Methanex (MEOH) Q3 2026 Earnings Call Transcript

These outstanding operating results drove record levels of cash flow generation for our business, and I will speak more about our capital allocation priorities in a moment. Thank you. Starting with the methanol market. The ongoing Middle East conflict continues to have an unprecedented impact on the industry given the region would normally supply 15 to 20 million tons, representing 30% to 35%. Of the internationally traded methanol market. The ongoing conflict continues to significantly restrict this supply and has resulted in elevated industry pricing, inventory drawdowns and ultimately demand destruction. Required to balance the market. This pressure continued and became more severe as we moved through the third quarter.

After absorbing the short term release of supply during the temporary cease fire in mid June to early July, we have seen very little supply able to reach the market and as a result, there was increasing pressure on methanol prices. Particularly in Asia and China regions, with a significant fly up in September resulting in spot price increases of $100 to $150 per tonne in these regions. As a result, we saw increasing pressure on downstream demand, particularly in Asia Pacific, through the third and into the fourth quarter to balance the market.

We estimate that the Middle East supply into the market is currently at approximately 5% to 10% of normalized annual levels, and this has been balanced with the shutdown of all coastal methanol to olefins demand in China and the reduction in demand in other regions, including the Middle East, Southeast Asia, and India. We estimate current annualized industry demand to be approximately 90 million tonnes or a reduction of 10 million to 15 million tonnes as a result of these supply pressures. We are currently seeing methanol spot pricing in the Atlantic region at $500 to $550 per ton Asia ex China at $550 to $650 per ton, and China at approximately $500 per ton.

Looking ahead, there remains significant uncertainty as to how long the industry dynamics and pricing environment could last. We are carefully monitoring the factors and related time frames required for a normalization in the methanol industry as well as macroeconomic impacts from an elevated global energy environment. We are unaware of any specific material damage to methanol production facilities in the Gulf region. And the full impact of potential disruptions to regional natural gas and related infrastructure remains unclear. Turning to our operations. We continue to deliver strong production results in the third quarter, with total equity methanol production of 2.1 million tonnes. Starting in North America, we produced another record volume of methanol this quarter.

Reaching 1.6 million tons across Canada and the United States. Geismar and Medicine Hat continue to run at full rates producing 1.007 million tonnes and 140 thousand tonnes respectively. At Beaumont, after completing cooling tower repairs in early in the quarter, we produced 199 thousand tonnes of methanol, and 83 thousand tonnes of ammonia. Our equity share of production at the Natgasoline joint venture was 221 thousand tonnes. In Chile, we produced 221 thousand tonnes in the third quarter. As expected, production was lower in the third quarter as we undertook single plant operation through most of the period, reflecting the seasonal reduction in natural gas availability from Argentina during the Southern Hemisphere winter.

Late in the quarter, we restarted 2 plant operations as planned. In Egypt, our third quarter production was similar to that of the second quarter with plant operating at full rates through the Egyptian summer. In New Zealand, we produced 156 thousand tonnes in the third quarter. Following a planned winter outage in the second quarter to supply gas to the New Zealand electricity sector, the plant was restarted in July. As previously disclosed, we have entered into an agreement commencing in the first quarter of 2027 to sell our remaining gas entitlements, through the end of the decade and are planning to indefinitely idle the New Zealand operations at that time.

For 2026, our expected equity production continues to be approximately 9 million tonnes of methanol. Actual production may vary depending on timing of turnarounds, gas availability, unplanned outages, and unanticipated events. As previously discussed, we continue to operate under significant industry pressures, resulting in an elevated pricing environment and based on October and November contract price postings, and current spot pricing, we expect our average realized price range for these 2 months to be approximately $525 to $550 per ton. Assuming current pricing levels are sustained through December, and produced sales volumes are similar to those of the third quarter, we expect adjusted EBITDA to be higher in the fourth quarter than the third quarter.

Continued strong methanol production, underpinned by attractive natural gas feedstock, in the current methanol price environment is driving very strong cash flow generation for our business. And we ended the third quarter with over $900 million in cash. In this strong pricing but uncertain industry and macroeconomic environment, we are continuing to focus the majority of free cash flow towards our deleveraging targets while also allocating a modest proportion to shareholder returns. Subsequent to the third quarter, we repaid $300 million of our senior of our 2027 senior notes, and we expect to redeem the remaining $400 million in the fourth quarter.

