Methanex Corporation (NASDAQ:MEOH) Third Quarter 2022 Results Conference Call October 27, 2022 11:00 AMm. ET
Participating companies
Sarah Herriott – Director, IR
John Floren – President and Chief Executive Officer
Rich Sumner – incoming CEO
Conference Call Participants
Joel Jackson – BMO Capital Markets
Ben Isaacson – Scotiabank
Nelson Ng – RBC Capital Markets
Steve Hansen-Raymond James
Josh Spector – UBS
Jacob Bout – CIBC Bank
Hassan Ahmed – Alambic Global
Matthew Blair – TPH
Chris Shaw as Monness Crespi
Steve Hansen-Raymond James
Operator
Welcome to Methanex Corporation’s Q3 2022 Call for Results.
I would now like to speak to Mrs Sarah Herriott. Continue.
Sarah Herriot
Hello everyone. Welcome to our third quarter 2022 earnings convention call. Our Press Release, MD
I would like to remind our listeners that our comments and responses to their questions may include forward-looking information. Such information, by its nature, is subject to hazards and uncertainties that could possibly cause the announced effects to differ materially from the actual effects.
Certain points or assumptions have been implemented to draw conclusions or make forecasts or projections, which are included in the forward-looking information. See our MD
I would also like to caution our auditors that all projections provided related to Methanex’s long-term monetary functionality are effective from Array. It is our policy not to comment on or update these projections between quarters.
For clarity, any reference to revenue, known average price, EBITDA, adjusted EBITDA, cash flow, adjusted earnings or adjusted earnings consistent with the consistent percentage made in today’s comments reflects our 63. 1% economic interest in the Atlas facility, our 50% economic interest in the Egypt facility and our 60% economic interest in Waterfront Shipping.
In addition, we provide our adjusted EBITDA and adjusted net earnings to exclude the influence of the market price on share-based payment and the influence of certain parties related to express known events. These parts are non-GAAP measures and indices that do not have a standardized meaning prescribed through GAAP and are therefore unlikely to be comparable with similar measures provided through other companies.
We provide these non-GAAP measures in this way because they are a larger measure of underlying operating functionality and inspire analysts covering the company to release their estimates on them.
I would now like to give the floor to Methanex President and CEO, Mr. John Floren, for his comments and a response period.
Jean Floren
Hello. I hope everyone stays healthy. This morning, we have Rich Sumner on the call, who will become our new president and CEO on January 1, 2023. It has been a privilege to be Methanex, President and CEO for the Hereafter. 10 years. I look to the future to see Rich continue to expand our leadership position in the global marketplace, while continuing to lead our strong performance, safety and operations when he assumes the role of CEO.
On today’s call, we will review our third quarter 2022 monetary effects, provide a review of methanol markets, discuss our operating effects, and percentages of our near-term outlook. Then we will open the call for questions.
Our average learned value of $377 consistent with the hour generated adjusted EBITDA of $192 million and adjusted net income of $49 million or $0. 69 consistent with the stock. Decreased adjusted EBITDA in the third quarter compared to the current quarter due to a decrease in average learned value, decreased sales of methanol produced through Methanex due to planned revisions and certain unplanned disruptions, and consistent with North American spot fuel prices that impacted EBITDA by approximately $10 million. This was partially compensated through the redirection and sale of our herbal fuel contracted in Egypt.
Global demand for methanol in the third quarter stabilized compared to the current quarter of 2022. Demand for classical chemical programs declined slightly as the restart of acetic acid extraction in North America was offset by other planned disruptions and logistical constraints in downstream sectors. as well as a slowdown in growth demand, mainly in Europe and China.
Demand for methanol for olefins or MTOs remains strong with the commissioning of Bohai MTO’s new chemical plant, which can consume up to 1. 8 million tonnes of methanol and reach 70% in the third quarter. This offset declining operating rates at existing plants in July and August, when MTO affordability came under pressure.
Demand for energy-related programs increased in the third quarter, as the easing of COVID-19 restrictions in China led to an increase in demand for MTBD [ph] and other fuel programs.
