plus days. And their on-the-street dwell time [at warehouses] was up to eight days, very similar to ours. So, they’re not getting equipment back nearly fast enough. Their normal model is about two days’ street dwell.

“These guys were saying, ‘How many more trains can I put in there because the guys in Southern California are screaming we need more rail cars, engine power and crews to get the next ship’s cargoes out. If [equipment] is just sitting in Chicago or other locations, I can’t get those assets and crews back.’ [Pausing service] was a painful decision they had to make.

“Combined, about 15% of our cargo was paused for that point in time. So, it didn’t decimate us, but every container that doesn’t move out of the port creates more of a clog right here. We’re once again sitting at about 95-98% of our land usage capacity and 80% is considered full-throttle for us.”

AMERICAN SHIPPER: How has this emergency pause in service affected rail dwell time at the port?

SEROKA: “For the small snapshot in time that they went into this pause, it increased dwell times, as you could imagine, because you’ve got containers that are not moving out. So, right now, we’re sitting at 13.1 days rail dwell and that’s just off the peak that we witnessed back in February. But then we will see it slide as these Midwest trains start to be built and move out.

“What it did was help clear out Joliet to an extent where it’s now manageable [in terms of] the cargo they can put through their terminal — and that will accelerate trains moving out of here going to Chicago.”

AMERICAN SHIPPER: Looking at all that’s happened already in 2021 — from the rail situation to the anchorages and all the other issues — it has really been an incredible year.

SEROKA: “And the story still has not been finished yet.”

August 4, 2021

Port of LA Update

In the eye of the congestion storm: Q&A with Port of LA’s Gene Seroka

Southern California gateway still clogged as wave of peak-season cargo looms

Greg Miller, Senior Editor Follow on Twitter Tuesday, August 3, 2021 6 minutes read

Peak season, for all practical purposes, is here. There are once again 25 or more container ships at anchor in San Pedro Bay off the ports of Los Angeles and Long Beach. Rail lines UP and BNSF were so backed up that they recently throttled container flows from Southern California to Chicago.

With no end in sight, how can West Coast ports handle the ongoing flood of imports?

To answer that question, American Shipper interviewed Gene Seroka, executive director of the Port of Los Angeles, on Wednesday. Following is an edited version of that conversion:

AMERICAN SHIPPER: There’s a parade of ships now headed from Asia to California. With peak season cargo coming in and new trans-Pacific services and extra loaders, is there any way for Los Angeles to squeeze out more productivity on the land side and dig out of this? Or does normalcy have to wait for imports to abate?

SEROKA: “The railroads are full. The warehouses are full. Port terminals are full. Ships are coming in and waiting to get worked. The factories are behind in orders. This incredible demand has got everybody in the entire value chain just clipping out at levels we never could have imagined — and it’s still not enough.

“We’ve still got so much cargo coming in. We were on the phone with a big retailer this morning and they said that they’re still going to need another year to get inventories up to a level they think is appropriate.

“Something’s got to ease. We’ve got 23 vessels scheduled to come into both ports over the next three days. That’s pretty high. We’ve now got 25 ships at anchor for both ports, 17 of which are directed to LA.

“But, for example, if we suddenly got a break in the warehouse system and a bunch of cargo was pushed out after being put in 53-foot boxes, we could have an immediate release valve on these terminals. One overnight run of 60,000 containers makes us look very, very different tomorrow than we do right now.”

AMERICAN SHIPPER: There have been several times when the number of ships at anchor dropped by 10 or more over a single weekend. Is that part of the strategy?

SEROKA: “Yes, it has been preprogrammed and planned. One of the things that’s difficult is getting the trucker community aligned with those additional gates and work times. Because these guys and ladies have the 11-hour federal mandate of work plus extra rest time. So, we’ve got to be in real synchronicity with these folks to say, ‘Hey, look, we’re going to be able to move a ton of cargo out on Saturday, Saturday night, Sunday, Sunday night. Can you have the power available?’ And they may forgo a little bit of work on Thursday and Friday, for example.”

