On Thursday, Methanex (NASDAQ:MEOH) discussed first-quarter financial results during its earnings call. The full transcript is provided below.
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The full earnings call is available at https://events.q4inc.com/attendee/645957353
Summary
Methanex reported Q1 2026 adjusted EBITDA of $220 million and net income of $23 million, driven by higher methanol prices despite slightly lower sales volumes.
The company repaid $60 million of a term loan, ending the quarter with $380 million in cash, and plans to repay $290 million in the second quarter.
Methanex's production in Q1 was 2.4 million tons with significant contributions from the US, Chile, and Egypt, but faces challenges in New Zealand and Trinidad due to gas supply issues.
The Middle East conflict has disrupted methanol supply, leading to increased prices and the expectation of stronger Q2 earnings and cash flow, with anticipated prices between $500 and $525 per ton.
Management remains focused on operating assets reliably, progressing on the OCI integration, and deleveraging, while considering opportunistic share buybacks.
Full Transcript
Kate (Operator)
Good morning. My name is Kate and I will be your conference operator today. At this time I would like to welcome everyone to The Methanex Corporation first quarter 2026 results conference call. All lights have been placed on you to prevent any background noise. After the speaker's remarks there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on 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 Methenix, Mr. Robert Winslow. Please go ahead, Mr. Winslow.
Robert Winslow (Vice President of Investor Relations)
Thank you. Good morning everyone. Welcome to Methanex's first quarter 2026 results conference call. Our 2026 first quarter news release, Management's Discussion and analysis and financial statements can be accessed through our website at methanex.com I 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. To 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. Rich Sumner for his comments followed by a question and answer period. Thank you Robert and good morning everyone. We appreciate you joining us today to discuss our first quarter 2026 results. Our first quarter average realized price of $351 per ton and produced methanol sales of approximately 2.2 million tons generated, adjusted EBITDA of $220 million and adjusted net income of $23 million. Adjusted EBITDA increased versus the fourth quarter of 2025 primarily due to a higher average realized price partially offset by slightly lower sales of Methanex produced methanol. During the first quarter cash flows from operations allowed us to repay $60 million of the term loan, a facility ending the period in a strong cash position with nearly $380 million on the balance sheet. Turning to our operations in the first quarter, our total equity methanol production of 2.4 million tons was slightly higher compared to the fourth quarter. Starting with our United States operations, we produced 934,000 tons at our Geismar plants and 194 95,000 tons at the Beaumont plant in the first quarter. Our equity share of production at the Nat Gasoline joint venture was 203,000 tons. Our US assets operated at high rates outside of a short period early in the quarter when production was reduced in response to a significant short term spike in natural gas prices in late January. In Chile we produced 398,000 tons in the first quarter utilizing gas supply from Chile and Argentina.
Rich Sumner (President and CEO)
A third party pipeline failure that occurred late in the fourth quarter was rectified early in the first quarter and our plants operated at full rates for the remainder of the period. We're expecting to idle one Chile plant during the middle part of the second quarter in line with gas availability during the Southern Hemisphere winter season. In Egypt, our first quarter production was similar to that of the fourth quarter with the plant operating at full rates. The plant continues to operate well today and we're closely monitoring the regional situation for any potential impact on its gas supply. In New Zealand we produced 158,000 tons in the first quarter, down moderately from the prior quarter. Despite the stable gas and production levels over the past few months, a structural gas outlook in New Zealand continues to be challenging. Our equity production for 2026 remains 9 million tons of methanol. Actual production may vary by quarter based on timing of turnarounds, gas availability, unplanned outages and unanticipated events. Now turning to methanol industry fundamentals, the conflict in the Middle east, which began in late February, escalated into the second quarter. These events have significantly disrupted global markets for energy and petrochemical supply, including methanol, and we continue to monitor both short term and longer term impacts on global markets and our business. The Middle east supplies approximately 20 million tons of methanol per annum to global markets and this has been significantly reduced since the beginning of March. Thus far, overall methanol demand has remained relatively resilient with no significant signs of customer shutdowns or demand destruction. In Asia and China, which rely significantly more on Middle east imports that need to bypass the Strait of Hormuz, we've seen no trade flows from Middle east non Iranian supply and very modest supply from Iran into coastal markets in China since late February and believe that downstream operations have been primarily