In addition, yesterday, we announced board approval to initiate a normal course issuer bid under which we may purchase and cancel up to 5% of our shares outstanding. These actions reflect our disciplined approach to capital allocation as we move towards our balance sheet leverage target of 2.0x to 2.5x adjusted debt to adjusted EBITDA while also providing returns to shareholders. Our priorities remain unchanged safely and reliably operate our assets, cost effectively operate our global supply chain to provide unmatched security of supply to our customers, complete the integration plan and capture the planned synergies, and focus on conversion to cash through the business to deliver value for shareholders. We would now be happy to answer your questions.

Operator:At this time, I would like to remind everyone, in order to ask a question, press star and then the number 1 on your telephone keypad. Please limit yourself to 1 question and 1 follow-up. Please stand by while we compile the Q&A roster. Our first question comes from the line of Hassan Ahmed with Alembic Global. Hassan, your line is open.

Hassan Ahmed:Richard, a question around, obviously, fairly elevated methanol prices. And I know you sort of touched on this in your prepared remarks as well, but just wanted to sort of get a better sense of, at these pricing levels, what you guys are seeing potentially in terms of demand destruction, potentially also in terms of a supplier response? I mean, are there any talks about incremental capacity? How we should think about that as well?

Richard W. Sumner:Yeah. Thanks, Hassan. We are we are. In terms of supply response, like I said, I think where we are today is that the demand is effectively absorbed this kind of level of Middle East supply. We said on the on the Q2 call, we were working through that temporary cease fire. There was volume in the market, and we actually saw pricing in China in the 300. Low 300 levels during that period. Our view is that after the cease-fire ended that unless something changed, we were going to run up against demand pressures and that was going to become more severe through the quarter.

And we have seen now all coastal MT operations shut down. that is the first time we have seen that since MTO-- the MTO sector started up. So that is 9 million to 10 million tonnes of demand right there in a normalized annualized that is out of the market today. And about 3 million to 4 million tons in Asia Pacific That would be Middle East, Southeast Asia, India, operating at lower operating rates. So as of today, pricing levels are already above MTO affordability, well above marginal cost of production. And we are watching it really closely as to where that demand pressure is. We think that it is largely into other applications in China.

Fuel applications may be under pressure. Acetic acid was under pressure. We think that is had a little bump here recently as well. So we are watching it really closely. We have found that this balance today of I think, 12 million to 14 million tonnes effectively being absorbed under demand. Of course, there is still risk in the 5% to 10% getting out of the strait. October was 1 of the-- you know, we saw attacks on ships being the highest through October and there could be even more pressure on that supply. But as of today, we have kind of found this balance, and that is where pricing is at.

So we saw that kind of lift up into September. And our forecast for or our guidance for the months of October and November are more reflective of that September being rolled through Q4. Very helpful, Richard. And as a follow-up, on the buyback, I mean, the balance sheet is improving extremely rapidly. How should we think about sort of the balance between further deleveraging and further sort of, returning cash to shareholders? I mean, there is there a sort of specific leverage threshold at which you would start getting a little more aggressive with the buybacks? Yeah. I think, like, a few points there.

I think first and foremost, the earnings levels are driving are driving great free cash flow in our business. I just want to recognize that having GE3 running sustainably and having the OCI assets smoothly integrated, and then having all of our other assets running reliably are the basis for such good free cash flow generation. As it relates to leverage, we have set the leverage target at 2.0x to 2.5x on an adjusted debt to adjusted EBITDA level. We are progressing really well there. As it relates to the buybacks. You know, when we think about buybacks, we both. We are really pleased to have announced that. We think that gives us a lot of flexibility.

We do think that buybacks represent the most attractive return when we can say we are buying back at conservative mid cycle type of valuations or below. So, you know, I think we will be looking at that. We will likely enter into the buyback with flexibility to go up if we see the share prices come off and also pull back if the share price has really good performance. So we have got a lot of flexibility right now to focus of the majority of the focus is to deleveraging, and we think that provides a lot of downside protection to our business as well as more optionality on other ways of deploying capital. Very helpful, Richard.

Thank you so much.

