All posts by hlancey@bloomberg.net

Negotiations Resume Between Railroads, Union

Canada, News Briefs

Labor negotiations resumed this week between the Teamsters Canada Rail Conference (TCRC) and Canadian National Railway Co. (CN) and Canadian Pacific Kansas City (CPKC) to avert a major railroad strike in Canada that could happen as early as next week. Negotiations between the union and railroads have been stalled for several months.

“The meetings were frank, constructive discussions that reflected the gravity of the situation before Canada’s railways, workforce, and entire economy,” said Labor Minister Steve MacKinnon in an Aug. 5 statement.

Christopher Monette, a spokesperson for TCRC, told Bloomberg that the goal was to increase “the pace and frequency” of discussions. “A work stoppage can be avoided, provided both companies are willing to return with fair and equitable proposals,” he wrote in an email. The union represents close to 10,000 workers at the two companies.

The railroads and TCRC are awaiting a decision by the Canadian Industrial Relations Board (CIRB), which is considering whether a strike would compromise safety and essential services. CIRB in July said it expects to make its ruling by Aug. 9 (GM July 19, p. 1), and no strike or lockout can take place until at least 72 hours after the decision.

Weather, Margins Impact The Andersons 2Q

Carbon, Earnings, News Briefs, U.S.

The Andersons Inc., Maumee, Ohio, reported second-quarter net income attributable to The Andersons of $36 million ($1.05 per diluted share), down from $55 million in last year’s second quarter. Adjusted net income came in at $39.5 million ($1.15 per diluted share), down from $51.8 million.

Adjusted EBITDA was $98 million for the quarter, down from $144 million last year. While adjusted pretax incomewas up in the company’s Trade segment, to $9.5 million from $7.2 million last year, results were down for the Renewables and Nutrien & Industrial segments.

“Overall, our second-quarter results were consistent with our expectations given the shift in ag markets over the past several months,” said Chairman and CEO Pat Bowe. “Renewables had a very solid quarter with increased ethanol production and higher margins but didn’t match last year’s results on declining co-product values. Trade results were slightly improved from last year despite lower prices and volatility.”

“Nutrient & Industrial had solid results although well behind last year’s outsized performance given weather-related delays and lower margins,” Bowe continued. “Farmer selling remains relatively quiet with adequate supply in this low-price commodity environment. We are seeing the benefits of our portfolio mix with grain assets and our growing premium ingredients business helping to offset a reduction in merchandising opportunities.”

The Nutrient & Industrial segment reported pretax income of $23 million for the quarter, down sharply from last year’s $43 million, with EBITDA falling to $32 million from $52 million. The company said volumes were negatively impacted by a late and wet spring application season, while declining nutrient prices failed to provide the “margin opportunities” seen in previous years.

“Also impacting the year-over-year comparison was a 2023 second quarter that had a significant shift of income from Q1 into Q2,” the company said. “The engineered granules business saw improvement in the quarter on higher sales volume. Looking forward, second half agronomy sales and applications are dependent on the timing of harvest and grower’s overall profitability.”

The Renewables segment reported second-quarter pretax income of $39 million and adjusted pretax income attributable to the company of $23 million, down from last year’s $67 million and $32 million, respectively.  Renewables posted second-quarter EBITDA of $52 million down from $74 million in 2023.

The company highlighted its announcement in June to acquire an ownership interest in Skyland Grain LLC, with grain and agronomy assets across Kansas, Eastern Colorado, and the Texas and Oklahoma panhandles.

“We are devoting significant resources to this opportunity and expect to provide an update later in the third quarter,” Bowe said. “Our longer-term Renewables projects are moving forward, and we are focused on lowering the carbon intensity of our ethanol plants. We continue to manage a robust pipeline with meaningful growth opportunities in each of our businesses.”

