Wednesday, November 16, 2005
YaSheng Group (YHGG) methanol update
YaSheng issued another press release to clarify their methanol deal.
Key points:
Key points:
- It will use a metallurgical by-product gas as well as natural gas.
- The project will comply with national quality standards GB338-92, which has three categories: first-rate, grade-1, and qualified. This is based on the purity of the methanol itself and not the process or anything like that. YaSheng doesn't say which one.
- Construction will take 3 years. This matches what Methanex says about bringing new supply online: it takes a long time.
- Sales are expected to be $121 million. This means they're assuming a price of $242 per ton. Right now, the Asia Pacific price is $280 per ton. If you look at historical prices, in Sept 2002, they were $202 per ton. If you look back earlier, prices can be very low, well below YaSheng's expected cost point.
- They expect profits of 22% (I don't know if that's gross profit, operational profit or what, but we'll assume gross profit). This means their cost will be $188 per ton. That happens to be the exact number I quoted here.
- They claim the "profit ratio of investment is approximately 12.29%." No, an approximate number is 12% or 13%, not four digits of precision. I guess they mean return on assets, which would be fine.
Conclusion
The only thing that's new is that they're using some by-product gas. And that doesn't even matter because their cost is exactly what I expected. If I were in charge at YaSheng, I'd stop the project immediately, even with the contributions from the Chinese government.// posted by Bruce @ 7:13 PM 
