Westlake Chemical Corporation (WLK)

US Securities and Exchange Commission Washington, D. C. C. 20549 Form 10-
Annual Report of the K year submitted under section 13, 15 (d)
Pursuant to section 1934th or section 15th, the Securities Trading Act or transition report for the fiscal year ended December 31, 2018 (d)
Provisions of the Securities Exchange Act of 1934 on the transition period from the Commission file number001-
32260 West Lake Chemical Company (
The exact name of the registrant specified in the articles of association)Delaware 76-0346924 (
State or other jurisdiction registered or organized)(I. R. S.
Employer identity number)
Oak Avenue after 2801, Suite 600 Houston, Texas 77056 (
Address of main administrative office including postal code)(713)960-9111 (
Registrant phone number, including area code)
Securities registered under section 12th (b)
Title of the act: each class name of each exchange registered for common stock, $0.
01 face value New York Stock Exchange Co. , Ltd.
Securities registered under section 12th (g)
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Well-known experienced issuers as defined in Rule 405 of the Securities Act.
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Or a short period of time required for the registrant to submit such reports), and (2)
This filing requirement has been bound for the last 90 days.
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Or within a shorter period of time when the registrant is required to submit such documents).
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To the knowledge of the registrant, K is not included in the final proxy or information statement referenced in Part 3 of this Form 10 and will not be included in it
K or any amendments to this form 10K.
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A smaller reporting company, or an emerging growth company.
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Whether or not the total market value of voting shares held by registrant non-registrants
Registrant\'s affiliates ended on June 30, 2018, according to the closing price of $107 on June 29, 2018, the second fiscal quarter recently completed by the registrant.
The stock price on the New York Stock Exchange is about $4. 0 billion .
As of February 13, 2019, 128,474,346 shares of the common stock of the registrant were outstanding.
Reference to included documents: Certain information required in Part II and Part III of this table 10
K is incorporated in reference to the registrant\'s final proxy statement submitted under Regulation 14A regarding the registrant\'s annual meeting of 2019 shareholders to be held on May 17, 2019.
Part 1 of the catalog item 1)Business 1A)
Risk factors 1B)
Unresolved opinions of staff 2)Properties 3 )
Legal action 4)
Mine safety disclosure executive officer of registrant part 2 5)
Registrant\'s common stock, related shareholder matters and issuer\'s purchase of equity securities market 6)
Selected Financial and Operational Data 7)
Management Discussion and Analysis of Financial Position and operational results 7A)
Quantitative and qualitative disclosure of market risks
Financial statements and supplementary information 9)
Changes and disagreements with accountants in accounting and financial disclosure 9A)
Control and procedure 9B)
Part 3 10)
Directors, executives and corporate governance
Administrative compensation 12)
Guarantee ownership and related shareholder matters of certain beneficial owners and management 13)
Independence of directors and certain relationships and related transactions
Part IV 15) major accounting expenses and services
Annex and schedule 16 of the financial statements)Form 10-
K summary of explanatory notes references in this annual report on table 10K (this \"report\")
\"We\", \"we\" or similar terms refer to the West Lake Chemical Company (
\"West Lake\" or \"Company \").
Warning statement on forwarding
The Private Securities Litigation Reform Act of 1995 provides safe harbor provisions for the future
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Certain statements contained in this form 10-K are forward-
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All statements except statements of historical facts, including in this form 10-
K. it is moving forward to deal with activities, events or developments that we anticipate, predict, believe or predict in the future or that may occur --
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Finding statements can be identified by using words such as \"believe\", \"intend\", \"possible\", \"should\", \"can\", \"expected, \"intended\" or similar terms, or by discussion of strategies or trends.
Although we believe this expectation is reflected in the future
We cannot guarantee that these expectations will prove right. Forward-
The outlook statement deals with the following: future operating rates, profit margins, cash flow and demand for our products;
Industry Market prospects including crude oil prices;
Production capacity;
Devaluation of the currency;
We are able to borrow additional funds under our credit agreement;
Capacity to meet liquidity needs;
Our ability to meet our debt obligations under debt instruments;
Our expected Quarterly Dividend
Future capacity growth and expansion in our competitive industry;
The results of the acquisition, including our acquisition of nakan tm;
Time, funds and results of capital projects, such as the construction of LACC factories and related facilities;
Pension plan obligations, funding needs and investment policies;
Comply with current and future environmental-related penalties, capital expenditures, remedial actions and procedures, including environmental regulations and costs related to any new law, regulations or treaties that may enter into force to limit or control carbon dioxide and other greenhouse gas emissions or to address other issues of climate change;
Effectiveness of pending legal proceedings;
Time and amount of capital expenditure.
Based on our experience and our views on historical trends, current conditions, we base these statements on assumptions and analysis, and we believe that in the case of speaking, the expected future development and other factors are appropriate. Forward-
In nature, the statements involve significant risks and uncertainties that may have a significant impact on the expected results, and actual future results may differ materially from the results described in these statements.
While it is not possible to identify all factors, we still face many risks and uncertainties.
Factors that may lead to significant differences in future actual results include risks and uncertainties discussed under \"risk factors\", as well as risks and uncertainties as described from time to time in other documents we submit to the SEC, including but not limited to: general economic and commercial conditions;
Cyclical nature of the chemical and construction products industry;
Availability, cost and volatility of raw materials and energy;
Uncertainties related to the US, Europe and the world economy, including those caused by political tensions and unrest in the Middle East and beyond;
Current and potential government regulatory actions in the United States and other countries, as well as political unrest in other regions;
Production capacity and operating rate of the industry;
Balance of supply and demand of our products;
I. competitive products and pricing pressure gauges;
Instability in credit and financial markets;
Entering the capital market;
terrorist acts;
Operation interruption (
Including leaks, explosions, fires, weather
Environmental risks such as related events, mechanical failures, unplanned downtime, labor difficulties, transport disruptions, spills and releases);
Changes in laws and regulations, including trade policies;
Technological development;
Foreign exchange risk;
Our ability to execute business strategies;
And customer reputation.
