Cautious Outlook for Methanex Amid Acquisition and Market Challenges

Jeffrey Zekauskas, an analyst from J.P. Morgan, has initiated a new Hold rating on Methanex (MEOH).

Jeffrey Zekauskas has given his Hold rating due to a combination of factors impacting Methanex’s current and future performance. Methanex, a leader in methanol production, is strategically positioned as a low-cost supplier by focusing its operations in regions with favorable natural gas prices. However, the company’s balance sheet is expected to become more leveraged following the potential acquisition of OCI’s methanol and ammonia assets, which could increase its debt levels significantly.
Despite the potential benefits from the acquisition, such as an increase in EBITDA, the overall market conditions for methanol remain challenging. The demand for methanol is currently subdued due to high interest rates and low oil prices, which affect its use in construction and as a gasoline additive. Additionally, the methanol market is facing oversupply issues, particularly in China, which could lead to price weaknesses in the near term. Given these mixed factors, Zekauskas’s Hold rating reflects a cautious outlook with a price target of $33 by December 2025.

In another report released on May 30, RBC Capital also maintained a Hold rating on the stock with a $50.00 price target.