Pryor Chemical Co., a wholly-owned subsidiary of LSB Industries Inc., on March 3, 2016, entered into a UAN purchase and sale agreement with Coffeyville Resources Nitrogen Fertilizers LLC, a unit of CVR Partners LP, effective June 1, 2016. In doing so, it did not renew an offtake agreement with Koch Nitrogen Co.

Under the agreement, CVR will have the exclusive right (but not the obligation) to purchase all the tons of UAN that Pryor makes available to it (i) that will be produced at the Pryor Chemical Facility in Pryor, Okla., and (ii) that are in excess of the needs of Pryor or its affiliates, which shall be no more than 30,000 short tons per year and no more than 10,000 tons in any calendar quarter. If CVR fails to take delivery of certain tons of UAN produced at Pryor and such failure causes Pryor’s storage capacity to be more than 75 percent utilized, or the production unit at the Pryor facility to be slowed down, shut down, or idled, Pryor may immediately sell such unpurchased product to a third party without restriction.

Approximate UAN capacity at the Pryor plant is 300,000 st/y, according to the Green Markets Nitrogen Supply & Demand Model.

The deal is another growth spurt for CVR, which is in the process of buying Rentech Nitrogen LP’s East Dubuque, Ill., nitrogen plant (GM Aug. 17, 2015). That deal may close as early as the end of March.

And since LSB is currently eyeing its strategic options, this deal gives CVR, which is in an acquisition mode, the opportunity to forge a closer relationship with LSB.

The initial term of the Pryor-CVR agreement is for three years. It automatically continues for one or more additional one-year terms unless terminated by either party by delivering a notice of termination at least twelve months prior to the end of term in effect. However, CVR may unilaterally terminate the agreement upon 180 days advance written notice of termination to Pryor, provided that each party’s rights and obligations pertaining to UAN that CVR committed to purchase before such advance notice will survive termination. Additionally, Pryor can terminate the CVR agreement upon 90 days advance written notice of termination to CVR, provided that each party’s rights and obligations pertaining to UAN that Pryor committed to sell prior to such advance notice will survive termination.

On March 1, 2016, Pryor said it provided notice of termination under the UAN agreement that it had with Koch Nitrogen Co., dated May 7, 2009. The termination will be effective as of May 31, 2016. Under the Koch agreement, Koch had the exclusive right to purchase substantially all of the UAN produced at the Pryor facility and the limited first right to purchase additional amounts. Pryor said it did not incur any early termination penalties in connection with the termination of the Koch agreement.

Trupointe Cooperative Inc. in Piqua, Ohio, and Sunrise Cooperative in Fremont, Ohio, announced on March 8 that members of both organizations have approved a merger that was first announced last December (GM Dec. 11, 2015).

Ballots were tallied on March 7 at special meetings held at each company’s corporate office, with 64 percent of Sunrise’s members and 73.9 percent of Trupointe’s members voting in favor of the merger. The companies said the majorities exceeded the 60 percent minimum requirement for the merger to proceed, noting that 68.1 percent of Sunrise’s voting members had returned ballots, compared with 47.6 percent of Trupointe’s members.

“This merger really was and is about creating more for our members together than we could separately,” said George Secor, president and CEO of Sunrise, who will also take the helm of the combined co-op. “As we move forward, we will work hard to deliver on that promise for our members.”

According to a voting tabulation document posted to the Sunrise website, 1,269 Sunrise members voted in favor of the merger, while 713 voted against. Of the 1,779 votes cast by Trupointe members, 1,314 supported the merger.

The combined business will begin operations on Sept. 1, 2016, under a name that has yet to be determined by the new board of directors. The 12-member board, which will have six members from each co-op, will also move quickly to select a location for the company’s headquarters.

Trupointe and Sunrise said the combined business will have more than $900 million in annual sales, with a number of key benefits for members, including stronger equity that will continue returning profits to members through timely equity redemption; increased ability for greater investments in facilities and assets; and access to key partnerships and product supply chains to expand opportunities for innovation.

