Methanex Corporation (MEOH) Q2 2026 Earnings Call Transcript

Operator: Good morning. My name is Angela, and I will be your conference operator today. At this time, I would like to welcome everyone to the Methanex Corporation Second Quarter 26 Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. Simply press star followed by the number 1 in your telephone keypad. If you would like to withdraw your question, press the pound key. Thank you. I would now like to turn the conference call over to the Vice President of Investor Relations at Methanex, Mr. Robert Winslow. Please go ahead, Mr. Winslow.

Robert Winslow: Good morning, everyone. Welcome to Methanex's second quarter 26 Results Conference Call. Our 2026 second quarter news release management's discussion and analysis, and financial statements can be accessed through our website at methanex.com. Would like to remind listeners that our comments today may contain forward looking information. Which by its nature is subject to risks and uncertainties that may cause the stated outcome to differ materially from actual results. We may also refer to non GAAP financial measures and ratios that do not have any standardized meaning prescribed by GAAP and are therefore unlikely to be comparable to similar measures presented by other companies. Any references made on today's call reflect our 63.1% economic interest in the Atlas facility, our 50% economic interest in the Egypt facility, our 50% interest in the Natgasoline facility, and our 60% interest in waterfront shipping. Review the cautionary language regarding forward looking statements and to find definitions and reconciliations of the non GAAP measures please refer to our most recent news release, MD&A, annual report, and investor presentation. All of which are posted on our website under the investor relations tab. I will now turn the call over to Methanex's president and CEO, Mr. Richard W. Sumner, for his comments followed by a question-and-answer period.

Richard W. Sumner: Thank you, Robert, and good morning, everyone. Appreciate you joining us today to discuss our second quarter 2026 results. Our second quarter average realized price of $529 per tonne and produced sales approximately 2.2 million tonnes generated adjusted EBITDA of $577 million, adjusted net income of $300 million This adjusted EBITDA, which includes a $12 million accrual for restructuring activities at our Trinidad and Tobago operations, increased versus the first quarter of 2026, largely due to a higher average realized price. Driven by the Middle East conflict combined with continued strong production from our enhanced asset base. Particularly in North America, The resulting strong cash flows from operations allowed us to repay the remaining $290 million outstanding on the Term Loan A facility, while still ending the period in a strong financial position with more than $380 million of cash on the balance sheet. The continuing Middle East conflict has resulted in an impact on many industries. Including methanol. We estimate that 15 to 20 million tonnes of annualized methanol supply is required to transit the Strait of Hormuz to reach end markets. During the second quarter, we believe some of this supply, mainly from Iran, came to market at significantly reduced volumes and almost entirely from preexisting inventories. We believe the significant supply gaps created through the second quarter were met with a combination of rapid drawdowns of inventory primarily in Asia, and through increasing demand rationalization, both methanol to olefin demand in China and other demand particularly in Asia. This situation led to elevated in volatile methanol pricing across the world, throughout the second quarter. There remains significant uncertainty as the ultimate resolution the ongoing conflict, and the extent of damage to methanol plants and broader infrastructure is still not clear. As we move into the third quarter, under current conditions, the impact of a more prolonged conflict will become even more severe on the methanol industry. We believe the 15 million to 20 million tonnes of production previously mentioned continues to be idle and that pre conflict inventories are now meaningfully reduced. As a result, we would expect to see even less supply from the Middle East as we move through the third quarter and this, combined with inventory now drawn to very low levels, means we would expect increasing pressure on industry supply to meet ongoing demand. Under current conditions, demand rationalization will increasingly be required until a resolution allowing Middle East production to resume and to reach the market on a more normalized basis is found. Turning to our operations in the second quarter. Our total equity methanol production of 2.2 million tonnes was slightly below first quarter production levels. Starting in North America, we produced a record high volume. During the quarter of 1.6 million tons across Canada and The United States. We produced 1.1 million and 27 thousand tonnes at Geismar, which is also a record level in a quarterly period for that site. We produced 180 thousand tonnes of methanol at the Beaumont plant in the second quarter, and our equity share of production at the Natgasoline joint venture was 204 thousand tons. At Beaumont, we took the plant offline in early June and safely executed a 30 day unplanned outage to repair the cooling tower with the plant restarting in early July. In Chile, we produced 327 thousand tons in the second quarter. Utilizing gas supply from Chile and Argentina. As expected, production was lower in the second quarter, as we shifted to operating 1 plant midway through the quarter, due to the seasonal reduction of gas availability from Argentina during the Southern Hemisphere winter. In Egypt, our second quarter production was similar to that of the first quarter with the plant operating at full rates. The plant continues to operate well today, and we are closely monitoring the supply and demand balances in the country during the summer season when local residential gas demand typically peaks. In New Zealand, we produced 46 thousand tonnes in the second quarter, down from the prior quarter as we entered into various commercial arrangements to manage and optimize our gas supply entitlements. Given the meaningful short term uncertainty and structural challenge in the gas market. We shut down the plant for May and June, and restarted in early July at similar reduced operating rates to the first quarter. Lastly, on June 29, we announced the indefinite idling of our Titan plant in Trinidad and Tobago. As we were unable to come to terms on a commercially viable natural gas contract. We will continue to monitor future developments in Trinidad with a view to reassessing conditions over the coming years. I want to thank our excellent team members in the country for their professionalism through a difficult period. As a result of the commencement of restructuring activities, we recorded a $115 million noncash after tax asset impairment charge and a $12 million accrual for restructuring activities. Looking forward, our expected equity production for 2026 is approximately 9 million tonnes of methanol. Actual production may vary by quarter based on timing and turnarounds. Gas availability, unplanned outages, and unanticipated events. Based on July and August contract price postings, and assuming market conditions remain consistent in this volatile macro environment, we expect our average realized price range for July and August will be approximately $460 to $485 per ton. Assuming this pricing holds through September, and factoring in produced sales volumes similar to those of the second quarter, we expect another strong quarter of earnings lower than in the second quarter due to lower pricing. Our priorities for 2026 are unchanged, to safely and reliably operate our assets and supply chain, and to complete the OCI integration plan and realize plan synergies. Now that 500 and the $550 million term loan A facility been repaid, we are approaching our initial leverage target of approximately 3x adjusted debt to adjusted EBITDA. In this highly uncertain and volatile environment, we will continue to direct the majority of available free cash flow to building cash and reduce reducing debt to move towards our longer term leverage target range of 2 to 2.5x adjusted debt to adjusted EBITDA at mid cycle pricing. As we make progress towards this goal, we will evaluate directing a modest amount of free cash flow towards share repurchases. We would now be happy to answer questions.