Many of these factors are beyond our control or prediction.
Any factor, or combination of these factors, may have a significant impact on our future operational results and the final accuracy of the forward
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Forward-looking statements do not guarantee our future performance, our actual results and future development may be significantly different from future predictions.
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Management warns against overreliance on strikers
View reports or forecast any future results based on such reports or current or previous income levels. Every forward-
The outlook statement is made only on the date of the particular statement and we are not obliged to publicly update or amend any forward statement
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Industry and market data used throughout table 10
K is obtained through internal corporate research, surveys and research conducted by unrelated third parties and publicly available industry and general publications, including information from IHS Markit (\"IHS\").
We do not independently verify market and industry data from external sources.
While we believe that internal company estimates are reliable and market definitions are appropriate, none of these estimates and definitions are validated by any independent source.
Unless otherwise stated by us, the annual production capacity estimates used in Table 10-
K represents the rated capacity of the facility in December 31, 2018.
We calculate the rated capacity by estimating the number of days in typical years where the plant production unit is expected to operate, after allowing downtime for regular maintenance, and multiply that number by the amount equal to the best daily output per unit based on the design of the raw material mixture.
Because the rated capacity of a production unit is an estimated amount, the actual production capacity may be more or less than the rated capacity.
Part 2 Catalogue Part 1 item 1.
We are a global manufacturer and marketer of vertically integrated base chemicals, vinyls, polymers and building products.
Our products include some of the most widely used chemicals in the world that are critical to many different consumer and industrial markets, including flexible and rigid packaging, automotive products, coatings, water treatment, refrigerant, residential and commercial buildings and other durable and non-durable goods.
We operate in two major business units, olefin and Vinyls.
We are highly integrated along our olefin product chain and have made significant downstream integration with polyethylene and ethylene monomer.
We are also a global integrated manufacturer of vinyls, downstream with PVC (\"PVC\")
Building products.
In 1986, after our first polyethylene plant, the olefin division business, near Lake Charles, Anna, Luis, was acquired from Western oil companies, we started operations.
We started our vinyls business in 1990 and acquired vinyl chlorine monomer (\"VCM\")
The factory from Goodrich Corporation is located in Calvert, Kentucky.
In 1992, after we acquired three PVC pipe factories, we started the construction products business of Vinyls division.
Since 1986, we have rapidly developed into a global integrated producer of petrochemicals, vinyls, polymers and construction products.
We achieve this growth by acquiring existing factories or building new ones and completing a lot of capacity or line expansion.
We often consider acquisitions that align or complement our overall business strategy and other internal and external growth opportunities.
In 2014, we set up the West Lake chemical partner LP (
(Partner of West Lake)
Operation, acquisition and development of ethylene production facilities and related assets.
Also in 2014, West Lake Partners completed the initial public offering of 12,937,500 public units (
(IPO of West Lake partner).
In September 29, 2017, Westlake Partners completed a secondary release of 5,175,000 sets of regular equipment for $22.
00/Taiwan, another 5 units. 0% newly-
Westlake Chemical OpCo LP (\"OpCo\")
About $0. 229 billion, 18 in total.
3% limited partner equity in OpCo from July 1, 2017.
Westlake partners had 18 assets as of February 13, 2019.
3% limited partner interest in OpCo and general partner interest in OpCo.
Before the Westlake Partners IPO, all the assets of OpCo were-owned by us.
OpCo\'s assets include two ethylene production facilities at our olefin plant at Lake Charles plant, one ethylene production facility at our Calvert City plant and one 200-
Miles of ordinary carrier ethylene pipelines from Bellevue Hills, Texas to Longview, Texas, including our Longview polyethylene production facility.
We keep 81.
Rights and Interests of OpCo limited partners 7%, a 43.
8% limited partner equity of Westlake Partners (
Composed of 14,122,230 public units)
General partner rights and interests in West Lake Partners and incentive distribution rights.
The business of Westlake Partners is consolidated in our financial statements.
We are a party to certain agreements with West Lake Partners and OpCo, among other things, OpCo sells us 95% of the ethylene produced by it at cost
Plus the basis for the expected $0 fixed margin per pound. 10.
We use this ethylene in the production process of olefin and Vinyls segments.
For more information, see \"-
Olefin business and-
Here is Vinyls Business.
In August 31, 2016, we completed (\"Axiall\")for $33.
00 yuan per share-
Cash transactions (
\"Axiall merge \").
Axiall is a manufacturer and international marketer of chemicals and building products with manufacturing plants in North America.
After the Axiall merge, we are the third one.
The world\'s largest chlorine
Alkali producer and third
The world\'s largest manufacturer of PVC.
In January 2, 2019, we completed the acquisition of nakan tm, a global composite solution business.
NAKAN\'s products are widely used
A wide range of applications including the automotive, construction and construction, as well as the medical industry.
Through this acquisition, our compound business currently has factories in China, France, Germany, Italy, Japan, Mexico, Spain, the United States and Vietnam and all over the world
First-class research institutions and several application laboratories in France.
We benefit from highly integrated production facilities that enable us to process raw materials into higher value
Chemicals and construction products have been added.
As of February 13, 2019, we (
Through the OpCo and our 95%-and 60% -
Joint ventures in China and Taiwan respectively)
About 42.
In many manufacturing plants in North America, Europe and Asia, the total production capacity is £ 1 billion per year.
Olefin business products Olefin is a basic component for the manufacture of various petrochemical products.
We produce ethylene (through OpCo)
Polyethylene, styrene and related
Our products at the manufacturing plant in Lake Charles and polyethylene at the Longview factory.
We have two ethylene plants, two polyethylene plants and one ethylene monomer plant in the olefin plant at Lake Charles plant.
We have three polyethylene factories and one professional polyethylene wax factory on the Longview website.