AMERICAN SHIPPER: You just mentioned warehouses as a possible release valve. You’re implying more can be done at warehouses productivity-wise?

SEROKA: “Absolutely. It works on either end. If ships slow down for a week coming in, we could push out some of this cargo. There would be a little bit of a flow issue to direct the trucks and trains, but at least it would put a dent into the anchorages. Conversely, a similar outcome — maybe even with faster results — would be at the warehouses. You’ve got 2 billion square feet of space. If you were suddenly able to push out 53-foot domestic boxes at an abnormal pace — because these guys are only open from 8 to 5 — but if you added night shifts and weekend shifts, we could really release the air out of these terminals and get this port in better shape to welcome that next vessel.”

AMERICAN SHIPPER: There has been a shortage of job applicants across the country, in many different industries. How much is this a factor, not just in the warehouses, but across the entire land-based logistics system?

SEROKA: “I’ll break it down into three areas. The ILWU [longshore union] rank and file has been on the job between five and a half and six days a week since the pandemic began. We’ve added about 1,000 longshoremen and women during this process and it could be more. The employers and the union have to agree on those numbers within the collective-bargaining agreement, but if we can get more workers out there, even better in my view.

“On the trucking side, we’ve got about 18,000 truckers registered individually to do business at this port, only half of which call at the port at least once a week. With these terminals super-full with containers, that slows down truck times. Because we’re not getting four turns a day, we’re only getting two, we need more drivers and you still have half the population you can recruit into this business. How quickly individual companies and independent contractors want to [resume work at the port] remains the question.

“On the third segment, the warehousing guys, that’s been hit or miss all throughout COVID. You’ve got physical distancing and the teams that work in warehouses are now smaller and working farther apart. With stimulus, some may have forgone working in warehouses because those checks took care of the needs of them and their families. Now bringing them back are things like rent abatements and eviction moratoriums and unemployment benefits starting to wane and expire. So, you may see more people in the [warehouse labor] market.”

AMERICAN SHIPPER: There have also been huge challenges on the rail side. You reported in mid-June that Los Angeles’ on-dock rail time was still 12 days, not far from its peak earlier in the year. Then, in July, UP suspended Southern California-Chicago service for a week and BNSF rationed service for two weeks. How has that affected the port?

SEROKA: “That was a very difficult decision — pausing trains from Los Angeles/Long Beach to Chicago — and I think it had to be done. I talk to the senior guys and ladies at both companies, regularly, if not daily. What I learned from UP was that at the time that decision was made, they had 25 miles worth of trains sitting outside of Joliet. Lo and behold, very shortly thereafter, BNSF had 22 miles of trains sitting outside that facility.

“They are facing some of the same difficulties that we do here in LA. Their dwell time for containers, once a train gets discharged, was three times as long as it used to be, pre-pandemic, pre-surge. The expectation is that their customers come in within the day and pick up their boxes. It was going to three-plus days. And their on-the-street dwell time [at warehouses] was up to eight days, very similar to ours. So, they’re not getting equipment back nearly fast enough. Their normal model is about two days’ street dwell.

“These guys were saying, ‘How many more trains can I put in there because the guys in Southern California are screaming we need more rail cars, engine power and crews to get the next ship’s cargoes out. If [equipment] is just sitting in Chicago or other locations, I can’t get those assets and crews back.’ [Pausing service] was a painful decision they had to make.

“Combined, about 15% of our cargo was paused for that point in time. So, it didn’t decimate us, but every container that doesn’t move out of the port creates more of a clog right here. We’re once again sitting at about 95-98% of our land usage capacity and 80% is considered full-throttle for us.”

AMERICAN SHIPPER: How has this emergency pause in service affected rail dwell time at the port?