Operator: At this time, I would like to remind everyone in order to ask a question, press star and the number 1 on your telephone keypad. On today's event, we request everyone to please limit yourself to 1 and 1 follow-up only. Thank you. And your first question comes from the line of Ben Isaacson with Scotiabank.

Ben Isaacson: Thank you very much, and good morning, everyone. I just have 1 multipart question, Richard. On the Q4 call, so about 6 months ago, you said that we would not really see much Q1 margin cap of rising spot prices as it related to the start of the war. As you were going to honor contracts and discount rates that had already been negotiated, I think, a few days earlier. So the thinking was that if you did not capture margin on the way up, then you would certainly capture it on the way down. And I think why the stock is down a bit today is because it appears that ASP guide that you are giving it appears to be giving up margin on not just the way up but the way down as well. So is that the wrong way to think about it? And can you remind us how exactly monthly contract prices are set how those discount rates are set and adhered to? And then just a blue sky question, would it not be easier just to charge Spot plus, say, a fixed premium or whatever the number is, $40 or so for customer service availability, reliability, etcetera. Thank you.

Richard W. Sumner: Yeah, thanks. Thanks, Ben. I think just to answer that question, I think is it the wrong way to look at it? Maybe partially, but you certainly there is an explanation regarding spot. I think in a rising price environment, what happens is contract prices tend to lag the rising price. Some elements in our contracts have some reference to spot pricing. And some of our regions are more focused towards a spot type of pricing element, Asia being the 1 that points more towards spot. So in a rising spot environment, you will have I gotta call it, a compression. You will realize more off of the discount in a rising price environment and in a lower price environment you would realize you would realize less of that contract price because of those components in our in our contracts. So right now, we, when we gave our price guide for the third quarter, just remembering that from a market perspective, saw a pretty meaningful impact through, and this is a very highly volatile price environment we are in. Through July and August was the period here when we entered the period where we had the temporary ceasefire. And a lot of product got released in a very short period of time. that is now obviously stopped. That actual volume combined with sentiment meant we saw a pretty big downshift in spot price particularly in Asia, but actually in regions around the world. So we effectively put that into our estimates for the quarter to be conservative. that is actually already started to reverse. So when we look at our price guide, we are probably already at the top end of the range. If market conditions continue because we do not see supply being released, we would expect things to tighten up and that those realizations would be higher, based on that view. So and then back to your point about pricing. You know, the I think, the, call it, the market principle has been contract price processing. that is the way the industry prices. Are we always looking the way discounts have gone and the way some of the formulas work, we are always looking at, is there a better way to price? But as of today, we remain committed to our contract price postings, and that is the way we go to market to customers. Hopefully, that answers your question.