The following table lists our production capacity in February 13, 2019 by main products and the main end-use of these materials: annual production capacity end-use of products (
Pounds Sterling)Ethylene (1)
2,990 polyethylene and ethylene chloride (\"EDC\")
Low epoxy ethylene/ethylene glycol-
Density Polyethylene (\"LDPE\")
1,500 high definition packaging and bags, shrink film, food packaging, coated cardboard, cup holder, folding carton, lid, cap and universal molding line-
Density Polyethylene (\"LLDPE\")1,070 Heavy-
Styrene film and bag, general purpose liner 570 consumer goods, packaging materials, electrical appliances, paint and paint, resin and building materials1)
Production capacity owned by OpCo. Ethylene.
In terms of volume, ethylene is the most widely used petrochemical product in the world.
It is the key building block used to generate a lot of higher value --
Chemicals including polyethylene, EDC, VCM and styrene were added.
The production capacity of OpCo is about 3.
Our olefin plant at Lake Charles plant has a billion lbs of ethylene per year, and we have the ability to consume all the OpCo products we buy at Lake Charles to produce polyethylene and styrene monomer in the olefin business, and produce VCM and EDC in Vinyls business.
OpCo also produces ethylene for our Vinyls department at Calvert City website, and most of the ethylene we buy from OpCo in Calvert City is used internally for VCM production.
For the OpCo annual ethylene production we purchased for our Vinyls business, see \"business-Vinyls business.
\"Plus, we (through OpCo)
Production of ethylene
The products include chemical grade propylene, crude benzene, cracked gasoline and hydrogen. We (through OpCo)
Sell all our products
Provide products to external customers.
In 2016, OpCo completed the upgrade and capacity expansion of its Petro 1 ethylene unit at our Lake Charles plant, which increases OpCo ethylene capacity by approximately £ 0. 25 billion per year. Polyethylene.
Polyethylene is the most widely consumed polymer in the world and is used to manufacture various film, coating and molded product applications mainly used for packaging.
Polyethylene is often classified as low-density polyethylene, llannan, or high
Density Polyethylene (\"HDPE\").
Density is related to the relative stiffness of the enduse products.
The difference between low-density polyethylene and LLDPE is molecular, and products usually produced by LLDPE have higher strength properties than those produced by low-density polyethylene.
Low Density Polyethylene has better definition and other physical properties for final products such as bread bags, dry cleaners, food packaging, milk box coating and food packaging.
Llannan is used for applications with higher film strength such as stretch film and heavy duty bag.
High Density Polyethylene is used to manufacture products such as groceries, goods and garbage bags, hard plastic containers, plastic caps and pipes.
We are a leading manufacturer of low density polyethylene in North America, mainly using autoclave technology (
Compared with tubular technology)
Can produce high profit special polyethylene products.
In 2018, our annual capacity was about 1.
To meet the needs of our diverse customer base, there is a £ 5 billion formula to choose from.
We also have the ability to produce about one.
The various formulations of llannan are 1 billion pounds per year.
We produce low density polyethylene and llannan at Lake Charles and Longview facilities.
Our Charles Lake and Longview facilities are also capable of producing high density polyethylene.
We sell polyethylene as final product to external customers in pellet form. Styrene.
Derivatives such as polystyrene, acrylic-benzene, unsaturated polyester and synthetic rubber are produced from benzene.
These derivatives are used in many applications including consumer goods, food packaging, household goods, paints and coatings, building materials, tires and toys.
We produce styrene at Lake Charles plant, where we have the ability to produce approximately £ 0. 57 billion of it per year, all of which are sold to external customers.
We are highly integrated in the olefin product chain. We (through OpCo)
Produce most of the ethylene we need to produce polyethylene and styrene.
Ethylene can be produced from petroleum liquid raw materials such as naphtha, condensate and gas oil, or from natural gas liquid raw materials such as ethane, propane, and ethanol.
The Charles Lake ethylene plant in OpCo is mainly made of ethane.
According to the raw material supply agreement between us and OpCo, OpCo receives ethylene raw materials through several pipelines from various suppliers in Texas and Luis Anna state at our olefin facility on site in Lake Charles.
We have 50% of 104 rights and interests
Miles of gas and liquid pipeline from Mount Bellevue to Lake Charles.
OpCo has 200-
From Mount Bellevue to the mile ethylene pipeline of our Longview website.
In addition to the ethylene supplied by OpCo, we also purchase ethylene from third parties to meet some of our ethylene needs.
We use the production of polyethylene and benzene as raw materials, and purchase Zhengding benzene and hexene to produce styrene.
We received dingone and hexene at Lake Charles site through several supplier railcars, and received hexene at Longview site.
We receive benzene through barges, boats and pipes.
Semester arrangements.
We buy more than butenes and hexene.
Annual contracts, some of which may extend an additional period of time, subject to notification by either party to the contract that it does not wish to renew the contract.
We buy electricity for our Charles Lake facility in long-down
Term of industrial contract
Marketing, sales and distribution we have an internal sales team that sells our products directly to our customers.
Our polyethylene customers are one of the largest producers of film and flexible packaging in the country.
We sell ethylene and ethylene co-with OpCo-
Provide products to external customers.
Primary ethylene co of OpCo-
The products include propylene, shun butadiene, cracked gasoline and hydrogen.
We have storage protocols and exchange protocols that allow us and OpCo to access customers who are not directly connected to the plumbing systems we have.
The OpCo delivers coarse Ding and pyrolysis gasoline by rail or truck.
In addition, we also transport polyethylene and styrene by rail or truck.
In addition, Styrene can be transported by barge or boat.
In 2018, none of the customers accounted for 10% or more of the net sales of the olefin portion.
The market competition for our olefin business is fierce.
We compete on the basis of customer service, product delivery capability, quality, consistency, performance and price.
Our competitors in the ethylene, polyethylene and styrene markets are some of the largest chemical companies in the world, including Chevron Phillips Chemical, Dow DuPont
Exxon Petrochemical Company, Formosa Plastics Company, Leon de Basel industrial company. V.
And NOVA Chemical.
Vinyls business products the main products of our integrated Vinyls Department include PVC, VCM, EDC, chlor-alkali (
Chlorine and caustic soda)
Derivatives via OpCo, ethylene and chloride.
