All posts by hlancey@bloomberg.net

Unigel Wins Reprieve from Creditors

Brazil, News, News Briefs

Troubled Brazilian fertilizer and chemical producer Unigel Participacoes won additional time from a meeting with local creditors (GM Aug. 18, p. 28) to avoid breaching a covenant that would trigger a cross-default clause on its dollar debt, according to a Sept. 5 Bloomberg report.

A group of local creditors agreed not to take any action that could prompt the early maturity of bonds for a period of 90 days, or until the company concludes the restructuring of its local notes, according to people familiar with the matter.

The standstill gives the company breathing room as it negotiates new terms with local creditors. Holders are asking for substantial changes to the existing notes, including more collateral and equal treatment with other creditors such as global bondholders, in exchange for a delay on debt payments, the people said.

Unigel declined to comment.

Unigel is set to breach a covenant on its local bonds after lower fertilizer prices globally eroded earnings and sent its leverage ratio skyrocketing. Lending agreements or indentures for the company’s local notes require it to keep the ratio of net debt to adjusted EBITDA below or at 3.5 times. S&P Global Ratings says it could peak at near 10 times by year-end.

The company will likely breach the covenant with second-quarter results, the release of which have been postponed amid talks with local bondholders. If holders declare the early maturity of the local debt, it would trigger cross-default clauses on its 2026 dollar notes. The bonds, which traded near par until May, have since sunk to around 37 cents on the dollar.

Unigel was founded by Henri Slezynger, whose family fortune is valued at more than $2 billion, according to calculations by the Bloomberg Billionaires Index.

Argentina Narrows Search for $1 B Potash Investor

Argentina, Brazil, News, News Briefs, Potash

Argentina’s Mendoza Province has narrowed its search for a company to resume development of the Rio Colorado potash mine, a decade after Brazil’s Vale SA withdrew from the project (GM Jan. 13, 2018).

“We have completed the bid selection process,” according to a Sept. 4 post from Mendoza Governor Rodolfo Suarez on X, the social media platform formerly known as Twitter. “Now, we will move quickly in the final negotiation of the contract with the best qualified bidder.”

Under the advice of UBS Group AG, provincial authorities sought offers in a competitive process that initially drew the interest of more than 30 firms, according to Suarez. The winner will invest $1 billion over five years.

Mendoza, which is better known for its exports of Malbec wine than its vast mineral wealth, took over Rio Colorado after years of wrangling with Vale. The Brazilian company pulled the plug in 2013 after spending $2.2 billion to build almost half the mine. Vale acquired the potash project in February 2009 from Rio Tinto Plc (GM Feb. 9, 2009).

The original plans for the project proposed an initial 2.1 million mt/y capacity with a second phase increasing that to 4.35 million mt/y, as well as the construction of a railway spur of 350 km to transport the potash to Argentina’s Bahia Blanca port.

A more likely scenario for the project would be for an annual output of 1 million mt, which could be transported by truck, according to a 2021 Bloomberg report (GM Nov. 12, 2021), which cited provincial officials. This scenario would need an investment of some $1 billion. Absent the $1 billion investment, reports were that Mendoza may have been prepared to scale down the project still further simply to get it operational and to serve the Argentine and Uruguay markets.

Brazil Eyes Investment in Bolivian Fert Plants

Argentina, Brazil, News, News Briefs, Nitrogen, Peru, Phosphate, Potash, Urea

Brazil’s government is seeking to invest in new fertilizer projects in Bolivia that would produce nitrogen fertilizers, including urea, as well as potash and phosphates, according to a Bloomberg report, citing a statement by Bolivian Hydrocarbons and Energy Minister Franklin Molina.

Molina recently met with Brazilian Deputy Agriculture Minister Iraja Lacerda and other officials in La Paz. Molina said the proposed agenda also included collaboration in developing Bolivia’s bio-fuel industry. In addition, a delegation from Brazil’s Petrobras is expected to visit the country to discuss gas exploration.