Operator:Our next question comes from the line of Laurence Alexander with Jefferies. Laurence, your line is open.

Laurence Alexander:So good morning. Curious about what you are seeing in terms of the impact of the current methanol price surge on long term decision making? And I guess the areas that might be most visible would be the cadence of orders for new fuel flexible ships. But curious if you are seeing-- like, are you seeing any of the end markets where longer term decisions that would affect the structural trend in methanol demand are being delayed in a significant way. Because of what is going on and how long the war has gone on.

Richard W. Sumner:No. Thanks, Laurence. Not. I would say not yet. You know, the commitments to ships are still happening. And in fact, there is a decent amount of ships already in the water that are not burning methanol today and really have not been because the economics of methanol to conventional bunker fuels like VLSFO and heavy fuel oil have really not been there. And so we have not seen an uptick in the use of methanol for those dual fuel vessels. The vessel commitments remain. Other downstream sectors, you know, the MTO sector is obviously 1 that is now effectively phased out of this current market. And the wave of those had already come off.

So it is interesting, like, what is happening in this market is we are starting to see some downstream producers in Europe who we thought would be phased out operating because of constraints around the Middle East. So there is definitely a lot of short term dynamics happening. I do not think it is it is resulting in yet a change in long term downstream capital deployment, but it is something we will certainly watch.

Laurence Alexander:And then secondly, can you give a sense for how much of the. You know, or maybe at what levels or how quickly. Let's put it this way. How quickly does the areas of demand destruction likely flex back if methanol prices come down. So if it. I guess, there is, like, the MTO, there is the DME, there is of the other markets that have curtailed a little bit. there is the marine fuel. Can you just give a sense for what chunks of capacity might have a lag response to lower prices as opposed to a quick response?

Richard W. Sumner:Yeah. I think, in a lot of ways, we have seen the coastal MTO sector be almost a big kind of buffer against the Iranian supply. Iran usually imports about 9 million to 10 million tonnes into coastal markets, and that is the kind of downstream demand from coastal MTO. So there is almost like a balance there, and we would expect that if supply gets released that segment is there to start up, and it would largely be based and have to be at lower methanol price to be competitive today. And then on the other sectors, it will be mainly into traditional chemical applications, acetic acid operations, and potentially local. Localized formaldehyde demand that would pick up.

And so there may be a little bit of stickiness just because of the volumes there are not are not typically as big, and we need to get that absorbed. So we could see volatility. You know, whereas we have seen pricing run up, we could see supply come on, pricing lag, demand pick up. So we are watching things very closely, and obviously carefully managing through this environment, which is part of the reason why we think our focus on the balance sheet makes a lot of sense right now. And then, obviously, really focused on continuing to deliver such great results from our business. Thank you.

Operator:Our next question comes from the line of Matthew Blair with TPH. Matthew? Your line is open.

Matthew Blair:Thanks, and good morning. Some of the natural gas production trends in Argentina have been pretty promising. And wondering if you expect your Chile methanol production to be higher in 2027 and 2028 as a result of this? Or are there any, you know, pipeline constraints or any other bottlenecks that would prevent you from capitalizing on that?

Richard W. Sumner:Sure. Thanks, Pat. You know, there is not constraints on our side. We have got more than enough pipeline capacity to bring gas into our plants for full rates year round. As it relates to Argentina, we would agree about the positive developments there. there is a lot the Vaca Muerta continues to be developed. Production continues to increase, and pipeline infrastructure is being progressed to continue to improve the natural gas balances in that country. And in fact, if you saw that Total came out with a commitment of $10 billion into Argentina. Part of that is in the Vaca Muerta and part of that is also in the Tierra Del Fuego offshore gas close to our plant.

So a lot of positive developments. The timeframes to bring both the infrastructure in line with the production as well as get other things happening in the country is over the next few years. That also aligns to the current planned gas regime that covers exports in the country. And so we think it is probably going to take that time until we start to see the opportunity to have year round gas, and that is what we are working towards. And we are really optimistic about that.

But right now, we are going to continue to guide when we come out with our numbers, and we will give guidance for next year in the coming quarter here, it will likely be at the more 1.4 million ton level for Chile. For 2027. Sounds good.