The companies offered no other details on whether certain locations would combine operations or if some facilities would close as a result of the merger. Trupointe serves approximately 4,100 members in west-central Ohio and northeastern Indiana, and operates agronomy, grain, feed, fuel, propane, turf, and retail store divisions from some 27 locations in that trade area.

Trupointe’s agronomy centers are located in Milford and Fort Wayne, Ind., and at Ohio locations in Botkins, Georgetown, Maplewood, Medway, Osgood, South Charleston, Springfield, St. Marys, Starbuck, and Uniopolis. The co-op offers grain services at 18 locations, and has farm and ranch stores in Georgetown, Minster, Springfield, and Xenia; feed and livestock locations in New Bremen, St. Anthony, and Xenia; and fuel centers in Lebanon, Minster, Springfield, and Wilmington.

Sunrise is a full-service co-op serving 3,200 member-owners in a 12-county area of north-central Ohio. The company has 192 employees and total annual sales of $525 million, and operates grain, agronomy, feed, and energy divisions from approximately 10 Ohio locations. Sunrise’s four agronomy facilities are located at Attica, Ballville, Crestline, and Norwalk, and its five grain facilities have total storage capacity of more than 27 million bushels.

“This is a merger of equals and intention, not necessity,” said Secor. “The fact that we were both able to select a partner who paralleled our strengths and vision for the future is one of the strongest ways to begin a new venture.”

Sociedad Quimica y Minera de Chile SA (SQM) reported 2015 full-year net income of $213.2 million ($0.81 per share) on revenues of $1.73 billion, down from 2014’s $296.4 million ($1.13 per share) and $2 billion, respectively. Results from 2015 include a one-time write-off of $57.7 million related to stopping the operations of the Pedro de Valdiva mines (GM Nov. 23, 2015).

“During 2015, we faced many challenges, including lower prices and lower volumes impacting some of our business lines,’ said SQM CEO Patricio de Solminihac. “As mentioned previously, our sales volumes in both the Specialty Plant Nutrition and Potassium segments were lower as a result of delays during the first half of 2015. We were not able to fully compensate for those delays during the second half of the year. In addition, prices have fallen significantly in the past 12 months in the potassium chloride and iodine markets.” He said the restructuring of nitrate and iodine assets in 2015 will improve SQM’s competitive position. Lithium prices, up over 10 percent, partially offset the lower prices for other commodities.

Specialty Plant Nutrition revenues for 2015 were $651.2 million, down from 2014’s $708 million. While sales volumes of field fertilizers decreased, SQM said water-soluble fertilizer sales were up 5 percent. Overall, SPN average prices were lower at $784/mt. The company expects the prices will likely be lower in 2016. Within the segment, potassium nitrate and sodium potassium nitrate volumes were down 7 percent, to 493,600 mt from 531,600 mt and specialty blends to 203,900 mt from 228,000 mt. Other SPNs, which includes trading of other specialty fertilizers, was up at 107,500 mt from 102,500 st, while sodium nitrate was up at 26,000 mt from 15,800 mt.

In the Potassium Chloride/Potassium Sulfate segment, revenues were down 26 percent, to $430.2 million from $584.3 million, and volumes 20 percent to 1.24 million mt from 1.56 million mt. The combined average price for the unit was
$346/mt, down 7.7 percent from the 2014 price, with fourth-quarter prices some 27 percent lower than year-ago levels. SQM expects 2016 sales volumes for potassium levels to increase back to 2014 levels, with prices lower than those for 2015.

SQM fourth-quarter net income was $44.6 million ($0.17 per share) on revenues of $411.3 million, down from the year-ago $78 million ($0.30 per share) and $491.4 million, respectively.

A request by defendants in the West Fertilizer case to move the next trial to another county has been denied by the presiding judge. The upcoming trial, currently set for May 16, is the third scheduled in the case. Out-of-court settlements were reached in the first West trial last October (GM Oct. 19, 2015), and again in the second trial in late January 2016.