Brazil is already the main customer of Bolivia’s only urea complex, Marcelo Quiroga Santa Cruz (formerly Bulo Bulo), which includes two plants. Brazil took an estimated 77% of the offtake in the first quarter, with some 20% going to the domestic market (GM May 5, p. 31). Bolivian urea also goes to Argentina, Paraguay, Peru, and Uruguay (GM Sept. 10, 2021).

The company reported that some 273,688 mt of urea was produced in first-half 2023, with 15% going to the domestic market and 85% for export. The main customers were Brazil and Argentina.

The granular urea complex, which has a 2,100 mt/d nameplate capacity, was restarted in September 2021 after a 22-month hiatus (GM Sept. 10, 2021). The facility began operations in September 2017, but has suffered a series of operational problems since then.

Bolivia is reported to be building a 60,000 mt/y NPK plant in Santivañez in Cochabamba Province with production targeted for 2023 (GM July 15, 2022). It would use urea from the Marcelo Quiroga Santa Cruz plant. The company has also announced plans to tender in 2023 for the engineering and design studies for a second urea plant (GM Jan. 27, p. 26).

Investors Consider Fertilizer, AN Plants in Peru

Ammonium Nitrate, News, News Briefs

Peru’s Economy and Finance Minister Alex Contreras announced that four companies have expressed interest in building a petrochemical complex that would include two fertilizer plants, according to bne IntelliNews citing Andina, Peru’s news agency. The plants would serve the domestic industry.

Ammonium nitrate would also be produced for the local mining industry. The fertilizer and ammonium nitrate plants would be built in the southern region of the country and would require an estimated investment of $1.5 billion.

Bangladesh Shuts Urea Plant, Diverts Gas to Another

Bangladesh, News, News Briefs, Urea

Jamuna Fertiliser Co. Ltd., a unit of Bangladesh Chemical Industries Corp. (BCIC), on Sept. 5 indefinitely closed its urea plant due to a gas shortage, according to The Business Standard.

BCIC opted instead to use the gas going to Jamuna at the newly built Ghorashal-Polash Urea Fertilizer Project (GPUFP), which is starting trial production with full commercial production of 2,800 mt/d expected by the end of the year (GM April 21, p. 30), the newspaper reported.

The Jamuna plant began production in December 1991 (GM Jan. 20, 1992), producing some 1,700 mt/d at that time. It was the country’s largest urea plant. GPUFP will now take that title.

In addition to Jamuna, BCIC has closed two other plants due to the shortage of gas – the Chittagong Urea Fertiliser Ltd. (CFUL) in November 2022 and the Ashuganj Fertilizer and Chemical Co Ltd. (AFCCL) in April 2023, according to the newspaper. This will leave BCIC with only two plants in operation – GPUFP and the Shahjalal Fertiliser Co. Ltd. There is concern that the BCIC will not meet its urea production goals with only two plants.

The multinationally-owned, export-oriented Karnafuli Fertilizer Co. (KAFCO) urea plant reportedly still receives gas and remains in production.

Indorama, Jindal Steel to Invest in Nigeria

Methanol, News, News Briefs, Nigeria, Urea

Indorama Corp., Singapore, is looking to invest $5-$7 billion in a methanol and urea project in Nigeria, the country’s Minister for Industry Trade and Investment Doris Uzoka-Anite told reporters in New Delhi, according to Bloomberg. The company has already invested about $5 billion in the country.

The minister spoke to reporters after Nigerian President Bola Tinubu held a meeting with Indian business leaders. She also announced that Indian steelmaker Jindal Steel and Power Ltd. is seeking to invest $5 billion to set up a steel plant in Nigeria.

Other possible investments were also announced. Skipper Seil Ltd. is looking to invest $1.6 billion in 100mw power generation plants in the nation’s northern states, while Nigeria and Military-Industrial Complex of India will partner to make Defense Industries Corp. of Nigeria 40% self-sufficient in local manufacturing and production of defense equipment by 2027.