We also produce and sell PVC compounds and building products made of PVC, including siding, pipes, fittings, profiles, decorations, molded, fence and decorative products, windows and door components as well as film and paper products.
We manage the integrated Vinyls production chain from basic chemicals to finished building products to optimize product profit and capacity utilization.
Our main North American chemical manufacturing facility is located in Calvert, Kentucky, and Geismar, Lake Charles, prachand, Luis Anna.
Our factory in Calvert City includes an ethylene plant owned by HCFC OpCo
Base plant, VCM factory and PVC factory.
Our Lake Charles includes three chlorine methane.
Soda Plant, two VCM plants, one chlorine derivative plant and cogeneration assets.
Our factory includes one.
Assets of Soda Plant, VCM plant, PVC plant and cogeneration.
Our Geismar website includes a chlorine salt
Base plant, VCM factory and PVC factory.
We also produce chlorine, caustic soda, hydrogen and chloride derivatives in sodium in West Virginia;
Longview, Washington, and bohanoise in Mississippi, Quebec facilities and PVC resin facilities.
Our European chemical manufacturing plants are located in Germany and the UK, including two methane chlorine plants
Base plant, two VCM plants and six PVC plants.
Our Asian manufacturing plants are located in Shanghai, China and near Kaohsiung, Taiwan through our joint ventures of 95% and 60% respectively, including a PVC factory, PVC film and board factory, chlorine salt-
Alkali plant and chlorine derivatives plant.
As of February 13, 2019, we have 36 construction products and PVC composite facilities in North America, Europe and Asia.
The following table lists our production capacity for February 13, 2019 by main products and the end use of these products: products (1)
Annual capacity (2)End Uses (
Pounds Sterling)
Commodity PVC 1,100 building materials, including pipes, siding, doors and windows profiles, special PVC 6,030 automotive sealing materials, cable sheaths, medical applications and other applications, film and paper for packaging and other applications VCM 7,480 PVC, PVC compound chlorine 7,140 VCM, organic/inorganic chemicals, bleach caustic soda 7,860 pulp and paper, 2,290 production of ethylene by paints, flavoring agents, film, refrigerant, water treatment applications, chemicals and pharmaceutical (3)
730 building products and PVC compounds (4)
3,350 pipes: water and sewers, pipes, irrigation, pipes; fittings;
Introduction and foundation of building products;
Parts of doors and windows;
Fence and deck parts;
Side panels, decoration and molding;
Interior of the car, exterior of the car, stabilizer, medical applications, Outline of windows and doors, styling, electrical products, housing and packaging1)
The VCM intermediate product EDC is not included in the table. (2)
Including capacity related to our 95% and 60% Asian joint ventures. (3)
Production capacity owned by OpCo. (4)
Including the production capacity of NAKAN we obtained in January 2, 2019. PVC.
PVC is the third most widely used plastic in the world, and because of its versatility, durability and cost, it is made of traditional materials (such as glass, metal, wood, concrete and other plastic materials)Competitive power.
PVC is produced by VCM, which is made of chlorine and ethylene.
PVC compound is a highly customized formula that provides specific ends
According to customer usage attributes-
Determine the manufacturing specifications.
PVC compounds are made by combining PVC resin with various additives to make rigidity and impact-
A compound that is resistant to or soft and soft.
Then make the various compounds into the end
Products by extrusion, pressing, injection-Molded or blownmolding.
We are the third one.
The world\'s largest manufacturer of PVC.
We have the ability to produce about 6.
0 billion pounds and 1.
Of our worldwide facilities, 1 billion pounds of merchandise and specialty PVC are available each year.
We use some PVC inside when producing building products and PVC compounds.
Our remaining PVC products are sold to downstream manufacturers and international markets. VCM.
VCM for the production of PVC, solvent and PVC-
Related products.
We produce VCM using ethylene and chlorine.
We have the ability to produce about 6.
0 billion pounds and 1.
Our North American and European factories have 5 billion VCM each year.
Most of our VCM are used internally in PVC operations.
Not used for internal VCM sales to other vinyl producers in the domestic and international markets.
Chlorine and caustic soda.
We combine salt and electricity to produce chlorine and caustic soda, commonly referred to as chlor-alkali.
Facilities in our Lake Charles, prakmine, Nana, Calvert City, Gemma, bohanoise, Longview, Gendov and backpacks, Germany and Kaohsiung
We are the third one. largest chlor-
Alkali producers in the world.
We use chlorine products at VCM and chlorine derivatives factories.
We currently have the ability to supply all of our chlorine needs internally.
Any remaining chlorine is sold to the commercial chlorine market.
Our caustic soda is sold to external customers who, among other things, are used to produce pulp and paper, organic and inorganic chemicals, and alumina.
4 Content table of chloride derivatives.
Our products derived from chloride include vinyl chloride, vinyl chloride, and vinyl chloride.
Ethane®Solvent, VersaTRANS®Solvent, calcium hypochlorite acid, hydrochloric acid (\"HCL\")
And Ball caustic soda (\"PELS\").
We have the ability to produce about 2.
Each year, 3 billion pounds of chloride derivatives are mainly available in our Charles Lake, Lake Nana, Lake bohanoise and langview facilities.
Most of our chloride derivatives are sold to external customers who, among other things, use these products for refrigerant, water treatment applications, chemical and pharmaceutical production, food processing, steel pickling, solvent and cleaning chemicals, and natural gas and oil production. Ethylene.
We use ethylene produced by OpCo in Calvert City to produce VCM.
The Calvert City ethylene plant at OpCo has the ability to supply in part the ethylene required for our total VCM production.
We obtained the remaining ethylene required for our Vinyls business from Lake Charles plant and third party purchases at OpCo.
The Calvert City ethylene plant in OpCo utilizes ethylene raw materials, enabling us to enhance the integration of ethylene chains through OpCo.
In 2017, OpCo completed an expansion project to increase the ethylene production capacity of our factory ethylene plant in Calvert City.
Together with other initiatives, ethylene production capacity has increased by approximately £ 100 million per year.
