Sandra Daycock - Director of Investor Relations John Floren - President and CEO.

Ben Isaacson - Scotiabank Hassan Ahmed - Alembic Global Daniel Jester - Citi Jacob Bout - CIBC Steve Hansen - Raymond James Joel Jackson - BMO Capital Markets Laurence Alexander - Jeffries Robert Kwan - RBC Capital Markets Cherilyn Radbourne - TD Securities Chris Shaw - Monness Crespi Brian MacArthur - UBS Securities Charles Neivert - Cowen and Company.

Ladies and gentlemen, thank you for standing-by. Welcome to the Methanex Corporation Fourth Quarter 2014 Results Conference Call. I'd like to turn the conference over to Ms. Sandra Daycock, Director of Investor Relations. Please go ahead Ms. Daycock..

Thank you. Good morning, ladies and gentlemen. Welcome to our results conference call. Our 2014 fourth quarter report along with presentation slides summarizing the Q4 results can be accessed at our Web site at www.methanex.com.

I would like to remind our listeners that our comments and answers to your questions today may contain forward-looking information. This information is 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 forecast or projections, which are included in the forward-looking information. Please refer to our latest MD&A and to our 2013 Annual Report for more information.

For clarification, any references to EBITDA, cash flow or income made in today’s remarks reflect our 63.1% economic interest in the Atlas facility and our proportionate economic interest in the Egypt facility.

On December 9, 2013, we completed the sale of a 10% equity interest in the Egypt facility, our proportionate interest in the facility was 60% prior to that date and 50% thereafter. In addition, we reported our adjusted EBITDA and adjusted net income to exclude the mark-to-market impact on share-based compensation and other non-operating items.

We report our results in this way to make them a better measure of underlying operating performance and we encourage analysts covering the company to report their estimates in this manner. I would now like to turn over the call over to Methanex’s President and CEO, Mr. John Floren, for his comments and a question-and-answer period.

John?.

Good morning. Our results in the fourth quarter were very good. We generated adjusted EBITDA of $150 million and adjusted net income of $80 million or $0.85 a share. Our earnings were $0.10 a share below consensus with the main differences related to analyst average posted price and realized discount assumptions.

Our average price discount was larger than expected and this was a function of rapidly declining spot prices in Asia which pressured the effective discount of our posted prices. As well in the declining methanol price environment, we experienced product inventory losses which occurred in Q4 and we expect it to be even higher in Q1.

We have reached a significant milestone on our Geismar relocation projects having produced the first methanol from Geismar 1 facility. The plant is making on spec methanol and it's currently running at about 80% rates and we plan to ramp up the operating rates over the coming weeks.

Geismar 2 continues to make solid progress and we are targeting to produce methanol from this plant in late Q1 2016. In 2014, we recorded record sales volume of methanol totaling 8.5 million tons and enhanced our market leadership position.

During the quarter, we returned over a $100 million in cash to shareholders in the form of dividends and share repurchases bringing the total cash return to shareholders in 2014 to just over $340 million. We issued $600 million of unsecured notes with $300 million at 4.25% due in 2024 and $300 million at 5.65% due in 2044.

We are able to access the 30 year bond market for the first time as a result of our investment grade credit rating. We renewed and extended our $400 million revolving credit facility to our five year term until 2019.

We announced today that we will extend and increase our normal course issuer bid to allow for up to an incremental 3,751,519 common shares to be purchased for a total of 8,577,716 common shares or 10% of our public float. Today we have repurchased just over 4.8 million shares since the initiation of the bid.

We want to emphasize that with the current methanol market uncertainty we are planning to start buying a moderate amount of shares per day and gauge how market conditions evolve over the coming weeks and months. The Stena Germanica Ferry engine conversion to run on methanol is on track.

In February the ship will have the first of four engines installed as well as the associated fuel system. Regarding our Medicine Hat operation, we have hedged 80% of our 2015 and 2016 natural gas requirements at around $3 an mmbtu, which translates to a plant [indiscernible] cash cost of less than $190 a metric ton U.S.

We are also in the process of looking to hedge an additional 10% of our 2015 and 2016 natural gas requirements with the current prices ranging between 225 and 260 mmbtu. Given current market conditions for natural gas in Alberto, we are looking to lock in our Medicine Hat gas requirements for periods beyond 2016.