sustained through the drawdown of inventories. We believe this situation will be unsustainable in the short term, and we're working closely with customers to understand their demand outlook. We're also trying to better understand the extent of damage to methanol plants and related supporting infrastructure in the conflict region, if any, and the length of time it might take to restore back to full operations, which is still unclear today. Given these unprecedented events, we've seen a rapid and significant escalation in methanol prices across all major regions through March and April, and we're well positioned in today's market with our advantage asset base that continues to operate safely and reliably. As a result, we're expecting to see significantly stronger earnings and cash flows in the second quarter compared with the first quarter. Based on April and May contract price postings, we estimate our average realized price for April and May is between approximately 500 and $525 per ton. Assuming this pricing holds through June and factoring in produced sales volumes similar to those of the first quarter, we would expect a significant increase in adjusted EBITDA in the second quarter consistent with the first quarter and adjusted for these higher methanol prices. It should also be noted that due to the timing of inventory flows, there will be delayed recognition into the third quarter of cost increases we're seeing now from higher natural gas prices linked to higher methanol prices as well as higher ocean freight costs from higher bunker fuels. We believe the current market dynamics could be prolonged for some time and we're monitoring the medium and longer term impact and risk to the global economy. Our priorities for 2026 are unchanged to safely and reliably operate our assets and supply chain, deliver on the OCI Integration plan and continue to progress our deleveraging goals. Based on our short term financial outlook, we expect to repay the term loan of approximately $290 million in the second quarter. After the term loan is repaid, we will remain focused on directing the majority of our free cash flow towards the repayment of the bond due in 20, while evaluating share buybacks with a smaller portion of cash if they represent an attractive investment for shareholders. We'd now be happy to answer your questions.
Kate (Operator)
At this time I would like to remind everyone in order to ask a question, press star, then the number one on your telephone keypad. We request to limit yourselves to one question and one follow up. For additional questions, you can go back on the queue. Your first question comes from the line of Ben Isaacson with Scotiabank. Your Line is open.
Ben Isaacson (Equity Analyst at Scotiabank)
Thank you very much and good morning. Rich, a supply demand question for you. And I know on the supply side it's very, very fluid in terms of intel, but based on your best understanding right now, what do you think has structurally changed when it comes to methanol in the Middle East? And assuming the Strait of Hormuz opens, how likely is it that Iran will be able to kind of go back to that run rate of about 9 million tonnes a year, give or take. And then on the demand side, we know macro is challenging. We're seeing weak housing and construction on methanol affordability. I believe there's a few small cracks in some of the smaller applications. So can you just discuss what you're seeing, the cadence of demand or how you're feeling about demand destruction? Thank you.
Rich Sumner (President and CEO)
Thanks, Ben. You know, on the supply side right now we're, it's difficult to get a read on exactly what, what could be sort of the longer term impact on the supply side. There's a, there's a number of things that we're going to be trying to get a better read on. And so it really starts with, you know, the, the infrastructure around methanol and that would be the upstream, you know, what, what if, you know, if any. Is there extent of damage to upstream natural gas feedstock and related infrastructure? If there is, what will happen to gas allocations? Where will methanol fit in the, in the pecking order? Has there been any, any structural damage to methanol plants or related logistics infrastructure? So all of those things we need to get a better read on as things start to stabilize and we are not anywhere close to that today. So very, very, very important things for us to get a read longer term when it comes into the demand side. For us, we haven't seen the demand, any significant signs of demand destruction. Obviously affordability is going to be really important. We do think that as particularly in coastal markets as the longer this, the blockade is in place, the less Iranian product will be flowing into coastal markets there. And we do think that'll put pressure on MTO operating rates. We've seen methanol prices now around the world outside of China in the 550 to $650 range. And it's really a supply, a supply issue. So demand side, of course we're very concerned what this means around higher costs. Right now it's really demand still pulling the supply in, but what this means longer term in terms of inflationary implications and which end streams actually hurt the Most remains to be seen. So we're working really closely with our customers to understand their demand outlook, their affordability levels, what impact this has both in the short term and long term. So it's a difficult one to be able to, to give you a lot of guidance on right now, but all things we're monitoring.
