Methanex: Developing Strategy in a Commodity Industry

550 Words3 Pages
Methanex had become the world’s largest producer of methanol, with production and trade all around the world. It became successful in large part due to its cost leadership by continually seeking remote locations where natural gas was stranded, and also due to its reliable delivery by developing its own Waterfront Shipping Company. By 2012, Methanex produced roughly 7 million tonnes of methanol, taking about 16% of the global market share. However, Methanex was faced with strategic issues at this moment from both demand and supply sides. In the demand side, Methanex’s revenue was exposed to the fluctuation of the demand for methanol, since Methanex only produced methanol. This situation was more serious in the supply side, where the price the “raw material”, natural gas was subject to fluctuating prices, interruptions to supply lines and international policies and regulations governing imports and exports. In last decades, some plants in New Zealand and Egypt had to shut down temporally for fluctuating price of natural gas or political issues. The options for Methanex to solve/relieve these issues include: • Using derivatives on natural gas and methanol to hedge the risk from price fluctuation • Expanding the market in China to explore opportunities in both demand and supply sides • Exploring opportunities in areas where long-term contacts on demand (in methanol) or supply (in natural gas) instead of focusing only on the richness in natural gas reserve • Expanding new products lines to reduce the risk from strongly relying on a single product. It could also make use of the idle resources (plants, machines, etc.) • Shutting down plants in relatively risky markets if the benefit from cost efficiency is not equivalent to the risk taking From my point of view, the use of derivatives could
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