All posts by mickeybarb@charter.net

Orica Completes Sale of Minova; Continues to Expect Strong 1H-FY2022

Australia, Europe, News, News Briefs

Melbourne-based explosives manufacturer Orica Ltd. completed the sale of its Minova business to the Aurelius Group, a European-based investment firm, for A$180 million (approximately US$130.9 million at current exchange rates) on Feb. 28.

The company said it received A$149 million cash at completion, after allowing for debt and debt-like items, adding that any potential adjustments for working capital and debt-like items will be determined based on the final completion accounts.

The expected profit on disposal, as well as release of the foreign currency translation reserve, will be presented as an individually significant item in Orica’s first-half FY2022 results.

Orica and the Aurelius Group announced the agreement to sell Minova, which delivers ground support solutions for the mining, civil/tunneling, geotechnical, and construction industries, to Aurelius in December (GM Dec. 17, 2021). Orica had revealed its intention to pursue a sale of the Minova business last May (GM May 21, 2021).

Orica Managing Director and CEO Sanjeev Gandhi said the sale of Minova “is consistent with our refreshed strategy, which identified the subsidiary as non-core to Orica.” The divestment will allow the company “to focus on its four key business verticals of growth – mining, quarry and construction, digital, and mining chemicals.”

Orica said it continues to expect its first-half performance in the 2022 financial year, which runs to Sept. 30, to be stronger than the prior-year corresponding period (GM Nov. 12, 2021).

The company cited the positive momentum leading into the year associated with improved global commodity markets, which, it said, will result in volume growth in line with global GDP growth. It said pricing in contract negotiations is expected to broadly mitigate rising input costs and pass-through lags.

It noted security of supply for its customers remains a priority in a tightening global ammonium nitrate (AN) market due to geopolitical issues and supply chain disruptions, which it said will result in increased trade working capital.

Orica reported all of its continuous manufacturing plants have been operating to required available capacity as determined by market demand. Two planned turnarounds have been completed in the first fiscal half to date.

The turnaround of the AN Carseland site, 40 km south-east of Calgary, Canada, which started in September 2021 was completed in October. The Yarwun, Queensland, turnarounds for two nitric acid plants, one AN plant, and the emulsion manufacturing plant were all completed in November 2021.

The company said the outlook for its financial year 2022 remains unchanged, subject to market conditions.

Shareholders of Croatia’s Petrokemija Approve Delisting

Croatia, News, News Briefs

Shareholders of Croatian fertilizer producer Petrokemija d.d. on Feb. 28 approved a proposal to delist the company’s shares from the Zagreb Stock Exchange.

The shareholders also authorized the company to buy own shares, according to a SeeNews report, citing a stock exchange filing.

The shareholder vote had been due to take place on Feb. 21 but was postponed due to the lack of quorom.

Petrokemija’s management and supervisory board approved proposals for the delisting and for its management to acquire own shares from the company’s shareholders in January (GM Jan. 14, p. 30).

The company has said there are not any major benefits from trading on the regulated market, and delisting could save the firm 100,000 kuna a year (approximately $15,000 at current exchange rates), according to an earlier report by Croatian daily newspaper Poslovni Dnevnik.

In a separate development, Croatia’s state-owned fund for enterprise restructuring and privatization CERP has so far not taken a decision regarding a binding bid for the acquisition of Petrokemija by Turkish holding company Yildirim. CERP is the Croatian fertilizer company’s second largest shareholder, with a 17.90 percent stake.

According to earlier reports, Yildirim’s bid was valid only until Jan. 31 (GM Jan. 14, p. 30).

Yildirim owns the Turkish fertilizer producer Gemlik Gubre and is Turkeys biggest CAN and ammonia producer, and third largest fertilizer and chemicals trading company.

E.U. Moves to Full Ban of Belarusian Potash, Adds More Products

Belarus, Europe, News, News Briefs, Potash

The European Union (E.U.) on March 2 approved new sanctions against Belarus for its role in supporting Russia’s invasion of Ukraine, and has effectively banned about 70 percent of all imports into the European bloc from Belarus.

The new measures include a full ban on imports of Belarusian potash into the European bloc, closing loopholes under existing E.U. sanctions on Belarusian potash imposed last June and which came into force on June 25 (GM July 2, 2021; June 25, 2021).

The earlier measures excluded a key grade of Belarusian potash from the import ban, which also included a transit ban via E.U countries. Potassium chloride with a potassium content evaluated as K2O by weight, exceeding 40 percent but not exceeding 60 percent on the dry anhydrous product, was not included on the earlier sanctions list. The earlier measures only affected around 20 percent of Belarusian potash exports to the E.U.

