All posts by jlarareo@bloomberg.net

Comment Period Ends for Hydrogen Tax Credit

Clean Ammonia, Low-Carbon

The open comment period for the US Treasury guidance on the 45V Production Tax Credits ended on Feb. 26 and generated more than 29,000 letters from industry stakeholders. Many have criticized the guidance as being overly restrictive, favoring stricter interpretations of low-carbon hydrogen production that could harm the growth of the industry.

The 45V Section of the Inflation Reduction Act allows for a production tax credit of up to $3/kg of hydrogen produced. Ammonia producers who produce their own hydrogen can be eligible for the credit if they follow the low-carbon production guidelines. A public hearing on the guidance is set for the end of March.

CVR 4Q Income Drops, Volumes Up on Lower Prices; Strong Fall Ammonia Season Reported

Ammonia, Earnings, Featured, Indicators, Natural Gas, News, UAN

CVR Partners LP reported fourth-quarter net income of $10 million on net sales of $141.6 million, down from the year-ago $95.4 million and $212.2 million, respectively. EBITDA was $37.9 million, down from $122.3 million.

Full-year net income was $172.4 million on sales of $681.5 million, down from 2022’s $286.8 million and $835.6 million, respectively. EBITDA was $281.1 million compared to 2022’s $403.2 million.

“CVR Partners reported solid operating results for the full-year 2023 driven by safe, reliable operations, with a combined ammonia production rate of 100% for the year,” said Mark Pytosh, CEO of CVR Partners’ general partner. “Fall application ammonia demand was one of the strongest we have experienced in recent years.”

Pytosh told analysts that following a reset in nitrogen prices in the summer of 2023, prices increased in the fall, particularly for ammonia, driven by strong demand for application after harvest.

“Looking ahead, we expect nitrogen fertilizer demand to be strong for the spring planting season with attractive farmer economics,” Pytosh added. “In addition, the partnership is proud to have declared cumulative cash distributions of $17.80 per common unit during 2023.”

Pytosh told analysts that current inventories are lower than historical levels due to higher interest rates, with buyers unwilling to carry their cost of capital. He said much buying that normally occurs in December was instead shifted to January and February.

CVR is putting the company’s 2024 ammonia utilization rate at 86-91%, which reflects planned downtime at Coffeyville, Kan. The plant has been having converter issues and is currently down for a catalyst change, but is expected to be back up in early March.

Pytosh confirmed that a union strike continues at the company’s East Dubuque, Ill., nitrogen plant (GM Oct. 20, 2023), but he said the company has operated the plant in a safe and reliable manner since the strike began, with utilization of 94% in ammonia production in the fourth quarter. Pytosh said the only significant downtime in the quarter occurred in early October before the strike.

“We had record monthly production in December and shipped near-record volumes of ammonia in November for the fall application,” he said. “While it’s hard to predict the future, we believe we can continue to operate the plant safely and reliably at high utilization rates. We sincerely appreciate the hard work of our people at East Dubuque in supporting facilities to keep the plant running and meeting the needs of our customers.”

Pytosh said CVR is conducting engineering studies on the potential to use natural gas as an alternative feedstock to petcoke at its Coffeyville facility. He expects to present a decision to the Board of Directors by the end of the year. While the plant could conceivably operate on 100% natural gas or petcoke, the thinking is it would use both fuels, continuing to use petcoke sourced from sister company CVR Energy, but eliminating any third-party petcoke contracts.

He said CVR continues to evaluate brownfield development projects at both production facilities that could be attractive targeted capacity increases to the existing footprint.