Production for the fourth quarter of 2014 was 1,207,000 tons compared with 1,204,000 tons for the third quarter of 2014. This was less than we forecasted going into the quarter. In Trinidad our Titan plant was impacted by 30 days of down time due to mechanical issues.

The Atlas plant experienced some mechanical down time in addition to production constraints associated with the air separation unit. Both Trinidad plants were further impacted by regional power outage that resulted in additional outage during the quarter. Gas restrictions in Trinidad during the quarter were less than anticipated going into Q4.

In New Zealand our Waitara Valley plant experienced down time due to mechanical issues. In addition multi Motunui in Waitara Valley were taken offline to conduct a statutory methanol pipeline inspection. Medicine Hat production was impacted by an outage due to mechanical failure and lower availability of CO2.

The plant continues to be constraint by mechanical issues which is leading to a production running at 10% than full operating rates. This issue will be fixed during our major plant refurbishment later this year.

Egypt production plant at a rate of 66% on average for 2014 in the current environment it's difficult to predict operating rates for 2015 and our best guess at this point would be average operating rates being similar in 2015 versus 2014 although we have seen significant gas restrictions in the month of January related primarily to a explosion to a pipeline in the western desert of Egypt.

With the addition of our new operations in Geismar, we expect the production of methanol in Q1 to be substantially higher than in Q4 due to the accounting related to inventory flow, we believe the bulk of this additional product flow will be into inventory and not be reflected in our Q1 results.

We also expect our purchase product inventory to be reducing throughout the quarter. A stronger U.S. dollar is beneficial to our business as most of our selling prices are denominated in U.S. dollars and some of our cost are incurred in foreign currencies which leads to lowering our overall cost structure.

The rapid oil price decline drag down energy related downstream product pricing impacting methanol affordability into methanol to olefins and methanol to gasoline. LPG and propane prices with the hardest hit with both being below historic correlations to oil and impacting demand in the DME and MTO sectors.

The current environment has caused several methanol to olefin producers to postpone the start up of their new plants until Q2, 2015. In January we are also seeing slightly operating rates from existing MTO producers. Q1 methanol demand is estimated to decline by 3.5% compared to Q4 mainly due to the decline in demand for methanol energy applications.

Global methanol demand grew about 1% in Q4. In China the majority of the natural gas base plants are shut down due to economics and winter gas restrictions and are expected to remain shut in through the quarter. Only a fraction of high cost coal based production is shut down at this time.

We believe the shutdown of marginal production in China is required to bring prices back to cost curve level which we estimate to be in the range of $260 to $280 per metric ton. We are uncertain at this time how long the high cost producers will sustain operations.

As we head into the Chinese New Year, we would expect some marginal cost producers who use coal as a feedstock to shut down. I will now stop and take questions from the audience..

Thank you. [Operator Instructions] The first question is from Ben Isaacson from Scotiabank. Please go ahead..

Thank you very much. My first question is on MTO demand. You mentioned in your press release about 6 million tons of methanol is the run rate that’s consumed annually. Can you talk about what you are seeing for new plants coming on in 2015 and what that run rate should look like by the end of the year? Thank you..

Yes, hi Ben I think it's very difficult to predict the run rates on any of these energy applications in the current environment.

In our plan today between now and the end of 2015, I think we have, 1, 2, 3, 4, 5, 6 different plants coming on consuming between 1 million to 2 million and most of them at 1.8 million, so significant in the order of 8 million to 10 million tons of methanol at full rates.

I think when we forecast in a traditional environment we think about 80% rate but in the current environment, it's really difficult to predict what the operating rates will be..

Great. Thank you and then just my follow up. Can you just talk about – you talked about the strength of the U.S. dollar, can you talk about specifically with respect to the Euro obviously that's the big chunk of your business and as the euro continues to depreciate how are you managing that or are Euro price set to rise in a flat U.S.

dollar price environment?.

Yes, it's a global commodity that’s denominated in U.S. dollar, so all prices that are set around the world are based on the U.S. dollar price.