Ben Isaacson (Equity Analyst at Scotiabank)
That's great, thank you.
Kate (Operator)
Your next question comes from the line of Hassan Ahmed with Alembic Global. Your line is open.
Hassan Ahmed
Morning, Rich. You know, just wanted to approach the earlier question a slightly different way. You know, in talking to sort of a variety of chemical executives, you know, it just seems that the normalization in supply chains, let's say if peace was declared tomorrow and the Straits of Hormuz were to open up again, it just seems the way, you know, from sort of, you know, reopening the oil and gas fields, just the way the pecking order of various sort of, you know, chemicals, energy sort of sources, feedstocks and the like will work. It may take as long as nine months from the opening of the Strait of Hormuz, from the declaration of peace, for these sort of supply chains to normalize. And then obviously, as you rightly said, we still don't know the full extent of damage, particularly in Iran and certain other Middle Eastern countries. So I mean, as I sort of compare that to what I at least see, you know, in terms of consensus earnings estimates for you guys, I mean, you know, they have you guys peaking in EBITDA in Q2 of this year and then a steep fall off there on after suggesting to me, you know, the consensus seems to be baking in a sort of V shaped recovery in sort of, you know, volumes coming out of the Middle East. So would love to hear your thoughts about this.
Rich Sumner (President and CEO)
Yeah, I mean, in the opening comments. Thanks, Asana. I did mention that we think this, this could be prolonged for some time. And what that means is we don't think it gets fixed in short order like that. Gas infrastructure is really important and we do think that methanol probably fits lower in the priority. When you think about energy products for power or for transportation, fuels and fertilizers for food, we likely fit somewhere down the line in the priority there. So it will come down to how quickly can all the infrastructure get up and running, including the downstream as well as the upstream. And then you also have to think that inventories throughout the supply chain are significantly lowered. And we're not talking about just Asia Pacific here, even though it'll be most acutely felt in Asia Pacific, but it's a globally traded market and so that's going to be drawn down inventories globally and that's why we've seen pricing in the market run up globally. So we've got supply chains that have to be restored, we've got infrastructure that has to be back in place, we've got, you know, and on top of that it's a 25 to 30 day transit time, you know, out of the Gulf. So we've got a lot of things that have to happen for these supply chains to come come back and it won't be, you know, our view would be that that would very unlikely to be a light switch to happen now. The big thing for us is how quickly does the demand side shut down and do we see that happening in a big meaningful way and then when product does come back online, does supply get ahead of the demand restarting and those types of things. So we have to be careful about what kind of whipsaws could happen on the other side of this which we do think will be prolonged. So hopefully that's a little bit more context on that one.
Hassan Ahmed
Definitely very helpful Rich. And as a follow up could you just talk a bit about sort of in this sort of new pricing regime that we're seeing China's role particularly as it pertains to the coal based methanol obviously on the cost curve now it's positioned quite differently. And the reason I ask you this is particularly over the last couple of weeks certain sort of further downstream chemicals like acetic acid which rely on methanol seem to have been coming under fairly severe downward pricing pressure on the spot market in China in particular. So just would love to hear your views about pricing particularly in China and how you know, certain elevated pricing regimes in other parts of the country, the world may actually hold up even if China puts some downward pressure on pricing.