Sales (000 st) 4Q-23 4Q-22 2023 2022
Ammonia 98 77 281 195
UAN 320 261 1,395 1,114
Plant Gate Price $/st 4Q-23 4Q-22 2023 2022
Ammonia 461 967 573 1,024
UAN 241 455 309 486
Production (000 st) 4Q-23 4Q-22 2023 2022
Ammonia – gross 205 210 864 703
Ammonia – net 75 75 270 213
UAN 306 308 1,369 1,140
Feedstock* 4Q-23 4Q-22 2023 2022
Petroleum Coke 77.09 53.36 78.14 52.88
Natural Gas ($/mmBtu) 2.95 6.68 3.42 6.66

*Used in production

The Andersons Report Increased 4Q Income; Nutrients & Industrial Have “Mixed” Quarter

Earnings, Featured, Indicators, News

The Andersons Inc. reported fourth-quarter net income attributable to the company of $51.2 million on sales of $3.2 billion, up from the year-ago $9 million and $4.68 billion, respectively. Adjusted EBITDA was up at $135.1 million from the year-ago $103.7 million.

The Andersons said Renewables had an excellent fourth quarter with record ethanol production and strong corn to ethanol yields at the company’s four ethanol plants. In the Trade segment, the company’s eastern grain assets had good results from improving basis after a later harvest coupled with income from drying wet corn.

The Nutrient & Industrial (N&L) had a mixed quarter, the company said, with year-over-year improvement from its ag supply chain product lines.

“With these results, we are reporting a 30% year-over-year improvement in adjusted EBITDA for the quarter, leading to a full year adjusted EBITDA of $405 million, just behind last year’s record of $412 million, and well above our previously disclosed range of $350-$375 million,” said President and CEO Pat Bowe.

“Looking forward, we acknowledge a shift in fundamentals of the commodity markets with increased global stocks,” Bowe continued. “Our mix of North American storage and ethanol production assets and combined with strength in merchandising positions us well to benefit from these market shifts.”

Bowe said the company saw good results from recent investments in ingredients supplied for pet and human consumption. “We are actively pursuing opportunities for growth in the Renewables space, including carbon reduction plans and increased renewable diesel feedstock merchandising,” he noted, adding that the company has “a robust pipeline of opportunities that include both investment in our facilities and M&A with a strong balance sheet to support this growth.”

The Andersons reported full-year net income attributed to the company of $101.2 million on sales of $14.8 billion, down from the year-ago $131.1 million and $17.3 billion. Adjusted EBITDA was $405.1 million compared to 2022’s $412 million.

The N&L segment reported fourth-quarter net income of $1.4 million from continuing operations attributable to the company, down from the year-ago $1.72 million. Adjusted net income for the segment was up at $2.1 million, with the company citing higher volumes of core agriculture products. The company said it remains optimistic for a good spring application season as nutrient prices have stabilized and farm economics should still incentivize application of crop inputs.

“Even with an expected reduction in farmer income, we continue to anticipate solid demand for fertilizer and specialty liquids that we supply our N&L segment,” Bowe told analysts.

“In our turf products lines, we are taking steps to improve our operations and continue to look for further opportunities in this space,” he added. “We continue to explore North American agricultural growth opportunities.”

Fourth-quarter N&L results included a $2 million charge relating to a standstill agreement for an acquisition that the company elected not to pursue.

Fourth-quarter N&L sales were down at $205.3 million from the year-ago $255.1 million, while adjusted EBITDA from continuing operations was $11.2 million, up from the year-ago $10.5 million.

Full-year N&L income was $25 million on sales of $943.4 million, down from the year-ago $39.2 million and $1.1 billion. Adjusted EBITDA was $62 million, down from 2022’s $73.1 million.

EuroChem to Inaugurate Serra do Salitre Complex in March

Brazil, Featured, News, Phosphate, Phosphoric Acid, South America, Sulfuric Acid

EuroChem Group AG will inaugurate its phosphate fertilizer production complex in Serra do Salitre in Brazil’s southeastern Minas Gerais state on March 13, according to a Valor International report, citing an interview with the company’s Head of South America, Gustavo Horbach

The Zug-based fertilizer group reported in late December that the Salitre complex was 95% complete and operations would begin in February-March (GM Jan. 26, p. 25). It said at the time that it had received the license to start operations at the complex’s sulfuric acid and phosphoric acid units.