Ben Isaacson: that is great. Yeah. Thanks, Richard. Appreciate it.

Operator: Your next question comes from the line of Joshua Spector with UBS.

Joshua Spector: Yes. Hey, good morning. So I just wanted to ask on the production guidance. You basically held that constant despite taking down supply. I mean what is the assumption behind that? Are you assuming you could run Americas harder? Or am I just reading too much into a small change here?

Richard W. Sumner: Thanks, Joshua. Really, when we look at that guide, we are sort of, we are looking at where we are today. And where we are today, we are we are slightly we are higher than that, higher than the guide. And so we have kind of already accounted for the back half of the year with Titan now being idled and as under the assumption that our what we have seen so far and where we are higher is really in Egypt and New Zealand. And, you know, when we look at the back half of the year and how things are trending, we think we make up that volume. So we are around the 9 million tonnes and holding to that. I will also say that the when we think about the tonnes, not all tonnes are created equal when it comes to earnings. Right? And, you know, taking out Titan is a lot different than having higher Egypt volumes. So there is a there is benefit there certainly in terms of the cost competitiveness of the production that is really running well right now.

Joshua Spector: Okay. That makes sense. And I just wanted to follow-up on your comments you made around cash deployment and particularly buybacks. I guess, we do not know how long higher prices are going to last, but I mean you are clearly generating more cash here. I mean, we understand your goal of getting the 2 to 2.5x, but your stock is very volatile around people's views around war on, war off, And it would seem like you have opportunistic opportunities to maybe deploy some cash there. And still have pretty good visibility to getting to your leverage target in 6, 12 months from now. So why not considering do doing something earlier, or is that something that is going through the thought process at all as you look at where your stock is over the next 3 to 6-- It is certainly going through the thought process right now.

Richard W. Sumner: You know, we will make an assessment of where we are against our deleveraging what is the forward view of cash generation and where the share price is performing and determining how much goes to share repurchases and also when we would open up the flexibility to do that. But I can say that it is in the thought processes right now. Okay. Thank you.

Operator: Your next question comes from the line of Jeffrey Zekauskas with JPMorgan. Your line is now open.

Jeff Zekauskas: Thanks very much. Your cash flows were very strong this quarter, but it is a little difficult to tell, you know, if there are taxes that need to be paid or if working capital really needs to move up toward the end of the year, What do you think the relationship between your operating cash flow and your adjusted EBITDA will be this year? What percentage will be operating cash flow? Roughly?

Richard W. Sumner: Yeah. So when we look at our adjusted EBITDA in a normalized environment, we look at our adjusted EBITDA and our on an annualized basis, And the difference, we would say, is around $500 million between the 2, and that is that is our lease payments, our interest, our capital, and then cash taxes as well. When it comes to this period, we did have a significant working capital build that was around $150 million, and a lot of that is in our trade receipts. So you can think of a lot of our you know, a pretty big chunk of the earnings we saw is captured in AR right now. In an event if we get back to more normalized prices, we would expect that those earnings would come through. So the longer that does not come through, the more we are earning in terms of higher prices. And then when it relates to cash taxes, maybe I will I will turn it over to Dean Richardson, our CFO, to speak to that.

Dean Richardson: Sure. Good morning, Jeffrey. So correct that we did accrue cash taxes in the quarter. Obviously, given the earnings. And so you will see that the cash taxes paid on the cash flow is a modest amount, and so there is a payable that is been built. So that is part of build in our accounts payable. So you are correct. There is a timing factor there that is already been accounted for. it is our guide on taxes remains the same as that about 25% tax rate and about 50/50 cash taxes, and that is primarily due to the in this high price environment, our US assets are not cash taxable. that is the micro answer. The macro answer, you know, Richard gave it around the relationship between EBITDA and cash flow. Mhmm. Thanks for that.

