Methanex Corp (MEOH) 2009 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to Methanex Corporation third quarter 2009 earnings conference call. As a reminder this call is being recorded on Wednesday, October 28th, 2009.

I'd now like to turn the conference call over to Mr Jason Chesko, Director of Investor Relations. Please go ahead.

Good morning, ladies and gentlemen. I would like to remind our listeners that our comments and answers to your questions may contain forward-looking information. This information by its nature is subject to risks and uncertainties that may cause the stated outcome to differ materially from the actual outcome. Certain material factors or assumptions were applied in drawing the conclusions or making the forecasts or projections which are included in the forward-looking information. Please refer to our latest MD&A and to our 2008 annual report for more information. I would now like to turn the call over to Methanex's President and CEO Mr Bruce Aitken for his comments.

Good morning, everyone. Welcome to the Methanex third quarter conference call. I have a number of colleagues with me here in the room and they will be available to help answer questions a little later. Firstly some comments on our results. In the third quarter we reported EBITDA of $31 million and a loss of $800,000 or $0.01 per share. Most notably all of our numbers reflect an improvement in the operating environment in Q3, relative to the first half of 2009. Sales volumes of 1.6million tons were 13% up quarter-over-quarter and a comparable to pre-recession sales volumes. We achieved an average realized price of $222 per a tonne which is about $30 per a tonne higher than last quarter. And EBITDA increased by 24% in Q3 compared to Q2.

Our earnings would have been higher but for a number of issues that impacted our cost structure. These included things like costs -- freight costs, which increased due to higher bunker costs, bunker fuel, and a softer back hall market, lower production from our plants in Chile and Trinidad which I'll talk about in a moment due to maintenance outages and higher stock-based compensation causing an increased share price. Those of you who analyze our numbers more closely will also notice a produced product in which we make most of our margin, have been quite flat over the last year or so. The result is that increased sales have not generated much in the way of increased earnings, I'll comment on our outlook in a -- more detail a little later. It is worth emphasizing our plans in 2010 for increased production in Chile, Egypt and Trinidad are expected to have a significant positive impact on our reported earnings. As I just mentioned I will comment more on the industry and pricing outlook a little bit later, but first I'd like to provide you with an update on our operations.

Firstly in New Zealand the Motunui plant continues to operate well during the third quarter and we produced 202,000 tonnes of methanol. In Trinidad we are completing planned maintainence at ourTitan plant at the beginning of the third quarter, our plants ran at near capacity for most of the quarter and we produced 445,00 tonnes of methanol. With the debottle making and maintainance programs completed at our Trinidad plants earlier this year, we expect about 5% to 10% higher production from Trinidad in 2010. We continue to operate one plant in Chile and produce 197,000 tonnes of methanol during the third quarter. This was a disappointing result, some technical issues led to unplanned outages and a loss of production of about 65,000 tonnes. We expect improved production from our site in Chile in the fourth quarter, and I'll comment more on the outlook for natural gas plants and Chile in just a few moments. I'll switch topics now and address the industry and pricing outlook.

On the last conference call I mentioned that we'd seen global methanol demand start to recover in the first half of this year, primarily due to strong demand from Asia, particularly China. During the third quarter we've seen further improvement in demand in both traditional and energy derivatives, and in all major regions including Europe and North America. And early indications are that the margins show further improvement in the fourth quarter. To put it into perspective, when the global economic slowdown impacted the methanol industry back in Q4 2008, methanol demand had decreased by about 15% or to about 36 million tonnes, measured on an annualized basis. As we enter the fourth quarter of 2009 we estimate that global demand is close to recovering to its peak level of last year.