Ethos to Loan $50 M for Potash Mine in Thailand

Asia, News, News Briefs, Potash, Thailand

US-based Ethos Asset Management has agreed to lend $50 million to Thai-Sing Potash Trading Pte Ltd. (TSPT) to develop a potash mine in Thailand, according to Bloomberg, citing a statement from Ethos.

The loan has a 15-year term, according to an Ethos spokesperson, who said TSPT will disburse $10 million every month for the next five months to mine project concessionaire and developer Asia Pacific Potash Co.

The mine is expected to start producing potash at the end of 2025 or early 2026, Ethos CEO Carlos Santos told Bloomberg in an interview.

EU 1H Urea Imports from Azerbaijan Up 76%

Ammonia, Europe, News, News Briefs, Urea

European Union (EU) countries imported 75,760 mt of urea from Azerbaijan in the first half of 2023, a 76% year-over-year increase, according to a bne IntelliNews report, citing EuroStat. The value of the urea imports increased 46%, to €30.174 million.

The top importers in the six-month period, according to the report, were Romania with 45,865 mt, up 420% year-over-year; Italy with 19,440 mt versus no deliveries in the previous year; Greece with 5,500 mt versus no deliveries in the previous year; Slovenia with 4,753 mt versus no deliveries in the previous year; and Poland with 180 mt versus no deliveries in the previous year.

EU countries imported a total of 78,651 mt of urea from Azerbaijan in 2022, a 32% increase on 2021’s import volume, according to the report.

Azerbaijan has been producing urea since the start-up in January 2019 of the State Oil Co. of the Azerbaijan Republic’s (SOCAR) ammonia and urea complex at Sumgayit, some 30 km from the capital of Baku (GM Jan. 18, 2019).

The plant has nameplate production capacity of 650,000-660,000 mt/y of granular urea. However, according to Trade Data Monitor data, global imports of urea from Azerbaijan totaled only 289,859 mt in 2021.

Ammonia

Ammonia, Black Sea, Brazil, California, Eastern Cornbelt, India, Market Watch, Middle East, Northwestern Europe, Pacific N.W., Tampa, U.S. Gulf, Western Canada, Western Cornbelt

US Gulf/Tampa:

The ammonia market was trending higher in the wake of last week’s Tampa close at $390/mt CFR for September. Although still too early for clear direction on October, sources said they expect another increase, citing production curtailments and additional strength in both inland and international ammonia prices.

Eastern Cornbelt:

Ammonia prices were strengthening in the Eastern Cornbelt, though most producers had reportedly pulled offers. Sources quoted the market at $625/st FOB in Illinois and Indiana for the latest prompt or prepay tons, well above the prior $500-$525/st FOB range.

Western Cornbelt:

Sources said most ammonia offers in the Western Cornbelt were pulled in early September, but the few indications that were reported suggest higher prices at $600-$625/st FOB for prompt or prepay tons, up significantly from the prior $500-$525/st FOB range. In the Northern Plains, new pricing was reported at the $650/st FOB level in Minnesota.

In the Southern Plains, the latest ammonia offers firmed to $500/st FOB Pryor, Okla., and $525/st FOB Enid, Okla., while truck pricing at Beaumont, Texas, jumped to $380/st FOB for limited business, up from the previous $270-$280/st FOB Gulf Coast truck market.

“It’s a bit of a quiet time of year for ammonia, but prices are following world market trends on ammonia and urea,” said one industry contact.

California:

Ammonia remained at $580/st DEL in California, with aqua ammonia referenced at $159/st FOB Stockton and $169/st FOB Sycamore.

Pacific Northwest:

Ammonia pricing jumped to $600/st FOB regional terminals for limited tons in the Pacific Northwest, up from the $460/st FOB summer price. “There are limited-to-no September loads,” commented one source, noting that most of the new business is likely for October shipment. Delivered ammonia offers were pegged at the $760/st level for railed tons from the Midwest.

The aqua ammonia market firmed to $155/st FOB in the Pacific Northwest, up from the prior $120/st FOB level.

Western Canada:

The last confirmed ammonia prices in Western Canada strengthened to C$900/mt FOB and C$1,000/mt DEL for October-December tons.

