Thank you, Rachel. Good morning everyone and thank you for attending our first quarter '22 earnings conference call.

Joining me today on the call is Scott Rook, our President and Chief Executive Officer. After two years, it is great to be doing this call in person from our office this morning.

Please also note that the call has an accompanying presentation available on our website that is supplemental to our discussion this morning. The first quarter of '22 was a strong quarter for Chemtrade, categorized by continued improvement across most of our key products, with notable strength in chlor-alkali chemicals and supported by a broad-based rebound in industrial end markets.

To begin today's discussion, I will provide a high level overview of the first quarter results and our segmented performance. I will then outline the increase to our '22 adjusted EBITDA guidance that we announced yesterday.

Scott will then comment on the strong market dynamics that we're seeing across our business, supporting the increase to our guidance. He will also provide an update on some of the exciting organic growth projects that we're undertaking, which we believe offer significant growth potential for Chemtrade over the coming years.

Scott will also reiterate the steps that we're taking to position Chemtrade, an industry leader in ESG and will detail some of the defensive attributes of our business, following our prepared remarks. We will then come up -- we will then open up the call for analyst Q&A.

Before proceeding, I would like to remind you that our presentation contains certain forward-looking statements that are based on current expectations and are subject to a number of uncertainties and risks and actual results may differ materially. Further information identifying risks, uncertainties and assumptions and additional information on certain non-IFRS and other financial measures referenced in this call can be found in the disclosure documents filed by Chemtrade with the securities regulatory authorities available on sedar.com.

One of the measures that we'll refer to in this call is adjusted EBITDA, which is EBITDA modified to exclude only non-cash items such as unrealized foreign exchange gains and losses. For simplicity, although our accompanying presentation will refer to adjusted EBITDA, we will just refer to EBITDA in our remarks as opposed to adjusted EBITDA.

Non-IFRS and other financial measures are fully defined in our MD&A. Starting with the consolidated results for the first quarter of '22, we delivered strong year-over-year improvement across our key financial metrics, including revenue, EBITDA, and distributable cash.

We generated revenue of $390.3 million, an increase of $77.9 million or 25% over the first quarter of '21. We earned $107.8 million in EBITDA, an increase of $52.4 million or 95% higher than the first quarter of '21.

As a reminder, last year's results include results from the business that was sold in November '21 up to the date of sale. During the first quarter of '21, this business contributed revenue and EBITDA of $12.7 million and $5 million respectively.

The improved results that we delivered this quarter are due to improved fundamentals for key products in both of our operating segments. Year-over-year impact of foreign exchange movements was immaterial this quarter.

Our improved EBITDA for the quarter resulted in distributable cash of $63.3 million, an increase of $45.4 million, compared with the same period in '21. Distributable cash per unit was also materially higher year-over-year.

Notably, our attractive $0.05 per month distribution remains very well covered with a payout ratio of 25% this quarter and 48% in the trailing 12-month basis. Additionally, we took a number of steps last year to improve the balance sheet, including an equity financing last March and the sale of our Specialty Chem business last November.

As a result of these steps, we significantly improved our leverage and Chemtrade ended the quarter with a total leverage ratio of 3.5 times, compared with 5.9 times a year ago. Turning now to our segmented performance for the first quarter of '22.

We would first like to remind you that we reconfigured our operating segments effective this quarter. Following the sale of our potassium chloride and vaccine adjuvants business in November, we combined the Sulphur Products and Performance Chemicals or SPPC segment with the remaining Water Solutions and Specialty Chem or WSSC segment to form a new segment called Sulphur and Water Chemicals or SWC.

Electrochem segment remains unchanged as a result of this reconfiguration. Starting with the SWC segment, we generated revenue of $229 million during the first quarter of '22, an increase of $38.2 million over the first quarter of '21.

The increase in revenue is primarily attributable to higher selling prices for merchant sulfuric acid, water solutions products and sulphur products and increased sales volumes of Regen sulphuric acid. The improved demand for Regen acid is reflective of higher gasoline demand year-over-year in addition to impacts to Regen volumes in Q1 of '21 from the severe winter storms in the U.S.

and stay-at-home orders in California. The higher selling prices we achieved in the SW segment are largely reflective of higher sulfur prices and in the case of merchant acid, tight industry supply as well.

As a reminder, the increase in revenue for the segment was partially offset due to the sale of the Potassium Chloride and Vaccine Adjuvants business last year, we generated $12.7 million in revenue for the first quarter of 2021. For the first quarter of '22, the SWC segment delivered $62.5 million in EBITDA, an increase of $12.7 million over the first quarter of '21.