Matthew Blair:And then the Q3 realized methanol pricing in your system seemed better than expected. Was there a onetime boost from selling the New Zealand natural gas commitments? Or any other factors that we should be thinking about?

Richard W. Sumner:No. No. Certainly, nothing to do with our gas. Really, what we saw when we look at the pricing, you know, we saw through the third quarter a significant boost up in especially in the Asia Pacific regions where China lifted up and Asia Pacific ex China lifted up by a 100 to $150 a ton. What you will see is that September pricing a bit of uplift around the world as well. So that September environment is carrying forward into the into the fourth quarter. September really lifted us up. If you look at our ARP July, August, September was the highest, and that is what is continuing into the fourth quarter. Sounds good. Thank you.

Operator:Our next question comes from the line of Ben Isaacson with Scotiabank. Ben, your line is open.

Ben Isaacson:Thank you very much, and good morning, everyone. 2 questions for me. Richard, first 1 on capital allocation. If you are cash flow strength continues, you will achieve your balance sheet targets very, very quickly. And beyond the 5% buyback, which I estimate you can achieve every few weeks if you wanted to, is there any focus or consideration on deploying growth capital and is there any consideration on revisiting the dividend?

Richard W. Sumner:Yes. Thanks, Ben. Right now, obviously, I said, our focus is around deleveraging. And you are right. We are making really good progress there. When it comes to growth capital, of course, we would. We are always interested Can we can we find a value accretive growth for shareholders? When it comes to organic growth, we our position still remains the same, notwithstanding the current price environment, we would have a lot of hesitation thinking that we are at a price that we need over a 20 year time frame at the mid-400s or maybe slightly below to make long term investment economics work for organic growth.

And that is largely because we are still seeing a very hot EPC market out there. And so the cost to build are still very high. As it relates to M&A activity, we know that is very opportunistic and assets do not trade. We would look, obviously, look at something, but we are going to be very disciplined about the way we would look at anything, and we would measure that return over other capital deployment, like buying back our own production through share repurchases, So our focus continues to be on debt. We have got lots of flexibility, like I said, which is great.

We think that as we are deleveraging, we are creating a more resilient company and giving ourselves down-cycle protection for the company and we are creating more flexibility to step in and do buybacks at a bigger level if it makes sense. So I think right now, we have got our head down, and we are running the business safely, reliably, continuing to produce results, and then we will deploy capital and make those decisions when we get there.

Ben Isaacson:And I will just Yes.

Richard W. Sumner:Sorry. You did ask about the dividend. We think a dividend is important piece of our capital allocation. We want it to be meaningful. It is not our primary return of capital; we want to deploy through the flexible buyback. We remain committed to the dividend level. And as we are buying back shares, we would look to maintain that level by increasing the per dividend to shareholders. Thank you, Richard.

Ben Isaacson:And my follow-up question, CF Industries recently gave some very compelling arguments as to why mid cycle nitrogen prices should be higher for longer. And all of its arguments had nothing to do with nitrogen, but they were based on capital costs, logistics, inflation, etcetera. So, Richard, you have talked about a $350 mid-cycle for several years. Do you still believe that is the right mid cycle going forward? And if not, what should it be? Thank you.

Richard W. Sumner:Yeah. Thanks, Ben. I think, obviously, in our industry, where we want to be is getting pricing to support growth. The challenge for us is that, and we would have seen this actually pre war is the general petrochemical markets. it is not-- this is not methanol in particular. it is just the markets around methanol. Our market, we have got very good supply demand balances, pre-- this is on prewar levels, very tight industry market. But we have downstream consumption around us that is that it has a lot of excess capacity combined with, you know, a slower growth demand environment.

So for us, we have to see where we are long term, but certainly the olefin sector was pointing to balance until kind of the end of the decade or beyond. What happens out of this remains to be seen, and we are going to continue to evaluate that. But I think the hard part for us lifting above that is seeing some healthier markets downstream. Of course, this dynamic is bringing new fundamentals into that industry that we have to better understand. So I think the big thing for us is the health of our downstream markets that support reinvestment. And our view was that would get progressively better over time and as we.

As that gets better, we think that lifts our mid cycle pricing. And so that is kind of the way we are looking at it. We are monitoring things very closely. that is perfect. Thanks so much.

Operator:Our next question comes from the line of Joel Jackson with BMO Mark. Capital Markets. Joel, your line is open.