SEROKA: “For the small snapshot in time that they went into this pause, it increased dwell times, as you could imagine, because you’ve got containers that are not moving out. So, right now, we’re sitting at 13.1 days rail dwell and that’s just off the peak that we witnessed back in February. But then we will see it slide as these Midwest trains start to be built and move out.

“What it did was help clear out Joliet to an extent where it’s now manageable [in terms of] the cargo they can put through their terminal — and that will accelerate trains moving out of here going to Chicago.”

AMERICAN SHIPPER: Looking at all that’s happened already in 2021 — from the rail situation to the anchorages and all the other issues — it has really been an incredible year.

SEROKA: “And the story still has not been finished yet.”

August 2, 2021

Leggett & Platt Q2 Results

Leggett & Platt Reports Record 2Q Results

Aug. 02, 2021 4:10 PM ETLeggett & Platt, Incorporated (LEG)

CARTHAGE, Mo., Aug. 2, 2021 /PRNewswire/ —

• 2Q sales were a quarterly record¹ $1.27 billion, a 50% increase vs 2Q20
• 2Q EBIT was $172 million, an increase of $149 million vs 2Q20
• 2Q record adjusted² EBIT was $144 million, up $94 million vs 2Q20
• 2Q EPS was $.82, up $.87 vs 2Q20; 2Q adjusted² EPS was $.66, up $.51 vs 2Q20 adjusted² EPS
• Acquired Kayfoam, an Ireland-based provider of specialty foam and finished mattresses
• Increasing 2021 guidance: sales of $4.9–$5.1 billion; EPS of $2.86–$3.06; adjusted² EPS of $2.70–$2.90­

Diversified manufacturer Leggett & Platt (LEG) reported record¹ quarterly sales in second quarter of $1.27 billion, a 50% increase versus second quarter last year.

• Organic sales were up 50%
  • Volume was up 31%, reflecting strong recovery in most of our businesses and increased demand versus 2Q 2020, which was significantly impacted by the COVID-19 pandemic
  • Raw material-related selling price increases of 16% and currency benefit of 3% added to sales growth
• Acquisitions and divestitures offset each other

Second quarter EBIT was $172 million, up $149 million from second quarter 2020. Adjusted² EBIT was $144 million, a second quarter record and an increase of $94 million from second quarter 2020 adjusted² EBIT

• EBIT and adjusted² EBIT benefited primarily from volume growth and metal margin expansion
  • Maintained $20 million of fixed cost reductions implemented in 2020 (versus $36 million in 2Q20)
  • 2Q 2021 adjustment for a $28 million gain on the sale of real estate associated with our exited Fashion Bed business
  • 2Q 2020 adjustments include a $25 million goodwill impairment charge related to our Hydraulic Cylinders business and $2 million of restructuring charges primarily from pandemic-related cost reductions
• EBIT margin was 13.5% and adjusted² EBIT margin was 11.3%, up from 6.0% in the second quarter of 2020

Second quarter EPS was $.82, an increase of $.87 versus second quarter 2020. Second quarter adjusted² EPS was $.66, up $.51 versus adjusted² EPS in second quarter 2020.

CEO COMMENTS
Chairman and CEO Karl Glassman commented, “Our employees continued to drive strong results in the second quarter despite a challenging macroenvironment. Due to their tremendous efforts, we are pleased to deliver all-time quarterly record¹ sales along with record second quarter adjusted² EBIT and EBITDA. While we continue to navigate inflationary pressures along with supply chain disruptions, consumer demand remains strong and we are increasing our full year guidance.

“We are also pleased to announce that on June 4, we acquired a leading provider of specialty foam and finished mattresses primarily serving customers in the UK and Ireland. The company, Kayfoam, is located near Dublin and has two manufacturing facilities with combined annual sales of approximately $80 million. Kayfoam expands the capabilities of our European Bedding business and establishes a platform in foam technology and finished mattress production. Similar to our U.S. Bedding business, this acquisition allows us to support our European bedding customers anywhere in the value chain from innerspring and foam components to finished products including private label mattresses, toppers, pillows, and other bedding accessories.

