Methanex Posts Solid Quarterly Results, but Methanol Market Begins to Soften

30 July 2001 00:00  [Source: ICB Americas]

During the second quarter, the methanol market remained stronger than it was in 2000, but pricing fell off relative to the first quarter of 2001. Methanex Corp., the world's largest marketer of methanol, posted net income of $40.3 million in its fiscal second quarter, which ended June 30. The company's net income was only $29.1 million in the second quarter of 2000, but it reached $68.8 million in the first quarter of 2001.

"Our average realized price for methanol in the second quarter [of] 2001 was $200 per metric ton, down from $225 per metric ton realized in the first quarter [of] 2001," Pierre Choquette, Methanex's president and CEO, noted during a review of the company's fiscal performance. "Almost all of the decrease in EBITDA (earnings before interest, income taxes, depreciation and amortization) from the previous quarter was due to lower methanol prices."

The company's cash balance has reached nearly $400 million. In addition, Methanex will receive $45 million plus accrued interest for winning an income tax dispute with the Canadian government.

Slower global economic growth has weakened methanol's demand and price, but Mr. Choquette says "underlying industry fundamentals remain sound." In the second quarter, ICI closed its 500,000-metric-ton plant in the UK, and production from the new 850,000-metric-ton Ampco plant in Equatorial Guinea was fully absorbed into the market.

Only 400,000 metric tons of new capacity is projected to come on over the next two years, and Mr. Choquette expects that even a modest improvement in the global economy will strengthen supply-demand fundamentals. Celanese and Valero shut down their 600,000-metric-ton methanol plant in Clear Lake, Tex., on April 6, 2001, and Methanex agreed to supply their methanol requirements until mid-July. The Clear Lake plant remains down.

Methanol prices weakened late in the second quarter and early in the third. According to Methanex, prices in Asia are $148 to $167 per metric ton. In Europe, the third quarter transaction price settled at á220 before discounts ($185 per metric ton at the time of the settlement). Methanex's non-discounted US reference price for July is $190 per metric ton (57 cents per gallon), and US spot prices are down around $110 to $123 per metric ton (33 to 37 cents per gallon). If natural gas is $3.10 to $3.90 per million BTUs, the full cash cost of a typical Gulf Coast methanol producer is $135 to $165 per metric ton (41 to 50 cents per gallon).

"While we have continued to maintain our global market position, sales of our own production for the first half of 2001 were 2.5 million metric tons, approximately 550,000 metric tons (18 percent) lower than [during] the same period in 2000," Mr. Choquette says. "Total sales volumes for the second quarter of 2001 were 1.8 million metric tons compared to 1.9 million metric tons for the first quarter of 2001 and 1.7 million metric tons for the second quarter of 2000."

He adds that the company's plants "continue to operate well." During the second quarter, Methanex ran its facilities, excluding the idled Kitimat, British Columbia, Canada, and Fortier, La., plants, at 85 percent of capacity and produced 1.2 million metric tons of methanol.

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