On March 1, 170th State District Judge Jim Meyer declined a motion to transfer the May 16 trial to a location other than McClennan County, where the City of West and the former West Fertilizer Co. are located. The request was made at a Tuesday hearing by defendants CF Industries Holdings Inc. and El Dorado Chemical Co.

According to the Waco Tribune-Herald, defense attorneys argued that local media coverage of the April 2013 West Fertilizer explosion and “intense feelings” generated by the case had made it difficult to select an impartial jury in McLennan County. Plaintiffs’ attorneys successfully countered that at least 43 potential jurors in the county had indicated no opinion or personal feelings about the case in a questionnaire.

Meyer recently pushed the third trial date back from March 21 to May 16 while negotiations continue between the parties. The final list of plaintiffs for the third trial is still under consideration, but reportedly includes the wrongful death claims of three West Volunteer Fire Department members killed in the blast, the West Rest Haven nursing home, and a number of West residents claiming personal injury and property damage.

The total list of plaintiffs in the complex litigation originally numbered about 200. Defendants include West Fertilizer owner Adair Grain Inc. and several fertilizer companies that either manufactured or sold ammonium nitrate to West Fertilizer in the months prior to the explosion, including CF Industries Holdings Inc. and related CF companies, International Chemical Co. (Inter-Chem), and LSB Industries Inc. and its subsidiaries El Dorado Chemical Co. and Thermaclime Inc.

The first lawsuits were filed within days of the blast against Adair Grain (GM April 29, 2013), but plaintiffs’ attorneys began casting a wider net when it was revealed that Adair carried just $1 million in liability insurance coverage. CF was first named as a defendant in June 2013 (GM July 1, 2013) in a lawsuit filed by the City of West. Inter-Chem was added as a co-defendant in January 2014 (GM Jan. 27, 2014), and LSB, El Dorado, and Thermaclime were added in February 2014 (GM Feb. 17, 2014).

Adair Grain has since filed a countersuit against the fertilizer companies (GM May 19, 2014), and CF, El Dorado, and Inter-Chem have filed court motions (GM Aug. 4, 2014) naming the City of West, Adair Grain, and others as “responsible third parties.”

In December 2015, the Waco Tribune-Herald reported that defense attorneys had asked Judge Meyer to include Adair as a plaintiff in either the second or third trial groups, but plaintiffs’ attorneys argued that doing so would be confusing and unfair to the other plaintiffs still awaiting their day in court. Meyer reportedly denied the defense motion, but instructed plaintiffs to include Adair in the fourth trial, which currently has no date set.

The first trial, which was settled in October for an undisclosed amount, included the families of three first-responders killed in the blast. Plaintiffs in the second trial, which was scheduled for Feb. 1 but canceled on Jan. 28 after the parties reached undisclosed or partial settlements, included the wrongful death claims of two volunteer firefighters and a number of West residents who filed personal injury and property damage claims, as well as subrogation claims filed by insurance companies to recoup claims they have already paid.

The Waco Tribune-Herald reported that at a settlement conference in November 2015, defense lawyers stressed that any resolutions reached in the case involved no admission of liability on the parts of defendants.

Plant problems and market conditions conspired to put LSB Industries Inc.’s Chemical segment’s operating income in the loss column for the fourth quarter and full year ending Dec. 31, 2015. The unit had a fourth-quarter loss of $10.3 million on net sales of $87.4 million, compared to year-ago income of $4.5 million and $115.1 million, respectively. The full-year loss was $41.8 million on sales of $428.1 million, compared to 2014 income of $51.3 million and $483.6 million.

Company-wide, LSB reported a fourth-quarter loss of $11 million ($0.48 per diluted share) on net sales of $157 million, compared to a year-ago income of $657,000 ($0.03 per share) and $187.2 million, respectively. It reported a full-year loss of $38 million ($1.67 per share) on sales of $711.8 million, compared to 2014’s net income of $19.3 million ($0.83 per share) and $761.2 million, respectively.