So, we will remind you that the prices in Europe are set on the quarterly basis and again we see quite a bit of fluctuation in the exchange rates because of the things like the easing of the central bank in Europe as well as the Swiss Franc, so it's really hard to predict but we do have the ability on a quarterly basis to adjust pricing and certainly the currency at the given time is taken into account..

Great. Thanks John..

Thank you. The next question is from Hassan Ahmed with Alembic Global. Please go ahead..

Hi there John.

You know obviously a big disconnect in terms of where contract pricing in Asia and where spot is and I was taking a quick look recently and it seems spot is down in low 200s now you obviously just talked about how you see that coal based producers are probably producing 260 to 280 a ton, so is there any business being done in the spot market at all with these pricing levels?.

Yes, the current spot prices today is around 240 to 245 rmb for local produced product import products is 250 range today. You are right, it was down in the lower 200s earlier in the month. Again we are watching it on a daily basis.

We do see activities in the spot market but how liquid it is, it’s probably not as liquid today as it was some months ago. We are seeing people clearing inventory and we are seeing inventory drop. So again very difficult to predict what's going to happen in the coming months in the current environment..

Fair enough. And you know you obviously talked about demand sort of ticking down in the back of lower oil prices and the like, but you know I mean, to the course of 2013, 2014, we had seen a variety of sort of at least new build announcements in the U.S. right on the methanol side of things.

So, are you hearing any sort of further news on potential cancellations and the like?.

Well I heard yesterday that – I read yesterday at [indiscernible] delayed their $60 billion so I wouldn't expect in the current environment with the methanol pricing we are seeing in the capital cost and the uncertainty with regards to the energy outlook for oil that it will be very difficult to get project financed and if you didn't have a solid balance sheet, that’s probably going to lead delays if not cancellations..

Fair enough and a final one if I may, you know, you talked about how really in the year you would sort of give further guidance on the MLP side of things I know a bunch of moving parts right now and you are only just building inventory on Geismar 1 but any thoughts around the MLP?.

Yes, we are still looking at it. Obviously we don't have to make a decision until we have some operating experience but Geismar the messaging is the same we will make a decision around an MLP in the first half of this year..

Very good. Thank you John..

Thanks Hassan..

Thank you. The next question is from Daniel Jester with Citi. Please go ahead..

Good morning John. On natural gas hedging since you don't have a gas contract for Geismar 2, any thoughts about layering in some long term hedges to kind of lock in the cost structure as that plant starts up next year..

You are in meeting room Daniel. Yes, you make a great point. I think we are always looking for G2 to have a similar structure to what we have with G1 which is a floor price in a sharing mechanism.

With the current environment of gas in North America, you can look at ten year hedges that's very, very attractive pricing on average throughout that period and we are certainly really focused on that. So, you may see us prefer to go that route in the current environment.

We haven’t made any decision and we are not going to be operating G2 till the end of Q1 2016, so we have a bit of time, but yes, I would say in the current environment, it's pretty attractive..

Okay great. That's very helpful. And then, on the mechanical operational issues on New Zealand and Trinidad, is there going to be any carry over into the first quarter to that and I guess similarly I notice that you cut your sustaining CapEx guidance for 2015 so is there anything driving that specifically? Thank you..

I don't think we will cut our sustaining cap. We probably revived based on what we spent in the fourth quarter so the sustaining cap is similar to what I have guided at $80 million a year for million tons of operating capacity as we get to G2. So think of 10 million a year per million tons of operating capacity.

It will be little higher in 2015 because we have a major refurbishment at Medicine Hat facility but that guidance is still valid. These technical issues they are unplanned. They are not expected. So it's really hard to predict.

We expect to run our plans at very high operating rates and things happened that are out of our control sometimes the country wide power outage in Trinidad is an example, so our goal is to run our plants at very high rates and we believe we can do that under normal operating conditions provided we get all the gas that we need.

I will remind you as we do have gas restrictions at various sites of our plants don't like to be running in a variable mode. They like to run at high rates in a steady mode so that does contribute to some of the technical issues we experience. .

Great. Thank you very much..

Thank you. [Operator Instructions] The next question is from Jacob Bout with CIBC. Please go ahead..

Hi, John. Let me just give a short current thoughts on future expansions specifically Medicine Hat or which you are thinking about G3 or New Zealand. .