Jeff Zekauskas: And When the Straits opened up, how much methanol do you estimate came through the straits and how much have the Chinese increased their methanol production to make up for the tons they are not getting from their own?

Richard W. Sumner: Yeah. So on the first question, you know, when we think about the Middle East and the 15 to 20 million tonnes, The big question is sort of how does the market stay in balance there? We think of that amount during the second quarter, about a third of that was actually released during the quarter. And that was Iran coming out at smaller, more reduced volumes throughout the whole second quarter, mostly. And then during the period where there was the temporary ceasefire, we saw both Iran and the Saudi volumes being released Saudi and other non Iranian volumes being released out of the Gulf. So it is about a third total. Determining how much came out during the ceasefire versus the ceasefire is a bit difficult, so we do track best and a lot of those will be coming into the market over July and August. But it was certainly lumpy during that time frame. You know, where we go from here, how we also balance, was on inventories. Both the coastal inventories in China and then also on demand rationalization. So those levers are going to be hard to replicate because the plants have not been idle, and now inventories are fully drawn. Domestic operating rates in China have been strong. But there has not been a huge step up of Chinese operating rates. The Chinese market has been somewhat sheltered by MTO shouldering most of the supply issue. With Iran. And what will happen is as that as we work through inventories and there is no longer these buffers, you know, it is gonna put both all of the MTO coastal demand under pressure and likely start to pressure domestic markets. So in a lot of ways, the domestic industry has been sheltered because MTO really takes the brunt of lost Iranian product into the into the market. Thanks.

Operator: Your next question comes from the line of Joel Jackson with BMO Capital Markets. Your line is now open.

Joel Jackson: Good morning. I am looking at Beaumont You took down I think the cooling tower is back up. I know you talked about maybe being able to make some changes. Over time at that plant maybe improving it, would that be something you have to wait to do a bit later on a turnaround or were you able to do some of the work in the last month or sorry, in June?

Richard W. Sumner: Yeah. No. Thanks, Joel. Just a reminder maybe about more broadly, you know, both Natgasoline and Beaumont. We are we are very pleased so far with what we have seen from those assets a year from the point where we closed the deal. You know, the operating rates we have seen so far have been above where we would have, you know, where we sort of came out from a deal value perspective. This what we have done is deep technical reviews of both the assets, and that is looking at how the assets have run. We look at all of the inspection reports, and then we come up with a list of risks and vulnerabilities. And our goal is to always reduce those down as much as possible through online maintenance, through if we have unplanned maintenance, as well as major turnarounds. And, obviously, the most work you can do is during a major turnaround. This issue with the cooling tower, we did have as a risk in our risk matrix for the plant. And we and we had plans to do online maintenance during this second half of the year here. But upon further inspection, we saw that the structural damage to the support of the cooling towers was too much, so we took an outage. The team executed that within 30 days, as planned safely and at the same time, we took out other vulnerabilities of the plant So our goal is to continue to run this reliably and safely and reliably and we believe we can, on a long term basis, do that with both of these sites. Now, we are still learning the assets. If you ask us, would we like to have a full turnaround cycle? For sure. But we know we are getting to know these assets really well now. And, you know, our goal is to continue to operate at really strong, reliable reliability and then get the opportunities to reduce risk as much as possible. The next 1 being the turnarounds, which is not until the 2028-2029 time frame, but the team's done a great job learning the assets and integrating with the teams. Okay. And then I at Geismar, the 3 plants seem to perform really well.

Joel Jackson: You get over 1 million tons in a quarter. You have never done above 1 million before. Should we be modeling that going forward? Should we above 1 million tons now, ignoring turnarounds or any unplanned outages?

Richard W. Sumner: I mean, I think we, that is our goal. Our goal is 4 million tons for the plant. And that is considering about 97% reliability rate. The plants performed, we always do have in between turnaround cycles. There become limitations as you get closer to a turnaround that makes the 9, you know, kind of getting to the 4 million tons. Sometimes that you do dip below that because you are where you are in catalyst life. But over the average, yeah, the target is to have 4 million tons of production there. Thank you.

Operator: Your next question comes from the line of Hassan Ahmed with Alembic Global. Your line is now open.