Hasan
Yeah, thanks Hasan. So I, you know for us when we look at our, the pricing in
Rich Sumner (President and CEO)
China we definitely think that it's a demand driven price more than a cost side price for us. And it's really driven off the fact that there's 11 million tons of coastal MTO as a ready and willing market. So where we've seen pricing in China going from methanol is in the 400 to $450 per ton range which is very consistent with what you've seen around the affordability back to C2, C3 pricing which a lot of that's driven off of naphtha price. So we do think that we've been saying for quite some time methanol is increasingly a demand driven, driven pricing. And then what we've seen is that that's the price in China. Outside of China we've seen pricing going into the 550 to 650 range. When we look at some of the downstream. You mentioned petrochemicals and petrochemicals related to methanol have, you know, been, been overbuilt. So even in the current environment I'm assuming that a lot of the acetic acid that's come on stream over time has been a weaker, it's been a weaker segment because of, you know, the economic, the impact economically of what's happening and that of course those are consumers of methanol. So it's something we need to watch out for is does that release more supply into the market if acid producers are lowering their operating rates. But we haven't seen a significant impact of that coming back into the, into the supply base for us today. So. But something we'll watch highly driven towards a demand driven cost curve for us. And that's on the basis that methanol is very different than other petrochemicals. We're forecasting to see a supply gap in the next five years of 9 to 10 million tons. And that supply still relied on Iranian production, existing production as well as potentially new projects. So I think for us we're in a structurally tight market ultimately and we do think that leads more to a demand driven cost curve.
Kate (Operator)
Your next question comes from the line of Joel Jackson with BMO Capital Markets. Your line is open.
Joel Jackson (Equity Analyst at BMO Capital Markets)
Hi, good morning. I'm going to ask a couple of questions on some of your marginal assets and I'll do one by one. First we talk about Trinidad. You know, I've seen some of your. So you obviously have a gas deal that's up for renegotiation later this year. One of those plants that you're running. I've seen two of your nitrogen peers in Trinidad very recently signed very short term gas field. A third nitrogen tier has not been able to do. So is that something you would consider doing like moving. Describe the Trinidad environment. Would you consider shorting, signing a short term gas deal to keep the plant running during this very strong environment?
Rich Sumner (President and CEO)
Thanks Joel. I mean right now we're in discussions, our gas contracts up in middle of September. We're in discussions with the NGC. We're considering all possible range of outcomes through those discussions including you know, a short term deal as well as the potential to have to idle the plants. It'll come down to those NGC discussions. You know, in the short term, Trinidad is an extremely tight gas market with LNG, ammonia and methanol all operating below the nameplate capacity. And so a lot of that's going to come down to those commercial discussions. But our team is looking at all possible outcomes and also thinking we are looking longer term there and what optionality may come in. But we do think any new gas from Venezuela is quite a ways out and also carries risk on whether it can ever flow to methanol economically. So there's a lot, lot for us to consider there. But yeah, we would look at short term. We also are, if we can't get the short and the medium term to work together, we're also having to look at other, other outcomes out of those discussions.
Joel Jackson (Equity Analyst at BMO Capital Markets)
Okay. In terms of New Zealand, obviously just running the one plant there at quite low rates. Gas has been a problem there and it looks like the Maui gas field might be closing into this year, maybe making that situation worse. What is the end game here in New Zealand?
Rich Sumner (President and CEO)
So I mean I'm going to start by, I will kind of remind you that both New Zealand and Trinidad, while they represent over 10% of our production, it's less than 5% of our, of our run rate earnings. So you know, both these assets have performed extremely well for us over our history and operate extremely well. New Zealand, you know, the issues around gas are not new to us. We've been seeing a deterioration in, in the gas supply for quite some time. And you know, so omv, our big gas supplier came out with an announcement that they would cease production on their Maui gas field by the end of the year. If that were to happen we, you know, we can no longer, we no longer are capable of running our plant. So it's something we're working on with our gas suppliers and we're looking at all options on how we, how we monetize our gas position, including producing methanol or selling gas. And whatever we're doing, we're doing safely and reliably as we, as we, as we move towards whatever the resolution is going to be. But the outlook is tough and it's structurally challenging there.