The complex will have a production capacity of 1 million mt/y of phosphate fertilizers, comprising MAP/NP and SSP/TSP products. EuroChem expects to produce 500,000 mt of fertilizers in the first year of operation and aims to reach full production in 2025. EuroChem has invested a total of $1 billion in Serra do Salitre, including the acquisition cost.

The group bought the Serra do Salitre project from Yara International ASA in 2021, when the project was 50% complete, paying some $410 million (GM Aug. 6, 2021). The acquired assets also included phosphate mining operations with an annual production capacity of 1.2 million mt/y of phosphate rock. 

With the start of operations at the new production complex, EuroChem’s total volume of fertilizer deliveries in Brazil in 2024 is anticipated to reach 7.5 million mt, according to the report, citing Horbach. This volume is some 1 million mt more than in 2023, when EuroChem supplied Brazil with 6.5 million mt of fertilizer, he said.

With its newly operational Serra do Salitre complex, EuroChem anticipates that Brazil’s reliance on imported fertilizers could decrease by 15%, Horbach told Valor International. The group aims to deliver 10 million mt of fertilizer to the Brazilian market by 2025, “positioning itself as a competitor to Mosaic and Yara in the country’s fertilizer production market,” according to the report. 

Horbach said in another interview in September last year that EuroChem aims to reach a capacity of 10 million mt/y of installed and operating fertilizer production capacity in Brazil by 2025, and already had achieved some 8.8 million mt/y by August 2023 (GM Sept. 8, 2023).

In Brazil, EuroChem owns a 79.98% controlling stake in Fertilizantes Heringer SA (GM June 30, 2023) and 100% of Brazilian fertilizer blender and distributor Fertilizantes Tocantins (GM Aug. 21, 2020).

Orica Continues Strong Performance in FY2024

Australia, Earnings, News, News Briefs

Australian explosives manufacturer Orica Ltd. reported that the momentum that underpinned the company’s strong performance in its 2023 financial year (Oct.1, 2022-Sept.30, 2023) has continued into the first four months of FY2024. 

In its Feb. 15 business update statement, the company cited the continued execution of its strategy coupled with strong demand for products and services across the mining value chain. As a result, Orica said the outlook for the first half of FY2024 from continuing operations has “improved slightly” from the outlook at the FY2023 results on Nov. 9, 2023.

“The positive momentum from the second half of the 2023 financial year has continued as a direct result of our continued focus on executing our strategy, strong customer demand, and increased earnings from new technology offerings, and these efforts will be reflected in our financial performance in the first half of 2024,” said Orica Managing Director and CEO Sanjeev Gandhi.

Gandhi believes external challenges remain, but the company will continue to work hard to mitigate the impact of these on its business. As previously reported at the time of its FY2023 results, Orica is undertaking several major turnarounds in the first half of FY2024. 

The first stage of a scheduled six-yearly ammonia plant turnaround at Kooragang Island, New South Wales, was completed as planned, with the plant resuming normal operations in November 2023. The planned second stage has commenced and is scheduled to be completed by mid-March.

The first stage of Kooragang Island’s ammonium nitrate (AN) prill tower emission abatement installation was also completed. The second and third phases will now be combined and completed this June, reducing the impact on production.  Following this turnaround, the prill tower abatement system will be fully operational, further improving the air quality emissions from the site, Orica said.

At the Yarwun site in Queensland, the nitric acid plant (NAP) 3 and the AN 2 turnaround is planned for this March for approximately 30 days. The company said the tertiary abatement installation on NAP 1 and NAP 2 is also well-advanced, with completion expected in April and October respectively.

Orica also said the preparation for the planned turnaround at the Carseland site in Alberta, Canada, in late FY2024 is also progressing as expected. The company said it does not expect any impact on customer supply from these scheduled turnaround events.