Consistent rates with respect to the industry declined in the third quarter due to prolonged outages and planned and unplanned closures globally. We estimate that the industry charge curve over the coal manufacturer’s marginal prices in China is approximately $350 consistent per ton.
Our published month of November remained healthy. North America held steady at $585 per tonne, Asia Pacific and China were stable at $410 per tonne and $395 per tonne, respectively.
The value of our European contract is set quarterly and we have reduced our value for the fourth quarter of 2022 from €45 per tonne to €510 per tonne. 21. 5% compared to the current quarter.
Lately we are seeing similar demand in the third quarter, similar to the third quarter. We identified that there is a potential problem and demand threat due to the energy crisis in Europe, the prolonged COVID-19 lockdown in China, global inflationary pressures, and the impact of emerging interest rates on customer confidence and demand.
High global energy tariffs have increased the competitiveness of the methanol load compared to select fuels, which could lead to an increase in methanol demand. Demand from the shipping industry continues to grow and, based on existing dual-fuel vessels, we expect potential demand to increase from approximately 300,000 tonnes to 2 million tonnes of demand over the next few years.
Our production levels decreased in the third quarter compared to the current quarter due to two planned outages, some unplanned outages and a redirection of the sale of our fuel in Egypt, which I will talk about after an update on the rest of our sites. .
Medicine experienced a drop in production in the 3rd quarter due to an unplanned disruption in July by a typhoon that affected the plant’s power supply. Geismar recorded a decline in production in the 3rd quarter due to an unplanned disruption and expanded in July the highest fuel costs at the time.
Also in late September, Geismar’s electric power supplier suffered a prolonged power outage due to a faulty transformer, which lasted until mid-October.
The team took this opportunity to advance some revisions of Geismar 3. We expect an herbal fuel value of approximately MMBtu of approximately MMBtu for the fourth quarter for the spot portion of 35% of herbal fuel purchases that are contracted.
In Chile, production decreased in the 3rd quarter, higher than in the 3rd quarter of 2021. As only Chile was in operation due to Argentina’s limited fuel availability.
We sometimes experienced lower fuel deliveries during the Southern Hemisphere winter months, which affected our timing and third quarter. Chile restarted in October with fuel deliveries from Argentina that will allow us to operate both plants until the first quarter of 2023. We estimate a 2022 production of around 907 – 0. 9 million tonnes.
In New Zealand, we effectively finished the Motunui 1 change, which we started in mid-September. Motunui 2 operated in the third quarter, but to decreasing degrees due to restrictions in fuel availability from other fuels. It plans to operate at full capacity in the fourth quarter. Based on existing production and our outlook for herbal fuel in New Zealand, we estimate 2022 production to be between 1. 2 million and 1. 3 million tonnes.
We had low production levels from Egypt in the third quarter when we finished a full plan review. The response schedule allowed us to succeed in an agreement to redirect and sell the herb-based fuel plants under contract from late July to late October.
This was an exclusive opportunity to utilize excess LNG capacity in Egypt, an era of high LNG costs in Europe, and this was done in collaboration with our Egyptian government partners. We estimate that the sale and diversion of our fuel generated an additional merit of approximately $35 million. In the 3rd quarter compared to the use of this fuel for methanol production the time era was not expected to be in recovery. The plant is restarting.
We ended the third quarter in a monetary position with approximately $890 million of uncontrolled equity money, adding our percentage of money in the [Indistinguishable] joint venture and we have $600 million of unused backing money.
We remain committed to our disciplined technique for capital allocation. We continue to maintain our business through the pursuit of economic value-added expansion opportunities that exceed our capital charge through 3-percent issuances and returning excess money to shareholders.
Construction of our Advantage G3 assignment is progressing safely and is expected to be completed in the fourth quarter of next year. We spent approximately $810 million before capitalized interest at the end of the third quarter and expect a remaining capital charge of approximately $450 million to $500 million before capitalized interest, which is funded entirely through available money. Our asset portfolio and money-making capacity will particularly improve when G3 becomes operational next year.
