00:00Can you talk to us about the impact that the conflict in Iran now appearing to be suspended,
00:06well, the impact that it had had on the lubricant business? Did it change the way that you dealt
00:11with supply chains and are you now feeling comfortable enough to change them back if it did?
00:17Well, thanks, Paul. I have to start by saying since the initial parts of this Middle East
00:22conflict, Lubrizol's focus was on ensuring that we kept our customers supplied. That's really what
00:28we are here to do every day, making sure we bring great products to our customers around the world.
00:33So we immediately went into our supply chain contingency planning mode and ensured we had
00:38the right products in the right regions to service our customers. As you can imagine,
00:43with the shortages that happened in Asia and in India, that we did have to move products around
00:48and supply from the U.S. in certain cases. But we've done a great job keeping our customers covered.
00:56So you did a great job of keeping your customers covered. If the Strait of Hormuz
01:00reopens energy, oil, fertilizer, everything else starts free flowing again. Are you going to change
01:06again the way that you're operating your supply chain in a more cost effective way potentially
01:11to serve your customers? Well, with the amount of oil that's been taken offline over the last hundred
01:17days, it's going to take a significant amount of time for the supply chain to stabilize. So we expect
01:24that we need 60 days to maybe six months or more for the supply chains to really get back to
01:30normal,
01:31particularly in areas like base oil, which, you know, 40 percent of certain base oils come out of
01:36the Middle East. And those are in very short supply right now. So we'll be working hard to see those
01:42supply
01:42chains get back to the right level and we'll adjust as we need to. Is there going to be confidence,
01:50not just from yourself, but from some of your partners and other businesses that operate in
01:54the region that things are going to go back to business as usual in the Strait of Hormuz? Or is
01:59that now a very risky proposition? Do you have to be aware of complacency going forward?
02:05I think what we've learned from COVID and the U.S. Gulf Coast freeze and a lot of the supply
02:10chain
02:10challenges that happened after those events, as well as now the Middle Eastern crisis, that we
02:15have to have contingency plans. So we will continue to buy from the region, but we'll also have
02:22contingency plans that cover us in other parts of the world should we have shortages or conflicts
02:27that prevent product from flowing from the Middle East. Well, Lubrizol has been a big player in the
02:36fuel additives business as well. And it's not just geopolitical tension that makes your job
02:40interesting. I mean, that's the transition to electric vehicles as well. How does that affect
02:45things like your lubricant business strategy? Well, Lubrizol has a variety of offerings for
02:52the transportation market, anything from the internal combustion engine to flex fuels,
02:57which we're seeing rapidly grow here in India, as well as for electric vehicles and hybrids
03:04as well. So that portfolio of offerings that we have are essential to ensure that we can
03:09cover the full slate of transportation needs for the future. And we're excited to continue
03:14to innovate across that entire spectrum. So which industrial sectors are you seeing the strongest
03:21demand at the moment for your products? Well, I have to say since the Middle Eastern crisis
03:27started, marine diesel has been very, very strong. Of course, there's a lot of ships that are moving
03:32in routes that they haven't done over the past several years. And that's putting a demand for marine
03:38diesel to be high. But, you know, we see continued growth across all of the transportation sectors,
03:45particularly you look at heavy duty trucks. And as I mentioned before, some of the more alternative
03:51fuels like flex fuels based on ethanol. You also have another product, CPVC, which I believe you
03:59invented, correct me if I'm wrong. You've recently doubled your capacity to produce this in Daesh in
04:04India. You're opening a new plant in Gujarat as well. You really seem to be putting a lot of chips
04:09on India at the moment. Do you see it as overtaking China as your primary growth engine in Asia?
04:15Well, let me start by talking a little bit about the CPVC molecule. You're right. We did invent that
04:20in the 1950s and we brought it to India about 25 years ago. Lubrizol is the leader for PVC in
04:27India,
04:28bringing clean water to people here every single day. We started manufacturing CPVC compound in India
04:36in 2016. And we're excited to bring the CPVC resin today to India because that makes us have a fully
04:44integrated CPVC chain, you know, again, with the ability to support the needs here in India. I guess
04:52when it comes to where the most growth is, we see growth across the entire Asia region, depending on
04:57our products. As I think many of your customers may know or your watchers may know, we sell into a
05:04variety of applications. And you probably used our products many times already today in the shampoo
05:11that you used to wash your hair or the lotions on your face, the medicines you took or your running
05:15shoes. And as we discussed, obviously, your car for your transportation lubricants. So depending on the
05:22area of focus in the in markets, we see a lot of growth across the Asian region.
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