This was primarily driven by stronger results in our Regen acid business. Although Sulphur cost increased sharply year-over-year, the higher selling prices we were able to realize for our Water Solutions products more than offset the impact of the higher raw material costs during the first quarter.

Additionally, as previously discussed, the sale of the Specialty Chem business created a $5 million year-over-year EBITDA headwind in the first quarter. Adjusting for this item, EBITDA for the SWC segment in the first quarter increased by $17.7 million year-over-year, robust improvement that sets the stage for a strong '22 for this segment.

Transitioning to our EC segment, we generated $161.4 million in revenue in the first quarter of '22, an increase of $39.7 million over the prior period. The higher revenue is primarily due to higher selling prices that we achieved for each of our chlor-alkali products, caustic soda, chlorine, and hydrochloric acid.

Market fundamentals for all three of these products remain favorable. This resulted in a realized metric ECU netbacks, being up approximately $715 year-over-year with approximately 60% of this increase attributable to stronger caustic soda pricing.

Our Brazil business also delivered improved results relative to the first quarter of '21. The improved results for North American chlor-alkali business and Brazil were partially offset by lower sales volumes of sodium chlorate, which continues to experience soft demand, related in part to decrease end-use demand for office paper.

For the first quarter of the EC segment earned $65.6 million in EBITDA, an increase of $38.4 million over the first quarter of '21. The significantly improved performance in our chlor-alkali business, resulting from the higher pricing we achieved in the period marks a very strong start for the EC segment in '22.

Our corporate costs for the first quarter '22 were $20.2 million, slightly lower than the $21.5 million of corporate costs in the same period in '21. The decrease in corporate cost reflects lower cost related to our long-term incentive plan of $1.4 million and higher realized foreign exchange gains of $2.9 million year-over-year, offset by a $4.7 million recognized in the prior period, relating to government support program.

Turning now to our balance sheet. Our leverage ratios and liquidity continue to improve during the first quarter of '22, reflecting the robust EBITDA we delivered and the various steps we undertook to strengthen our financial position last year.

Chemtrade's net debt to adjusted EBITDA ratio stood at 3.5 times, down from 4.2 times at the end of '21 and down from 5.9 times at the end of Q1 '21. Additionally, we have US$215.6 million undrawn on our senior credit facility and following the convertible debenture refinancing completed earlier this year, we have no debt maturities until May 2024.

Chemtrade remains in compliance with all debt covenants client our improving liquidity position, we continue to take additional steps to further strengthen our balance sheet. Subsequently, we completed the sale of an idled acid plant in the Augusta, Georgia, net proceeds of US$10 million.

Last month, we also announced the launch of a process to sell real estate around North Vancouver, BC side through a sale and leaseback transactions, if it is completed will provide Chemtrade with additional financial flexibility and liquidity for our primary capital priorities of deleveraging and investing in economically attractive organic growth projects. Given that the sale process is ongoing, we are limited in what we can say at this time, but we will provide an update in terms of an agreement reached or the process is terminated.

Moving to our guidance, we announced yesterday evening an increase in our 2022 EBITDA guidance. We are now expecting EBITDA of $300 million to $330 million this year versus our prior guidance of $265 million to $295 million and 2021 EBITDA of $280.4 million.

The primary drivers of this increased guidance are our strong start to the year, the strength in chlor-alkali products, we have seen recently and the favorable market conditions for many of our other key products. Notably, we now forecast that the average Northeast Asia spot price for caustic soda that will be a key determinant for realized selling price in '22 will be US$575 per ton, which is US$285 per ton higher than in '21.

This is US$135 per ton higher than our previous assumption. The average index value used for the first half of '22 was US$660 per ton, implies an average value of US$485 per ton for the second half of '22.

For clarity, the average index values for Q2 and Q3 helps set pricing for the second half of the year. The rest of our assumptions are set out on the slide deck in our MD&A and I will not go through them on this call.

We believe that this revised guidance illustrates the strong improvements we're delivering across the business and the strong market conditions for most of our key products, which Scott will elaborate on momentarily. The biennial maintenance turnaround at the North Vancouver chlor-alkali facility in the second quarter of this year is expected to have a $20 million EBITDA impact.

Even ignoring the impact of this turnaround, the midpoint of our revised guidance of $315 million will mark year-over-year growth of $66.5 million after normalizing for the sale of our Specialty Chem business and the benefit of settling the narrow loss within 2021. We also expect this positive momentum to continue in the coming years, as we will execute on the compelling organic growth opportunities ahead, which Scott will provide updates on.