With our fully funded G3 projects, our strong monetary position and our ability to generate significant money flows at a wide variety of methanol prices. We are well placed in this era of economic uncertainty to continue returning money to shareholders through a sustainable expansion dividend and buyback percentage, adding up to our 5% buyback percentage announced in mid-September.
Production in the fourth quarter is expected to be around 1. 6 million tonnes, well above that of the third quarter. We expect to accumulate inventories produced in the quarter, as methanol sold in the quarter will have more weight to acquire products due to our FIFO stock. caudal.
Based on our October and November costs and expected higher product sales, we expect adjusted EBITDA to accrue in the fourth quarter through the third quarter if the unique advantages of selling $35 million herbal fuel in Egypt are removed.
In the medium term, the outlook for the methanol market is positive and we are expanding the money-making capacity with the launch of the G3 in the fourth quarter of next year. At a value of $375 consisting of metric ton of methanol and four MMBtu of gas, we expect G3 to generate approximately $250 million in EBITDA consistent with the year. We have a strong balance sheet and are committed to meeting our capital allocation commitments by returning excess money to shareholders.
Going forward, our advantageous geographic location in raw material costs, with 85% of North American herbal fuel desires covered next year in our exclusive global supply chain, will continue to enable us to be the methanol supplier of choice and deliver shareholder value.
We would be happy to ask questions.
Q&A session
Operator
[Operator Instructions]
The first is from Joel Jackson of BMO Capital Markets. Your line is open.
Joël Jackson
Hello, hello, Juan.
Jean Floren
Hi Joel.
Joël Jackson
We miss calls like this. I don’t think he said. . . I don’t think he was giving any kind of production volume forecast for the fourth quarter. Could you tell us what the fourth quarter would look like compared to the third quarter?
And then, also a momentary component of this consultation is whether we expect the profits of reselling fuel in Egypt to be consistent with the month, much lower than the rate rate of 70. 5 million with the month that was provided to you in the Third quarter in August and September?Because fuel costs are notoriously falling?
jean floren
Yes, it was at the age that we learned all the benefits in the third trimester. So all this was done in the third trimester. So, $35 million is quite a merit of redirecting that fuel to LNG and sharing it with the government, et cetera. . So it is based on promoting the costs of the three-month period. In terms of production, yes, it’s 1. 6 million times for the fourth quarter, that’s our planned production.
Joël Jackson
So my next consultation is fun. Okay, then John, [Indistinguishable], thank you a long time ago. But, over the past decade as CEO, what do you think you’re most proud of?And which ones would you say: the one who missed the opportunity?or something that was lost?
Jean Floren
Yes, I would say that our protection record is what I am most proud of, as well as our internal succession procedure and the development of other people. Those are the two things I’m most proud of. One thing: a lot of things got away. I think we’ve had a lot of volatility in the last 10 years and I think we’ve come out of a stronger company, thanks to teamwork. So I don’t need to overlook all the things that have gotten away, still a lot of noise in the last 10 years.
Joël Jackson
Fine thank you.
Jean Floren
Thanks Joel.
Operator
Next is from Ben Isaacson from Scotiabank. Su line is open.
Ben Isaacson
Thank you very much and good morning to all. In other petrochemical chains, we have noticed a volume drop of 10%, 15% in Europe, similar in China, suspended in the rest of Asia and North America, that is, now you have said that the volume of the third quarter is stable, compared to the second quarter and right now, what you are seeing is that it is flat and you have also already highlighted the dangers in Europe and China.
But when you say it’s solid right now, does that mean it’s more potent in some spaces and weaker in others?So is what you see consistent with what we see in other chemical changes?And if not, can you just communicate about real-time call for a regional basis?
Jean Floren
Yes, I’ll ask Rich that question.
Rich summer
Yes, you are right that it is not the same in all regions. So, in the third quarter, we saw a more powerful transition from the classic look to a more powerful call in North America, thank you. in part to the decline in operating rates for acetic acid producers. But we see demand still being healthy in North America. Things are pulling pretty hard there. And we really believe that declining exploitation rates in Europe are having an effect on shifting some commercial production to North America.