Production issues were reportedly impacting the market. Industry sources said Nutrien’s Joffre Nitrogen facility in Alberta remains down for another seven days after earlier reports indicated the plant would come back online on Sept. 7, while operations at Carseland and Redwater, Alta., continue at reduced rates. Nutrien declined to comment.

Black Sea:     

Turkey continues to work the spot market for the 40,000-50,000 mt of ammonia it needs each month. Sources said buyers have spread their requests wide, including Venezuela and Iran in the mix. While Turkey’s monthly requirement is well known, sources said buyers continue to place their orders on a month-to-month basis instead of securing long-term contracts.

Turkey imported 499,000 mt of ammonia in January-July, Trade Data Monitor reported, up about 27% from the year-ago 392,000 mt. July imports were 64,000 mt, a 23% increase from the 53,000 mt received in July 2022. Trinidad and Tobago led suppliers with 33,000 mt, Russia sent 13,000 mt, and Qatar added 10,000 mt.

India: 

After receiving no response in its August tender for 7,500 mt of ammonia, FACT tried again, closing the re-tender on Sept. 6. A single offer from Trammo was reported at $500/mt CFR, more than $100/mt above the prior landed price. Sources could not confirm whether an award was made as Green Markets went to press.

The $500/mt CFR offer is well above any other international market and appears to indicate Trammo seeing a need and moving to take advantage of it, an action traders described as unsurprising. Some questioned whether FACT needs the ammonia so badly that it would pay Trammo’s price, as there is some indication that the company may be able to operate without accepting the offer.

Middle East: 

Producers continue to hold out of the spot market, or at least remain quiet about any deals they may have done. Last month’s Nutrien/Saudi trade, reported at $400/mt FOB, continued to stand as the ammonia market’s last public deal, sources said.

Sources noted talk of producers quietly reaching out with offers at $430/mt FOB, but with no takers. One trader said the new offers were designed to reinforce the $400/mt FOB price as the basis for all future talks.

Northwest Europe:  

Ammonia prices remain stable. The production cost of ammonia in Europe continues at $400/mt ex-plant, leaving no room for any real shift in the imported price.

The bulk of the ammonia currently being received in Northwest Europe appears to have been brought in by companies for use in their own plants. In this way, the purchase price remains within the corporate structure and does not allow for pricing in the public market.

Brazil:

Exports of ammonia from Brazil are sporadic at best, said sources. Trade Data Monitor reported 48,000 mt of ammonia shipped from Brazil in the January-August period, down marginally from the 49,000 mt exported during the same period of 2022. August exports totaled just 20 mt, against 41 mt in August 2022.

Brazil will only export ammonia when its regularly scheduled imports exceed demand, sources have previously said. Exports begin to increase in 2022, noted one source. Shipments averaged 28,000 mt/y in 2017-2021, indicating increased export totals in 2022 and 2023.

January-August imports softened 34%, to 210,000 mt from 319,000 mt in the prior year. August imports were counted at 33,000 mt, falling from 48,000 mt in August 2022. Trinidad sent 17,000 mt, followed by 16,000 mt from the US.

Urea

Black Sea, Brazil, California, China, Eastern Cornbelt, India, Indonesia, Market Watch, Middle East, Pacific N.W., Turkey, U.S. Gulf, Urea, Western Canada, Western Cornbelt

US Gulf:

India’s sudden tender call on Sept. 4 caused urea prices to spike at NOLA. The market jumped to $450/st FOB on Sept. 4 for confirmed September tons, well above last week’s $340-$376/st FOB range. NOLA trades then fell to $390/st FOB on Sept. 5 before rising again to $425-$430/st FOB for limited business on Sept. 6-7.Sources said bids for October business also ranged broadly.

Eastern Cornbelt:

Urea prices ramped up quickly in the Eastern Cornbelt, fueled by surging NOLA barge prices in the wake of an unexpected tender call from India. Some regional suppliers reportedly pulled offers during the week until the market settles.