“Finally, we remain focused on cash generation while reducing debt and deploying capital in a balanced and disciplined manner that positions us to capture near- and long-term growth opportunities, both organically and through strategic acquisitions.”

https://seekingalpha.com/pr/18418497-leggett-and-platt-reports-record-2q-results

August 2, 2021

Leggett & Platt Q2 Results

Leggett & Platt Reports Record 2Q Results

Aug. 02, 2021 4:10 PM ETLeggett & Platt, Incorporated (LEG)

CARTHAGE, Mo., Aug. 2, 2021 /PRNewswire/ —

• 2Q sales were a quarterly record¹ $1.27 billion, a 50% increase vs 2Q20
• 2Q EBIT was $172 million, an increase of $149 million vs 2Q20
• 2Q record adjusted² EBIT was $144 million, up $94 million vs 2Q20
• 2Q EPS was $.82, up $.87 vs 2Q20; 2Q adjusted² EPS was $.66, up $.51 vs 2Q20 adjusted² EPS
• Acquired Kayfoam, an Ireland-based provider of specialty foam and finished mattresses
• Increasing 2021 guidance: sales of $4.9–$5.1 billion; EPS of $2.86–$3.06; adjusted² EPS of $2.70–$2.90­

Diversified manufacturer Leggett & Platt (LEG) reported record¹ quarterly sales in second quarter of $1.27 billion, a 50% increase versus second quarter last year.

• Organic sales were up 50%
  • Volume was up 31%, reflecting strong recovery in most of our businesses and increased demand versus 2Q 2020, which was significantly impacted by the COVID-19 pandemic
  • Raw material-related selling price increases of 16% and currency benefit of 3% added to sales growth
• Acquisitions and divestitures offset each other

Second quarter EBIT was $172 million, up $149 million from second quarter 2020. Adjusted² EBIT was $144 million, a second quarter record and an increase of $94 million from second quarter 2020 adjusted² EBIT

• EBIT and adjusted² EBIT benefited primarily from volume growth and metal margin expansion
  • Maintained $20 million of fixed cost reductions implemented in 2020 (versus $36 million in 2Q20)
  • 2Q 2021 adjustment for a $28 million gain on the sale of real estate associated with our exited Fashion Bed business
  • 2Q 2020 adjustments include a $25 million goodwill impairment charge related to our Hydraulic Cylinders business and $2 million of restructuring charges primarily from pandemic-related cost reductions
• EBIT margin was 13.5% and adjusted² EBIT margin was 11.3%, up from 6.0% in the second quarter of 2020

Second quarter EPS was $.82, an increase of $.87 versus second quarter 2020. Second quarter adjusted² EPS was $.66, up $.51 versus adjusted² EPS in second quarter 2020.

CEO COMMENTS
Chairman and CEO Karl Glassman commented, “Our employees continued to drive strong results in the second quarter despite a challenging macroenvironment. Due to their tremendous efforts, we are pleased to deliver all-time quarterly record¹ sales along with record second quarter adjusted² EBIT and EBITDA. While we continue to navigate inflationary pressures along with supply chain disruptions, consumer demand remains strong and we are increasing our full year guidance.

“We are also pleased to announce that on June 4, we acquired a leading provider of specialty foam and finished mattresses primarily serving customers in the UK and Ireland. The company, Kayfoam, is located near Dublin and has two manufacturing facilities with combined annual sales of approximately $80 million. Kayfoam expands the capabilities of our European Bedding business and establishes a platform in foam technology and finished mattress production. Similar to our U.S. Bedding business, this acquisition allows us to support our European bedding customers anywhere in the value chain from innerspring and foam components to finished products including private label mattresses, toppers, pillows, and other bedding accessories.