Building Products and PVC compounds.
Products made of PVC are used in building materials, from water and sewer systems to residential and commercial applications, for siding, decoration, molding, fences, decks, windows and door systems.
Our building products include two main product groups :(i)
Exterior products, including siding, trim, molding, window decoration, fencing and decorative products; and (ii)
PVC pipe, special PVC pipe and accessories.
We produce and sell exterior products under Royal Building Products®Royal Celect honeycomb view®, Royal Zuri premium decoration®, Royal S4S trim®And external portfolio®Brand name.
We produce and sell professional plumbing and fittings, water, sewer, irrigation and plumbing products under North American plumbing®And Royal Building Products®Brand name.
We produce film and paper for Asian and global markets in Shanghai factory.
Flexible PVC compounds are used for wire and cable insulation, medical film and packaging, flooring, wall covering, interior and exterior decoration and packaging of the car.
Doors and windows profiles, vertical blinds, and building products (including pipes and siding) generally use rigid extruded PVC compounds. Injection-
Molded PVC compounds are used for special products such as computer housing and keyboard, electrical parts and bottles.
Powder compounds are mainly used for door and window profiles, pipes and accessories.
All of our building products and PVC compounds are sold to external customers.
The comprehensive capacity of our 36 construction products and PVC compound factories is about 3.
£ 4 billion per year.
We have highly integrated the raw materials along our vinyls production chain.
We produce most of the ethylene required for the Calvert City and Geismar facilities (through OpCo).
Ethylene produced at the OpCo Calvert City plant uses ethylene raw materials.
Under various contracts, we purchased the remaining ethylene required for our other North American and European facilities from many sources.
We are a party to the lacc llc joint venture (\"LACC\")
Build an ethylene plant with Lotte Chemical USA, which will have 2.
The annual ethylene production capacity is 2 billion.
LACC ethylene unit is located near our vinyls unit in Lake Charles.
According to the agreement with LACC, we will receive 50% of ethylene produced by LACC starting from 2019 as expected
Renovation of facilities in the first half of 2019.
We can get it in Germany and have it in part.
Salt requirements for a few of our larger chlorine salts
The alkali plant is supplied from inside the salt hills that we own or rent and is transported through the pipes that we have.
We buy the salt we need for other chlorine
According to long-term contracts.
The electricity and steam of one of our facilities in Lake Charles are made up of two on-
On-site cogeneration unit and through the charging arrangement with RSCogen, LLC (\"RSCogen\")
We have a joint venture of 50%.
Steam, natural gas during RSCogen operation-
Coal-fired cogeneration facilities near the site.
Power and steam of Plaquemine facilities by our on-
On-site cogeneration unit.
Part of the electricity demand for our sodium facility is from our on-
Generate unit on site and purchase the rest.
We buy electricity for the remaining facilities under longterm contracts.
We purchase VCM for our Asian PVC factory based on contract and spot.
Our PVC facilities in North America and Asia mainly supply all the PVC needed for our construction products factory.
The PVC required for the PVC compound factory is either purchased internally or externally based on the location of the factory at the market price.
The remaining ingredients include pigments, fillers, stabilizer and other ingredients we purchased in the short term
Regular contract based on market price.
5 catalog marketing, sales and distribution we have a dedicated sales team organized by product line and region.
In addition, we rely on distributors to market products to smaller customers.
We use some PVC inside when producing building products and PVC compounds.
Our remaining PVC products are sold to downstream manufacturers and international markets.
We have the ability to use most of our chlorine internally to produce VCM and EDC, most of which in turn are used to produce PVC.
We also produce chlorine derivatives internally using chlorine.
We sell our remaining chlorine and basically all of our caustic soda products to external customers.
Most of our products are shipped directly to our customers through pipes, trucks, railways, barges and/or ships from production facilities.
The remaining products are shipped from production facilities to third-party chemical terminals and warehouses until they are sold to customers.
We are the second largest PVC pipe manufacturer in the United States.
We sell most of our siding, decorative and molded products, PVC pipes, professional PVC pipes and accessories, and film and sheet products through a combination of internal sales staff and manufacturer representative.
We run 19 companies in Canada.
Own distribution branch that sells our vinyl siding and accessories, decorative and molded products, and plumbing and accessories.
We are also involved in advertising programs aimed primarily at trade professionals to raise awareness and interest in our products.
In addition, we show our building products at the exhibition.
In 2018, not one customer accounted for 10% or more of Vinyls\'s net sales segment.
Competition is fierce in the market for our Vinyls business operations.
The competition in the Vinyls market is based on product availability, product performance, customer service and price.
We compete with other producers in the vinyls market, including Formosa Plastic, oxygen chemical, LP, New Co.
Paulie company Olin.
, Teknor ApexMexico, United States. A. B. de C. V.
The Innova group and the Kem One Group SAS.
Competition in the construction product market is based on-
Delivery time, product quality, product innovation, customer service, product consistency and price.
We compete with other manufacturers and manufacturers including Diamond Plastics, JM Eagle Inc. in the Construction Products Market
Ply Gem Holdings Limited
, CertainTeed, IPEX Inc.
Related Materials Limited liability company and Azek company.
The environment is common in our industry and we are subject to environmental laws and regulations related to use, storage, processing, power generation, transportation, emissions, disposal and remediation, exposure to hazardous and non-hazardous environments
There are hazardous substances and waste in all countries where we do business.
National, state or provincial and local standards for managing air, water and land quality have basically affected all our manufacturing locations around the world.
Compliance with these laws and regulations has and will continue to require capital expenditures and increased operating costs.
Our policy is to comply with all environmental, health and safety requirements to provide a safe and eco-friendly workplace for our employees.
In some cases compliance can only be achieved by generating capital expenditures.
In 2018, our capital expenditure on environmental compliance was $23 million.
We estimate that capital expenditures related to environmental compliance in 2019 and 2020 were approximately $47 million and $45 million, respectively.
Estimated capital expenditure of 2019 and 2020 is relatively higher than our expenditure related to environmental compliance in recent years, which is largely due to capital expenditure related to EPA (the \"EPA\")regulations.
