Methanex Corp T.MX

RBC

[retiredcf]

If this reads a bit rough, for some reason it was a nightmare to cut and paste. Their current and upside scenario targets are US$45 and US$60. GLTA

Methanex Corporation

Methanol prices remain robust, but pricing expected to soen in H2/21

Our view: Methanex recently posted its April reference prices for North America (up 5%), Asia Pacific (unchanged) and its Q2/21 reference price for Europe (up 5%), which we have incorporated into our model. We are maintaining our Sector Perform rang on the shares, as we connue to believe that methanol prices will soen in H2/21 due to improving methanol supply condions.

Key points:

Methanex recently released its North America and Asia Pacific non-discounted reference prices for April at $519 (up from $492 in March) and $430 (unchanged), respecvely. Methanex also posted its Q2/21 European reference pricing at €410 (up from €390 in Q1/21). IHS' latest report showed monthly methanol spot prices increased in the U.S. Gulf Coast (up 8%), while European and North East Asia prices decreased M/M (down 10% and 3%, respecvely).

Extreme February weather in the U.S. curtailed some methanol producon. Due to the extreme winter storm experienced in Texas, the Gulf Coast and other parts of the U.S. during mid-February, a significant poron of the methanol capacity in the Gulf Coast was temporarily offline. According to IHS, the extreme weather negavely impacted methanol supply in the Gulf Coast more than methanol demand, resulng in ghter supply condions in the region and higher methanol prices. Methanex has 2 million MT/year of producon capacity in Louisiana (Geismar 1 and 2), which we believe were also impacted.

Limited impact from the Suez Canal blockage. Methanex's jointly owned methanol facility in Egypt mainly supplies domesc and Mediterranean markets. As a result, we believe the facility does not typically use the Suez Canal, and may even benefit from potenally higher near-term prices.

IHS expects soer methanol prices in H2/21.IHS' latest report showed monthly methanol spot prices increased in the U.S. Gulf Coast (up 8%), while European and North East Asia prices decreased M/M (down 10% and 3%, respecvely).

Extreme February weather in the U.S. curtailed some methanol producon. Due to the extreme winter storm experienced in Texas, the Gulf Coast and other parts of the U.S. during mid-February, a significant poron of the methanol capacity in the Gulf Coast was temporarily offline. According to IHS, the extreme weather negavely impacted methanol supply in the Gulf Coast more than methanol demand, resulng in ghter supply condions in the region and higher methanol prices. Methanex has 2 million MT/year of producon capacity in Louisiana (Geismar 1 and 2), which we believe were also impacted.

Limited impact from the Suez Canal blockage. Methanex's jointly owned methanol facility in Egypt mainly supplies domesc and Mediterranean markets. As a result, we believe the facility does not typically use the Suez Canal, and may even benefit from potenally higher near-term prices.

IHS expects soer methanol prices in H2/21.IHS' latest report showed monthly methanol spot prices increased in the U.S. Gulf Coast (up 8%), while European and North East Asia prices decreased M/M (down 10% and 3%, respecvely).

Extreme February weather in the U.S. curtailed some methanol producon. Due to the extreme winter storm experienced in Texas, the Gulf Coast and other parts of the U.S. during mid-February, a significant poron of the methanol capacity in the Gulf Coast was temporarily offline. According to IHS, the extreme weather negavely impacted methanol supply in the Gulf Coast more than methanol demand, resulng in ghter supply condions in the region and higher methanol prices. Methanex has 2 million MT/year of producon capacity in Louisiana (Geismar 1 and 2), which we believe were also impacted.

Limited impact from the Suez Canal blockage. Methanex's jointly owned methanol facility in Egypt mainly supplies domesc and Mediterranean markets. As a result, we believe the facility does not typically use the Suez Canal, and may even benefit from potenally higher near-term prices.

IHS expects soer methanol prices in H2/21. IHS modestly increased its North American methanol price forecast over the past month as a result of higher contract and spot prices. Looking into the price forecast for the next several months, IHS forecasts robust prices due to plant outages and fundamentally strong demand (recovery from pandemic year). Thereaer, IHS assumes an eventual recovery of methanol producon in both the U.S. and Trinidad, resulng in improved supply and soer pricing in the laer half of Q2/21 and into 2022.

Increasing esmates. We increase our 2021 and 2022 Adjusted EBITDA esmates to $780 million and $629 million (from $709 million and $618 million), respecvely. The adjustments to our forecast reflects Methanex’s latest reference prices and IHS’ updated methanol price forecast. We also modestly reduce our producon esmate for the Geismar facilies (due to extreme weather) and modestly increase our producon forecast for the Atlas facility (improved gas availability)