OCI Reports Lower 2Q Revenues, EBITDA

Europe, Low-Carbon, Middle East, Natural Gas, News Briefs, Nitrogen, Texas

OCI reported second-quarter 2024 revenues of $1.2 billion and EBITDA of $295 million, down 12% and 9%, respectively, from last year due to lower nitrogen prices globally, higher gas prices in the Middle East, and planned maintenance at Natgasoline.

The nitrogen major highlighted its strong operational performance, boasting a 90% asset utilization rate at its Beaumont and OCI Nitrogen facilities. Additional tailwinds in the amount of $22 million stemmed from lower natural gas prices globally.

“Following extremely challenging market conditions in 2023, conflated with prolonged turnarounds at some of OCI’s assets, OCI benefited in the second quarter of 2024 from sustained improved asset reliability across the business,” said OCI CEO Ahmed El-Hoshy. “OCI’s manufacturing excellence program and investments to improve reliability continue to drive productivity gains, with asset utilization rates surpassing historical levels across both the nitrogen and methanol complex.”

OCI highlighted its recent European product portfolio expansion with AdBlue, CAN+Sulphur, as well as bio-melamine. OCI also announced the sale of its Beaumont Texas low-carbon facility to Australian energy major Woodside. No updates on the closing of the IFCo and Fertiglobe sales were provided.

SABIC Posts 2Q Profit of $0.58 Billion

News Briefs

SABIC reported second-quarter net profit of SAR2.18 billion ($0.58 billion), representing an 85% year-over-year increase. EBITDA rose 37%, to SR4.88 billion, fueled by higher sales volume and average selling prices.

“The significant rise in profits is attributed to better product margins and increased sales volumes, along with effective management of supply chain challenges in the region,” said SABIC CEO Abdulrahman Al-Fageeh. “This reflects our resilience, innovation, and ability to adapt under the prevailing challenging circumstances and meet the demands of our customers worldwide.”

SABIC Agri-Nutrients (formerly SAFCO) reported net income of SAR705 million ($188 million) for the quarter, up 8% from last year, with total sales reported at SAR2.7 billion ($0.7 billion), up 2% from 2023.

Average sales prices were down 4% from last year while sales volumes were up 6%. Compared with the first quarter, sales prices were down 15% and sales volume were up 25%, resulting in a 6% increase in revenue. Agri-Nutrients’ net profits fell 5% in the first half due to lower average selling prices.

European Commission Approves Bunge/Viterra Deal

Brazil, Canada, Europe, News Briefs

The European Commission (EC) has approved the proposed merger of Viterra Ltd. and Bunge Global SA following an agreement that Viterra’s oilseed business in Hungary and Poland will be divested, along with a number of logistical assets linked to those operations.

Under the EU Merger Regulations, the EC’s investigation found that the merger as initially proposed would have resulted in a considerable concentration of oilseed processing capacity in Central Europe, where both parties are active across the whole supply chain, with potential negative effects on farmers and downstream customers.

The EC said the commitments made by Viterra and Bunge “fully address the competition concerns…by removing the horizontal overlaps and vertical links between the parties’ oilseed businesses in the concerned territories.”

“We had concerns that the transaction could affect the supply chains of rapeseed and sunflower seed in Central Europe, with potential ramifications across the food, feed, and biofuel industries,” said Margrethe Vestager, Executive Vice President in charge of competition policy. “The divestiture of Viterra’s entire oilseeds business in Hungary and Poland will preserve competition in these markets.”

Bunge shareholders approved the company’s $8.2 billion acquisition of Viterra last fall (GM Oct. 6, 2023). The transaction has been approved by regulators in Brazil (GM May 17, p. 27) and Australia (GM Dec. 22, 2023), but Canada’s Competition Bureau in April concluded that the deal is likely to result in “substantial anti-competitive effects” and a “significant loss of rivalry” between Viterra and Bunge in agricultural markets in Canada (GM April 26, p. 1).