Hassan Ahmed: Morning, Richard. Richard, wanted to revisit the 15 million to 20 million tons of sort of capacity being impacted by the Middle Eastern conflict question again. I understand that you mentioned that almost a third of that was released as Hormuz opened up. And you know, clearly, it seems that these fits and starts will continue. But, you know, as you sort of cut through the noise, I am just trying to get a better sense of how much of those 15 million to 20 million tons have actually been significantly adversely impacted? Meaning, you know, what percentage of those 15 to 20 million tons will take a while to hit the market as and when, you know, there is these declaration and hormones fully opens up.

Richard W. Sumner: Got it. Thanks, Hassan. You know, I think this is a-- it is, you know, when you ask how much of the production is impacted, all of it is. it is all idle. You know? So and none of it is able to transit. We do not have free navigation flowing in through the Strait of Hormuz now, and all of it has to transit that waterway. And so we have a long ways to go before we get back to normal here. And really what, in my opening remarks, what I was trying to communicate is you know, what we have is that we did have about a third of that, we would say, came into the market through pre existing inventories. That was what was in storage or in vessels prior to the conflict. And then we have not had any production to back that up. And how the market's really effectively weathered that is by drawing by having that be released, and then draw inventories through the supply chain And, also, we have seen now demand much lower than what we would expect at this time of year. So typically, you would have you know, the coastal MTO operating. that is 10 to 11 million tonnes of demand. That would be operating at high rates in a normal year. So last year, we would have seen that operating at 80% to 90% operating rate to 30% to 40%. We have seen demand happening, rationalization in The Middle East, in India, in Southeast Asia, and that is making up for a chunk of this. What we are not going to have we did have this product be released through July and August, and that is coming into the market today. And once we get through, if we do not see some sort of normalization, once we work through that inventory, you know, we do not have those levers to work with, and so then we have got a an issue where you have to see further demand rationalization and pressure on the industry. And even if we get back to something that is more normal, it is really important that we are able to assess can they get gas flowing to methanol plants the same way it was Are methanol plants able to operate at the same rates they were? And as navigation as free flowing as it was prior to the conflict level. Given the risks on shipping and the ability for owners and charterers and insurers to get comfortable with that navigation. So, you know, it is it is we are in a situation where here where we do see some sustained pressure to getting back to something that looks like the world pre-this conflict.

Hassan Ahmed: Very helpful, Richard. And, again, 1 to dig a bit deeper probably on the demand side now as well, you know, particularly in light of some of the inventory statements you guys made. You obviously talked about fairly significant drawdowns of inventory in Asia. And I am just trying to get a better sense. I mean, look, You know, no 2 periods are the same. But, you know, if 1 was to go back to 2003 and, you know, the Iraq conflict, it just seemed starting with upstream, oil prices obviously are quite correlated to methanol prices, You know, going back to that time period, initially as sort of you know, the conflict subsided, you know, there were steep declines in oil. You know, drawdowns in inventory, a lot of paper selling, of sort of oil and, in theory, obviously, negatively impacting downstream product pricing, And then all of a sudden, the physical buyers came out, and, you know, demand picked up. There was major restocking and pricing. Went up significantly. So again, with that in mind, I am just trying to get a sense of how critical are inventory levels right now, you know, as you, you know, earlier said that pricing even today may be trending to the higher end of the guided range. So if pricing does start ticking up, I mean, you know, what potentially could a restock look like?

Richard W. Sumner: Yeah. No. Thanks. Thanks, Hassan. I think, you know, you are asking all the right questions. Really hard for us to formulate, you know, firm views of because it is such a dynamic environment. But the you know, for us, what we see on the methanol side is what we see from methanol is that, you know, we think our supply chains have been depleted of inventory pretty meaningfully, especially in Asia. When you look at coastal markets in China, it is now around 500 thousand tonnes. That was-- it was a million that is 1 million tonnes draw in a quarter. You know, that is on an annualized basis. that is a lot. And then we do think that customer supply chains are really tight. Then it gets into, well, how is that affecting the downstream? I mentioned there that China has somewhat been sheltered because they have had strong domestic production. That has supported some of the chemical markets like acetic acid and others where you do have export that has propelled a lot of export manufacturing, which is probably filling some of the traditional chemical value chain, the gaps created in by Middle East supply, how long that lasts, and how sustainable that is without price killing off demand further downstream is a big question mark for us. So these are the things that we are continually monitoring. Now 1 of the things to note for us is that the markets that are most acutely impacted here are the markets that we do not we do not supply because it is where the Middle East is logistically advantaged. So it is a lot of India. it is Southeast Asia. it is Taiwan. But I do we do think that the longer this goes on, it is gonna creep into the markets that we are in. So we are paying really close attention to that with our customers as well. But, again, price is usually the 1 that kills it off, and then that also gets into, you know, higher pricing down the value chain and inflationary pressures. And what does that do to long term demand risks. And that is why we are navigating this current market really, really carefully and carefully monitoring the situation. So Very helpful, Richard.