Additionally, the midpoint of our updated guidance translates into an implied distribution payout ratio for ‘22 of approximately 50%, highlighting the sustainability of our attractive distribution. With that, I will now turn the call over to Scott, who will walk you through the outlook for our key products and we'll provide an update on our organic growth projects.

Scott?

Thank you Rohit and good morning everyone. Thank you for joining us today and I'm pleased to walk you through all of the items that have us excited about Chemtrade's outlook, not only for this year, but also for the years to come.

I believe that the future is the brightest it's been for Chemtrade in many years, and I'm extremely confident in our ability to execute on what we see as a very favorable backdrop for our key products. Beginning with Sulphur Products, we see a strong outlook for three forms of sulphuric acid that Chemtrade producers, regen, ultrapure, and merchant acid.

Demand for regen acid used in the production of gasoline continues to rebound nicely, as individuals once again begin to move about more freely and driving activity has picked up leading to higher refinery utilization rates across North America. In fact, we've seen U.S.

driving miles return to 2019 levels and we have not yet seen any notable negative impact on driving activity from high gasoline prices, though this is something we continue to monitor closely. The demand for ultrapure acid, which as a reminder is used in semiconductor industry continues to have a very strong outlook, as the US has placed strategic importance on domestic semiconductor production.

As a result of this onshoring, which is taking place over the coming years, demand for ultrapure acid is projected to increase by 2 times to 3 times over the next five years. In a moment, I'll provide an update on the projects we are undertaking to capitalize on this sharp demand growth.

Additionally, our performance in ultrapure acid continues to improve, as we have successfully replaced the bulk of the volumes we lost in early '21. Meanwhile, merchant acid which has seen widespread industry uses continues to see a demand rebound on broad-based improvement in industrial end markets.

In addition to these improving demand dynamics, we also maintained a positive outlook for sulfuric acid pricing near-term. This result is based on recent sharp increases in sulphur prices, that we have witnessed and as market supply of sulphuric acid is very tight currently with notably strong demand from the fertilizer end market that has resulted from supply dislocations caused by the Russian-Ukraine war.

Sulphur prices for Q2 '22 have increased by approximately $200 per ton, quarter-over-quarter to $480, driven by tight market conditions. As a reminder, sulphur is a key input into making on purpose sulfuric acid, which in turn is a significant raw material for the production of our water chemicals, as a result we expect the recent spike in sulphur prices we have witnessed to be a short-term margin headwind for our water chemicals products.

However, we have taken proactive steps to pass-through these higher input cost to our customers and we expect this margin impact to be transitory. Despite these near-term pressures, we maintain a positive outlook for our Water Chemicals portfolio, given the essential nature of these chemicals and their growing demand from increasing regulations for water treatment broader population growth.

Transitioning to the outlook for our electrochemical segment, the market dynamics for chlor-alkali remain very positive with strong demand and pricing for both caustic and chlorine. Caustic soda prices, which have seen recent support from the ongoing Russia-Ukraine conflict, which has led to a dislocation of the supply of aluminum in Eastern Europe and a pickup of aluminum production, elsewhere, leading to increased cost of stable demand in North America.

The Northeast Asia spot index for caustic soda was $650 per ton in mid-April, materially higher than a year ago. We anticipate that demand and pricing for caustic soda will remain elevated for at least the next 12 to 18 months, as a result of the dynamics we are seeing in the market.

Additionally, we continue to see a very bullish long-term outlook for caustic soda, as the demand for this used across many industrial applications, including in the production of aluminum and lithium-ion batteries is projected to continue to steadily grow over time and there is very limited supply projected to come online globally in the coming years. As a reminder, for every $50 per ton increase in caustic soda pricing, the business generates approximately $10 million in incremental margin.

The chlorine market also continues to benefit from favorable market conditions. Industry supply of chlorine remains tight, following capacity rationalization that took place last year and the recent industry outages, while demand for chlorine from industrial and construction in markets continues to rebound supporting pricing.

We believe that these factors will help keep chlorine pricing elevated through the balance of '22. The outlook for hydrochloric acid, which is used in fracking also continues to improve, supported by ongoing steady increases in U.S.

and Canadian rig counts and geopolitical conflicts. Industry experts anticipate that the Russia-Ukraine conflict will lead to a pickup of exports of natural gas from North America to Europe.