While traditional demand has not recovered to its pre-recession levels, demand growth in energy applications has continued to be strong, particularly in fuel blending in China. Demand growth in this application has historically been driven by provincial standards, and recently another province in China, Zhejiang, a large gasoline consuming province on the east coast, introduced new methanol fuel standards, which should further support growth in that province. National standards for methanol blending in gasoline were rolled out in China earlier this year. And take effect in a few days on November the 1st. These standards are expected to add further impetus to methanol blending throughout the country. The economic [ration up] for continued growth of methanol blending in China is strong. Based on current gasoline prices in China, methanol is cost-effective for fuel blending into gas at up to about $450 per a tonne on an energy equivalent basis and about double that on a volumetric basis. In addition methanol demanded to DME in China has also improved recently, higher LPG prices provide support for higher DME prices and this industry today is consuming about 2.2 million tonnes of methanol on an annualized basis with lots of potential for more growth.

Turning to methanol supply there have have been numerous planned and unplanned outages reducing supply to the industry throughout the third quarter. Notely two new world scale plants that started up earlier this year have operated at reduced rates due to various issues, and this has added further tightness to the market. As a result of the recent tightening of supply and demand dynamics in an environment of low global inventories, methanol pricing increased significantly towards the end of the third quarter and into the fourth quarter. In October our average non-discounted price across the regions was set at about $315 per a tonne. And we have today announced an increase price in November in North America for about $16 per a tonne. November's contract pricing in both North America and Europe, will be about $330 per tonne. Pricing is up by more than $100 per tonne since the beginning of Q2 2009. With the increase in pricing we have seen some high cost production restarts particularly in China. And imports into China have declined but remained high relative to historic levels.

I'll switch topics now and provide you with an update on the key initiatives that we're focused on. Visiting our natural gas supplies to our plants in Chile. As I mentioned earlier we continue to operate one plant in Chile with an operating rate of about 25% to 30% for the site. Based on gas supplied exclusively from Chile. Gas production from the Fell and Dorado Riquelme blocks has been steadily increasing over the past few quarters. And combined production from these two blocks now represents around half of the gas supply to our Chile site. We expect gas supplied from Dorado Riquelme to ramp up over the next quarter and with the southern hemisphere winter ending and more gas becoming available from traditional sources we are planning to start a second plant in the next few weeks. Our plan is to operate two plants at reduced rates, and we expect this will result in more than 20% higher production from our Chile site over the next year.

We are very pleased with the success that we have seen from the new blocks to date. Geopak Fell block alone is providing us with over one third of our current gas supply and to build on this success we recently agreed to provide Geopak with $18 million of additional financing to step up its exploration program in southern Chile. This new financing is structured similarly to the first advance that we made to them. We've provided a loan that will be repaid with natural gas under a ten-year exclusive gas supply agreement. After next year, we expect production in Chile to ramp up more quickly as we see the benefits of gas development in the nine other exploration blocks near our plants that the government of Chile awarded to several international oil and gas companies. Apache has announced that it has commenced drilling activities in its Rusfin and Lenga blocks during Q4 2009 and drilling activity in other blocks is expected to commence in the first half of next year. Based on the significant increase in gas exploration activity expected to occur in southern Chile over the next couple every years and the success already achieved, we continue to be optimistic about returning our Chile site to a full-plant operation over the next few years.

The next opportunity I want to provide you an update on is our project in Egypt, which is nearing completion. All of the pipeline infrastructure is now complete and the utility systems are currently being commissioned. The project remains on budget and on track for producing methanol in the first half of next year. We are very excited about the addition of this first-class project into our supply chain which will increase methanol supply to our customers and significantly increase cash generation. Assuming today's pricing environment of around $300 per tonne, our 60% interest in the project is capable of generating in excess of $150 million of annualized EBITDA after its start-up next year.

I'll change topics now and make a few comments about our liquidity and capital allocation in the current environment. During the third quarter we regenerated $36 million of cash flow from operations before changes in working capital, and we continue to be in a strong financial position. We have just under $200 million of cash on our balance sheet, prudent leverage, no refinancing requirements until 2012 and an undrawn operating facility of $200 million. We have two key priorities for the use of our cash. Firstly, our project in Egypt which requires remaining equity contributions of about $20 million and secondly we expect continued committing capital to accelerate gas development in southern Chile. We are in a strong position to satisfy these commitments and our planned maintenance expenditures.