In Europe, we are seeing a decrease in classical demand and therefore in this region there is a certain lag there. We continue to be attached to China, or the classic expansion in demand, we would say that it has been stable. some tension with 0 COVID lockdowns and home and also a slowdown in housing there. So we’re watching those things closely. But we haven’t noticed a significant decline in demand in any region. Europe is where we have noticed a modest setback. Therefore, we continue to monitor all of this across all applications.
Obviously, we have had some compensation, with increasingly strong demand on other energy programs in China. And the current quarter was an era where COVID lockdowns were restrictive and the third quarter was eased in part, meaning there was increased demand for transportation. fuels, as well as other thermal programs. And we would see this continue with higher energy costs and some if COVID lockdowns continued to loosen. So, we’re all watching the markets right now and things are likely to continue trending at third quarter levels. .
Jean Floren
Yes, and I just loaded the [Indistinguishable], we loaded a new factory in Bohai. So this is a new application. It is 1,7 and 4 rates. So, we monitor other customers, who also report, we just don’t see that in our business right now. But we are wary of what might happen. Thank you.
Ben Isaacson
Merci. Et then just a quick follow-up. You mentioned, John, that I think you said the two plants in New Zealand will be operational in the fourth quarter. Does this mean this Maui fuel box challenge is behind us?And while we are looking at 2023 in the absence of any recovery, do we deserve to have returned to mainstream production in New Zealand, on equal terms?
Jean Floren
Yes, any of the plants are operating now, Ben. I think my point was about full rates for the quarter. So that’s our expectation. We plan to operate both plants at full capacity next year, provided there are no further disruptions to fuel supply. That’s what we’ve been told by our fuel suppliers and that’s what we expect.
Ben Isaacson
Super. Thank you so much.
Operator
Next up is from Nelson Ng of RBC Capital Markets. Your line is open.
Nelson NG
Thanks a lot. And congratulations, John, on your upcoming retirement and congratulations to Rich on your new role. So, the first question is, it turns out that Egypt was a special scenario where you can use LNG access capacity to divert fuel. we do have other opportunities to resell fuel or divert fuel because in New Zealand they recently agreed to reduce production to allocate more fuel to forced plants. Are there other opportunities in other regions to divert fuel?
Jean Floren
Yes, we produce methanol and sell methanol. I think the Egyptian opportunity is exclusive because we had an opposite plan at the same time and that only happens every four years and the situations were that there was excess LNG capacity and a maximum value in Europe.
So, I mean, though, those are very unique situations, where those situations happen at some point in the future, haven’t they happened in the last 30 years?So, who knows, we’re still in the business of generating and promoting methanol.
Nelson NG
Ok, I get it. And then he talked about G3 and his expectation of, I think, $250 million in EBITDA consistent with the year. Does this mean that it works at almost 90% to one hundred consistent with consistent use?And then, can you give us an update on your political position in North America?
Jean Floren
Yes, so our hedging position didn’t replace the quarter, we didn’t go up anything, we didn’t cover. Then he remains in the replacement. And yes, we plan to run G3 at full speed.
Nelson NG
Fine thank you. I’ll do it there.
John Floren
Thank you.
Operator
The following is from Steve Hansen with Raymond James.
Steve Hansen
Yes, hi guys. I’m just going to echo the previous congratulatory comments to any of you. The initial consultation is regional contract gaps. I know we are in a position like we have been for some time. the recharge gaps are incredibly wide compared to the story here, especially in the Atlantic basin, is this a scenario you plan to stay in until 2023?And beyond the market dynamics you see?Or what would you think of this spread in the future?
Jean Floren
I’ll ask Rich about our reaction to that.
Rich summer
Hi Steve. It’s definitely a dynamic. We have noticed: we are now in the season of contract, it is just beginning. It is complicated to give you a recommendation on this topiccapacity that has been added over time. We haven’t noticed any new capabilities or, or — in our view, any new capabilities other than G3. So, we’re going on to have to take a look and see what happens. That and give some indication of the degrees of reduction that we are contemplating in the future.
