On Apr 8, we issued an updated research report on leading methanol producer Methanex Corporation (MEOH). While the company is still exposed to natural gas curtailment issues, it is well placed to gain from strong demand for methanol, capacity expansion and its Geismar methanol project.
Methanex swung to a profit in fourth-quarter 2013, results for which were reported on Jan 29. Healthy demand and higher methanol pricing boosted top and bottom lines in the quarter. Methanex expects the methanol industry and pricing to be healthy in the first quarter of 2014.
Methanex, a Zacks Rank #1 (Strong Buy) stock, is the world’s largest supplier of methanol. The methanol industry and its pricing environment appear attractive in the longer term as global demand is expected to surpass new capacity additions. Despite the global economic weakness, demand for methanol remains healthy driven by energy-related applications in Asia, particularly in China.
Methanex has also taken up a number of steps to boost capacity. The company is progressing well with the relocation of the first Chilean plant to Geismar, LA, and is also relocating the second Chile plant (expected to come online in early 2016). The Geismar project is expected to create significant value for its shareholders.
With continued initiatives to increase production in New Zealand and Medicine Hat (Canada) and progress in the Louisiana project, Methanex has the potential to increase its operating capacity by nearly 3 million tons by 2016, which in turn, will contribute to cash generation and increased supply to customers.
Methanex’s healthy financial position, strong global supply network and competitive cost position are expected to strengthen its position as the global leader in the methanol industry and enable it to continue delivering incremental returns to shareholders.
Key Picks from the Sector
Other companies in the chemical industry with favorable Zacks Rank include Celanese Corporation (CE), LyondellBasell Industries NV (LYB) and Olin Corp. (OLN), all holding a Zacks Rank #2 (Buy).
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