The rest of the estimated expenditures for 2019 and 2020 are related to equipment replacement and upgrading.
We expect to continue to impose strict environmental regulations on us and the industry as a whole.
Although we cannot predict future expenditures with certainty, management is confident that our current spending trend will continue.
From time to time, we receive notification or inquiries from government entities regarding alleged violations of environmental laws and regulations related to the disposal, discharge and storage of chemical substances, including hazardous waste
S-regulated by SEC 103
When the government authorities are the party to the proceedings, which involve potential monetary sanctions, K requires disclosure of certain environmental matters, unless we reasonably believe that such sanctions will not exceed $100,000.
6 The catalogue of May 2013, the amendment to the existing consent order agreed by the Ministry of Environmental Protection of West Virginia, and the predecessor of Axiall, inter alia, requiring it to pay a fine of $449,000, and continue to take certain corrective measures in connection with hcexane emissions (
Usually called BHC)
From the sewage discharged from the sodium plant
The penalty has been paid and corrective action is required-
Pursuant to the agreement of December 2018, the compliance date is extended in accordance with the amended consent order.
The revised consent order also provides penalties that exceed the facility\'s temporary wastewater discharge limit, and we believe that the total amount of these penalties may reach or exceed $100,000.
During September2010, we received a comprehensive compliance order and a notice of potential penalties at the vinyls facility in Lake Charles and prakming, alleging violations of the air at these facilities
Reporting license deviations related to records
Keep violations.
We have been negotiating global solutions to these and several other issues with the environmental quality department of Luiz Anna (\"LDEQ\").
On May 2018, we reached a major agreement with LDEQ to resolve these consolidated enforcement matters with a fine of $162,500.
The settlement agreement is under preparation and will be publicly reviewed and approved by the attorney general of the state of Luis Anna upon final determination.
Over the years, the Environmental Protection Agency has been implementing law enforcement measures against refineries and petrochemical plants on the release of the bomb.
On April 21, 2014, we received EPA\'s request for information in Section 114 of the Clean Air Act, which requires the provision of flare information for Calvert City facilities and certain facilities in Lake Charles.
We have been informed by EPA that the information provided led to the EPA\'s belief that some of the flares did not meet the applicable standards.
The Environmental Protection Agency says it is seeking a consent decree that requires us to take corrective measures against alleged non-compliance.
We believe that addressing these issues may require payment of monetary sanctions over $100,000.
EPA\'s regional offices have investigated and, in some cases, checked our compliance with the risk management plan requirements under the Clean Air Act at sodium and Geismar facilities.
We believe that addressing these issues may require payment of monetary sanctions over $100,000.
On November 24, 2014, we reached an agreement order with the Kentucky Energy and Environment Cabinet (\"KEEC\")
Regarding the limits that our Kentucky pollutant discharge removal system at our factory in Calvert City allows for the release of HCB and Mercury.
On July 9, 2018, we reached a new agreed order with KEEC under which, in addition to the penalties imposed on excess of these temporary emission limits, we will also be subject to the new HCB interim in general, what penalties do we think may reach or exceed $100,000.
We believe that addressing any or all of these issues will not have a significant adverse effect on our financial position, results of operations or cash flows.
Please also see our discussion of environmental matters contained in Item 1a \"risk factors\", item 3, \"legal procedures\" below and note 19 to the consolidated financial statements contained in Item 8 of this formK.
As of December 31, 2018, we have approximately 8,870 employees in the following areas: category no olefin part 850 Vinyls part 7,680 company and other 340 approximately 33% employees represented by the Union, all of these union employees work under the collective bargaining agreement, which expires at different times before 2022.
We have a number of collective bargaining agreements in Europe, Canada and the United States that cover different groups of our workforce.
There were no strikes, stoppages or stoppages in 2018 and we thought our relationship with our employees and unions was open and positive.
Historically, our technical strategy is to selectively obtain licenses from third parties.
And develop our own proprietary technology.
Our selection process includes a number of factors, including technical costs, the ability to meet customer requirements, raw materials and energy consumption rates, product quality, capital costs, maintenance requirements and reliability.
Most of the technology licensed from third parties
The party provider is permanent and has paid in full.
We have a portfolio of intellectual property developed from the focus of process and product technology.
After acquiring or developing a technology, we have put a lot of effort into effectively utilizing it and further developing it, with a focus on continuously improving our competitive position.
Instead, we selectively license our patented energy®The technology used in the production of LLDPE and the technology used in the mixing technology of proprietary low density polyethylene reactor.
We have also granted several licenses for EDC/VCM technology, including direct chloride processes and catalysts, as well as S-PVC (
Suspended PVC for hot plastic process)
Process and Technology.
Our website address is www. westlake. com.
The content of our website is for reference only.
It should not be used for investment purposes and should not be referenced into this form 10-K.
We provide free \"Investor Relations/SEC filing\", our agency statement, Annual Report of Form 10 on this website
Quarterly Report on table 10
Q: Current Report of Form 8
K and after we submit these materials electronically to SEC or provide them to SEC, revise them as soon as reasonably practicable.
The SEC also maintains a website on www. sec.
Gov with reports, agency statements and other information about SEC registrants (including us.
We intend to meet the requirements under Item 5. 05 of Form 8-
K by posting this information on our website, disclosing any changes to our code of ethics and any waiver of the terms of our code of ethicswestlake.
Com under \"Investor Relations/corporate governance. \" Item 1A.
The risk factors in the petrochemical industry are cyclical and may lead to lower operating profit margins or operational losses in the past and in the future.
Our historical results reflect the cyclical and volatile nature of the petrochemical industry.
Mature industry, capital intensive.
Profit margins in this industry are sensitive to both domestic and international balance of supply and demand, which is historically cyclical.
These cycles are often characterized by tight supply, resulting in high operating rates and profit margins, followed by oversupply mainly due to new overcapacity, resulting in lower operating rates and lower profit margins.
In addition, the profitability of the petrochemical industry is affected by the level of global demand, while price competition may increase due to new industry capacity.