Hassan Ahmed: Thank you so much.

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

Nelson Ng: Great. Thanks, and good morning, everyone. Just on shipping costs, I think the disclosure was higher logistics and other costs than Q2. Compared to q '1 reduced EBITDA by about, I think, $18 million. Can you just provide a bit of color in terms of whether the majority of that was mainly at higher shipping costs And within shipping costs, like, is it just higher fuel costs, like, longer shipping routes? Insurance, or other factors?

Richard W. Sumner: Yeah. No. Thanks, Nelson. Yeah. When we when we are looking at our shipping cost today, I think we are we are in a very different environment on the supply chain than what we would have expected coming into this year. And it is affecting both the fuel cost because we saw bunker cost go up by about 40% during the quarter over this last 5-month period. The other thing that is happening is you know, in a normal environment, you see a much lower spot vessel market. So the spot pricing for spot vessels has gone up significantly. And there is far less backhaul opportunity as refiners are limiting or unable to get the crude they need to produce or limiting exports. And so what that means is a is a far less optimal fleet both from a shipping cost as well as the I am gonna call it the miles per ton of methanol because we are carry we are we are having more shipping days for the tonnes of methanol that we are moving around the world. And we are avoiding any spot exposure from a cost perspective. So those 2 factors are probably causing $30 million to $40 million versus our, call it, our run rate or plan for the year. All of that would actually would normalize and go away in a different in a different in a different market, in a different pricing scenario. So part of the price uplift we are getting is coming with a with a less optimized fleet, which we are carefully managing. We saw about $18 million come through in Q2. We would expect that it we will continue to have some increasing costs as we Move into Q3. Because of the lag impact on inventory and how that works through, our shipping actually gets kinda attached to the inventory and flows on a lag basis. Okay. Got it.

Nelson Ng: And then just can you remind me, like, what portion of your product do you transport with your own ships versus using spot Is it Yep.

Richard W. Sumner: Pretty much the vast majority? The vast majority is our time charter. So thinking 80%. In a normal environment, 80% is time charter, and about 10% to 20% is gonna be COA and spot. In this environment, we are big normally, we would be doing backhaul and efficiently managing fleet. Without backhaul, we shift away from we use our time charters to solely move our product So we are more towards 100% basis. Right now because that is the most efficient way with lack of opportunity and the high cost in the system. So we are trying to optimize around that, but today, it is we have zero spot exposure effectively because we are managing around that.

Nelson Ng: Okay. Got it. I will leave it there. Thank you.

Operator: Your next question comes from the line of Laurence Alexander with Jefferies. Your line is now open.

Laurence Alexander: Good morning. 2 related questions on the demand side. 1 is could you be a little bit more granular about where you are seeing demand shaking out this year by the key end markets? And I guess, can you clarify to what extent your visibility on the degree to which demand is getting pushed back, or are you hearing from the downstream chain you know, significant efforts to shift or substitute away or just outright demand destruction? Just trying to get your sense for how much visibility, if any, you have been able to get over the last few months.