Increased fracking activity of 20% to 25% over the next year and ultimately higher HCL demand. The improved demand of both chlorine and hydrochloric acid is particularly notable, as strong demand for these products allows our North Vancouver chlor-alkali plant to run at high operating rates and fully capture the benefits of higher caustic soda prices, as these are co-products.

As a reminder, the North Vancouver plant is taking its biennial turnaround this quarter. We have been executing this turnaround during April, and it remains on schedule with the plant restarting this week.

Finally, while sodium chlorate markets remained under pressure from ongoing softness in demand for office paper, we have yet to see a material recovery in volumes to-date. We are focused on renewing contracts at higher prices.

We remain optimistic that a more widespread return to the office could drive improved demand. Given the lack of recovery in demand to-date, we have made the difficult decision to close our sodium chlorate facility in Beauharnois, Quebec, which we expect to be completed by the end of this year.

Plant has an annual capacity of approximately 40,000 ton and the volumes from this facility will be absorbed by our Brandon and Prince George facilities. We anticipate this footprint rationalization will lead to improved cost structure for our sodium chlorate business moving forward.

As a result -- as a reminder, our sodium chlorate facility in Brandon Manitoba has the lowest production cost in the industry. Turning now to the compelling organic growth opportunities we are executing, ultrapure is the largest single opportunity for organic growth that we have seen over the medium term and we have already outlined the explosive growth that we expect to see over the next five years.

As a reminder, many companies such as Intel have announced plans to onshore their semiconductor production in North America. Chemtrade is poised to benefit from this onshoring, as the leading North American producer of ultrapure acid.

We previously announced the expansion of our Cairo, Ohio ultrapure facility. This will increase the facility's production capacity by 60%, which includes upgrading the quality of the plant's existing capacity and is expected to be attractive financially with greater than 25% ROIC expected on our $50 million investment.

Project continues to progress on schedule and is expected to be completed by the end of 2023 with the new capacity coming online in '24. We continue to evaluate additional projects to capture more of the demand growth that's projected and we expect to have more positive news to deliver soon.

We also continue to make good progress on monetizing our hydrogen, that's a byproduct of our sodium chlorate manufacturing process. As a reminder, hydrogen is valuable as it is expected to be a significant energy source in a low carbon future and Chemtrade already produces the most desired form of hydrogen being green hydrogen process.

We continue to expect construction of our hydrogen project at Prince George facility to commence this year and production of hydrogen from the project will begin next year. In addition, we continue to progress in the planning stages of a hydrogen project at our Brandon, Manitoba facility expected to be more significant given the scale of this facility.

We will share more details on this project soon. In addition to the ultrapure and hydrogen projects, we have previously announced we have a number of smaller organic growth projects at various stages of evaluation and development.

As we discussed earlier, we see growing demand for water chemicals driven by increasing regulation and we believe Chemtrade is well positioned to capitalize on this opportunity, as one of North America's largest suppliers of inorganic coagulants for water treatment. We're undertaking some smaller projects to expand our production capacity of poly aluminum chloride or PAC and aluminum chlorohydrate or ACH, which are forecasted to see demand growth of more than 5% per year.

These projects are proceeding on schedule. They are expected to be completed later this year and will contribute more meaningfully to next year's results.

We also continue to make good strides on operational efficiency projects and continue to target $10 million or more incremental cost savings annually through various initiatives. These include the productivity and reliability initiatives we've outlined in previous calls as well as from other sources such as leveraging technology to improve performance.

We remain acutely focused not only on driving top line growth, but also on building a culture of continuous improvement, striving for ongoing improvements in operational efficiency and effectiveness. It would be remised if I did not reiterate our commitment to ESG and remind investors of the key targets we recently introduced across the spectrum of environmental social and governance.

We strive to be good stewards for all of our stakeholders, including the communities in which we operate. Some of our key ESG targets pertain to reducing greenhouse gas emissions and using an increasing amount of renewable energy, reducing our industrial waste, driving improvements in workplace safety and increasing diversity across Chemtrade's leadership team.

While we remain in the relatively early stages of our ESG journey, we believe that Chemtrade can be a leader on this front in the chemical industry and that the targets we have established across the company for this leadership position. We will be providing an increased visibility into our ESG performance moving forward, including through the publication of the sustainability report, which will be issued in the second quarter.

Finally, before I conclude, I would like to briefly touch on the topic of a potential economic downturn. Now, Chemtrade is well positioned to navigate such economic environment should it occur given numerous defensive attributes.