“Our fourth quarter fell short of our expectations,” said Dan Greenwell, LSB president and CEO. “Results for our Chemical business were weaker than the fourth quarter of 2014 due to unplanned downtime at our Pryor facility, lower sales of ammonium nitrate to the mining sector, and lower selling prices for agricultural chemicals, which were down approximately 16 percent compared to the prior-year period. Looking at the current year, fertilizer prices appear to have stabilized, and we believe that due to the contracted fall fertilizer application season, demand for fertilizers will be stronger this spring and pricing will firm up from current levels.

“Additionally, we were disappointed with the unplanned outage at our Cherokee facility,” Greenwell added. “Cherokee operated efficiently and consistently during 2015 with the exception of two weeks in December, and its ammonia plant operated at an on-stream rate of 94 percent for the full year of 2015. We are continuing to take positive steps with equipment replacement and upgrades at both the Pryor and Cherokee plants to increase on-stream rates in 2016.”

Both Pryor and Cherokee are now producing at normal rates. The company took a $3.5 million writedown on Pryor ammonia assets in the fourth quarter. LSB anticipates that Pryor will go down for a turnaround in late summer/early fall and Cherokee in late summer.

As earlier reported, LSB expects its new El Dorado ammonia plant to come up in the second quarter and be within budget (GM Feb. 19, p. 12). Greenwell told analysts that he expects the plant to actually begin production in April, and ramp up for full production during the rest of the quarter. The company is upbeat on plant economics once the ammonia plant comes up. LSB reiterated that it will continue to review strategic alternatives, including asset sales or the separation of its two businesses. In the past, LSB has listed the completion of the ammonia plant as an important milestone prior to moving ahead with these alternatives.

To date, El Dorado has been pressured by the high cost of purchased ammonia and the loss of the Orica contract for explosives grade ammonium nitrate, as well as lower ammonium nitrate prices. Also during the quarter, LSB bought forward natural gas in a falling gas market, having an average of $3.05/mmBtu for the quarter, though down from the year-ago $3.89/mmBtu. As of March 1, LSB said it has booked about 40 percent of its forward gas at $2.75/mmBtu. Purchased ammonia costs were down at $415/st from the year-ago $593/st.

For the Chemical unit, fourth-quarter Agricultural sales were down 20 percent, to $39.6 million from the year-ago $49.3 million, while Industrial/Mining/Other (IMO) were off 27 percent, to $47.8 million from $65.8 million. In the Ag sector, total tons sold were about level, though pricing was off.

For 2016, LSB expects sales to be up for both the Ag and IMO sectors, mainly due to the El Dorado expansion coming online. Within the Ag sector, it projects UAN sales of 365,000-390,000 st, AN 185,000-210,000 st, and ammonia 110,000-130,000 st. In the IMO sector, nitric acid sales are expected to be 540,000-570,000 st, AN 110,000-135,000 st, AN solution 55,000-65,000 st, and ammonia 150,000-175,000 st.

Fourteen people at K+S AG, including CEO Norbert Steiner and other members of the management board, are reported on March 4 to have been charged with illegally disposing of saline waste water and polluting waters. It is understood the former CEO and two former public officials were also been charged. The charges have been brought by prosecutors in the town of Meiningen in Germany’s Thuringia state, according to Bloomberg, which broke the news.

The charges relate to the injection of waste water into the Gerstungen trough between 1999 and 2007. It is understood K+S officials and local authorities are accused of colluding to illegally produce licenses for the disposals.

In a statement March 3 before the prosecutors’ announcement, K+S said it remains convinced that it lawfully obtained the permit for the injection of saline waste water into the Gerstungen trough for the years in question. The permit relates to the Werra plant, which comprises the Unterbreizbach, Hattorf, and Wintershall sites. The company says that a continuing audit by an external law firm on its behalf in recent months has revealed “no evidence of criminal conduct.” In its statement, K+S added that against this background, it sees no need to implement any precautionary financial measures, including in the form of provisions.

K+S has said previously that it was cooperating fully with the investigators. Thuringia state prosecutors searched the company offices in September following long-standing complaints from environmental groups about the producer’s wastewater being disposed of into the Werra river (GM Sept. 11, 2015). K+S declined to comment further on the proceedings.