Joel Jackson:Not to beat a dead horse, Richard, but, you know, amazingly, you are paying back $700 million of debt, as you know, in the second half of this year. If this second half, your methanol price, your earnings-- if your earnings in the second half of the year repeat again in the first half of next year, you would have another, what, $7 million to deploy Would we assume that the full buyback here, that we have a few hundred million dollars and the rest deleveraging Would you look to upsize the buyback, the NCIB? Like, I know you are talking about you will make the decisions when you come to it.

What if in the next 6 months, earnings levels stay the same, you have another $7 million to deploy, how does that work? Buyback versus deleveraging?

Richard W. Sumner:I mean, we are. We-- thanks, Joel. Appreciate the question. We are thinking ahead, obviously, but we are also we are also monitoring things very closely. This is a-- things can change very quickly, and we think that the other side of this can have a lot of volatility and there are also risks, right? So we are we are we are we are managing things very carefully. The good problem or the good challenge you pose is for us will be to look at what do we think provides the best return. And, you know, we do think that the buyback will be a part of that.

We also think that as we look-- you know, if we are deleveraging into the low end of our range or even slightly beyond, that provides downside protection, and it also provides more optionality for capital deployment. So we have got a lot of flexibility in our choices, and we are managing things really closely. Buybacks will certainly be a part of that, and we just have to make decisions about the proportion of that as we progress here. But, you know, let's get there, and we will make those decisions as we continue to produce great results for shareholders.

Joel Jackson:And just a couple of housekeeping questions. Just wanted to ask you. There were. In some of the trade journals every week, you know, there were a couple discussions about Beaumont over September, October a couple multiday outages that then seem to restart. So I want you to comment on that if there is anything at Beaumont we should be thinking about. You had a to comment about Beaumont earlier. And then also, sure you saw the news today or yesterday that you, a bunch of nitrogen producers are getting gas cut maybe 20% in November. Would your operation in Egypt be facing similar constraints? Could you talk about that?

Richard W. Sumner:Yeah, so first on Beaumont, really nothing to report there. The big challenge that we worked through, and the team did a great job. You know, bringing us back online was the cooling tower repairs that were in Beaumont, but nothing major to report there at all. As it relates to Egypt, we continue to run our plants at full rates. We continue to monitor the gas grid balances and are in communication with our gas suppliers, but we are continuing to run at full rates today. And you will see our results as we move into our fourth quarter reports.

Operator:Our next question comes from the line of Steven Hansen with Raymond James. Steven, your line is open.

Steve Hansen:Good morning, Thanks for the time. I recognize that you have got this leverage target threshold arranged but, I mean, is there any reason you would not just drive your leverage down much lower in the current environment? Just, again, recognizing the broader macro environment pretty unique right now and the cash flow's so strong. Why not just take leverage closer to zero?

Richard W. Sumner:Yeah. I think zero is pretty. It would require good a good sustained pricing environment for sure. Steven, appreciate the question here. And that is something we are looking at. We would not have thought we would be accelerating as quickly as we are Certainly with the production levels, the attractive gas pricing as well as the high methanol pricing that we are we are in right now. And we are continuing to focus there. it is accelerating very quickly, but, again, there is lots of uncertainty as to what the other side of this looks like once things do normalize and what that new normal looks like.

So but to your point, you know, we think that moving deleveraging provides that downside protection through the cycle for. Which is a great position for us to be in, and it provides optionality as well. So certainly, you know, further debt repayment will be a portion that we would look at, as long as we are in this extraordinary situation that we are in today. Okay. Very helpful.

Steve Hansen:And just a quick follow-up just on the North American production. Could you continues to be quite strong. You have had the OCI assets under your belt for a while now. Spent some time under the hood. Like, are there additional opportunities that it brings on a brownfield basis or an efficiency basis where you could spend capital again, while the cash flow stream is quite rich here, I am just trying to get a sense for how these assets could be optimized from what you understand so far.

Richard W. Sumner:Yeah. I appreciate that question, Steven. We are we are very happy with the with the way the integration has gone. Just talking about both of the assets, that gasoline-- you know, kudos to the team there that is delivered the record production. You know, over the last year. And our JV structure is working really well. We are working extraordinarily well with our JV partner there. And we think it is got tons of methanol experience together, and, of course, we have run that technology in Trinidad. So that is running. In terms of debottlenecking, that is a world-scale plant. Do not see a lot of options in capital or debottleneck at that site.