Despite the recent recovery in methanol demand and pricing, there continues to be uncertainty around the future and the sustainability of the recovery we've seen. In this environment we continue to remain focused on maintaining a strong financial position and a conservative balance sheet. Longer term our philosophy around capital allocations has not changed. We'll continue to employ a balanced approach for the use of cash. A balance between reinvesting and growing our business. And return, excess cash to shareholders. And with the capital spending for our Egypt project almost complete, and our initiatives at other sites to increase produciton only requiring a modest amount of capital, we believe we are in an excellent position to generate significant cash flow for our shareholders over the next few years. Before stopping for questions, I'll briefly comment on our expectations for the fourth quarter, I've already commented that contract methanol prices are significantly higher and given you some idea of the range of those prices and also that we expect improved production in the fourth quarter. These two factors are expected to result in substantially improved earnings for the fourth quarter. So at this point I'm happy to stop and I'll take any questions that you might have.

Thank you. And we'll take questions from the telephone lines. (Operator Instructions) Our first question is from Jacob Bout from CIBC. Please go ahead.

Good morning.

Good morning, Jacob.

I had a question on your comments on -- on methanol demand and just wondering how you are accounting for China in that. Are you basically looking at a net number out of China when you talk about demand being down, about 15% in the fourth quarter 2008?

Well, my comment might be a bit confusing because when we talk about demand we're looking at global demand and when I talk about the recovery of demand back to 2008 levels, I'm including demand growth from China in that number, Jacob. But as you know, as we analyze supply and demand balances, we tend to exclude China from that analysis, simply because it is self-sufficient in production. And the thing that we track most closely are net imports. And so that's the -- that's the element that has the biggest impact on global demand and supply. And what we're continuing to see is imports, I think the latest statistic was something over 300,000 tonnes in the month of September, and so that annualizes it at 3.6 million tonnes, which is still at quite a high level, not as high as it has been but that is still quite a high level which indicates that China is still drawing a lot of methanol from other parts of the world.

But arguably as methanol prices move higher, once we get north of $300, you've got to think that China essentially reverts back to where they've been historically where they've been a net importer, say 1 million to 1.5million tonnes.

I doubt that will happen, Jacob. I think we're in a new world now. There's lots of moving parts here. I don't want to be -- I don't want to be making definitive forecasts but let me point out the moving parts. One, I think high oil prices lead to higher gasoline prices and I talked about methanol affordability as a gasoline and methanol by the way trades mostly on a volumetric basis in China, so the affordability level is well north of $600 a tonne on that basis. High oil prices lead to higher LPG prices and we've seen that, we've seen DME production utilization step up from around 20% earlier this year to around 40% today. And I see a little more DME potential stata in the next few weeks as well. And so higher energy prices are leading to increasing demand in China.

The other -- the other factors are -- we've still got quite strong coal prices in China and coal tends to be going up. And so the cost pressure on producers in China tends to be an upward cost pressure, not a downward cost pressure so, I -- I think that China will tend to import less at higher prices, and will import more at lower prices. And we've talked about that a lot over the last few years and we've seen precisely that happening over the last 12 months, and I think we'll continue to see that. And so China probably does represent something of a cap on pricing. But I -- I would hesitate to say that we're going to see imports return to that 100 to 150. I think that those days are well beyond it.

And then as far as -- for lack of a better word, alternative outside of your traditional formaldehyde, acetic acid demand for methanol where would you put that at globally as far as direct blend and DME?

Well, globally demand has pretty well recovered in most derivatives. If I go through the derivatives, we think globally formaldehyde is pretty much back to where it was in Q3 2008, with that said, some of that demand growth is in China and some of the loss in volume is in North America, probably more so in Europe. And if we look regionally at our -- at our numbers, we think Europe and North America is still a little bit below Q3 2008 but there's more than made up for increased demand in China and in Asia Pacific and when I look down -- I have a list here of various derivatives, formaldehyde is flat, acetic acid is reasonably flat, [TBE] is flat, DME is up, fuel blending is up and other applications are down a bit, and so if I average all of those across it means that demand is pretty well where it was 12 months ago.

