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Methanex (MEOH) Inks Interim Supply Deal for Titan Operations

Zacks Equity Research

Methanex Corporation MEOH has issued an update on Trinidad natural gas supply discussions. The company has entered into an interim agreement with National Gas Company of Trinidad and Tobago Limited (“NGC”) for the supply of natural gas to its Titan methanol facility. The supply will start from Jan 1, 2020 and will continue till Jan 31, 2020.

While the current natural gas supply deal for Titan expires on Dec 31, 2019, this interim arrangement enables Methanex to continue operations at Titan. It will also help the company to continue negotiations with NGC for a long-term natural gas supply deal.

Shares of Methanex have lost 18.9% in the past year compared with the industry’s 13.2% decline.



In October, Methanex stated that it anticipates its Geismar 3 plant to deliver strong returns on significant capital and operating cost advantages. Over the coming years, most of the large-scale capacity additions are anticipated to be in the Americas and the Middle East. Moreover, the company expects new non-integrated capacity additions in China to be modest on continuous restrictions by the government in China.

Meanwhile, the company is still exposed to a challenging methanol pricing environment. Its average realized prices for methanol fell around 34% year over year to $272 per ton in the third quarter. Lower methanol prices hurt the company’s bottom line in the third quarter and are expected to remain a headwind in the fourth quarter.

Zacks Rank & Key Picks

Methanex currently carries a Zacks Rank #5 (Strong Sell).

Some better-ranked stocks in the basic materials space are Kirkland Lake Gold Ltd KL, Impala Platinum Holdings Ltd IMPUY and Polymetal International plc AUCOY, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Kirkland Lake Gold has an expected earnings growth rate of 97.1% for 2019. The company’s shares have surged 67% in the past year.

Impala Platinum Holdings has projected earnings growth rate of 255.2% for fiscal 2020. The company’s shares have skyrocketed 324% in a year.

Polymetal International has an estimated earnings growth rate of 40.5% for the current year. Its shares have returned 39.5% in the past year.

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