Sources quoted urea terminal prices in the $465-$490/st FOB range as the week progressed, where offers were available, up from last week’s $415-$450/st FOB, with the high confirmed at Cincinnati, Ohio. Urea prices were also up in the Northeast, with reports of new offers firming to $465/st FOB Fairless Hills, Pa., as of Sept. 5.

Western Cornbelt:

Most urea offers in the Western Cornbelt were pulled during the week due to a volatile and firming NOLA market, but sources said the St. Louis, Mo., market would be at a firm $460-$465/st FOB for new sales based on NOLA pricing.

In the Southern Plains, new offers were quoted at $470/st FOB Enid and $475-$490/st FOB Catoosa/Inola, Okla. In the Northern Plains, sources pegged the St. Paul, Minn., market firmly at the $480/st FOB level, with delivered tons reported in the $525-$550/st range in North Dakota.

California:

Granular urea was steady at $550-$600/st FOB Stockton, with prilled urea priced at the $620/st level FOB San Diego.

Pacific Northwest:

Urea was quoted at $530-$540/st FOB in the Pacific Northwest, up from $465-$470/st at last report, with the low confirmed at Rivergate, Ore. Delivered urea was pegged at $540-$570/st in the region, depending on location, up from the prior $490-$520/st rail-DEL range.

Western Canada:

Urea prices in Western Canada jumped to C$755/mt FOB on a spot basis during the week, up from the prior C$695-$720/mt FOB range, though most suppliers had reportedly pulled offers until the market settles. One source quoted a C$690/mt DEL level for December shipment late the previous week, but he said no new offers were on the table as of Sept. 4.

India: 

Rashtriya Chemicals and Fertilizers Ltd. (RCF) surprised the urea market, calling a tender to close on Sept. 15 with a shipping deadline of Nov. 14. One trader said the call came as he was talking to potential suppliers in China, forcing both sides to back away and reevaluate their positions.

A new tender was previously expected closer to Sept. 26, when the last of the urea from the Indian Potash Ltd. (IPL) tender is slated to be shipped. Industry watchers previously calculated that India would be about 2-2.5 million mt short of urea by the end of the year unless a strong tender was conducted before the end of September. New statistics that showed the shortfall could reach 3 million mt appear to have driven RCF to the early call.

At the same time, word of new restrictions on urea exports came out of China. Adding to the concern, reports indicated that while an overall limit on exports would be enforced, there is reportedly pressure from the central government to place an even bigger restriction on urea shipped specifically to India.

The restriction on Indian purchases appears to stem from political disputes between India and China. Sources noted that Chinese Premier Xi Jinping’s choice to skip the 2023 G20 Summit in India was seen as a snub to the Indian government. At the same time, the two countries are embroiled in an ongoing border dispute.

Sources were initially concerned the new restrictions would include the tonnage already booked for shipment to IPL. The issue was quickly settled, however, and vessels previously committed to picking up cargoes for IPL were allowed to berth and begin loading product. There remains some concern that there will not be enough time to secure all the tons promised out of China before the Sept. 26 deadline, however.

China:           

A memo from CNAMPGC issued earlier this week required urea producers to ensure they have enough tons to meet China’s mini-application season in October and November. The wording implied that material slated for export under the IPL tender might not be allowed to be shipped before the Sept. 26 tender deadline.

After many phone calls, sources said the situation was clarified. Product already cleared for export to India under the IPL tender could be shipped, while other tons currently undergoing inspection for export approval will also be allowed to be exported.

Late last month, sources expressed concern that the export inspection process could represent a roadblock to meeting the Sept. 26 deadline. Now, traders are apparently more concerned about the logistics of getting the urea from the factories to the ports and onto ships. One trader said the inspection process is taking less time than previously estimated, leaving the urea’s physical movement as the main issue.

The call to limit exports appeared to be directed at shipments that would occur in October and November, the same shipping window covered under the new RCF tender. Rumors surrounding the new limitations suggested an unwritten understanding that producers would be permitted to export to as many regional buyers as they like, but that no exports were to be directed to India.