Okay. Switching gears over to Chile, and the natural gas exploration that's going on there, and development. How much have you spent to date? Are you capitalizing or expensing this? And as far as -- do you will actually take ownership of the gas or is there a type of -- some type of repayment? Maybe you can just walk us through some of those metrics.

Well, there's two areas in which we've invested a reasonable chunk of money. Firstly, I'll cover Geopak first because it is the easiest one, we advanced them $40 million I guess a year or so, they've repaid something around $8 million of it so there's about $32 million outstanding. And now we're in the process of advancing them another $18 million. And, again, that will be repaid out of -- out of future gas. And so I think that's relatively straightforward and not hard to find in our account.

The investment in Dorado Riquelme is different, we funded into that investment -- I'll check -- I believe it was $59 million? Was that about right? Yeah, okay, so $59 million is what we've invested to date, Jacob. Of that about $36 million was an up-front famine fee which recognized the money that had already been spent in developing that block. And we're -- we have now agreed annual budgets with our partner there and we will continue to exploit those resources on a -- on an ongoing basis. And so we have reverted, I think you might see in our disclosure, we've reverted to oil and gas accounting during this quarter, it hasn't had much impact but it's probably moved that that $59 million investment from probably other assets into --

Property, plant and equipment equipment.

property, plant and equipment and you'll begin to see a depletion charge and so one thing you might see in fourth quarter depreciation will go up a little bit. So that's -- that's probably the one subtlety that you'll see, but we own 50% of the gas coming out of there and we're accounting for our investment on a -- for the full-cost basis as noted.

Yes, full-cost.

Anything else?

No, other than the fact that that -- we haven't refined the accounting yet but that's the methodology we're going to find and we'll provide a lot more information obviously in the fourth quarter.

Okay. And then just last question, what -- what's your break-even realized methanol price that you think in 2010?

Oh, that's a -- that's a Zinger. I don't know. Jason, do you --

Yes, post Egypt it would probably be in the 130 range.

This is on an EBITDA basis?

Yes, on an EBITDA basis.

And what is it currently?

It would be sort of $20 higher roughly.

Okay. Thank you.

Okay, thanks, Jacob.

Thank you. And your next question is from Steve Hansen from Raymond James. Please go ahead.

Yes, good morning, everyone.

Good morning, Steve.

Could you just perhaps comment briefly on the state of global inventory levels throughout the supply chain.

Well, you know this an industry where they are not reported and so any -- any comments that I make are -- are based on our analysis, which is, of course, in -- imperfect. My gut feel is that they are very low. I know our own inventories, and you can see that from our numbers, our inventory number might have increased a little this quarter in dollar terms but that is because costs have gone up. In terms of the volume of inventory we've got, we -- we are very low. We've sensed the same thing from our customers and pretty much from our competitors as well. And so it -- it feels to me that global inventories are at quite a low level but as I said before, this is not a number that is reported by anybody and it is based on our -- what we see going on in the spot markets and what we see happening in -- in -- in -- in numbers that are reported by others.

Okay. Great. And then just -- I know you don't like to make definitive forecasts but given the sharp snapback in demand or relative sharp snapback to 2008 levels would you hazard a guess as to what demand might be in 2010, 2011.

Well, think we're back over now 40 million tonnes now and I could ask you the question what do you expect oil prices will do, because it has such a big impact on the demands in our area -- but in an environment where oil stays around $70 or $80 even I think the prognosis for continued growth in these energy applications is very good.