Richard W. Sumner: Yeah. Thanks, Laurence. Maybe just to try to put it into perspective, like, on a yearly basis, again, it is 100 million tons 60% of demand in China, 20% to 25% is in Asia ex China, and or 15% to 20% is in the Atlantic regions. What we have seen today is probably, you know, in as estimate, we are at 5 we are we are operating 5% to 10% lower demand today than what we would normally expect in this time of year. And that is MTO operating at, you know, probably 5 million tons lower demand on an annualized basis than what we would expect. And then there is probably another kind of 3 million tonnes of demand between Middle East like MTB. They have got MTB production there. They have got some acetic acid production there. that is not operating. The market in India has been impacted. The market in South Asia. So those we would say, is probably about, you know, 5% to 10% lower particularly in those markets. Now when we look at outside of you know, in the other applications, we think about formaldehyde is a very much a regional type of demand. Housing has not been particularly strong. it is it is stable off of a low base. Some of the other applications I was talking about earlier, is like, acetic acid, silicone, some of the more downstream products that you do see being exported further down the value chain, what we think is happening is the pressure has been somewhat dealt with by China continuing to operate and being and exporting out, and that is helping that value chain by solving that. that is solving some of the supply. How much of this is real demand destruction? It remains to be seen, and it has not we have not seen it trigger huge uptick in acetic acid pricing. And VAM pricing and others. So we are waiting to see how this responds. Because if it does lead to ultimately destruction further down the chain, you would expect to see pricing increasing to higher levels there. So we are monitoring all of it. I think as we progress here, we will get a bit-- we will get increasing visibility both methanol as well as further down the chain. Thank you.

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

Matthew Blair: Thank you, and good morning. Richard, do you think that Iranian methanol supply has been impaired going forward? And if so, would that come from you know, hits to, like, the South Pars gas field in Iran? Or actual damage to any Iranian methanol plants.

Richard W. Sumner: Well, thanks, Matthew. it is still unclear today around what damage may exist. I think we have not heard any reports that lead us to believe the actual methanol plants have been damaged. But we have heard reports about the South Pars field and we have heard that the gas processing from that from those fields could be limited. it is really hard to know because we obviously do not have, you know, direct access to information. And we have never seen a period where anything could operate stably through the last 5 months. So it is hard for us to know. You know, we will be looking really closely as soon as possible And when/if the gas fields are impacted or gas process of course, then it gets into how are you prioritizing your gas and where does methanol fit. And we do think that methanol is obviously going to be deprioritized relative to residential demand, etcetera. And that is always been the case when gas is not operating or there is peak demand residentially that gets prioritized. So it is a very, you know, this is a big risk in the ability for supply to continue to meet demand. The other big thing, obviously, is navigation and getting that reestablished. But as of today, we do not have visibility or information that confirms any long term damage.

Matthew Blair: Sounds good. And then I think it is interesting that Methanex itself has built inventory each of the past 2 quarters, you know, despite a very favorable methanol price environment. Should we think about that as preparation for upcoming turnaround in the back half of the year, Is that just kind of normal course of business? And, ultimately, would you expect to draw down some of that inventory in the back half of the year?

Richard W. Sumner: Yeah. I would not read too much into that. I would say that in this environment, we have seen customers being very cautious and especially when on sentiment. You know, if they see an upward pricing pressure that may stabilize we will probably see them destocking and being and running low inventories and buying as little as possible until there is a more normal. And I think the world is waiting for a more normal environment. So just small changes in our sales projections can lead to a bit of a build in inventory. But I would not read a lot into that. You know, you would expect those things to reverse over time, but I would not read out a lot into that build. Great. Thank you.

Operator: Your next question comes from the line of Hamir Patel with CIBC.

Hamir Patel: Hi. Good morning. Richard, with your current customer commitments and the, you know, different demand destruction that you are seeing out there, how do you think about for the remainder of the year, your geographic sales mix? Just thinking about that slide you show that shows a different regions and you know, how you might look to optimize that for the rest of year.

Richard W. Sumner: Well, thanks, Hamir. We are, you know, we are kind of we would stick to that guidance probably on the low end in the on from a China perspective, but we are going to be within the range certainly, you know, with lower with idled Trinidad now, you know, we would expect China. it would be lower. We would be selling less there. So probably the proportionality is leaning less to China and more to markets outside of China, which obviously has a benefit from an overall ARP. Great. Thanks, Richard.

Hamir Patel: And just last question I had. Earlier on a shipping question. I think you mentioned sort of 30 million to $40 million headwind you are seeing this year. You had $18 million in Q2. Should we expect most of that remainder to show up in Q2, the remainder the remainder in Q3?

Richard W. Sumner: Yes. I just want to clarify, that is $30 million to $40 million a quarter. So these are it is significant, you know, in terms of the fuel 40% increase in bunker charge and then the sub optimization overall in the fleet. So something we are very carefully managing. Yeah. About half of that came through. I am just you know, ballparking half came through in Q2, and the other half would be coming through in and I am quoting the $30 million to $40 million against our run rate or our plan. Which is way you know, far less optimized today because of fuel and fleet. But, yeah, half through Q2 and then the other half through Q3. And then once we are there, we are kind of seeing that running through the system. If things normalize, we would expect to see the benefit coming through lower shipping costs in future quarters. Okay. Great. Thanks. that is all I had. I will turn it over.