Jean Floren
I also think, I mean, we’re looking at the procedure that made it important. And I believe the ultimate foundation remains our most productive value for our entire company. So, yes, spreads are definitely something that other people take into account when we take a look at the value learned. So, 377 is, can I take this for the next 10 years, or can Rich take this for the next 10 years. I’m sure you can. . .
Steve Hansen
No, pretty fair. It’s useful. And maybe it’s a similar consultation then, because he brought this new contract with China that breaks the classic Asia-China combined contract, and maybe he can only communicate about the advantages he has noticed from it, and whether it is effective compared to what he expected?Thank you.
Rich summer
Yes, I think probably the greatest merit is that the Asia-Pacific region as a whole is. . . There are many unique elements. So, since the Chinese market is separate from the Asian market, those markets do not evolve in the same way. way. And we can continue to be competitive with our consumers in those markets, and in a much more timely manner. So I think it works well with our consumers in the regions and is helping us to remain competitive on a monthly basis in the markets. So, yes, it works as we expected.
Jean Floren
Yes, I think when we established a PCO 10 years ago, the radio product [ph] wasn’t just for China. And I think that dynamic replaced the Chinese import market. Therefore, China’s classic freight is different from other parts of Asia. has replaced accordingly. So having any of the prices, I think, allows us to stay more in tune with the other markets in Asia.
Steve Hansen
I that Thank you.
Operator
The following is from Josh Spector with UBS. Su line is open.
Josh Spector
Hello, thank you for answering my question. So, just to stick to the sale of Egyptian fuel and perceive that it is not because you do not need it to be your general mode of operation. But assuming fuel costs in Europe rise again, was this an exclusive kind of discussion with the government?for this to happen? And would you qualify it as punctual?Or if it’s open, is it something you could temporarily move towards if it were advantageous for you to do so?
Jean Floren
Well, we own 50% of that plant, we run it. We have a spouse there, and that’s mainly the government. So, all the concepts that we’re talking about with our spouses and in, I would say it’s exclusive. opportunity for us because we’re in a change of plan anyway, and we’re not going to have any other plan changes for probably three or four years. So, the dynamic would be different, if we fully serve in relation to a change of plan.
So I don’t like to be waiting for the future. I’m not very smart about that. But certainly, it’s very exclusive and hasn’t happened in our 30-year history. Yes, we did something in New Zealand, but it’s more of a necessity for the country, fuel for electricity. So those were very different cases from what happened here in Egypt.
Josh Spector
It is ok. Thank you. That’s helpful. And just a follow-up of the demand for methanol for fuel in the maritime market. I mean, you’re talking about the 2 million tons of potential demand that will be added. Color As in this calculation, does it imply an aggregate of fuel and those dual-fuel engines similar to what they are today, which is a low-point type of methanol?Are you just curious about how you’re doing today rather than how you see it in all likelihood shaping up in the next two years?
Jean Floren
So the 2 million number we’ve provided is the so-called prospective that assumes all those ships run on methanol one hundred percent of the time. Which fuel will be selected will depend on each of the shipping lines and what they operate. ? At some point, we actually think shipping companies are opting for methanol, in part because of its white-burning attributes, as well as its long-term path to low-carbon emissions. And they’re looking for and looking for the economics of methanol and our ability to decarbonize over time.
All this will have to be played. We believe that these 2 million tons correspond to what was ordered today. And there are many other discussions going on where we would expect this backlog to continue to grow over time.
Rich summer
And regulations will continue, regulations will continue to be stricter, and perhaps some of today’s opportunities may not be opportunities in the future. So, actually, if all the chips that are in order, or that are in the water today, were to run on one hundred percent methanol, that would be 2 million in demand.
Josh Spector
they gave it to me Very useful. Thank you.
Operator
The following is from Jacob Bout of CIBC. Su line is open.
Jacob Fight
Good morning.
Jean Floren
Hello Jacob.
jacob fight
I tried to communicate about methanol demand and the growing fear of a recession here until 2023. Perhaps how you see the demand for methanol and a situation of moderate or severe recession. And what could be different this time from what Have you noticed historically?
Jean Floren
So I think when you break down demand in the industry, you were between 85 million tons and 90 million tons, of which about forty-five million tons in the classic demand segment, that would be the segment that we would watch very closely. in terms of the impact of the recession.