“Finally, we remain focused on cash generation while reducing debt and deploying capital in a balanced and disciplined manner that positions us to capture near- and long-term growth opportunities, both organically and through strategic acquisitions.”

https://seekingalpha.com/pr/18418497-leggett-and-platt-reports-record-2q-results

August 2, 2021

Urethane Comments from BASF

BASF SE (BASFY) CEO Martin Brudermuller on Q2 2021 Results – Earnings Call Transcript

Jul. 28, 2021 2:42 PM ETBASF SE (BASFY), BFFAF

BASF SE (OTCQX:BASFY) Q2 2021 Earnings Conference Call July 28, 2021 4:00 AM ET

Company Participants

Stefanie Wettberg – SVP, IR

Martin Brudermuller – Chairman & CEO

Hans Engel – CFO

Martin Brudermuller

Good morning, ladies and gentlemen. Thank you for joining us today. On July 9, BASF released preliminary figures for the second quarter of 2021 and increased the outlook for the full year. Today, we will provide you with further details. Let us begin with the highlights of the second quarter of 2021. The strong growth momentum of the previous 2 quarters has continued. We achieved volume growth and price increases across all regions and all segments compared with the prior year quarter. In some businesses, we were able to restore and, in some cases, increase our margins with the price increases. In others, there’s still some way to go.

EBIT before special items rose by more than €2 billion compared with Q2 2020 and reached €2.4 billion. This is also considerably above the prepandemic level of roughly €1 billion in Q2 2019. Considerably higher earnings in our upstream businesses were the main driver for the strong increase in earnings overall. Compared with Q1 2021, margins in some commodity product lines such as isocyanates slightly declined in Q2 2021 but remain on a high level. In our downstream segments, we managed to increase volumes and prices based on strong demand. However, pressure from increased raw material prices remained high in several downstream businesses.

Let us now turn now on to the macroeconomic data. The indicators for the second quarter are estimates as most of the countries have not yet published their figures. According to the currently available data, global chemical production increased by almost 10% in Q2 2021 compared with the previous year quarter. With an increase in volumes of 28%, BASF Group grew well above global chemical production. All regions recorded strong demand growth. This was most pronounced in Asia, excluding China, and in Europe. In the prior year quarter, these regions as well as North America were significantly impacted by the COVID-19-related lockdowns. And in comparison, chemical production in China had already grown in Q2 2020.

This slide shows our volume growth by region. Sales volumes are compared with volumes in the respective prior year quarters. During the past 3 quarters, we increased volumes in all regions. In Greater China, we recorded double-digit volume growth during the past 5 quarters. In Q2 2021, volume growth in China was less pronounced as the recovery was already in full swing in the second quarter of 2020. Volume growth, however, remains strong at 10%. In Europe and in North America, volumes grew considerably in Q2 2021 as the prior year quarter in these regions has heavily been impacted by the lockdowns due to the pandemic.

We move now on to the volume development by segment. In Q2 2021, we increased volumes in all our segments. The volume increase was strongest in the Surface Technologies and Materials segment. Volumes also grew considerably in the Industrial Solutions, Chemicals and Agricultural Solutions. Overall, volumes increased by 28% or €3.5 billion in absolute terms compared with the prior year quarter.

We now look at our sales development compared with the second quarter of 2020. Sales of BASF Group increased by 56% to €19.8 billion. As already alluded to, considerably higher price in volumes were the driver for this. In total, organic sales growth amounted to 63% in Q2 2021. Currency effects of minus 7% were mainly related to the depreciation of the U.S. dollar. Portfolio measures had a negligible impact on sales.

As I already mentioned, EBIT before special items came in at €2.4 billion. We achieved considerably higher earnings in the Chemicals, Materials, Surface Technologies and Industrial Solutions segment. Further details on the earnings development in these segments can be found in our half year financial report published this morning. In the Nutrition & Care and Agricultural Solutions segment, EBIT before special items declined considerably. I will talk about that on the next slide. Earnings in Others also declined considerably compared with Q2 2020, and this was mainly due to higher additions to provisions for variable compensation components as a result of the strong earnings development.