Kate (Operator)
Your next question comes from the line of Jeff Jacowskas with JP Morgan. Your line is open.
Jeff Jacowskas
Thanks very much. In the event that your earnings fly up this year, what will happen to your cash taxes? Does your, what would be the cash tax rate or responsibility, you know, in a much more profitable environment? And also if you could comment on what would happen to your working capital, would your receivables and inventories and payables go up at the same rate as sales or do you expect it to be faster or slower? Could you help us out on those issues?
Dean Richardson (Chief Financial Officer)
Yeah, I think I'll turn that question over to Dean Richardson, our cfo. Yeah, thanks Jeff. When it comes to taxes, you know our tax rate guidance of 25% does hold even in a, in a different price, a higher price environment. From a cash tax perspective, we have been guiding to the majority of our of our taxes being cash. However, in a higher price environment, the majority of our earnings would go to the US and so the percentage of our cash taxes would actually go down because of the significant assets and loss carry forwards we have in the US given the acquisition and the build out. So the percentage of our 25% that's cash tax would go down more towards the mid range of that. It'd be about a 50, 50 cash versus deferred. From a working capital perspective, certainly methanol price has a significant impact on receivables. So you know, we would expect, and we did see some of that even in Q1, we would expect that in Q2 as well when it comes to our flow through to cash flows, that the receivable balance would increase with the higher price. From an inventory perspective, given we have limited purchases, most of our inventories are based on our cost structure of our plants. So we would not expect inventories to move and there would be some offset in payables when it comes to that. So net, net yes, we would expect a higher working capital balance due to the increase in ethanol price.
Jeff Jacowskas
And then for my follow up, given what you've already seen in April and whatever normal seasonal considerations there are as a base case, would you expect to sell more produced methanol in the second quarter than you would in the first? All things being equal,
Rich Sumner (President and CEO)
it will be highly dependent on our sales. And we're monitoring our sales quite carefully right now because obviously looking towards do we start to see any demand deterioration. We're also being very careful in today's environment around how much we buy as well. So if we have flexibility to not be selling in this environment, we may not be if it means we're covering that with produce, with produced tons, just given the risk that we could see things change. So to the extent that we hold our sales levels the same, you would probably see more produced tons coming through. If we were to decrease our sales, you may see about the same. So it's highly dependent what our overall sales are. The majority of the inventory we are bringing through now is produced product. And that, that's a, that's a big change since we brought, you know, 4 million tons of North North America supply on with G3 and the OCI acquisition.
Kate (Operator)
Your next question comes from the line of Josh Spector with ubs. Your line is open.
Josh Spector (Equity Analyst at UBS)
Yeah. Hi, good morning. I apologize if I missed this in the prepared remarks, but I guess when you're talking about your realized pricing, you seem to be implying a discount rate that maybe is in the high 40s versus you realize in the low 40s this quarter. And one, if you can kind of confirm that and then like related with that, I thought when pricing was going up the discount rate comes down as you're kind of catching up to that and then vice versa when prices go down. So things seem a little bit backwards versus what I anticipate. So can you help me understand that?
Rich Sumner (President and CEO)
Yeah. Josh. Will. Will for sure. What you're going to see is when we think about the, when we look into the, into the second quarter here we are expecting to sell a lower proportion of our sales in China and that's mainly where we have flexibility on our sales and where we can reduce down the level of purchases. So that's sort of the plan today. And that what that results in is a, is a higher discount because actually pricing outside of China has higher discounts yet a higher realized price. So we actually have higher and stronger average realized pricing when our discounts are higher. It's very, a little backward in the way to think of it, which is why I tend to like to ignore discounts and focus on the average realized price as much as possible. But, but that's, that's really the reason that you're saying that.