Right now, we expect a 3% to 4% expansion call early this year and for those derivatives, and we see that trend being strong today, as we talked about in the third quarter. To be looking at those forty-five million tons of demand and we’re going to see what effect this will have on the other jurisdictions. So, knowing accurately or accurately predicting what the effect will be, has a tendency to track GDP. However, we expect GDP expansion to have a tendency to be the way this segment is driven.
I think the other thing we’re seeing is that we’re seeing potential recessionary effects in an environment where energy costs are high and that tends to be a driving force of methanol growth. So, in the end, how those two things interact uncovers demand. Therefore, we believe that the environment of higher energy costs is indeed a positive detail to demand growth.
Jacob Fight
And are you more or less involved with China this time?
Jean Floren
We are very attentive to China. I think COVID has really had an impact on demand. What happens after national progress in and around policies will ultimately determine the impact it will have on us. So we’re watching the Chinese. market very strongly right now.
Rich summer
Yes. We are probably more involved in MTO. So, I mean, that’s been our biggest concern, even though the exploitation rates are a little lower, there’s still quite a bit of health. So, again, this is something our team monitors very regularly.
Jacob Fight
I’ll leave it at that, and good luck to you, John.
Jean Floren
Thanks jacob
Operator
Merci. The next one is from Hassan Ahmed from Alembic Global. Your line is open
Hassan Ahmed
Hello Juan and congratulations.
Jean Floren
Thanks Hasan.
Hassan Ahmed
John, a query about the app, I’m just going back to what you said earlier. I mean, obviously, sequentially, you communicated about the stagnation of demand, obviously, a little more for other commodities, which have experienced a significant reduction in stocks, in some cases 10%, 15%, 20%. Can you tell us a little bit about stock levels, where they are now, as more of those recession fears spread through the market?degrees of stock reduction?
Rich summer
Hello, Hassan. That’s rich. Watch out, then, in terms of stock levels, we saw stagnant demand in the quarter, but we saw quite a bit, we saw industry operating rates decline by 2% to 3% in the quarter. So, overall, we saw a decline in inventories in the quarter that — those production shutdowns occurred primarily in Iran, where we saw closures at several plants. There have been disruptions in North America, European refining equipment is operating at low speed. There were other issues, adding our own response times in Egypt and New Zealand.
So the operating rates of the industry were really when we balanced demand and production, we saw a decline in the quarter, which was the steepest in import markets in China, where we really see pretty low stock levels today. to some strengthening and pricing in the Chinese market during the quarter. Therefore, we are seeing a tight balance between adjusted stock stocks today.
Jean Floren
I think the dynamic, Hassan, is that as we move into the fourth and third quarters, those are historically the low end for production because of the diversion of heating oil and electric power in places like Iran, they’ve gotten the top fuel. Costs in North America impacted supply in the third quarter. Obviously, fuel costs have now been reduced to around five, six, which is a little more affordable.
If it’s not at the forefront, they repair themselves like we do, then. And then you have the top load curve in China, right?That’s the value of coal. They have a very high load curve. So yes, even if demand were to fall a bit, I think source issues will likely have a bigger impact on the final value of methanol compared to a drop in demand.
Hassan Ahmed
Very useful. And as a follow-up, I found that, sequentially, logistics prices increased by about $12 million. Now, we’re at a kind of shipping rate that’s going down, falling pretty sharply. If this is a smart tailwind for you, when we think about the fourth trimester and beyond.
Jean Floren
That’s one of our main competitive advantages, it’s built-in logistics and yes, we paid more for fuel, when the fuel was high enough. It’s gone down a bit and we’re also using methanol everywhere we can on our ships. The tanker market, if you look at what happened in the dry shipping market a few years ago, the tanker truck market didn’t have the same reaction, it fell again.
With what happened in Russia and the chains of origin and shipping days are much longer. The tanker market has grown significantly. So, tanker market rates, if it’s not incorporated like we are, and you buy cash, you pay double and more in comparison. At the same time it was last year. And I remind you that about 35% of what we send is link. So, the fees we get for that would be a little higher this year compared to last year.
