Key points:
Methanex posted lower reference pricing for December. Methanex released its North American and Asia Pacific non-discounted reference prices for December of $642/MT (down 7% from $692/MT in November, but remaining 15% above Q3 pricing) and $520/MT (down 13% from $600/ MT in November but remaining 20% above Q3 pricing), respectively.
Methanol prices retreat from the October peak, but are expected to remain at healthy levels through 2023. IHS made some modest downward revision to its next 6-month price forecast, which is mainly attributed to the softening of U.S. and North East Asia spot prices (decreased 9% and 15% M/M, respectively), a quicker recovery of supply, and more stable energy costs worldwide. IHS also rolled out its detailed 2023 methanol price forecast, which reflects North America methanol pricing decreasing a modest 3% from 2022, and North East Asia pricing decreasing 6% from 2022. Despite these modest revisions to its forecast we expect Methanex to generate healthy FCF through 2023, potentially accelerating stock buybacks and supporting a healthy balance sheet.
China sets energy efficiency benchmarks and targets for energy-intensive industries. In China, methanol spot prices decreased 28% since October 15, as the Chinese government announced that it would directly intervene in the coal market to control pricing. On November 15, the government announced a new set of energy consumption benchmarks for the nation's power-intensive industries, starting on January 2022, giving the owners three years to comply or shut down in an effort to meet its carbon emissions control and sustainability goals. Some petrochemicals, including coal to methanol, coal to olefin and coal to ammonia are included in the industry list and the benchmarks will apply to both existing plants and new projects. This new policy could have a significant impact on the methanol industry. According to IHS, the immediate impact will be an increase in production cost, and the longer-term impact will be both on new methanol project developments and the closure of older, more polluting units.
Tweaking our estimates. We have reduced our 2021, 2022, and 2023 Adjusted EBITDA estimates to $1,145, $976, and $897 million, respectively (from $1,153, $980, and $934 million, respectively). Our revisions primarily reflect IHS' updated methanol price forecast and Methanex's North American and Asia Pacific non-discounted reference prices for December.