Josh Spector (Equity Analyst at UBS)
Okay, that makes sense. And you made a comment earlier about some of the lags and some of the cost sharing agreements and that lagging into 3Q that's also a bit longer than what I would anticipate. You know, I don't think we've talked about those lags in the past really coming up. So if I interpret that right, it seems like you would over earn a little bit in 3Q because maybe you're paying less on the equivalent gas basis versus what you would and then that would catch up, I guess, Is that correct? And then is there a way to think about like how long those lags are? Are they actually a three month lag or is it just that it's increasing month by month and that's kind of the catch up we're talking about just so we can sensitize that from a cost perspective.
Dean Richardson (Chief Financial Officer)
Those are. That's a fair question. So it's, it really is about inventory flows and we have about 45 days of inventory, so you will see some of those costs coming through, but not all of them. You know, it won't be reflective of today's market structurally in the second quarter. So there's a lag, probably about 30 to 40 million of that over 45 days that'll be coming in, in the third quarter. That would be more structural in today's higher pricing environment. And that's both on the, on the ship. That includes the shipping and the, and the gas.
Josh Spector (Equity Analyst at UBS)
Okay, that makes sense. Thank you.
Kate (Operator)
Your next question comes from the line of Nelson with RBC Capital Markets. Your line is open.
Nelson
Great, thanks. First question, just a follow up on what was asked in Trinidad. So you mentioned that you're considering a number of options for the Trinidad facility or the Titan facility. Is it due for another turnaround after September 26th? So does a new contract need to be long enough so that you can fund a major turnaround,
Rich Sumner (President and CEO)
the new contract? No, there isn't a turnaround coming. But the economics of these existing contracts are, you know, the lion's share of the rents are going back to Trinidad and any increase in any pricing means that it makes it very difficult for us to support running there. And so obviously a lot of this is going to be coming through the negotiations with the NGC. But I hope you understand that. Yeah, obviously we're progressing, that indications look challenging.
Nelson
Got it. Okay. And you did mention that New Zealand and Trinidad makes up less than 5% of your run rate, EBITDA or earnings. 5%. Okay, got it. And then my next question is about the OCI assets. I think initially you guys provided an estimate of about 30 million of synergies that you were expecting to achieve. Can you just give a quick update on how that's progressed and what you still need to implement over the next several quarters to achieve that?
Rich Sumner (President and CEO)
Yeah. So those synergies come in the form of insurance, come in the form of logistics costs related to terminal optimizations, come in the form of IT costs. It comes in the form of looking at how we optimize some of the sites that we have. We're in the pro, things are progressing well. We're probably through some of the synergies, others we're actually carrying double cost this year, like it so, and we're progressing all that. We have a plan set out that by the end of the year we should be through that, but we are carrying higher fixed costs. We have A higher fixed cost carry this year to then achieve the synergies beginning in January of 2027.
Nelson
Got it. Sounds like we'll see most of the benefits next year. I'll leave it there. Thank you.
Kate (Operator)
Your next question comes from the line of Amir Patel with CIBC Capital Markets. Your line is open.
Amir Patel (Equity Analyst at CIBC Capital Markets)
Hi, good morning, Rich. You'll quantify the non gas feedstock cost increases that you're seeing and you know, how much on a per ton basis might that be once it's sort of fully apparent in Q3
Rich Sumner (President and CEO)
non gas feedstock costs? Yeah, well, just your non gas cost increases. Oh, I see. So into the, in the, in the first quarter versus the fourth quarter. Well, just by year end as it's, as that filters through. Okay. Well, it's mainly the cost that we're looking at. So if we think about, I do know that there's some focus on how we get to our run rate numbers and what's in our cost structure that we're working on. The first one is our fixed cost structure, which the last caller asked about where we, we are progressing to bring our fixed cost structure down through the year through the integration. The second area is ocean freight. You know, we've had a longer supply chain through the fourth quarter. We have some lag into Q into the first quarter around our longer supply chain costs. We have seen a weaker backhaul market over the past year. That's something we're managing very closely. In the current environment, though, things have changed quite a bit around freight. Our focus around freight is around avoiding any type of spot vessel requirements in our system. Spot rates we have, you know, there's 2,000 ships locked in the Gulf right now and supply chains have increased because products got to move longer outside of the Gulf to meet demand. So spot vessel rates have gone up quite significantly and the backhoe market has disappeared. So our goal today is to keep as little our ships all to our produced product, avoid any spot vessel requirements. And this is one of the competitive advantage we also have here is that we've got our own fleet and we have no exposure to the shipping market. Now our cost per ton might be higher, but our cost per ton is a lot lower than our competitors that face market rates today. So our attention around shipping has shifted here in the current environment, like a lot of parts of our business.