Operator: Next question comes from the line of Hassan Ahmed with National Bank of Canada. Your line is now open.

Analyst: Yeah. Thanks for taking my question. Just on the Trinidad idling process, beyond the $12 million restructuring costs, are there any ongoing other cash costs or closure expenditures that you anticipate in Q3?

Richard W. Sumner: No. No. there is there will not be. Obviously, we still have a-- we still have our team there. We are going through going through a restructuring planning activity right now to ultimately determine what the existing or the remaining preservation team will look like. And those would be costs that would be continued to be incurred in our system but would not be very material. Okay. that is fair. And just touching on the acquired assets and given their strong performance, you mentioned that you are on track to realize the synergies there an opportunity that perhaps you exceed your original targets for the acquired assets? In terms of synergies I think maybe it is just to put it in terms of, like, kind of some of the buckets here, we came out with $30 million of hard synergies. We have realized some of those so we are running lower cost in certain areas. This year, though, we are running higher cost to try to tease out those synergies by the end of the year. So we are very much on track for the $30 million in hard synergies by the end of the year, and the team is doing an outstanding job progressing that. In terms of the other, what we call, would call them deal value, because we did make some assumptions on deal value, and the I would put those in controllable and uncontrollable. The controllable variables are asset performance and capital deployment. And both in terms of how the assets have performed and how much capital we are deploying against those assets We are, you know, we are we are we are we are doing much better than what we showed on the deal value date or the, assumptions around the deal. And then the uncontrollable are the natural gas market and the methanol pricing market. And natural gas costs in North America have continued to be very competitively priced. And priced lower than the $3.50/mmbtu that we assumed on deal value. And then, of course, methanol prices have been have far exceeded, you know, kind of the 350 run rate numbers that we put out. So across all the elements, the transaction is obviously performing extremely well. And it also shows the benefit of having, you know, fixed cost because all of the uplift on price goes to earnings and cash flows. So but those are the elements. And today, you know, our job today is to control the controllables and continue to deliver on the on the integration on the synergies as well as maintaining safe, reliable operations of the assets. Okay. Thank you. that is very helpful. I will pass the line.

Operator: Your next question comes from the line of Roger Neil Spitz with Bank of America. Your line is now open.

Roger Neil Spitz: Thank you. Good morning. On Trinidad and Natural Gas Contracts, can you speak to why you were unable to agree on a new supply contract? How was Titan not contributing EBITDA or free cash flow in the second quarter?

Richard W. Sumner: So when we look at the way that the gas contract prices and you know, the big reason why we idled just to be clear, is the fact that we were unable to negotiate a future gas contract, and that gas contract was coming to an end. So we did wind up, you know, terminating a gas contract earlier by a few months. Because we would lived up to our contractual obligations. As it relates to the actual economics, the pricing on under the gas contract is such that it is linked to methanol prices. Those methanol prices are linked to different regions around the world. And then when we assess that gas price against where Trinidad fits into our supply chain, the netback the netback economics did not make you know, we were not making money on the on it from a from that perspective. And the fact that we are able to, you know, we were we were talking about a gas contract that was gonna be probably less favorable than the 1 we had at that point, and so we took the decision to idle the plant. Got it.

Roger Neil Spitz: And then last on the 5/2027, that go current October 15. What is your thought on refi timing or given methanol price levels? Maybe you think about just outright repaying the debt.

Richard W. Sumner: Yeah. I will I will I will turn that over to Dean.

Dean Richardson: Robert. You are correct. We have lots of options with regards to that in terms of as we build cash. Our intention is to deploy it. So we have not made a final determination as to early repayments or that, but we have lots of options that we are working through right now. Thank you very much.

Operator: Again, if you would like to ask a question, press star and the number 1 in your telephone keypad. There are no further questions at this time. I will now turn the call back over to mister Richard W. Sumner.

Richard W. Sumner: All right. Well, thank you for your questions and interest in our company. We hope you will join us in October when we update you on our third quarter results.

Operator: This concludes today's conference call. You may now disconnect.