Yes, so current view of expansions for our company, you are right to point out with the Medicine Hat 2 or Geismar 3 I’ll start with Medicine Hat 2 first, I think in the current environment if we are probably going to see some favorable labor market conditions in Canada.

So what's happening in the energy sector which could make the capital cost a lot more competitive I’ll remind you when you are building a plant about 60% of the cost is actually labor construction. So that actual labor rate is very important. So we are continuing to work on that project.

We are continuing to look for a partner that can take methanol and bring gas to the equation. We are continuing to look at how we get the product out turnmoiling rail as well as the pre feed for plants or current use to have something ready to be able to execute it at the appropriate time and we will work on that throughout 2015.

As far as Geismar, I mean I think we’ve looked at a couple of options relocating third plant from Chile or building something in Geismar that's similar to what we have in Chile, which is not a real full plant which takes some of the off stream from the other two plants and makes methanol.

So, we are looking at both options and I think we will progress those throughout 2015 as well. I see in the current environment for pricing and energy it would be very difficult to pull the trigger today on a new built but we still have our team working on both of those projects. There are other places around the world that we are looking.

As far as New Zealand goes, I think we have to see a much more robust gas environment there than we do today to think about expanding capacity there..

Alright. Thanks for that and just a quick follow up. Maybe talk a little bit about the mechanism to determine the discount rate between, you are talking about both spot and contract.

You said basically just a renegotiation and this Asia specific?.

Yes, I don't want to get it too detailed on commercial terms for obvious reasons but we are thinking about this business in 10 and 20 year length and our customers are the most important part of our business chain and we have long term relationship with our customers.

When you see significant changes in a marketplace in a very short period of time, we think it’s good business to think about the long term we are looking at pricing of product to our customers..

Thank you..

Thank you. The next question is from Steve Hansen with Raymond James. Please go ahead..

Hi, good morning. Just the follow-up to the discount rate question, John can you give me just a little bit color on how we should think about the discount rate in 2015 and 2016 in the context of a generally lower price environment and that I think the rolling off of some legacy contracts overtime here..

Yes, I think the guidance that we have given is still applicable at this point in a steady state pricing environment we would expect the discounts to improve over the period of 2015, 2016..

Okay.

That's a little bit helpful and then just generally speaking on the demand side, broadly speaking in Asia in particular, the energy based applications that you mentioned seemed to be working to some degree at the lower price environment but are you getting a sense for the commitment level that you are seeing from the sense of the existing projects still going ahead.

You described many that are still underway.

Any signs of those slowing down in terms of the actual capital spent thus far?.

Well, we’ve seen a bit of a slowdown in the ones that we are expecting to start off in Q1. So they are delayed by quarter. I think again they are watching daily like we are on what the affordabilities are and what the relative substitutes are priced at and they are changing on a rapid basis on a significant basis daily.

I think longer term those plants will run and they will run at good rates and I think in the short term they are going to look in the economics of cash cost and like we all do.

So, I think again it's really difficult to predict and even in the month of January the existing plants have had significantly variable operating rates and we’ve seen things like DME improve a little recently, but is that going to last it's really hard to predict in the current environment..

Okay, very helpful. Thank you..

Thank you. The next question is from Joel Jackson with BMO Capital Markets. Please go ahead..

Hi, good morning. I am just trying to get little more granular on the discount.

In Q1 would you expect the discount to be similar looking at Asian price as Q4, looking at Asian price have been looking the fact that some of your competitors have signed European contracts little bit lower than what your benchmark was?.

I’d rather not get into guidance on discount in Q1 there is just too many moving parts. Generally in the steady state methanol price environment we expect the discount to improve overtime..

Okay.

And thanks for that and in Argentina and Chili, can you give an update on where are you seeing some gas potential in the near future or in the midterm?.

Yes, so I was down there in December and there is a lot of activities in Argentina not only in the unconventional but in the conventional. We are expecting to continue to get gas from Argentina through their summer periods or winter periods that would be our current expectations.

We had a view that the [indiscernible] basin has the reserves and doesn't get developed and millions of dollars is being spent. I mean Argentina becomes self sufficient in energy again. No exports could be viable at some point in the future.