We've not yet seen any signs of this to-date in our business, but there is some speculation that a central banks unwind pandemic driven stimulus, we could experience a recession. In the SWC segment, our water treatment chemicals, which are used by municipalities for drinking water and waste water are non-discretionary.

They are therefore unlikely to be affected by a recession. Our Regen business also typically holds up well in recessions, as refinery utilization rates tend to remain quite high even in a typical economic recession, though the pandemic was of course different.

Meanwhile, the semiconductor industry is recovering from the global chip shortage and given the new investments in the U.S., this is unlikely to be affected by a recession. Regen sulphuric acid demand is tied to general industrial activity and is likely to experience reduced demand as a recession.

However, it's important to remember that we have risk shared contracts for a large portion of this business, where we share price movements with our byproduct supply partners. Also, demand for sulfuric acid in North America is likely to remain elevated, due to additional fertilizer demand in North America as a result of the Russia-Ukraine war.

In the EC segment, for chlor-alkali, a recession itself is not an issue. The impact will be determined by the imbalance in demand between the two co-products caustic soda and chlorine.

We will be hurt if the recession reduces demand for caustic more than it does for chlorine, but the reverse is also true. Finally demand for chlorate typically gets -- does typically get affected in recession.

But given the loss of volume due to the pandemic and people working remotely, we expect that the additional demand created by people returning to the office would offset any recessionary related demand reduction, so we are by no means immune to recessions, we believe we are well positioned if one occurs. To conclude, we believe that the strong improvements we have delivered in the first quarter sets the stage for a year of robust growth for Chemtrade, supported by ongoing improvements across most key products rebound in industrial end markets, including very strong chlor-alkali backdrop.

Moreover, we believe the future beyond 2022 also remains bright for Chemtrade with attractive organic growth opportunities and a number of areas expected to drive growth and our strengthened balance sheet and liquidity positions to support these opportunities. With that, we'll now open the call for questions.

Rohit and I would be happy to address with you.

Good morning.

Good morning.

Good morning.

So strongest first quarter on record or at least that I can remember, but when I look at your guidance and I factor in the first quarter, it implies a flattish remainder of the year. I know there's a lot going on here, but just had a few questions around that, I guess when we look at the SWC results, it was up I think 26% year-on-year.

Now, you changed your reporting here, so it's a little bit difficult to kind of triangulate what's going on here. But I'm assuming the majority of that is primarily because of better SPPC or the old SPPC results and then if we look at Water Chemicals how did that, the old WSSC how did that perform on a year-on-year basis?

Okay. Jacob, so let me help you with that.

So firstly, we spelt out that $5 million last year from the Spec Chem in that segment that isn't there, so you got to adjust for that. And once we do that, the biggest improvement in EBITDA, so revenue with a different story, but EBITDA is primarily a regen story, because regen demand has picked up, but some pricing improvements.

Last year, as a reminder, there was severe winter storms, there was -- California had stay-at-home orders in Q1 of '21. So most of the improvement year-over-year in that segment is regen.

The Water Treatment held its own, we were able to more than pass-through sulphur costs in Q1. Now, as Scott mentioned early in Q2, sulphur has spiked again, so short-term there will probably be headwinds there, but I think our business has demonstrated a very good ability to pass-through these costs.

So it's just a matter of time before they pass through the new elevated sulphur cost.

So then when we look forward to the remainder of the year, when we -- you've talked about a bunch of things happening on the electrochemical side, the North Van turnaround that type of thing, but when we think about the SWC results going forward, is that going to be relatively flattish after we account for the squeeze in margins due to the higher sulphur prices?

Yes. So if you look at last year Q1 was the biggest hit that the regen business took.

It did started to -- starting April last year, regen started to pick up and get more normalized. So again, I don't think we want to get very specific on a segment-by-segment basis, but I think generally speaking, yes, I think you can assume that the rest of the year for that segment is not going to be showing the kind of improvement that it did in Q1.

Okay. I'll leave it there.

Thank you.

Okay. Sure.

Hi, good morning. Would you able to share what you think will be the revenue and the EBITDA mix between SWC and Electrochem in the high level for the year?

So, I think.

Any granularity you could provide will be very helpful.

So I think, let me go back to, I guess we can draw from Jacob's question, where I said that for the remainder of the year, SWC EBITDA is -- it wouldn't show the kind of improvement that it did in Q1. And revenue, I would say in SWC, I probably wouldn't focus on revenue, because revenue is going to be high, but that's driven by sulphur.

So it's really kind of a -- it's not that relevant, it is more of an EBITDA story and so you can think that most of the improvement that's going to come is going to be from the EC segment and keeping in mind that Q2, we've got the turnaround.