Therefore, I believe that our supply chain and our own built-in shipping and logistics are a key competitive advantage, not only to deliver products on time and with the quality that our consumers want. , in the long term and with the new existing restrictions, in Europe, where Russian methanol and other petroleum products will not be able to be exported to Europe. next year.
Hassan Ahmed
Very useful. Thank you so much.
Operator
Next is from Matthew Blair with TPH. Su line is open.
Matthieu Blair
Hey HOLA. Could you tell us about MTO’s existing economics?Is it fair to say that they are slightly higher than at third quarter levels?And what are your expectations for MTO to work in the fourth quarter of 2023?
Jean Floren
So the affordability of MTO, when we look at it on the basis of ethylene propylene, is about $280 today, roughly, it’s less than $300. What he noticed is a small dissociation between: this is in a high-value oil environment, Traditionally, the affordability of MTO oil would be superior. So, there has been a bit of decoupling from oil due to what’s happening downstream, lower demand in the olefins market, combined with abundant supply. That’s something we’re watching very closely.
There are other points that come into play for true economic operational decisions for MTO sets. You need to look further down at what they produce downstream and the synergies that many of those sets have with their other parts of their facilities. So, it’s not just a mathematical number you can rely on to know your operational decisions. Today we know that there are some plants that are not working today, and that has been compensated, as John said, with the commissioning of 1. 8 million tons in northern China.
So, to date, we would say that MTO’s operating rates are almost below 80%. Therefore, there is a latent demand that is difficult to start, while stocks in China are scarce today. And at the current price in China of $330 per ton, we’ll practice and see what exploitation rates to expect, but we’d probably keep exploitation rates at degrees of around 80% today, and then monitor the decisions that are made.
Matthieu Blair
Super. Thanks for all the color. He also discussed that his vessels run on methanol possible. What is the difference between methanol and low-sulfur fuel oil or low-sulfur diesel?
Jean Floren
Yes, at the beginning of the year, when the price of oil was well above $100 a barrel, we found that methanol on an energy equivalent basis was a bit more affordable than other opportunities for ultra-low sulfur marine diesel or diesel, or is probably a 20% to 30% equivalent power reduction. We have noticed that these values recently fall to an average value level. Therefore, it is still exciting to burn methanol instead of opportunities.
Matthieu Blair
Super. Thank you.
Operator
[Operator Instructions] Next is by Chris Shaw with Monness Crespi. Your line is open.
Chris Shaw
Yes. Hello, hello everyone. How are you?
Jean Floren
Hi Chris.
Chris Shaw
I have a longer-term consultation on the availability of herbal fuel, either for, say, your existing progression plans and, I assume, long-term prospective plans or expansion. Considering what happened to Russian fuel and the protracted conflict in Ukraine. It imports from Europe much more LNG and it seems that it seeks to increase its capacity to do so in store.
Do you see adjustments in similar materials where you are now, back or elsewhere, perhaps herbal fuel manufacturers looking to liquefy more and ship it to Europe in the future?I mean, or is it really something that is likely to drive further progression and actually have more materials?How do you see that, I don’t know, four or 5, 10 years later?How does all this play out?
Jean Floren
I guess it depends on your LNG value forecast. I mean, certainly, if it’s $30, $40, if that’s your forecast, then it makes more sense to use fuel to produce LNG than to produce methanol. And unless you’re expecting that the value of methanol is $800 a ton, then, I don’t think many new methanol plants will be built. And if you, if your choice is from $ 30 to $ 40, LNG. fuel values in LNG, but the economy prevails, and it is a price that gives you a return on your used capital over and above your capital charge on which other people make investment decisions.
And there is an abundance of fuel in the world. Unfortunately, it is today, because of what has happened in Europe. It’s not in the right place. And this leads to value dislocations. But, when we look at the fuel futures curves in North America, it’s still in the $4 to $5 range. So, there’s still a lot of fuel in North America that can evolve and very economically, it’s between $4 and $5.