I think DME offers an interesting example in China, we're pleased that the industry is operating at 40% capacity utilization, still a very low utilization, so there's a lot of unused capacity there and we also understand that it's not too difficult to convert those DME plans into MTBE, and MTBE is in very short supply, prices are high, margins above feed stock costs are as high as I think I've ever seen them before and so it's a very, very profitable industry today, so we're quite bullish about prospects for MTBE and I think there is some potential for more methanol developing into that derivative in the coming months. So I think energy prices are the big driver, Steve, and the second big driver is just the general economy, and I'm no expert on that. I read the same newspapers as you do. It certainly seems from -- from the -- our customer base things are better today than they were, but it's hard for us, anyone, to say that we're back to normal again.

Okay, great. And then just lastly, if I may, just looking at the pricing discounts in the quarter, they were just a touch higher than I would have expected. I understand that you've got some fixed-price contracts rolling off over the next 12 to 18 months but is -- is there some sort of some rough rule of thumb we can start to think about to try and hone our ability to forecast these discounts?

Yes. That's a good question. In the fourth quarter we expect a discount to be similar to the third quarter, so even though prices are going up, it will -- let's say it will in the be any higher. It may actually be a little bit lower in the fourth quarter. So that -- that is a reflection of some reduction in these fixed-price contracts. We -- I don't think we've given any guidance in 2010 and we're probably not very well positioned to do that at the moment, Steve, and so that might be -- you might need to leave that with us to do a little bit of homework and we might to get some guidance but the direction is downwards because the volume of sales under these contracts is -- is going down and so we would expect that discount to decline as well.

Okay. That helps. Thanks a lot.

Right-O.

Thank you. Your next question is from Bert Powell from BMO capital markets. Please go ahead.

Bruce, just wanted to dig in a little bit into the 20% increase for Chile and natural gas, how is that ramped throughout the year, is this a step function up and is that something that you've got in the bag today? And can we look for increased gas supply and increased production above and beyond that for the year?

Yes, well, that's a good question, Bert, because I -- I'm a born optimist and I think that our number is extremely conservative. I'm not -- I've been talked out of being more bullish on our production forecasts for next year. I think that there is a lot of upward potential. And so we're -- we're assuming that -- in that number that we'll be able to produce from two plants for about eight months of next year and we'll probably go back to one plant during the next wintertime and certainly some of the forecasts I've seen we are able to continue running our two plants during -- during 2010, with increasing production towards the end of the -- the back half of that year. So I think that, yes, there is considerable upward potential there.

But we've tended to be a little bit disappointed with gas from the point of good of timing. It's always been a bit slower. And, maybe that's a little bit of our own my naivety in this industry, this industry of surging forward and finding and bringing to market natural gas is in the something that happens very quickly, and so while we see a lot of positive results, the net result in terms of higher methanol production has always been a bit slower than we expected so I think that the guidance that we provided is reasonable, it is cautious, it is a bit conservative but, yes, there is lots of upward potential.

Okay. And then just in terms of fourth quarter, in terms of restarting the second facility, how does that ramp through the quarter given --

Well, probably, more than expected, it has a huge impact in this quarter and so I said in the next few weeks.

Yeah, okay, fair enough.

In the month of November, it will have a small impact and -- and certainly we don't expect to have a repetition of the loss of production that we occurred in Q3. So, you would expect probably another 70,000 or 80,000 at least.

Okay. And then just in terms of the -- the production volume increases at the Titan and Atlas facility, you co-mingled them in your comments saying together five to ten and they do produce at different levels, is five to ten for both or --

No, just across the site. And our share of production, we expect to increase between 5% and 10%.

Okay. So -- so take the volume production capacity up 5% to 10% for both of those facilities for next year.

That's correct.

Okay. And then one other point of clarification Bruce just on the -- the comments, you spoke about Egypt. I thought I caught you -- I thought I heard you say the first half of 2010 for start.

Yes, that's right. Is that -- yes.

Okay. So when -- when in 2010 does that -- do you think that starts to ramp? Is there a contribution in Q2?

Well, the way it -- you might correct me if I'm wrong here Ian, but I think that early production ends up as an offset against capital until we reach commercial production.

No. No, that's --

Oh, wrong.