Okay. So what that means is, for the rest of the year Q2, Q3, Q4 in SWC, the margins are going to be a fair bit below 2021 margins.

When you say margin, you mean percentage margin -- EBITDA margin.

EBITDA margin, percentage margin.

Yes, EBITDA as a percentage of revenue.

Will be for the rest of the year in SWC significantly below 2021 margins.

Yes. So just Joel, just as a reminder, in that business typically when revenues are elevated due to higher raw material costs, the margin percentage does decline, but our goal is to try and not typically preserve margin percentage are going to push-through the higher sulphur costs.

So even if we're successful at that, the percentage of revenue does go down. And conversely, in a falling sulphur environment, our percentage margin goes up.

Okay. That's helpful.

So my last question is on the sale and leaseback opportunity you're looking at, which is interesting, I saw a very good report a month or two month ago, because that is March that Vancouver industrial land is going for about $7 million an acre. Now, can you talk about what type of valuation range you might expect, is there any contamination, any other interesting aspects about the property, good or bad that might weigh into what kind of valuation you may get and who are the interested and potential attrition buyers?

So Joel, this is Scott. All I'll say right now is -- it's really, I'll repeat what we've put in the news release, so we are marketing the land, not going to comment on expected value.

We do not see -- we don't see any significant, let's say, areas of concern with marketing this land. We are excited about what this can be.

We think that we have many interested parties in this land and the process is going to happen, let's say on schedule. So it's ongoing and in good progress to-date.

Let me just add one thing to that, Joel, so this is a pretty unique parcel of land, a pretty large parcel of land, so there are really no comparable properties that have been sold in the past and in terms of environmental stuff, chlor-alkali facilities tend to be pretty benign from environmental perspective, so I don't think we have with any made from the environmental perspective.

This land -- the land that we have, it's a deepwater port, so that in itself sets it apart and so we think it is -- we believe it's a very valuable piece of land and we see advantages with this process.

Thanks again.

Welcome.

Yes. Good morning guys.

Maybe I'll just ask follow-up on Joel and ask the question in another way, is there a value floor at which you would not be willing to go ahead with, I'm just try to get a context for what we can expect that the low end of the range, somewhat speculative or high-end of course, but is $2 million an acre too low, I mean any context there would be interesting.

So we have a floor, but we aren't going to share that. So this is a bit -- so this kind of a land is sold -- think of it like a sale for business, so there is no less price, it's really a marketed process and the buyers will set the price and if it's acceptable to us, we'll take it and if it isn't, we won't.

So we really can't share that -- the internal floor that we have.

Okay. That's helpful.

But maybe just one extra one -- as I recall the site, there's actually a big piece of open land on the site as well, are there higher better use opportunities for that land beyond just the industrial use today or is it just strictly industrial zoned.

I don't think I want to get into those, but there are -- Vancouver, there many uses of land in that area. It won't be residential we can tell you that, but the other --

Sure.

It is zoned as industrial, so the whole parcel of land is zoned industrial use.

Okay. Helpful.

And then just if I mean I go back to one of the earlier questions on the regen business, recognizing the California issue and lockdowns, et cetera. I just -- is there -- are the economics of that business strictly a volume business?

I'm trying to understand the year-over-year change, is it just at the rate of the refinery is running that much better or is there actually a thread you to the economics based upon how the underlying economics of the crack is running, because crack economics have been outstanding here of late. I'm just trying to get a sense of any kicker there that help choose things at all.

Yes. So I would say with our regen business, it is -- it's primarily volume, but also some price.

This business has long-term contracts and as those contracts expire, then there is typically a change in price. So primarily volume, but also some price.

Okay, helpful. And then just maybe lastly just on the monetization of the hydrogen opportunity.

Can you guys quantify the magnitude of that opportunity, whether it's Prince George or Manitoba thus far?

Yes. I think Prince George we have -- Prince George, we said it could be between $3 million and $5 million a year without any capital from our side and Brandon, we haven't quantified it, but we said Brandon is about five times the size of -- four times the size of Prince George, but we haven't, because hydrogen is very specific to geographies, et cetera.

So we haven't -- we haven't quantified the Brandon opportunity.

Okay. Pretty helpful guys.

Thanks.

Great. Thanks and good morning everyone.

I had a few chlorate questions. So the first one was in terms of the decision to close the chlorate facility in Quebec, will you be recognizing like a charge to close or decommission the sites.

Yes. So -- so there are two aspects of that question.