Rachel
Great. Thanks, Rachel. That's helpful.
Amir Patel (Equity Analyst at CIBC Capital Markets)
And just the last question I have. In terms of your 2026 methanol production, what percent of that? I'm guessing it's a very small percent. Would Be spot.
Rich Sumner (President and CEO)
Yeah. In terms of our sales portfolio, we have very little in the way of spot sales. We do have some flexibility to put, to put some product in the market. But today our, our commitment is to our term contract customers and that's who we're here to service. And you know, we have long term con, we have long term customers, we have term contract supply which is a minimum, you know, minimum min, max commitment per month for their businesses. That's where our primary focus is in ensuring that reliability is applied today to the extent that if our customers aren't unable to produce, we will have product available into the market. But today are commitments to our contract customers.
Kate (Operator)
Your next question comes from the line of Matthew Blair with tph. Your line is open.
Matthew Blair (Equity Analyst at TPH)
Great, thanks and good morning. Rich, could you talk about where MTO operating rates stand in China today and how that compares data to like a Q1 average?
Rich Sumner (President and CEO)
Yeah. So thinking back to Q, maybe I'll take back to the fourth quarter. the fourth quarter, MTO operating rates were close to in the 85 to 90%. We saw Iranian supply actually stay on the market in the fourth quarter until around the December timeframe. And then what we saw was a gradual lowering of MTO rates through the first quarter. the first quarter average is around 70, 70, 75% rates. And you know, through March we think some Iranian supply was able to move through March and April.. Some limited volumes, 200,000 tons a month. MTO has been holding at around a 70% operating rate. But now we're seeing a dramatic shift in coastal inventories in China which assuming this blockade stays in place and there's no product available in behind what's come in in the last few months, we're going to see inventories draw and I think we're going to, it's going to be very difficult for to see that those, those rates continuing.
Matthew Blair (Equity Analyst at TPH)
Great, that's helpful color. And then just circling back to the guide for Q2 that the 500 to 525 realized price group, April and May. You know, I appreciate that the discount rates moving up because you have less sales to China. If we just look at your realized price compared to a global spot average, your realized price tends to be above 100% capture on the spot average. But in Q2 it's shaking out closer to 92%. And so I guess just ask the question another way is is the guidance, should we think of it as conservative like or are you factoring in, you know, potential price decrease in June? Just trying to get a better sense of why that guidance isn't a Little bit higher.
Rich Sumner (President and CEO)
Yeah, I think in an upward market you're gonna, and I don't know how you're trending the spot price but in an upward market there is some catch ups through the, through the, through the delay of one month or one quarter quarter. As an example, we set our, what we set our European price, which is a quarterly price set back in March and European spot prices have gone from at the time I guess we were down in the 500 level or slightly over to now above 600. So there's going to be those lags even on a monthly basis depending on when you're trending the spot price, you know, it takes the month to be able to adjust, you know, adjust to the then prevailing market. And so you know, I think there could be some the read there could be because we've had a steady and significant increasing market pricing then that that's led to, led to that difference.
Kate (Operator)
Your next question comes from the line of Lawrence Alexander with Jeffries. Your line is open.
Lawrence Alexander
Good morning. Two quick questions. Just first a bit of housekeeping just on the ammonia side. Can you clarify, you know, how you're doing in terms of either ASPs or margins and kind of any kind of your baseline outlook for Q2, how much you've contracted versus spot and then secondly kind of higher level given how stark the disruptions could be if the conflict continues and the rhetoric around the war potentially continuing several more months and all the bottlenecks that that would imply. What are you hearing from customers about what they think it would take for the industry to undertake capacity additions elsewhere to fix the supply demand balance.