In Beaumont, again, really pleased with the production results as well as the integration of that site into our global asset management framework, and the teams are working really well there. As it relates to de-bottlenecking, there is probably some we certainly need to spend capital, and that is from a risk perspective. That was something we are. We are planning for when we get to the next turnaround because we are identifying. Always identifying where we need to spend money and then there could be some debottleneck opportunities there. We are looking at ammonia. and is there some chances for us to spend some money that increase volumes there?

So some interesting things that we are looking at, obviously, the safe, reliable operations of the asset are critical, and our teams are working really hard on all that. Appreciate the time.

Operator:Your next question comes from the line of Nelson Ng with RBC Capital Markets. Nelson? Your line is open.

Nelson Ng:Great. Thanks. Just along the lines of capital allocation, and paying down a bit more debt. So obviously, after you pay down the October 2027 notes, Are there any difficulties paying down the $700 million of December 2029 debt? I presume that would be like, next on the list if you were to further deleverage.

Richard W. Sumner:Yeah. I am going to turn-- Thanks, Nelson. I will turn that over to Dean Richardson, to. Our CFO to speak to that.

Dean Richardson:Yep. Sure. Good morning, Nelson. No. there is no difficulties. I think it is the short answer. You know, first of all, we have some debt at Natgas. We include our share in our adjusted debt, so we work with our partner there to optimize that structure. And then when it comes to our bonds, we have got a 2029 and a 2032. And, you know, we have different options there as to how if we wanted to deploy capital to those, we could do that fairly easily through open market or tender or other avenues. So lots of options, and we are looking at the best way to deploy that for the company.

Nelson Ng:Okay. Got it. And then just finally on. I think you touched on debottlenecking a bit. So are there. Like, you have touched on Beaumont and or the OCI assets in terms of them operating well. But for your other facilities, like, is it safe to say that you have looked at all the low hanging fruit in terms of debottlenecking or incremental expansions have been have been already, like, looked at and it would be-- like, if you were to extend capacity, it would be something more material.

Richard W. Sumner:Yeah. I think that is a fair that is a fair characterization, Nelson. We. Obviously, we are always looking at ways we can continue to invest in our sustaining capital to ensure reliability of our plants and of course look for opportunities where opportunities that we can spend capital to increase efficiency to create. But these are not big capital items. These are part of our regular capital programs, which is included in our you know, our estimate of $150 million in capital a year.

So I would not say there is any big opportunities that are in the hopper around big de-bottlenecks other than we are looking at some things around the ammonia But even that does not represent huge capital outlay.

Nelson Ng:Okay. And then just 1 last question. In terms of winding down New Zealand, and I think you mentioned you will be selling or winding down those gas contracts starting early next year? Like, is that a an asset or a liability, or do you expect to receive any proceeds from ending those contracts?

Richard W. Sumner:Yeah. You can think of that as a small asset. Like, just in terms of that contract itself, you know, we have been we have been foreshadowing gas in New Zealand for the deterioration in our gas outlook there for quite some time. We were operating plants at minimum operating rates. Our team has done a fantastic job operating it with a lot of uncertainty. Safely and reliably. But we got it got to a point where we had to make decisions there to create certainty because of that duration. So you can think of that contract as something to create that certainty, and we were able to monetize that position.

But it is it is not a meaningful or material cash inflow that we are anticipating, but we do expect to receive some cash on. Under that agreement. Got it. Okay. Thanks. I will leave it there.

Operator:Your next question comes from the line of Hamir Patel with CIBC Capital Markets. Hamir, your line is open.

Hamir Patel:Hi. Good morning. Richard, you have benefited from having no turnarounds this year. Can you update us on the turnaround schedule for 2027 and 2028?

Richard W. Sumner:Thanks, Hamir. Yeah. We did not have turnarounds this year, so most of our capital spend has been online work, but we are. We have had some prespending for our 2027 turnaround. So you can think we usually say around 2 to 3 turnarounds a year. We will be at the higher side of that in 2027. And our capital expenditure for next year where we usually guide around $150 million will be higher than that next year, but not significantly higher because we have pulled some of that capital into this year. Second half of this year. So, yeah, that is kind of the profile. And obviously, these things will go up and down each year given timing.