One is just the closure costs, which are not material and we have factored them into our revised guidance and in terms of the charge, there may be some non-cash charge, but we're still kind of evaluating what that might be, but we don't think -- I mean from a cash perspective, it's not going to be significant.

Okay. And then you leased the land right, you don't own it.

So there won't be any --

Yes. No there’s no land --

Whole proceeds or anything like that. Okay.

All right. And then just bigger picture question in terms of -- I guess given that the facility is in Quebec, I presume power prices in Quebec are still pretty low, like so this facility in terms of the production costs, it's still competitive -- still pretty competitive relative to the rest of the industry, like the decision to close the facility versus selling it and are power prices in Quebec about to increase or can you just talk about the decision to close rather than sell?

Yes. So firstly, so -- it's always a hard decision to close the plant and it's not something we like doing, but -- and in terms of, in terms of the variable cost of that plant, you're probably right, that's the hydroelectric cost in Quebec are pretty good.

But it's a very small-scale plant, the 40,000 chlorate plant puts it on the very small size. So from a fully loaded basis, it just didn't -- we could optimize our results much better than trying to keep it running and get the other two plants to run harder.

In terms of sale opportunities, it's a difficult to sell a standalone plant. This whole industry is very -- there are only a few players in this industry, so trying to do anything does have some antitrust considerations as well.

So, the right thing to do for the industry is to shed capacity, because we know that demand has been dropping, so.

Okay. And just on that --

I was just going to say again just reiterating what we said is, this was a hard decision as we looked at -- we looked at obviously our business and the industry, we have seen -- this industry has seen a significant drop-off in office paper and -- in North America, office paper has dropped 40% to 50%. So overall, the demand for bleach pulp has been down 10%.

We had excess capacity at our other sites. Brandon is the lowest cost plant in the world and we thought that, however, unfortunate it was that we could consolidate and reduce our fixed costs.

And the one last aspect is it is hydrogen, so we are already -- have the hydrogen project in Prince George and it will be -- we'll have a hydrogen project in Brandon. And so the profitability of those two plants improved quite a bit, because of that and we want to run those plants as hard as we can.

Okay. And then just on that you touched on the demand dropping off, so I guess year-over-year the demand for chlorate or the sales volume reduced, so even like relative to a year ago, you saw your volumes reduced, so was that more industry wide or is that specific to your business mix, given that I guess people have been returning to the office in the past year.

So that is across the industry. So we sold -- with COVID, we saw demand destruction, we believe, in the chlorate market of about 10% and so we were hoping that we were going to see a rebound in demand.

That really hasn't happened. We do think that it's roughly stabilized and we're still somewhat optimistic that we'll see a small pickup in demand, but we -- what we see with our customers and other customers in the market, they're making decisions about whether they're going to run bleached pulp or unbleached pulp and so there has been more demand recently or demand growth for unbleached pulp going into brown packaging and so with lots of shipments from Amazon and such, the increase in cardboard packaging has been growing and so downstream customers, some customers have been making the switch to go from bleached pulp into unbleached.

So with that, it is the outlook. We made the tough decision that we did.

Okay, got it. Thanks for the color.

And then just one last question from me. So Rohit, you mentioned that there is roughly a one quarter lag in terms of the caustic prices from Asia in terms of Q2, Q3 selling prices for the second half.

Given how volatile the prices have been month to month, like for example if April prices are high and it's expected to drop off in May, like, are you able to lock in Q3 in April versus May or how much flexibility is there for you to lock in several months at a time?

Yes. So this is -- we are dealing with very sophisticated customers here, so it is a negotiation.

And so I don't -- I think it's -- here's one thing I can tell you is, given the nature of our customers and our business dealings, we typically don't hit the high points in a quarter and we don't also get the low points in any given quarter, so we tend to be a little bit more muted than the index. So to answer your question specifically, no, we will not be able to -- if you capture the April, it will be part of a kind of an average calculation, but it will be very difficult for us to convince our customers to lock in April when there's May and June still to come.

Okay. So in general, it's -- we should just think of it as an average one quarter lag.

Yes.

Okay. Excellent.

I'll leave it there. Thank you.

Good morning, Scott, Rohit.

Good morning.

My question is related to the water treatment. You mentioned this before with acid price, but acid also at a price and I believe I've seen it's grown over quite significantly, so could there be a margin benefit for you on the plant?

Like aluminum prices?

Yes.

Yes. So as raw material start to stabilize and potentially come down, yes, we typically get a period of time where there is higher pricing and the higher margins, because pricing doesn't come -- sales prices don't come down that quickly.