Rich Sumner (President and CEO)
Thanks Lawrence. The product to your first question on the ammonia pricing where we produce around 80 and produce and sell around 80,000 tons a quarter and our estimates when we did the, when we did the acquisition was around 50 million tons of EBITDA per year and that was on a price of using a Tampa price of around $450 per ton. It's now at $775 per ton. That has climbed up over April and, and, and April and May. So you know we're obviously achieving a significantly higher earnings there. Probably an uplift of 20 million plus plus per quarter at these prices. So, so that's, that's where we are and we are, we are contracted there. We do sell mostly contracted tons. On your question around capacity additions. It's not something yet that I think the market is in discussions today. I think what we'll have to do is take a look at when things get resolved and I do believe it'll take. People want to get a read on where things rest long term. Does the pricing support what you need longer term to reinvest in the business, which will be a function of many things. Demand supply, long term, energy prices. Is there a race to capital because a lot of people want to do it at the same time. Many different factors would have to be worked out before I think you'd see big commitments to capital. So you know, we're in a, we're in a wait and see here on where this actually lands and certainly things that we're going to be monitoring very closely.
Lawrence Alexander
Thank you.
Kate (Operator)
Your last question comes from the line of Steve Hanson with Raymond James. Your line is open.
Steve Hanson (Equity Analyst at Raymond James)
Yeah, thanks guys. It could go to Rich or whoever. I mean the question really is around this Iranian situation and the restart of plants in recent weeks. I mean we've been reading about the restarts but it doesn't really seem to have a clear path to getting product to market. So the question is ultimately is there any indication that they're trying to recreate supply chains around the Gulf or around the Strait, either by a trucking or some other avenue to tide water that would allow any volume of magnitude to actually get out? I mean have you heard anything around that context or is it, is the research just really around testing the facilities? As best you can tell, I'm trying to get a sense for why we start if they can't get the product out.
Rich Sumner (President and CEO)
Yeah, no, we're not hearing any of that. Trying to get a different supply chain to avoid the strait. And we do think the US blockade is a significant obstacle in terms of trying to get move product out. So we, we haven't heard of any of that product and again everything has to move to China as well. So none of that's come to our attention.
Steve Hanson (Equity Analyst at Raymond James)
That's great. And just one follow up, apologize for the background noise. Just wanted to ask about your operational cadence this year. I mean are you making any plans that would differ versus your thoughts 3, 4 months ago around how to operate the assets this, this year? Just given the tightness. I think Joel had asked the question earlier about short term gas contracts, but even around the broader maintenance profile or anything else in your internal capability or levers to pull to run harder in this environment, is that being contemplated or is it still sort of the status quo plan? Thanks.
Rich Sumner (President and CEO)
Well, I think everywhere around the world in our asset portfolio. So North America we want to run 100%. Egypt, Chile, those are our assets that represent are well placed on the cost curve. Our operating strategy is always to run safely, reliably for the long term and always enhancing how we can have reliability at the highest rates possible. Around Trinidad and New Zealand. New Zealand is a bit of a different story. The gas actual contracts there are, are attractive, but we're running a plant very suboptimally because we're well below capacity and the gas is a mature basin and it's in decline. So if we were able to run there as a flexible asset, maybe we would. But it's really about the gas basin and it's structurally challenged. And then Trinidad becomes more of a cost issue and really how does the NGC negotiates? If there was something that made sense in the shorter term, maybe we will look at that. And that was to Joel's point. But it has to make sense in the short and medium term and we would look at those options. But at the same time we have to look at all possible ranges of outcomes out of those discussions. Discussions. And that's what we're doing.
Kate (Operator)
There are no further questions at this time. I will now turn the call over to Mr. Richard Sumner.
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