Leading methanol producer
) has forged a 10-year supply pact with Oklahoma-based
Chesapeake Energy Corporation
), the second largest natural gas producer in the U.S.
Under the agreement, Chesapeake will supply natural gas for
Methanex's methanol plant in Geismar, La. The supply will begin
with the startup of the 1-million ton plant, which is expected in
The contract is uniquely structured so that the price of natural
gas is linked with methanol price. Both the entities will share
the risks and benefits arising from the methanol price changes
over the tenure of the agreement.
Methanex, in Nov 2012, received the necessary air permits from
the State of Louisiana and the Environmental Protection Agency
(EPA) to build and operate its Geismar methanol project.
The project is expected to complete in less time and will involve
significantly less capital compared with a similar greenfield
methanol plant. Methanex expects that the project will also
create significant value for shareholders. The agreement with
Chesapeake lowers Methanex's exposure to short-term methanol
Methanex feels that the methanol industry and its pricing
environment appear attractive in the longer term as global demand
is expected to surpass new capacity additions. The company,
however, sees upward pressure on methanol prices in the fourth
quarter of 2012 stemming from steady demand and industry outages.
Nevertheless, the company believes that its healthy financial
position, strong global supply network and competitive-cost
position will strengthen its position as the global leader in the
methanol industry and enable it to continue to deliver
incremental returns to shareholders. Methanex will report its
fourth quarter results on Jan 30.
Methanex currently holds a short-term Zacks Rank #5 (Strong
Other companies in the chemical industry with a favorable Zacks
Arkema S.A. (
) with Zacks Rank #1 (Strong Buy) and
L'Air Liquide SA
) with Zacks Rank #2 (Buy).
(AIQUY): ETF Research Reports
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CHESAPEAKE ENGY (CHK): Free Stock Analysis
METHANEX CORP (MEOH): Free Stock Analysis
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