Laurent Favre

My first question is on that normalization in the upstream, as you said, less than — you still assume that conditions will normalize but just less than before. I was wondering if you could give us a bit more color on the various moving parts there of your assumptions. And in particular, do you see now the risk of further normalization into the first half of 2022? Or do you think that, that scenario is off the table? And if you could separate, I guess, Chemicals and Materials in your comments, that would be great.

And then secondly, Hans, on the ag side, compared to February, when you issued the guidance for slight EBIT growth, there are new moving parts on higher costs and better soft commodities, I guess, currency, if anything, are slightly better. If you net all of those new incrementals, do you think you can grow EBIT slightly in ag for the full year?

Martin Brudermuller

Laurent, then I’ll take the first question. I mean, first of all, let me say that the conditions for Chemicals and Materials segment in the second quarter overall were better than in the first quarter. And that was coming, on one hand, very strong demand because, I mean, in all the different businesses, there is really solid demand globally. There’s also — I think the world has been a little bit surprised by low inventories and then big business, so they have also to fill. And then we have also the supply chain topics. Some of the markets are actually, because also of the supply exchange issues and the shortage of containers, there is not in every business, an arbitrage business from one region to the other.

So partly, they are a little bit more segregated markets, and that’s also why everything reacted quite sensibly in a pattern. And also we have some of our players in the major commodities had supply problems, even coming back to the big freeze in the U.S., which took weeks and actually and partly until today to really normalize and to work down the backlog. So if we look in a lot of the margins, I have to say, we really have super margins in the moment. Very, very high level. And it’s just not right to assume that this is going to stay forever.

I mean if you look in products also like acrylic acid, but also BDO, but then also MDI, TDI, this is all very much on the high level and simply with the effect that in some areas, the supply normalizes. And even the demand stays strong, you just have a certain relaxation of margins. I expect, however, that, even in the second half, this is still a super-margin level. It’s not record margins anymore, but it is very, very good margin. So for that reason, we have to figure into our numbers that there is a certain normalization. And you know how sensitive that is.

I mean in the MDI case, one of the competitors had a force majeure and then immediately prices react. So that is always, let’s say, the joker in the pocket that there could be some unfortunate or unplanned outages, which would change the situation. But overall, I mean, margins levels are so high compared to the last 5, 6 years, that they have to go down to a certain extent. But that should not send you the signal that they are now collapsing on the floor. It’s just really a normalization.

Andreas Heine

Well, I’ll try two, but very brief. In Q3, in Chemicals, if I look to the prices, I can see, I would say, on average, prices might be even higher than in the second quarter. Is there anything I missed if you look on what you see for that particular segment in the current quarter?

Second, in agro, we have seen soft commodity prices being very much up, but no one in the crop protection and seed business could react on this as the season was already running. So now I guess everyone is hoping for price increases, especially for the second half in the Latin American season. Is there anything you can share with us on this price increases for Lat Am in the second half, especially also to offset what you have lost on the currency last year?

Martin Brudermuller

Andreas, the short answer on the Chemicals margins, if you look in some of the margins, they already, at the end of Q2, turned down a little bit. So if you see MDI and TDI in Asia, a couple, Lat Am, more flat and some others also, let’s say, started already to normalize a little bit. That’s why we expect simply with the higher availability that this is going to continue. If I then do the math, I would say the Q3 in average margins are a little bit lower than we had in Q2.

https://seekingalpha.com/article/4442139-basf-se-basfy-ceo-martin-brudermuller-on-q2-2021-results-earnings-call-transcript?mail_subject=basfy-basf-se-basfy-ceo-martin-brudermuller-on-q2-2021-results-earnings-call-transcript&utm_campaign=rta-stock-article&utm_content=link-2&utm_medium=email&utm_source=seeking_alpha