Sources said they were unclear as to why India was reportedly blocked from receiving urea, though traders suggested both a long-standing border dispute between India and China, as well as reports that Chinese leader Xi Jinping will not attend the G20 Summit hosted by India this month as possible triggers.

The RCF tender call and the potential limiting of exports combined to shut down all discussions of pricing out of China, leaving prills in the low-$350s/mt FOB for export. Granular has been noted at a much higher price, but with availability limited to the domestic market. The domestic paper market moved from $300/mt to $354/mt ex-plant due to the recent events.

Black Sea:

Black Sea prilled urea prices reacted to the news from India and China, moving up to $357-$394/mt FOB from last week’s $320/mt FOB.

Indonesia:     

New sales of granular urea were reported at the last tender price of $367/mt FOB. So far, Pupuk has closed deals totaling about 130,000 mt for September shipping, sources said. Many of the tons are expected to go to Australia, though sources reported a vessel inquiry indicating that one cargo could be heading to India to cover an IPL award.

Export licenses for 2023 are nearly used up, players said. Indonesia is now expected to hold one more selling tender for October and November shipments, after which exports will likely dry up until second-quarter 2024.

Petronas reportedly closed a deal for 30,000-40,000 mt at $405-$410/mt FOB. This could be the level that Pupuk shoots for in its next selling tender. The price fits with discussions reported following the urea tender call by RCF.

Middle East: 

Producers remain focused on fulfilling their orders from regular contract holders and awards from the IPL tender. Sources said that when a price is mentioned, it is usually closer to $420/mt FOB than the low-$380s/mt FOB achieved under the IPL tender.

No one was surprised by the higher price indications from the region. Even without the RCF tender call and indications that China will be limiting urea exports to India, producers were looking to move the price up for the last quarter of the year, sources said.

A reported granular urea auction from Iran featured a price floor of $330/mt FOB. The bids in the tender all seemed to come in at $310/mt FOB. Following the RCF tender call, however, sources noted prices firming to $340-$345/mt FOB.

Prices out of Egypt opened the week with small sales in the $430s/mt FOB, while larger quantities were reported going for $455/mt FOB by the end of the week. Producers are expected to keep pushing for more next week. Sources estimated that prices could reach $470/mt without much effort.

Turkey:         

January-July urea imports firmed to 2.2 million mt, according to Trade Data Monitor,up dramatically from the 1.3 million mt on record through the same period of 2022. July imports of 261,000 mt were down slightly from 287,000 mt in July 2022. Oman captured 48% of the market with 124,000 mt, followed by Egypt with 82,000 mt.

Ethiopia:       

Ethiopia imported 557,000 mt of urea in January-August under deals for steady shipments received throughout the year, Trade Data Monitor reported,up 22% year-over-year from 456,000 mt. Egypt dominated suppliers with 350,000 mt, for 63% of the market.

August imports stood at 159,000 mt, rising from 50,000 mt in August 2022. Oman sent 108,000 mt – the country’s first shipments to Ethiopia since 2016 – followed by 50,000 mt from China.

Brazil:

Landed urea prices leapt by roughly 30% on Sept. 4, to $450-$455/mt CFR from last week’s $340-$355/mt, following a surprise Indian tender announcement and news that the Chinese government had temporarily halted vessel loading.

Sources cited rumors of difficulties in obtaining the necessary export permits for 400,000 mt of Chinese urea committed to the IPL tender by the shipping deadline. The market subsequently came to a standstill, players said, with most buyers planning to delay purchases for a few more weeks in an undersupplied market.

Rondonopolis followed the import market higher, jumping to $540-$590/mt FOB ex-warehouse from last week’s $480-$490/mt FOB. The price surge triggered inactivity in the region, with buyers awaiting the outcome of the Indian tender before making any moves. Earlier offers reported above $600/mt FOB ex-warehouse saw no deals closed at that level.

Trade Data Monitor put January-August urea imports at 3.9 million mt, an 11% decline from the year-ago 4.4 million mt. August imports of 478,000 mt were off 27% from the 657,000 mt logged in August 2022.