How long, three, five, seven years it's hard to know again because it’s a fact of how much money is spent and how it's developed but there is certainly very prospective and very similar geologist to what we have seen in the U.S. On the Chile side, [indiscernible] has been relatively successful on the unconventional.

They are looking to develop those resources in the first half of this year and I think we will know more by the summer exactly how much gas is there and how much we can expect..

Thank you..

[Operator Instructions] The next question is from Laurence Alexander with Jefferies. Please go ahead..

Hello. I guess two questions.

First, if your varouis competitors are going to face more insurgency it might delay the decisions on projects, how do you think about the tradeoff between doing community capital to stock buy backs compared to entering into a partnership with somebody who might have been looking at doing standalone methanol unit previously?.

Well, we look at this all the time Laurence and we look at the current economics to build a new plant and you look at the gas price you can get and the long term price of methanol versus our stock price.

If the stock is trading somewhere around 650 a ton and replacement cost I don't think even in today's environment getting any close to building a new plant at those types of numbers.

So I think we announced another stock buyback yesterday for reason and it makes a lot more sense in the current environment to the buying back stock and if you are building a new capacity. That could change but that's the way it is today..

And secondly, can you give a little bit more detail on how you are thinking about fuel blending demand in China.

How close we are to or how much – how close we are on the economics to reaching the level where all the demand that can be stripped out has been stripped out?.

Yes, the fuel blending in China is still economical today. Obviously the low level blends that tend to trade at volume metric basis are much more appealing than the high level blends retained on the energy values. So, we haven’t seen any real slowdown in the blends.

Where we have seen the slowdown is in the methanol to gasoline which is a different set of economics but the actual fuel blending itself continues to be robust in China. I said we have a view of $40, $50 oil for the next 10 years than the growth that were anticipating in that market is probably not going to occur. .

Thank you..

Thank you. The next question is from Robert Kwan with RBC Capital Markets. Please go ahead..

Good morning, John. When you are talking about potential expansions in New Zealand, it sounded like maybe you are little as positive on the gas market there.

I am just wondering is that the case and if so that's because the lower liquid prices and what that’s meaning to producers or just something else going on?.

No I am actually more positive on the gas market in New Zealand. I think late last year they re-determined the reserves that are close to our plant. There was another three years of life. So, I think we have at least through the end of this decades, it's fairly good view that will be running a high rate of operations in New Zealand.

I think I have been consistent on maybe the confusion is coming from the different gas pockets in New Zealand around where our current plants are. I think the reserves are continuing to be developed.

You are right to say that there are associates of gas and if you have a low oil price environment low condensate price environment that could impact exploration over the medium term.

But the reserves that we have reported on is what we are seeing so again remind we are big part of that market and there is not many other prices for that gas to go so we would expect to continue to run New Zealand higher rates.

When we talk about expansions, it was really related to the south island and all of the activities that's happening in the great south basin on the exploration front to develop oil and gas. Now could that be impacted in the current environment, I guess so but it's pretty deep water and its pretty long term view.

So if there was success there you are talking into the next decade before we think about new production there. So maybe that's where the confusions is coming from..

Got it. And just the other question here on the share repurchase.

When we looked at the base you were very committed to and very confident you were going to buyback a tight number of shares and obviously you have done that, with this new amount it sounded like there is a little bit more cautiousness given what's happened with methanol prices, just wondering is that kind of what you are trying to signal and with the share repurchase and where the share price is, how are you thinking about that versus dividends were put differently, if the dividend increase consistent with prior year’s being next quarter factored into what the plans are on the share buyback..

It’s quite a bit there I mean let me think about that for a second. So as far as the share repurchase that we announced to the normal course issuer bid and the rules are that because we have announced one last May, we announced a second 5% we have to complete that by this coming May.

So there is a lot of 3.7 million shares in a 90 days period, in a very uncertain methanol price environment. So like I said we are going to be cautious, we are going to start slow and monitor how we see the market.

I think in the current market price of shares were very bullish about buying back shares at the current price based on a replacement cost and where we have to see the intrinsic value of the corporation.

So, we will take a balanced approach and make sure that we continue to have a very robust and bulletproof balance sheet, it features very hard to predict in this type of environment and we will continue to balance that on a daily/weekly basis but we will start slow. As far as the dividend we tend to look at around the AGM which is April of this year.