Accounting stocks are complicated now but we would expect probably some molecules coming out --

In the second quarter.

in the second quarter which we would recognize in earnings.

Okay. But the --

I would not count too much of that.

Yeah, that's right.

Okay.

We're kind of aiming to be operating at a reasonably high rate in the second half of next year, that's our ambition.

Second half is when you full stride and --

I think from a modeling point of view that's a reasonable assumption and I hope we surprise you on the --

That's what I was checking. And just on the shipping, are you seeing any opportunity, any improvement, on the back haul stuff?

No, probably the opposite. The tanker market was -- was quite strong at a time when the dry goods market completely fell over. And so tankers didn't follow that dry goods market. However they have more recently, and not quite to the same extent. But there's no doubt that the tanker market has -- has fallen into length and rates are lower and there's less opportunities. We've done pretty well. We've kept our fleet reasonably well-occupied but we are seeing some higher costs beginning to flow through, and that is a function of -- of lower back haul revenues.

Okay. Thank you.

Okay.

Thank you. Our next question is from Fai Lee from RBC capital markets, please go ahead.

Thanks. Bruce, I'm just wondering with respect to your comments about production next year, 20% increase in Chile being conservative, just to clarify is that forecast tied to potential new discoveries that have yet to be made or is it based already on existing finds that just need to be hooked up to the plant.

Well, it's probably -- it's a little bit of both. The nature of the area in southern Chile, it is a bit like Western Canada where you drill lots of wells, they're relatively cheap and you do get reasonably high decline rates so there's a constant -- a constant need to be reinvesting and continue drilling. Now the -- you're drilling into a gas field, so this is not wild cat exploration. You are drilling into known structures, but you are also not drilling into proved and probability reserves and so I find it -- your question is a little bit hard to answer. I think the -- the forecasts we make are based on the knowledge that we've got out of the drilling programs that have taken place, and I think we have reasonable confidence in them. But what I have learned out of this industry is there's lots of uncertainty.

And with respect to Egypt and the start-up, can you maybe just go over some of the major milestones that we should be looking for over the next, I guess, nine months?

Well, the -- one of the things we look at is first steam. When steam is first produced on the site. And that is occurring in the month of November, so we are commissioning some of the boilers right as we speak. We've got -- we have water on the site. We've made the demand water. We've got gas on the site, we couldn't start a boil without gas on the site, so gas has now been commissioned onto the site. And so there's probably not a lot else that I can give you, Fai. This is a process now of commissioning which there are a lot of detailed checking of systems, instrumentation and repairing miner issues with piping and so the -- I can't think of things that would say, okay, once we've done this then you can sleep easy at night. I think it's a -- it's a process that will take a -- the next three to six months.

Okay. As we get closer to the potential in-service date, will we be getting some updates from you as to how close we're getting?

Look, I expect so because we'll be expecting to plan our own shipping and sales and how we move the product so, yes, I expect we'll be keen to share that with our investors as well.

Okay, great, thank you.

Thank you. (Operator Instructions) Our next question is from Paul D'Amico from TD Newcrest, please go ahead.

Hi, it's actually [Vince Aceto] standing in for Paul. Just a few quick questions regarding the unplanned outage at the Atlas facility, can you give us a little more details on that.

Well, it -- there's not a lot to say. It is very -- typical of some of the things that happen at methanol plants. It was -- from memory it was about an one-week outage, we made the repairs and the plant's operating well again. So it was -- it was related to our separation plant and those -- one thing we discovered, that those parts of plant are vulnerable -- to issues. So -- so it was a compressor problem, that's been fixed and we done expect any ongoing issues with it.

Okay. How much lost production was due to the outage over that one week?

Do you remember that? It's probably -- probably about 25,000 tonnes I think of total production from Atlas. It won't -- wouldn't -- wouldn't be much more than that.

Okay, thanks. And just one more question on, I'm sorry if I missed this, given the capacity of restarts or some capacity for restarts in China, do you have an estimate of how much of the 6 million capacity in China is offline right now?