Hamir Patel:Okay. Great. And, Richard, I noticed in the intra quarter language that you use around expected prices, there is also a reference to spot pricings. You know, does that. Does that imply that perhaps you have increased your exposure to the spot market? And can you just remind us what percent of your sales are spot?

Richard W. Sumner:So we are not we are not selling on a spot basis. What we would, you know, we are selling at our term contracts in the 2 markets here that had the biggest impact are in Asia Pacific, and it is China and our Asia Pacific region. So those contracts are term contract supply, but the pricing mechanism has a reference to spot. So we had meaningful adjustments in both of those. We do not have that as much as in other regions. In our sales portfolio. Okay. Great. that is all I had. I will turn it over. Thanks.

Operator:Your next question comes from the line of Ahmed Abdullah with National Bank of Canada. Ahmed, your line is open.

Ahmed Abdullah:Thanks for taking my question. Just touching on those contract terms, are the current market conditions really allowing to improve the pricing terms there? And how much of that improvement could persist as spot markets normalize?

Richard W. Sumner:Yeah. We are going. Our contracts are on a year round basis, and we are in our recontracting period right now for 2027. So too early to say how our contracts look for next year or sales and marketing team are always working on how do we continue to provide that reliable supply to our customers and also achieve the best terms possible in the market. But not-- I would not be expecting big, big changes for next year. Of course, we think that our supply position is providing great reliability of supply through a pretty tough time in the market. So we are into customer conversations, and we will continue to do that.

You will see that as we move into 2027. Okay.

Ahmed Abdullah:Got it. And just on the current supply disruption, have you secured perhaps new longer term volume commitments that could remain after conditions normalize?

Richard W. Sumner:Maybe just want to make sure I understand the question. Is it that our commitments will be through-- you know, we are going to have regular annual commitments with customers, and you know, we would be we would be doing that through any period of disruption or new supply into the market.

Ahmed Abdullah:Yeah. My question was around new customers and new volume commitments that you know, were coming in to your books.

Richard W. Sumner:Yeah. We are gonna be high grading our. We always look at our sales portfolio, and we always look at what contracts we come up. We would not expect overall sales to be significantly different as we move into 2027, but we are always looking at which regions and which customers that we are gonna be selling to. So we do not expect a significant change in that, and you will see that in our 2027 results. Alright. Got it. that is it for me. I will get back in queue. Thank you.

Operator:Your next question comes from the line of Joshua Spector with UBS. Joshua, your line is open.

James Cannon:Yeah. Hey, guys. This is James Cannon on for Joshua. I just wanted to ask on to kind of dig in on the supply demand picture nearer term. Particularly, I think, we get into fourth quarter, we typically see some capacity shutting down in China. Kind of how do you see that impacting the market going forward? Do you think there is risk skewed to the upside in pricing, or something that you just see an incremental demand shutting down?

Richard W. Sumner:Yeah. Thanks, Joshua. I think you have certainly got a point there. We do tend to see winter when we start to see restrictions on coal usage. So part of that will be what is the toll on coal domestically in China. What does that do to operations there? Do they get supply constrained? And does that apply further demand pressure? it is something that I think we are going to watch that really closely. it is interesting. We have not really had the look at that because of the swings we have seen mainly in Iran have outweighed so much of the supply swings in the winter. So that is something we will watch.

And certainly coal prices are already at pretty high levels, which would indicate that market is pretty tight. So we will continue to watch again. We are at $500 a ton methanol price in China, which we have not seen for quite some time. So we do have to be careful how high we push and how much damage that does to downstream demand. But, again, that is another factor that is gonna keep us tight through the winter months. Got it. Thank you.

Operator:There are no further questions at this time. We will now turn the call back over to Mr. Richard W. Sumner for closing remarks.

Richard W. Sumner:All right. Thank you for your questions and interest in our company. We hope you will join us in February when we update you on our fourth quarter and annual 2026 results.

Operator:This concludes today's conference call. Thank you for joining. You may now disconnect.

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Methanex (MEOH) Q3 2026 Earnings Call Transcript was originally published by The Motley Fool