Bunge in April said Canada’s “localized concerns” are “misplaced” and that the company “looks forward to working with Transport Canada and the Bureau to provide further information addressing these points.” The agribusiness company said in April that it expects the transaction to close in the middle of this year.

Marion Ag, Columbia Seeds Partner in Oregon

News Briefs, U.S.

Oregon-based Marion Ag Service and Columbia Seeds LLC announced on Aug. 5 that they have agreed to a “supply and marketing consortium” that will combine Marion Ag’s fertilizer technology, combination products, organics, and soil amendment offerings with Columbia’s expertise in the seed market. 

Family-owned Marion Ag is based in St. Paul, Ore., while Columbia is headquartered in Albany, Ore. The two companies said they have an aligned company culture and a complementary supply, operational, and marketing structure that will allow them to combine their marketing efforts and relationships into a “collective market-leading suite of agronomic solutions.”

“Marion Ag’s strategic growth imperative led us to join the grass seed market in 2021,” said Jeff Freeman, Chief Strategy and Marketing Officer at Marion Ag. “Now, as our proprietary varieties are hitting the commercial market, accessing the experience, professionalism, and collaboration of the Columbia Seeds team will further catalyze our mission.”

While each company will continue to operate under their current structures, the collaboration provides exposure to greater seed production relationships and an opportunity for multiple agronomic product categories on a single delivery, thereby reducing supply complexity and improving inventory metrics for distributors.

“Combining both company’s marketing and supply efforts will generate new opportunities for our customers,” added Tom Pape, Vice President at Columbia. “I’m excited to partner with an organization that takes customer service as serious as we do.”

CHS, AgVend Announce Partnership

News Briefs, Texas, U.S.

CHS Inc. on Aug. 6 announced a new agreement with agricultural e-commerce business AgVend, Austin, Texas, that will allow CHS wholesale crop protection customers to place orders, view transaction and invoice history, and reorder on the AgVend platform.

The initial launch of the partnership is planned for September 2024 and will focus on crop protection products, but CHS said it plans to expand the experience into other agriculture and energy products, including crop nutrients, propane, refined fuels, and lubricants.

“This collaboration makes sense, as many of our wholesale customers already use AgVend as a business partner and see value in the solutions they provide,” said Gary Halvorson, Executive Vice President, Enterprise Customer Development, at CHS. “These customers have also expressed how much they value their connection with CHS and have encouraged us to find ways to collaborate with AgVend.”

As part of the collaboration, ag retailers using producer financing programs from CHS Capital will also soon be able to see loan information, including balances and related details, in the AgVend platform. Since launching their first platform in 2020, AgVend’s technology is used by more than 25% of the North American ag retail market.

“Our collaboration with CHS marks the introduction of a new product suite designed to enable distributors, manufacturers, and other third parties to offer their AgVend Network customers an easier way to do business,” said Alexander Reichert, AgVend CEO and Co-Founder. “We are thrilled to collaborate with CHS, which shares our vision of how digital connectivity can create a more dynamic and resilient ag supply chain.”

Yara to Sell Brazil Liquid NPK Assets to FassAgro

Brazil, News Briefs, Nitrogen, NPK

Yara International ASA has agreed to sell its NPK liquid fertilizer production and marketing assets in Brazil to FassAgro, the fertilizer business owned by Brazilian group ENG and based in Sertãozinho (São Paulo state), according to a Valor International report. The specific assets and the purchase price were not disclosed.

Neither Yara nor FassAgro issued a statement or announcement about the sale. According to the Administrative Council for Economic Defense (CADE), Brazil’s competition regulator, the assets involved in the sale are in the states of São Paulo, Minas Gerais, and Mato Grosso do Sul.

CADE documents said Yara wants to raise funds to “reallocate capital,” while FassAgro said the acquisition will “expand its activities in the fertilizer sector,” which Valor International estimated at roughly 10% of the NPK final fertilizer market in Brazil. CADE has approved the transaction without restrictions.

