RBC Capital Markets has lowered its price target on Methanex Corporation (TSX:MX) to $65 from $70, even as it raised the company's earnings forecasts for 2026 and 2027. The move signals that analysts believe methanol prices have likely passed their peak following the easing of geopolitical tensions in the Middle East.
Geopolitical premium fades
The catalyst for the shift is the resumption of shipping through the Strait of Hormuz, a critical chokepoint for global energy and chemical trade. Tensions involving Iran had briefly supported methanol prices earlier this year, but with those risks cooling, RBC now sees the commodity's pricing power diminishing.
Methanex, the world's largest producer of methanol, recently published its reference prices for the third quarter. The company held North American prices flat, cut China to $525 per metric ton and Asia Pacific to $620, but raised Europe's price to 915 euros per metric ton (roughly $1,042). That divergence between regions is a key sign that methanol markets are becoming more fragmented and less driven by a single global benchmark.
RBC now forecasts methanol prices at $403 per metric ton in 2027, well above its earlier estimate of $343. That suggests the bank still sees a higher long-run baseline than before the Iran conflict, but not high enough to justify the previous valuation.
Raising EBITDA, cutting target
At first glance, the analyst's math looks contradictory. RBC raised its 2026 and 2027 EBITDA forecasts to $1.69 billion and $1.50 billion, respectively. Yet it cut the price target by $5 and kept a “sector perform” rating, with shares trading around $45.75.
The explanation lies in valuation multiples. When an analyst raises cash-flow estimates but lowers a target price, it typically means they are applying a lower multiple to those earnings. In other words, RBC may be treating today's pricing as closer to “peak” and assuming methanol normalizes in the 2026-27 window, especially if shipping disruptions keep easing and regional prices keep diverging.
This dynamic is not unique to Methanex. Across commodity-linked stocks, analysts often adjust valuation multiples as the cycle turns. For everyday investors, the key takeaway is that even strong earnings growth may not lift a stock if investors are unwilling to pay a higher price for those earnings.
What it means for investors
For shareholders, the RBC note is a reminder that commodity stocks can be sensitive to both earnings and sentiment. Methanex's business is tied to global methanol prices, which in turn depend on supply-demand balances, energy costs, and geopolitical risks.
The easing of tensions in the Strait of Hormuz has also weighed on oil prices, as oil prices slipped on news of US-Iran talks and shipping recovery. Lower energy costs can reduce methanol production costs, but they also signal weaker demand or less supply disruption, which can pressure methanol prices.
RBC's $65 target implies roughly 42% upside from current levels, but the “sector perform” rating suggests the stock is expected to move in line with the broader market rather than outperform. The multiple compression RBC is applying means that even if Methanex delivers strong cash flows, the stock may struggle to break out unless investors become more comfortable with mid-cycle methanol earnings.
Investors should watch for further developments in Middle East shipping and Methanex's quarterly pricing updates. Any renewed disruption could reverse the current trend, while continued normalization would likely keep the stock range-bound.