But right now, given what just happened with sulphur in Q2, we don't see that happening in the next quarter or so. We'll have to see how the rest of the year plays out.

And this is Scott. What I'll add is with our water business, the rapid pickup in sulphur prices will begin to have an impact on our business later in Q2 and again with -- since water and especially alum is primarily sold to city municipalities, those contracts are annual contracts with fixed prices.

So it does take -- it takes some time, our team is working very aggressively on pricing to push those through, but it takes time and so we will have a headwind with this -- we have a headwind based on this big run-up in sulphur, but when sulphur changes that headwind turns into a tailwind for us.

That's good color. Thank you.

My second question would be related to chlorine and hydrochloric acid. So given that both of the Chemicals are doing really well, can you discuss whether you view the economics between chlorine and hydrochloric acid to be a bit differently now, so that we are not that incentivized to burn more chlorine into HCL?

Yes, certainly. So if you went back a couple of years ago, with Chemtrade, you always heard from me that the most profitable thing that we can do with our chlorine molecule is turn it into hydrochloric acid and to sell that into the fracking industry near our North Vancouver plant and that still remains true today.

But, the advantage of hydrochloric acid is not as strong, because a couple of things, so fracking activity has -- well, it did drop off from its peak, let's say in 2018. So fracking activity dropped off and so demand for hydrochloric acid followed that, it went in line and demand for chlorine grew.

So again -- so what we see as we look forward out over the next year or two years or so, what we are hearing from our customers is that, it's quite possible that hydrochloric demand will pick up 20% to 25% over the next two years. And because North America is going to be exporting oil and natural gas to Europe and there could -- well, if there was infrastructure in place, then there could be more of a pickup than 20% to 25% is only limited by I think the infrastructure that's in place right now currently.

And so, I think it's possible that there will be more infrastructure put in place, which could enable that number to go up, but that's yet to be seen, so a lot of work in oil and gas industry, I think happening in North America to come up with a plan to move more oil and gas from North America to Europe. And then so, I think that demand for hydrochloric will grow we think 20% to 25% over the next two years and possibly more.

So for us -- so I still think that that will hold, but the dynamics in chlorine have certainly changed a lot over the past couple of years and chlorine is more valuable than it was.

So is your conversion rate still in the range of like say lower than 30% right now?

It's about 30% and given today's environment, as I think you pointed out as well, there is not that difference in Chlorine and HCL, now if fracking picks up, then we can up that. It's very easy for us to increase the amount going to HCL, but today about 30% and that's fine.

Okay. Thank you.

And my last question would be about the operational efficiencies. So following the closure of your chlorate facility, as we look at the portfolio right now across North America, do you identify any other area, where you could see as an opportunity for improvement or cleaning up the portfolio.

So I think -- on the water business, it's very important to know that we have many plants, but they are small and they need to be close to customers. So there's very little opportunity there.

In terms of chlor-alkali we only have one plant and look at our acid network -- so we bought some smaller products that don't necessarily belong in the portfolio, but those could be sale candidates, but frankly, they won't really move the needle very much, but there's -- we don't really have any optimization opportunities in terms of network of plants of any significance.

Thank you.

Okay. Thank you.

Rachel, if there are no more questions -- Sorry, go ahead.

Hey guys, thanks for taking my questions. Yes, most of mine have actually been answered already.

So just one quick one from me, just on your CapEx guidance, I noticed there was an increase albeit marginal. Just wondering what that's attributable to?

Thank you.

Yes. So, I mean as you've probably read the talk about inflation and so we are not immune from that and all equipment prices are going up.

So there is a slight change there, but again nothing significant.

Okay, great. Thanks.

Yes. Thanks guys, just a quick clarification.

Rohit, could you perhaps repeat the assumption that you have for the second half on caustic soda, I think you said 440 for the back half implied. But I just wanted to -- if that's correct and any reason that you've got relatively cautious view versus recent market pricing, is there some sort of -- the outlook you described is actually quite bullish I found, but the pricing seems less the case?

So, I think there are so many macro things out there, geopolitical events happening, and so it's just hard for -- and also caustic pricing is near record highs and while we think they could persist, it's just hard to bake that into kind of our assumptions, because there are some the uncertainties out there. So what we want to do is to be very transparent without our assumption and then we'll see how the rest of year plays out.

Okay. Fair enough.

Appreciate. Thanks.

All right. So, thanks.

Thanks everyone. We appreciate your time today and have a great rest of the day.