According to CADE, the ENG Group operates in the fertilizer industry only through FassAgro and is not present in any of the other links in the agricultural inputs production chain. FassAgro makes sporadic sales of phosphoric acid and urea not consumed by its own production of NPK fertilizers, but the company does not produce basic nitrogen fertilizers.

European Gas Prices Spike After Ukraine Action

Europe, Natural Gas, News Briefs, Russia, Ukraine

European gas prices soared to the highest level this year following a report that Ukrainian troops seized the key gas-transit point of Sudzha, Bloomberg reported. Sudzha is the only remaining gas intake point for Russian pipeline gas going to Europe via Ukraine after the other major entry point, Sokhranovka, was put out of service in May 2022.

Benchmark futures jumped as much as 5.8% to €38.79 a megawatt-hour, surpassing the previous intraday high in early June. The unofficial Russian military blog Rybar said Ukrainian troops seized the gas intake point near the border town of Sudzha in Russia. The claim couldn’t be independently verified. Russia’s state-controlled Gazprom PJSC declined to comment, as did Ukraine’s defense ministry and general staff of the armed forces.

Traders have been on alert for disruptions at the transit point – a key remaining link carrying Russian pipeline gas to Europe – a as fighting intensifies on the border with Ukraine. Any halt in flows would likely cause a spike in prices, affecting consumers and industries as Europe continues to find its footing from an energy crisis caused by the war.

It’s unclear whether Gazprom will choose to continue sending flows through Sudzha if it has indeed been captured by Ukraine. Russian President Vladimir Putin accused Ukraine of a “large-scale provocation” by sending hundreds of troops into Russia’s Kursk region, the biggest assault on Russian territory since he ordered the 2022 invasion of its neighbor.

Austria and Slovakia are the primary remaining importers of Russian pipeline gas in Europe after Gazprom throttled deliveries to Germany and other countries two years ago. While those flows may stop when a transit deal expires at the end of this year, a sudden and earlier disruption could jolt the global gas market, intensifying global competition for liquefied natural gas cargoes.

OCI Announces Sale of Beaumont Low-Carbon Ammonia Project to Woodside

ADNOC - Abu Dhabi, Ammonia, Australia, Blue Ammonia, Clean Ammonia, Featured, Low-Carbon, Texas

OCI Global on Aug. 5 announced that it has entered a binding equity purchase agreement for the sale of 100% of its stake in the low-carbon ammonia project under construction in Beaumont, Texas, to Woodside Energy Group Ltd., a global energy company based in Australia, for $2.35 billion.

OCI will continue to oversee the construction and operationalization of the 1.1 million mt/y blue ammonia plant. The transaction is subject to regulatory approval and is expected to close in the second half of 2024.

The Beaumont plant is the world’s first large-scale, low-carbon intensity hydrogen-based greenfield ammonia facility, which began engineering in late 2021, construction in December 2022, and is expected to produce the first blue ammonia in 2025. In its first phase, the project will result in the capture and sequestration of 1.7 million mt/y of CO2.

“This pioneering investment will contribute to the global availability of low-carbon intensity ammonia, with significant potential to reduce carbon emissions in hard-to-abate sectors, including existing markets in fertilizer and industrial sectors, as well as in new applications in power and shipping,” said OCI Chairman Nassef Sawiris.

“We are confident that in Woodside we have found the rightful custodian for this landmark asset and its talented employees,” Sawiris continued. “Under Woodside’s leadership, OCI Clean Ammonia will play a vital role in the global energy transition, delivering new energy products and lower carbon services to reduce Woodside’s customers’ emissions globally.”

The sale of the Beaumont facility is the third major transaction announced by OCI since December, when it reported the sale of Iowa Fertilizer Co. to Koch Ag & Energy Solutions LLC (GM Dec. 22, 2023) and the sale of its stake in Abu Dhabi-based Fertiglobe Plc to UAE state-owned oil giant ADNOC (GM Dec. 15, 2023).