Overall, weak economic conditions in the US, Europe or the rest of the world tend to reduce demand and put pressure on profit margins.
It is impossible to accurately predict the factors that will affect the supply and demand balance and market conditions of the industry\'s operating profit margin in the future.
New olefin capacity increases in Asia, the Middle East and North America, some of which have recently been completed, may result in excess capacity
Supply and lower profitability.
Therefore, the operating profit of our olefin sector may be negatively affected.
We sell goods in a highly competitive market, facing great competition and price pressure.
We sell our products in a competitive market.
Due to the commodity nature of many of our products, the competition in these markets is mainly based on price and, to a lesser extent, on performance, product quality, product delivery capability and customer service.
As a result, we often cannot protect the market position of these products through product differences, or we may not be able to pass on the cost increase to our customers.
Therefore, the increase in raw materials and other costs may not necessarily be related to the price changes of these products, whether in the direction or magnitude of the price changes.
Specifically, the pricing time difference between the price of raw materials (which may vary daily) and the price of the contract product (in many cases, the price of the contract product is negotiated monthly or less), sometimes, due to the additional lag on the effective date of the increase, it has and may continue to have a negative impact on profitability.
Large fluctuations in raw material costs often put pressure on product profit margins, as rising sales prices may lag behind rising raw material costs.
Instead, when the cost of raw materials drops, customers can seek relief at a lower selling price.
8 fluctuations in raw material and energy costs may result in an increase in operating costs and adversely affect our operating results and cash flows.
Significant changes in the cost and availability of raw materials and energy may have a negative impact on our operational results.
In the past, these costs have risen sharply, mainly due to increased costs for oil and gas.
In order to produce several basic chemicals, we have purchased a large amount of ethane raw materials, natural gas, ethylene and salt.
We also buy a lot of electricity to supply the energy we need in our production process.
In general, the cost of these raw materials and energy accounts for a large part of our operating expenses.
The prices of raw materials and energy generally follow the price trend of crude oil and natural gas and change with changes in market conditions, which fluctuate violently and are cyclical.
Changes in regulatory policies applicable to the German industrial user energy sector have led to higher prices for future industrial energy users.
The results of our operations are likely to be significantly affected in the past and in the future by these cost increases.
Higher prices have increased our demand for liquidity, thus adversely affecting our liquidity and cash flow.
Besides, because we use the first onein, first-out (\"FIFO\")
Inventory accounting methods, during the period of the decline in raw material prices and the decline in sales prices, the results of our operations during the specific reporting period may be negatively affected, because the lower sales price will be reflected in operating income more quickly than the corresponding cost of raw materials.
In order to reduce the risk of price fluctuations in some raw material goods, we used derivatives.
In the future, we may decide not to hedge against any of our raw material costs or the results that we may not succeed.
In addition, our hedging activities involve credit risks associated with hedging opponents, and the deterioration of financial markets may adversely affect our hedging opponents and their ability to fulfill their obligations to us.
The price of crude oil fell, such as during the period from 2014 to 2018 (
In December 31, 2018, it was about 58% lower than the peak level of 2014)
, Reducing the cost advantage of natural gas liquids-
Ethylene cracking units in North America, such as our
Vinyl biscuits.
Therefore, our profit margin and cash flow are negatively affected.
The reduction in crude oil and gas prices may lead to a reduction in fracking in the United States, which may reduce the supply of raw materials and increase the price of raw materials in our business.
Rising gas prices may also adversely affect our ability to export products outside the United States.
In addition to this impact on our exports from the United States, the United States is also less competitive. S.
In the past, producers have also increased the supply of chemicals in North America because of the U. S.
Products that would otherwise be sold overseas are sold domestically, resulting in oversupply and falling prices in North America.
We may also face the threat of imported products from countries with cost advantage.
In addition, natural gas liquid exports from the United States or greater restrictions on fracking may limit our supply of raw materials in the United States, thus increasing our costs.
External factors beyond our control may lead to fluctuations in demand for our products and our prices and profit margins, which may have a negative impact on our operating results and cash flows.
External factors beyond our control may lead to fluctuations in raw material prices, demand for our products, product prices and quantities, and a decline in operating profit margins.
These factors also amplify the impact of the economic cycle on our business and operational results.
Examples of external factors include: general economic conditions, including the United States, Europe and Asia;
New production capacity in North America, Europe, Asia and the Middle East;
The level of business activity in the industry using our products;
Action by competitors;
Technological innovation;
Currency fluctuations;
Rising interest rates;
International events and circumstances;
War, destruction, terrorism and civil unrest;
Government regulation, including the United States, Europe and Asia;
Severe weather and natural disasters;
Reputation of customers and suppliers.
Some of our products are highly dependent on durable goods markets, such as housing and construction markets, which are particularly cyclical in themselves.
Weakness of the United States. S.
The weak housing market and economy in Europe may adversely affect the demand and profit of our products.
If the global economy gets worse in general,S.
In particular, the housing market or the deterioration of the European economy, the demand for our products and the results of our operations and cash flows may be adversely affected.
We may reduce the production or idle of the facility for a long time, or withdraw from the business because of the high price of raw materials, the oversupply of specific products and/or the lack of demand for that particular product, which makes production uneconomical.
Temporary disruptions sometimes last for several quarters, or in some cases for longer periods, resulting in costs incurred by us, including the cost of maintaining and restarting these facilities.
Factors such as an increase in raw material costs or a decrease in future demand may lead us to further reduce operating rates, idle facilities or exit from uncompetitive businesses.
The occurrence or threat of hostilities or terrorist attacks in the Middle East or elsewhere may adversely affect the economies of the United States, Europe and other developed countries.
Lower levels of economic activity may lead to a decline in demand for our products, which may adversely affect our net sales and profit margins and limit our future growth prospects.
Fluctuations in crude oil and natural gas prices may also lead to an increase in raw material costs.
In addition, crude oil prices continue to fall, for example, from 2014 to 2018, and may lead to a decline in profit margins in the United States.