Well, I'll have probably some better numbers on what we think it's actually operating. And while, that 6 million-tons is a moving target but we have had some new plants start up over the last six months as well and so quite -- how much is offline I'm not too sure. We -- we think that production has returned not to last year's peek levels, but it is certainly getting up there. From memory, the peak production that I remember was back in, I think, September 2008 when there was about 1 million and 50 produced in one month. So -- on an annualized, that's over 12 million tonnes per year. September this year, we think it's about 875,000 tonnes of production and in October, a similar number. So, we're almost at kind of a 10 million tonne production number for-- for -- for China, so it's getting back to where it was. And now we know that over the last 12 months a whole lot of small -- smaller, inefficient plants that really were high-cost, they have shut down and we would not expect them to start up again from the announcements that we've seen, that there is some permanent loss of capacity that we'll never see again.

At the same time there have been other new plants that have -- that were under construction that have started up and so the requirement of the 6 million tonnes, I'm not really sure but the Chinese industry will operate if it is profitability and have demonstrated that they will not operate if it is not profitable, and we continue to think that the costal provinces will continue to be serviced primarily by imports and the inland provinces will be services by coal-based methanol a lot of which ends up in gasoline and somewhere or in DME, so that's the big picture that's still our long-term expectation.

Okay, thank you.

Okay.

Thank you. Our next question is a follow-up from Mr Steve Hansen, please go ahead, from Raymond James.

Yes. Just wondering if you could comment perhaps on recent -- I understand that China is cracking down on overcapacity in several industries, methanol has been singled out as one of those.

Yes it is.

They are starting to -- if I understand it correctly they will crack down on any new plants seven million tonnes?

That's right.

Are there any long term implications that we can draw on that in your view.

Today there are no plants in China that are a million tonnes and over. Why they've chosen that number, we're not too sure but if you look outside of China every plant that has been built today is at or around a million tonnes or a bit bigger than a million tonnes and so certainly world-scale plans are around or greater that a million tonnes. I think from memory the biggest plant that I've seen in China, I know there is a 600,000 tonne plant in Hainan Island and another in Sichuan Province that's 800,000 tonnes, but by and large there are lots and lots of small plants in China and I think that is what the Chinese are focused on, it doesn't make as soon as to be in these energy intensive industries with inefficient subscale capacity so I think that longer term, yes, there is going to be some rational rationalization, I think if there are going to be very large methanol plants built they are going to be built in these inland coal-rich provinces and again my response is very similar to what I said a few minutes ago, that I think there is a market for those plants and I think they will continue to supply the energy needs of a lot of those inland provinces.

Okay. Great. Appreciate it.

Okay. Okay. It sounds like we've gotten to the end, operator.

There are no further questions.

Excellent. Thanks to everybody for participating. I think what I find interesting in our numbers is -- as I mentioned, is that demand has increased probably much quicker than we anticipated and it really is reflected in our own sales volumes and in others we do of the various derivatives and to be able to say that this industry has returned to a level that it was at last year, I think that that is very extraordinary. I will acknowledge immediately that a good part of that is within China but we are seeing nice recoveries in the -- in the other markets as well.

So, this is an exciting time for our -- for our Company, I think we've been through a very tough period in terms of production. And when I've looked back over the quarter by quarter production, I have a -- really since the middle of 2007 when we lost our gas supply from Argentina, we've had a very disappointing level of production and that's something that we've been very focused on, we've been addressing and we're going to begin to see -- coming -- we're coming out of that hole, we'll have increased production from Chile, increased production from Trinidad and increased production from Egypt and we're working on some really interesting opportunities in New Zealand and Canada and so I think we will get our levels of low cost production back to the sort of levels that we were accustomed to and we're going to be growing our -- our market share accordingly. So, as I say, this is a very exciting time, we're going to see increased cash generation, increased earnings and very optimistic and positive about the future and so thank you very much for your support and good morning to everybody.

Thank you. The conference has now ended. Please disconnect your lines at this time. We thank you for your participation.