Our current yield is 2.2% which is on the high end of the range of where we would like to see the dividend but we have a balanced approach to how it distribute cash we like to distribute it between dividends which is sustainable growing in meaningful.

So we will have a look at it in April and announced around the AGM time what our thoughts at that time..

Okay. That’s great. Thank you very much..

Thank you. The next question is from [indiscernible]. Please go ahead..

Good day fellows.

Question around MTO when you look today if you just kind of straight-line natter prices the rest this year, what kind of a methanol price do you think that would employ for MTO your marginal MTO producers in China actually want to run this year?.

It’s not that simple unfortunately. It’s really each plan is little unique, each plan has different road and different things that they are doing, so you have to not only look at NAPSA but ethylene glycol, ethylene oxide and methyl propylene and etc that many different things you look at so.

I think we are seeing a current methanol pricing and current relative substitutes on many other different plants but most of the MTOs still economical. I think it’s just too many moving parts to predict how these plans are going to operate over the coming 10-11 months..

Okay and then on the back of this fall in oil, are you guys seeing any change in the behavior of the uranium product either kind of the trade flows methanol coming out of a ran or their willingness to push more volume?.

We are not seeing significant changes, I think we are seeing some parcel end up some parts of the med, but this second nature in order volume, the majority of the product is still going to India and China and I think what happens in around is more around sanctions and possible lifting sanctions on a more permanent basis than energy.

So, we will watch that file and we don’t have any more information than what given in the press about how those sanction discussions are evolving..

Okay, great. Thanks Wallace..

Thank you. The next question is from Cherilyn Radbourne with TD Securities. Please go ahead..

Thanks very much just wondering if you could give us a feel for the magnitude of the product inventory loss as you have incurred in Q4, I mean expect to incur in Q1?.

Yes, I can Cherilyn..

Okay, fair enough.

Could you then just give us a view on gas availability in Trinidad this year versus last year and where you think the capacity utilization of your facilities will be?.

Yes, we expect the gas restrictions in Trinidad in 2015 to be similar to 2014 and I think there is an election there this year and we wouldn’t expect to see any change in 2015. As far as our plans go, we again try to operate them at very high rates and that would be our goal assuming we get the 85% and 90% of the gas that we require..

And in terms of the mechanical issues that were encountered in the quarter, should we think of those as one-time in nature?.

I hope so..

Alright, that’s it from me, thank you..

Thank you. The next question is from Chris Shaw with Monness Crespi, please go ahead..

Hi, good morning, how you are doing? Is it safe to assume that demand growth for methanol and the traditional chemical products still grew so that that global GDP rate or is there something maybe different happening this year that could offset that?.

No. The 60% of the demand for methanol which goes into chemical derivatives should grow between GDP and IP growth rates globally. 3% to 4% I think is the numbers I’ve seen on average..

Okay, thanks.

And then, I guess you sort of touched on - I was encouraging you guys when you made a decision to move Geismar 1, if in the environment we’re in now, I guess its under the – I guess the methanol environment under now but maybe with the construction cost that you are facing back then with decisions you made, probably made today to move Geismar 1?.

The Geismar 1 has been an outstanding project. I think we did it in about half the time of new building still at much better capital cost than a new build. So I think it's a home run..

What was the again I wasn’t talking about, what was the cost per ton initially that was Geismar 1 was supposed to be moved at..

The initial estimate was $550 million..

Okay. That helps and then just on, and you talk about currency but on the Canadian dollar, the corporate cost there and -- is that large enough to be a significant I guess a bit of a benefit want to put in U.S.

dollars this year?.

We are lean low cost operations. Most of our cost is natural gas related. We do have some people here about 100 people but in the order of magnitude it's second order..

Okay. That's all I want to know. Great. Thanks so much..

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

Yes guys just the follow up here on the concept of operating leverage.

Clearly, Geismar 1 coming online is the big step for you guys but I’m trying to understand or trying to think about sort of operating cost per ton basis, the benefits of adding Geismar 1 to the broader platform from the sort of the fixed cost spread basis and I guess same questions are applied to the Geismar 2 I mean should we – is there some sort of guidance you guys can give us in the sense of what sort of that fixed cost spread will be and how we should think about the operating leverage into 2015 and 2016?.