In addition, these risks may lead to more instability in the financial and insurance markets, and may adversely affect our ability to acquire capital and to obtain insurance that we believe is sufficient or that we require under a contract with a third party.
We operate on an international scale and face relevant risks, including exchange rate fluctuations, foreign exchange controls, political risks and other risks related to international operations.
We operate on an international scale and are at risk of doing business on a global scale.
These risks include, but are not limited to, currency exchange rate fluctuations, currency depreciation, and trade barriers (
Among other things, this may have a negative impact on our ability to export products outside the USS. )
Tariffs and duties imposed, restrictions on transfer of funds, changes in legal and regulatory requirements, participation in judicial processes in adverse jurisdictions, economic instability and chaos, political unrest and epidemics. If the U. S.
The US government has made certain changes to its foreign trade policy, which may lead to additional trade barriers and tariffs imposed on the US in foreign jurisdictions.
Any of these risks can have a negative impact on our operational results.
The deterioration of the global economic situation may have a negative impact on our business and financial situation.
The deterioration of the global economic situation may have a negative impact on our business and financial situation.
When we want or need to enter the capital market, our ability to enter the capital market may be severely restricted, this may affect our flexibility to respond to changing economic and business conditions.
In addition, there is no guarantee of additional financing at cost-effective rates.
The deterioration of the global economic situation may have an impact on lenders or our customers and suppliers under our revolving credit mechanism, resulting in their failure to meet their obligations to us.
In addition, the deterioration of the global economic situation may lead to a decrease in demand for our products, which will have a negative impact on our income and profits.
Our failure to compete successfully may reduce our operating profit.
Fierce competition in the petrochemical industry.
Historically, there have been some mergers, acquisitions, and rotations.
Joint ventures within the industry.
This restructuring has resulted in fewer but more competitive producers, many of whom are larger than us and have more financial resources than us.
Our competitors include some of the world\'s largest chemical companies and joint ventures in the chemical industry.
Competition within the petrochemical industry and in the manufacturing of building products is affected by a variety of factors, including: product price;
Balance of supply and demand;
Innovation in materials, technology and processes;
Technical support and customer service; quality;
Reliability of supply of raw materials and utilities;
Availability of potential alternative materials;
And product performance.
Catalog changes in a competitive environment can have a significant adverse impact on our business and operations.
These changes may include the emergence of new domestic and international competitors;
Capacity growth rate of competitors;
Changes in customer base due to consolidation;
The intensifying of market price competition in China;
Competitors introduce new or alternative products;
Technological innovation from competitors.
Our production facilities handle some volatile and hazardous materials that can adversely affect our operations.
We have production bases in the United States, Europe and Asia.
Our business is affected by common hazards associated with the manufacture of chemical, plastic and construction products and the use, storage, transportation and disposal of related raw materials, products and wastes, including: leakage and rupture of pipes; explosions; fires;
Severe weather and natural disasters;
Mechanical failure;
Unplanned downtime;
Difficulties in labor;
Interruption of transportation;
Transportation accidents involving our products;
Repair complications;
Chemical leakage, discharge or release of toxic or harmful substances or gases;
Other environmental risks; sabotage;
Terrorist attacks;
Political turmoil.
According to some experts, global climate change may lead to increased hurricane activity in the Gulf of Mexico and other weather and natural disasters worldwide.
If this becomes a reality, bad weather and natural disasters can pose a greater risk to our facilities, especially in the state of Luis Anna.
All of these hazards can cause personal injury and loss of life, catastrophic damage or damage to property and equipment, environmental damage, and may result in suspension of operations and the imposition of civil or criminal penalties.
We may be subject to environmental claims from government entities or third parties.
During the long-term operation of any of our chemical manufacturing facilities, loss or closure will have a significant adverse impact on us.
We retain property, business interruption and accidental injury insurance that we consider to be in line with industry practice, but we cannot fully insure all potential hazards of the business, including risk of war or loss caused by terrorist acts.
Due to market conditions, insurance premiums and deductibles for certain insurance policies may increase significantly, and in some cases certain insurance may become unavailable or only if the amount of insurance is reduced
If we are to assume a significant responsibility that we do not fully insure, this may have a significant adverse effect on our financial position, operating results or cash flow.
11 catalogue we suffer significant losses due to product liability, personal injury and other claims related to the products we manufacture.
In addition, individuals are currently seeking and may continue to seek damage to personal injury or property damage caused by alleged exposure to chemicals or other owned chemicals at our facility, which we control or manufacture.
We will also make current and future claims on workplace exposure, workers\' compensation and other matters.
With or without merit, any such claim could be a time-consuming, costly defense and could divert the attention and resources of management.
We maintain and expect to continue to maintain insurance for product liability, workplace risks, workers\' compensation and other claims, however, the amount and scope of such insurance may be insufficient or unable to pay the claim against our success.
In addition, such insurance may become more expensive and difficult to maintain, and we may not be able to obtain it on commercially reasonable terms or at all.
The results of any future litigation or claim are inherently unpredictable, but such results may have a significant adverse effect on our financial position, operating results or cash flow.
We rely on a limited number of external suppliers for specific raw materials and services.
We got a lot of raw materials from several major suppliers.
If any of these suppliers are unable to meet their obligations under any existing or future supply agreement, we may be forced to pay a higher price to obtain the necessary raw materials.
Any disruption in the supply of raw materials or price increases can have a significant adverse impact on our business and operational results.
Under the existing contract, the supplier can choose to modify its relationship at any time because of general economic problems or problems related to the supplier or us.
We have any material changes to the terms of the major suppliers, or any material additional requirements of our suppliers, we provide them with additional guarantees in the form of advance payment or letter of credit, may have a significant adverse effect on our financial position, operating results or cash flow.
We rely heavily on third-party Shipping, which puts us at risks and costs beyond our control.
These risks and costs may have a significant adverse impact on our operations.
We rely heavily on railways, barges, pipelines, ships, trucks and other shipping companies to transport raw materials to manufacturing facilities used by our businesses and to ship finished products to our customers.