Operator: Your next question is from the line of Nelson Ng with RBC Capital Markets. Your line is open.
Nelson Ng: Great. Thanks and good morning. My first question is, in terms of the outage in Egypt, obviously, you still need to supply Europe. Did you see materially higher transportation costs in Q4 and maybe in Q1? And if so, should we assume that things kind of normalize in Q2?
Rich Sumner: Yeah. Thanks, Nelson. Yes, we did see higher logistics costs. And I would say part of that was because of Egypt. Additionally, it does depend on your supply chain movements with more Chile product in our asset base, we do see more flows from Chile to Asia. So a little lengthening of the supply chain there. And we move forward, our supply chain, it will be partially lengthened with G3. G3 product will be flowing to all different areas within our supply chain. But there will be likely more flows into Asia as well. So, hard to say, how you model all that. But we expect there could be some slight increases in our ocean freight just based on shipping days and lengthen in the shipping and the supply chain.
Nelson Ng: Okay. That’s good to know. And then just one follow-up on New Zealand, you mentioned the lower supply. Is that from a maintenance outage at wells versus generally lower output? Would you say that the generally lower trend of output is that the larger factor in terms of your forecast for the large decrease in methanol production in New Zealand? Or is it specifically like a very big outage or long outage you’re expecting for maintenance at the wells?
Rich Sumner: It’s about half and half, I would say for that, like it’s about half because of the outage and half because of lower gas profile.
Nelson Ng: Okay. Are those outages like every other year or once every several years? Like should we expect these outages to happen again in 2026?
Rich Sumner: Every few years. Yeah, every 2 – around every 2 or 3 years.
Nelson Ng: Okay. So, base cases, we might see a modest increase in 2025 out of New Zealand if everything else remains unchanged.
Rich Sumner: We’ll keep updating you on the progress and we’re going to work really closely alongside and be able to give you better view on that as we get closer to next year.
Operator: Your next question is from the line of Matthew Blair with the TPH. Your line is open.
Matthew Blair: Hey, good morning. Thanks for taking my questions. I had a couple of modeling questions for G3. First, are there any significant startup costs that we need to incorporate into Q1? And then second, this inventory build in Q1, is that going to be like just a permanent part of your working capital or will it be temporary? And if it’s temporary, is that something that you think will reverse by the end of 2024 or something further out?
Rich Sumner: Thanks for that. So, the first question is about capital. There will be no other kind of startup costs for us to be focused on. Everything in terms of starting up and commissioning the plant is included in our $1.25 billion to $1.3 billion. And that’s all included in the numbers, the $60 million to $110 million, including what’s in accounts payable today. So, you shouldn’t foresee anything beyond that. As it relates to inventories, what I think we’ll see this year is, overall inventory levels will likely stay something similar, potentially even down like we could see inventories be managed down. We’re not significantly increasing our sales. So there isn’t a need to increase overall inventory levels. And I would expect to see that these things moderate over time in terms of the produced inventory buildup that you’re seeing today.
So I wouldn’t be forecasting this to be a permanent. And what we will see is that overall inventories stay the same, but there’s sort of a flip between produced inventories and purchased inventories, as we’ll be buying a lot less proportion of a purchased and producing more.
Matthew Blair: Okay. And then, so does that mean for 2024 that your sales volumes should be pretty close, maybe a little bit less than the 8.1 of production?
Rich Sumner: Yeah, it should be pretty close. And it might be slightly lower, because of the inventory build.
Matthew Blair: Got it. And then my follow-up is just around RNG. Could you talk about what percent of your sales were based on a RNG feedstock in 2023 and how might that change in 2024 and beyond? And what kind of customers are interested in methanol from RNG? Is that mostly the shipping or anything changing on the customer front there? Thanks.
Rich Sumner: Yeah, so I think the first and foremost, the overall level is quite small. Today, we have one customer purchasing bio-methanol, but there’s lots of interest. So there’s lots of interest in low-carbon methanol and RNG-based methanol. I think the challenge is about cost and availability of RNG. And RNG has other competitive alternatives that have increased the cost quite significantly and the premiums you need to pay. And so, we are trying to work on arrangements where we can maybe get a more favorable price by locking in longer-term and then selling into those markets. And those are the things that we continue to pursue. And it’s not just RNG in North America. We’re looking at renewable natural gas in all of our jurisdictions to find out where we can source it economically and securely over time.
In terms of the customers, it’s shipping. The shipping customers are interested in RNG, but also traditional chemical applications are also interested. In fact, the one contract we have is into the – is a traditional chemical application. And what it’s really customers that are seeking to have a green or bio kind of attached to their end product. So we’re seeing that in certain segments. It’s consumer markets, that is where we’re seeing it, ultimately landing in consumer markets that would be able to demonstrate a feedstock that’s more lower carbon or green. So we’re continuing to develop it, lots of interest, obviously getting securing long-term affordable renewable natural gas is the key. And then working with customers on their willingness to pay.
Operator: [Operator Instructions] Your next question is from the line of Laurence Alexander with Jefferies. Your line is open.
Laurence Alexander: Good morning. Could you give a bit more detail on what you’re seeing in China in DME demand and the industrial boiler applications? The amount of pull through?
Rich Sumner: I mean, yeah, I’ll speak to China a little bit deeper here. Maybe across all the applications, in particular, the ones you’re focused on. So in other energy applications, we saw growth rates, again, 5% to 10%. That includes MTB, DME, other thermal applications, boilers, and kilns, as well as other fuel applications, such as cooking fuels. And so, we saw a lot of very strong growth rates across all of those applications. In terms of boilers and kilns, where we see boilers at today is that these are residential and industrial applications. But I would say that, originally, there was thought that it would replace big, big industrial boilers. We haven’t seen that. Where we see it is in smaller applications, commercial, and smaller industrial changeover.
So it’s a decent growth rate, but it’s not some of the projections that were made early, I think, in this space where we’re quite dramatic. But we are probably seeing 5% to 10% would have seen that this year in that segment. Your question about DME? DME has been relatively flat, right, because that industry has kind of operated at a certain rate. It isn’t growing or expanding. And the existing industry sort of operates that are around kind of at 80% rate. And so, we don’t see DME growing at all. It’s really the other applications like cooking fuels, boilers and kilns, M100 vehicles. And Geely has a fleet of vehicles, but they’re also developing heavy duty trucks. And so that’s where we see more of the momentum is less so in, I would call it, the older new application DME and more into these newer applications.