Again we run our plants to low cost and we will see some minor advantages because of we are amortizing a larger volume over the same amount of people as well as the same amount of infrastructure for shipping and [indiscernible] we add less proportional amounts of those than we would if we build a million tons brand new in new locations so it's minor Steve but it will – you will see our fixed cost improve..

Okay. Thank you..

Thank you. The next question is from Brian MacArthur with UBS. Please go ahead..

Hi, good morning. Just two question, so John I think you said and I apologize if I got this wrong, Medicine Hat be like 190 with your gas prices locked in for 80% of the production.

Is that a deliberate cost amount now of course North American is not huge but that actually you are talking to deliberate cost with that if you want to try and back into the gas price?.

Yes, I wouldn't want to get that specific because each of our contracts are a little different with customers but think of that gate, but a lot of the freight that we do occur in Canada and North America we do recover. So I don't want to get too specific on that..

Okay. Great. Thanks.

That helps and the second question just to be clear on the start up on Geismar 1 you said all goes into inventory which I can sort of understand do we get a catch-up in Q2 on sales i.e., if you run perfectly in Q2, you will be able to sell more than a Q2 run rate or is it just kind of goes to the slow process and I should just think of delaying it like ramp up quarterly as part of goes through the incoming cash flow statement..

It's a factor really how much we produce Geismar 1 in the quarters. So, we are being a little conservative. Having said that I have also been clear that as we add more of a own productive capacity you won't see our sales increase to the same extend. We will lower the amount of purchase product that we buy on an annual basis.

So, some of it will be one time switch it on our inventory where our produce will go up and our purchase will go down and that's what's occurring in Q1 but ongoing how that's going to flow through on the different levels around the world that's very difficult to forecast..

Right but I wouldn't get a like sort of set of run rates to 250 a quarter and so we produce something this quarter whatever it is 100, 150 it's not like we will be able to get 300 in the second quarter for sales in Geismar, never mind I get the offsetting third party sale but it's not like there is catch up so that on a tight process time I get more than say 250 run rate in Q2?.

We might see some of that but again it's really hard to predict how these things flow through..

Okay great. That gives me....

The way I think about it is this is a great project. It's going to be there for a long time we have got gas for ten years, look at it over ten years, it's a fantastic operation and project..

Now, no question about that. I was just trying to get the near term because we have got so much volatility as you pointed out. So that's helpful. That's great. Thanks John..

Thank you. The next question is from Charles Neivert with Cowen and Company. Please go ahead..

Hi guys. Two questions. One, in China I know they still run some ethanol in their gasoline blend.

Do you think there is a chance or does it look like there is a possibility given at ethanol is probably more expensive than methanol is that methanol starts taking some of that market share going forward?.

I think, on the current policies in China but what I do recall Charlie is that ethanol especially from food is not going to be used too much in China so there is technical grade ethanol. It is being used for industrial and not too much into the fuel flow that's my last recollection..

Yes, I know some of the fuel which said no more being put into it after this point but I again on the cost side if they can pull it out they might.

The other question on the landed basis into New Orleans into the gulf sort of comparable to Geismar, is Trinnidad, including the transport together, lower cost or higher cost given the gas contract differential between the U.S.

Geismar operation and the Trinidad operation?.

Yes, I’m not going to get that specific on our cost structure, I think, you should see, how you should look at it is, with the advent of Geismar 1 we will back out some Trinidad product out of the U.S. and between where it goes versus our cost structure on delivering Geismar 1 it’s about a wash..

Okay, great, thank you..

Thank you. There are no further questions registered at this time. I’d now like to turn the meeting over to Mr. Floren..

Well, thank you very much. In closing despite the short term uncertainty in the methanol market, we believe the longer term fundamentals underpinning our strategy are intact.

We continue to make excellent progress on our capacity expansion initiatives, we’ve a strong balance sheet over $900 million of cash on hand at the end of December and expect to have more than sufficient cash flow to complete our Geismar project or further or other financial commitments.

As well, we remain committed to our disciplined approach to capital allocation. Thank you very much for your time..

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