Turning to Slide 11, in Polyurethanes and Dow Formulated Systems we are seeing signs of recovery in Europe particularly as a result of higher furniture and bedding demand as well as increased consumer confidence in the region. In the first quarter, demand in industrial and energy efficiency markets also improved globally. Overall, we are well positioned to improve profitability as a result of our increased emphasis on higher value market sectors together with business specific productivity efforts, including the six asset shutdowns completed to-date.
As we look ahead, we expect market demand to grow in the second quarter from increased construction activity in North America and EMEA while we anticipate Asia Pacific will benefit from the typical peak season in footwear. Severe cold temperatures impacted first quarter demand in North America across the Specialty Chemicals businesses. However, fundamentals remain healthy, as favorable trends in homecare products are driving growth for Dow Technologies aligned to this key end market.
P.J. Juvekar - Citi
Yes. Secondly in performance in materials, you talked about improving polyurethanes, can you also just talk about isocyanates like MDI and then in epoxies do you think you are seeing some kind of a rebound?
Andrew Liveris - Chairman, President and CEO
Definitely in epoxies to answer that first the Chinese are going to shut capacity but they are not going to shut epoxies. They have chosen their path to fundamentally glove the market with epichlorohydrin and before that caustic soda. We believe it's a structural change in the entire market. Some of the value added epoxies will earn money in the niche application but we don't have scale there. We are mostly are LER, liquid epoxy resin provider of intermediate to end use. We don't believe it's a good use of Dow capital to do the value-add. So therefore we made our announcements.
We are improving the business. We are running it very lean and mean. So it can actually be on sold to someone who can see value in completing the entire value chain but it's a value chain that we are voting on as you have seen in our announcements.
Look, MDI is different, MDI is the restructural of over capacity especially in Asia but the growth fundamentals are much, much more sound for isocyanates especially the platform called polyurethane formulation systems in rigid polyols in particular. Without new facilities in Sadara, we will be a grower of how isocyanates position especially in the emerging markets. And over time, we look at the competitiveness of our assets use in United States and Europe. But right now, PU is a business that we believe is on a solid rebound as witnessed by the Q1 results.
Operator
Our next question comes from David Begleiter with Deutsche Bank.
David Begleiter - Deutsche Bank
Thank you. Andrew, in performance materials given the severe weather in Q1, how should we think about the normal decline in Q2 versus Q1 given maybe some bounce back in Q2?
Andrew Liveris - Chairman, President and CEO
Well, I mean at the end of the day, performance materials and polyurethanes within performance materials and some of the specialty chemicals until PDH comes on, we are going to see volatility in their numbers quarter-to-quarter because of propylene. The unfortunate situation is being in the last many years propylene dynamic between U.S. and the rest of the world changed dramatic especially to Asia. And this propylene arbitrage it was on one of my slides that was solving for PDH is the game changer in less volatility quarter-to-quarter. While we get the acolyte value effect on less and less propylene coming out of U.S. refineries, you are going to see chemical grade propylene bouncing around a lot. We are the elastic demand to the inelastic demand on the transportation side as you get summer driving, the winter heat-cooling or summer heating, summer cooling, winter heating, you are going to get these effects. So we think that's a normal pattern that you are going to see a repeat of in Q2. Bill do you want to add to me?
John Roberts - UBS
I'm looking at Slide 19 on the polyurethanes business, I remember the last bubble chart we saw I think headed at 7% or around 7% EBITDA margin. So it would seem to you need multiples of that 200 bps improvement to get this to your targets?
Andrew Liveris - Chairman, President and CEO
Well, yes. And I have talked to exactly one of those big multiples right which is the PDH. So that's as I said that's why we gave you a lot of color on PDH on this call is that this time next year, we are in the throws of getting that ready to start up. And so that's a big part of the polyurethanes rehab story to make your observation act.
The other thing that's going on, in the early question, is it some market rebound, which is suits our type of polyurethanes especially with Europe coming back remember with a long and exposed in Europe and last but not least is the cost controls and the way Glenn Wright and his team are managing that business very focused on execution against cost and cash. And all those things and the CFO and I spend a lot of time on this business, how to take it away from a yellow into a green.
John Roberts - UBS
Okay. And then as a follow-up on the chlorine carve out, have you set the chlorine cost of contract terms yet for your internal needs longer term?
Andrew Liveris - Chairman, President and CEO
Bill?
Bill Weideman - CFO, EVP, Finance, Dow AgroSciences, and Corporate Strategic Development
No. Looking into a detailed negotiation going forward as Andrew mentioned in his prepared comments to tell you where we are at. We are targeting how to carve out completed this quarter and then we will get into detailed discussions in the third quarter. So we get into the discussions in the third quarter that's when we will start getting into those detail discussions.
Hassan Ahmed - Alembic Global Advisors
Fair enough. And as a follow-up, you highlighted obviously in the presentation the polyurethane side of the business and you are talking about things call it cycling up. There is obviously a fair bit of capacity coming on line over the next couple of years. Could you speak a bit about the supply/demand dynamic did you see over the next two, three years?
Andrew Liveris - Chairman, President and CEO
Oh, yes. I mean this part of the question it came early on isocyanates. There is going to be length in isocyanates and MDI and that's going to have to be consumed. The good news is, this ubiquitous market needs for polyurethanes especially those by isocyanates and MDI in particular and this growth is going to be above GDP. And so if you got the low cost position which we believe our unit in Sadara is low cost. We are going to be able to grow above at or above market for our polyurethanes franchise.
The other bigger name of course the polyols positioned here in North America gets enhanced by PDH. But on isocyanates, I think this is all about moving to higher value markets as I said on the call. And the team has done a very good job of getting out of the low end markets and fine tuning where we point the low cost assets too. The value-add piece here distinguishes it from the Epoxy business.