So, assuming the beyond the allocation of capital and capital that will be citizens in the future, one would expect fuel manufacturers to invest in production, if there is no demand. And that kind of price, that’s how raw fabrics paint and I don’t see anything I’ve noticed that adjustments that because of a short-term dislocation because of a war in Europe.
Chris Shaw
And then, I guess North America is their only market that has excess fuel to liquefy and ship to — to Europe that gets to New Zealand, Chile, Argentina, all those places. It would be if they had so much, it would be a smart challenge to have, wouldn’t it?
Jean Floren
Yes, I don’t think there is enough fuel in Chile or Argentina today. I mean, maybe at some point in the long term, as Neuquén expands, they’ll expand an LNG export market, but it’s long-term as they continue. to expand the Neuquén basin in New Zealand, there is definitely not enough fuel, think of an LNG plant. We have, obviously, Trinidad has LNG production, just like Egypt, but Egypt’s fuel customers are only getting more and more favorable as it needs a regional hub for Cypress and Israel fuel, as well as their additional fuel which they are expanding. So if all those regions, I’d probably expect Egypt to be the maximum, probably to expand more LNG capacity at some point in the long term. .
Chris Shaw
Super. It’s useful. Thank you.
Operator
The last one is from Steve Hansen with Raymond James. Su line is open.
Steve Hansen
Yes. Thank you. Just a quick follow-up. If we take a look at the long term here, in 12 or 15 months, G3 will be running at full capacity, which would be a wonderful result. How will you find out about the capital allocation?at that time? It would possibly be too early to ask the question, however, if we think about the context of too little additional capacity to be built in the next two years, the market will start to want it.
But at the same time, it will have to play with its concept of returning coins to shareholders. So I know he’s very focused on a balanced approach. Will you need to charge capacity again?Or will it be more susceptible to coin return?Thank you.
Jean Floren
Yes, that’s a wonderful question. I’m glad you asked. Yes, you are right to point out at any methanol value where we are today or even much lower. We’re going to make a lot of money from G3. No we have no major projects underway today. I mean, G3 will indeed meet our demand for source suction or suction growth, and we will concentrate on getting Titan and the Waitara Valley working again, if we can get more gas. , which will take time. So, I think we’ll have a lot of cash to distribute, whether we make a small investment in green methanol or other projects like that to be determined. But I think it’s somewhere after the G3. , at least one or two years.
Therefore, we want to grow in line with the market. Most of today’s questions have been about demand and we have noticed very little expansion in overall demand since COVID-19. That’s how it is since 2020, essentially we’ve noticed a lot, very little expansion is required. Therefore, we do not want to grow if we want to maintain our market share, and G3 will more than meet our expansion aspirations.
So, assuming it is carried out and works well, we are convinced of it. We have a wonderful start-up team, it has been a wonderful commission, a wonderful commission executed, there is nothing that leads us to not have a good time live. and paints well. And we’ll take excess money beyond the holding capital and dividends we have and buy back shares. That’s our plan.
Steve Hansen
Okay, great color. Thank you Jean. Enjoy.
Jean Floren
It would raise one thing that we plan to pay off the debt that is about to mature. $300 million. So, pay off the debt and buy stocks.
Operator
No additional questions. At this point, I will pass the floor to John Floren for any final remarks.
Jean Floren
Yes, thank you for your questions and interest in our company. Before ending the call, I should point out that we produce critical chemicals that have been used in many commercial and customer products. Methanol is also a cleaner-burning fuel that is in demand as a marine fuel.
We, the methanol industry, have a positive outlook with expanding demand and minimal capacity additions. Our well-positioned asset portfolio generates significant money flows through a diversity of methanol prices, allowing us to execute on our capital allocation priorities.
We are well placed in this time of economic uncertainty with a strong balance sheet, our fully funded and commissioned G3 allocation next year, to which we expect to raise approximately $250 million of EBITDA to $375 million of methanol and $4 of gas, which particularly enhances our money-making capacity.
We expect you to sign up with us in January when we make the percentage of the fourth quarter results. Thank you.
Operator
Ladies and gentlemen, this concludes the convening of today’s convention. Thank you for participating. You can now log out.