Orica reported a net profit after tax (NPAT) of A$295.7 million in FY2023, including A$73.3 million of significant items expense after tax. This compared to A$60.1 million in FY2022. FY2023 underlying EBIT from continuing operations was up 24% year-over-year before individually significant items, at A$698.1 million 

Orica now expects to complete the acquisition of Terra Insights from Vance Street Capital LLC by the end of March, with the relevant approvals and closing conditions progressing as planned. The CAD$505 million (approximately $373.8 million at current exchange rates) deal was announced in December last year.

“Terra Insights represents a complementary addition to Orica Digital Solutions and the successful GroundProbeTM business, adding additional products and capabilities across the mining and civil infrastructure value chains and allows Orica to establish a globally leading geotechnical and structural monitoring service,” Gandhi said.

Orica also reported that it has completed stage 1 of the sale of surplus land at Deer Park, Victoria, to Australian industry super fund UniSuper for A$260 million (approximately $170 million at current exchange rates), with all sale conditions being met and cash settlement completed on Feb. 14. The sale includes some 66 hectares of surplus land, or roughly half of Orica’s total surplus land holdings at Deer Park. 

The company reported the net profit from the sale is approximately A$173 million and will be recognized as an individually significant item in first-half FY2024.

Orica expects to offer the remaining surplus land at the site (stage 2) to the market in the future, pending the completion of remediation activities, securing approvals from relevant authorities, and supportive market conditions.

BHP Posts Flat Earnings; Updates on Jansen Stage 2

Earnings, News, Potash

BHP Group Ltd. reported this week that construction of its Jansen Stage 2 (JS2) potash project in Saskatchewan is expected to start in the fourth quarter of its current fiscal year, which ends June 30, 2024. 

As previously reported, construction is expected to take approximately six years, with first production expected in FY2029, followed by a three-year ramp-up period. Once fully ramped up, JS2 will provide some 4.36 million mt/y of potassium production capacity.

Jansen Stage 1 (JS1) is now 38% complete (GM Jan. 19, p. 25) and remains on track to deliver first production at the end of calendar year 2026, with a two-year ramp-up period. This first stage will have capacity to produce 4.15 million mt/y of potassium chloride.

BHP said earthworks at JS1 continued during the first half of FY2024, with the concrete foundations for the mill nearing completion. In the second half of FY2024, the group expects to award all remaining major equipment and construction packages for JS1 and said it will continue to progress underground mine construction activities.

The group expects to spend $1.2 billion on Jansen in FY2024, of which $0.53 billion was spent in the first fiscal half year, according to BHP’s first-half FY2024 results, released on Feb. 20. BHP is spending an estimated $5.7 billion on JS1, and last October gave the go-ahead for a further $4.9 billion investment on JS2 (GM Nov. 3, 2023).

BHP’s positive outlook for global potash markets remains intact. It noted that existing operations in Russia and Belarus are now back to around four-fifths of pre-sanction capacity, with global shipments tracking at 93% of calendar year 2020 levels.

In the medium term, the group expects existing capacity in Russia and Belarus to return to normal operating rates but expects new projects in the region to face “significant delays” versus pre-sanction timelines.

Longer term, BHP still sees “a compelling demand picture,” together with rising geopolitical uncertainty and the maturity of the existing asset base, to be “an attractive, accelerated entry opportunity” in a lower-risk supply jurisdiction such as Saskatchewan.

BHP posted a first-half FY2024 underlying attributable profit of $6.6 billion, largely unchanged from a year ago. The group cited strong revenue generation and disciplined cost control. First-half revenue increased by 6%, to $27.2 billion, up from $25.7 billion the previous year.

However, the group reported an exceptional loss related to the Samarco dam failure and impairment of its Western Australia Nickel assets, which decreased attributable profit by $5.6 billion, to $0.9 billion versus the prior year’s $6.5 billion. 

BHP declared an interim dividend of US$0.72 per share for the first half of FY2024, compared with $0.90 per share a year earlier.