US Celanese makes big profit from SCC methanol contract – analyst

19 July 2012 20:17  [Source: ICIS news]

HOUSTON (ICIS)--US-based acetyls producer Celanese has profited substantially from its methanol supply contract with Southern Chemical Corp (SCC), an analyst said on Thursday.

Celanese stands to gain as much as $213m (€173m) this year from its contract with SCC, according to information presented in a lawsuit between the two companies, said Deutsche Bank analyst David Begleiter.

Celanese reported net earnings of $607m in 2011. Begleiter’s $213m estimate of the company’s gain this year from the SCC methanol contract represents 38% of its total 2011 profit.

“This benefit is larger than we thought,” Begleiter said in his report, adding that the end of the supply contract in 2015 should not hurt Celanese if it can build its own methanol plant near Houston by the second half of that year, as the company announced in June. 

SCC sued Celanese in 2007, alleging that the company re-sold methanol supplied by the contract, something prohibited by the terms of the agreement.

SCC wants to end the 10-year contract and receive compensatory damages of $1.3bn in the suit, plus attorneys fees and punitive damages, according to a Celanese annual report.

Celanese denied violating the terms of the contract.

The lawsuit trial began on Monday.

During the opening arguments, Celanese lawyer Lazar Raynal said that the company had paid SCC approximately $130m/year under the supply contract.

Methanol is a crucial feedstock for acetic acid, which is Celanese’s flagship product. Celanese is by far the largest customer of SCC, the US marketing arm of Methanol Holdings (Trinidad) Limited (MHTL).

SCC attorney Jeff Chambers said that the contract price was 52 cents/gal and offered evidence alleging that Celanese re-sold methanol it received at big profits, ranging from $1.06-1.89/gal. SCC said this was not permitted under the contract.

Celanese denied reselling methanol it has received from SCC, which over the past six years of the contract (2006-11) has averaged about 807,000 tonnes/year, according to figures Raynal cited.

Begleiter said that was more methanol than he thought Celanese was buying under the contract. Begleiter estimated that Celanese needed 600,000 tonnes/year of methanol for its 1.2m tonne/year Clear Lake acetic acid plant.

Begleiter estimated that Celanese’s cost to make methanol at a new plant in Clear Lake would be 55 cents/gal, “or only 3 cents/gal more than Celanese’s current SCC methanol cost”.

($1 = €0.82)

By: Lane Kelley
+1 713 525 2653

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