This week’s new approved sanctions will also include contracts signed before the adoption, and companies will have three months to close open contracts.

Belarusian potash marketer and exporter JSC Belarusian Potash Co. (BPC) in any case last month was forced to declare force majeure after it could not find alternatives to railing product to the Lithuanian port of Klaipėda (GM Feb. 18, p. 1).

E.U. officials said the risk of banned products being exported via Russia or other countries would be addressed by customs authorities.

The bloc’s fresh economic sanctions also target Belarusian wood, timber, steel, and iron exports, which were not covered by previous sanctions, and cumulatively represent almost 40 percent of all Belarusian exports to the E.U. Other sectors hit are cement, rubber, and fuels.

Under the strengthened sanctions, the E.U. will also stop exporting advanced dual-use technology to Belarus.

In addition, 22 high-ranking members of the Belarusian military involved in the aggression against Ukraine have been added to the E.U.’s existing sanctions list against Belarusian individuals.

Union Members Vote in Favor of Strike Against CP Rail; Industry Warns of Fert Shipping Impact

Canada, Featured, News

The Teamsters Canada Rail Conference (TCRC) reported on Feb. 28 that more than 3,000 union members who work as engineers, conductors, and train and yard employees for Canadian Pacific Railway Ltd. have voted in favor of a strike action.

TCRC served a notice of dispute to the federal labor minister in early February, citing issues related to wages, benefits, and pensions (GM Feb. 25, p. 1). TCRC said 3,062 ballots were sent to members, with 96.7 percent voting in favor of a strike action. The 17-day voting period ended on Feb. 28 at 6:00 p.m. EST.

“With the show of your overwhelming support, we are hoping that this will encourage the company to negotiate terms acceptable to you, the members,” said a TCRC notice to union members.

The union said it will continue in an ongoing mediation process with a federally-appointed mediator/conciliator, with meetings planned for March 11-16. A legal work stoppage can only take place 21 days after the conciliation process is complete, but the threat of a possible strike on the cusp of the spring planting season was raising concerns within the fertilizer industry.

“There is concern in the market about the looming CP strike as the supply chain already appears to be bottlenecked heading into spring,” commented one Western Canada source, who noted existing shipping backlogs due to slower rail times and the cross-border vaccine requirements. “From our perspective, we are just trying to get as much of our purchased tons on hand as we possibly can.”

“Certainly there will be an impact in the full chain” if the strike takes place, another industry source told Green Markets. “A lot of shipments by rail will already be in place in the next month. Then truck is more critical. Truck freight has gone up substantially as well due primarily to fuel surcharges.”

In an email to Bloomberg, Nutrien Ltd. said the fertilizer industry is still “reeling” from impacts related to COVID-19, sanctions on Belarus, and Russia’s invasion of Ukraine.

“The global food supply is already stretched and cannot afford further negative impacts at this time,” the company said in a statement. “We would be very disappointed to see a labor dispute have such a significant impact on global agricultural supply chains, and consequently, we would hope that the Canadian government will consider intervening to avert another transportation crisis.”

If the walkout proceeds, it will be the fourth time in 10 years that CP employees have found themselves in a strike position. The last occurred in May 2018 (GM April 20, 2018) and involved 3,300 CP employees. The strike ended within days and caused few supply chain disruptions.

A CP strike in May 2012 (GM May 28, 2012), however, caused widespread shipping disruptions and prompted numerous complaints from trade associations and affected industries before back-to-work legislation was eventually approved to end the walkout (GM June 4, 2012). TCRC went on strike against CP again in February 2015 (GM Feb. 17, 2015), but union members returned to work just three days later after the Canadian government indicated it would act quickly to introduce back-to-work legislation to end the strike.

Fertilizer shipments with CP competitor Canadian National Railway Co. (CN) have also been impacted by a number of disruptive labor disputes, including a TCRC strike in November 2019 that prompted calls from Nutrien, Canpotex, and Fertilizer Canada for government intervention to end the strike (GM Nov. 22, 2019). The eight-day labor action forced CN’s network to run at only 10 percent of capacity.

Last minute labor deals averted earlier TCRC strikes at CN in October 2013 (GM Nov. 4, 2013), February 2011 (GM Feb. 11, 2011), and October 2010 (GM Oct. 11, 2010). A week’s long strike at CN in February-March 2007 (GM March 5, 2007), however, prompted numerous calls from fertilizer industry companies for federal intervention to end the strike.

U.K. Bans Russian Ships from its Ports

DAP/MAP, News, News Briefs, Russia, United Kingdom, Urea

U.K. fertilizer imports will be impacted after the country’s government banned Russian ships from its ports as part of an additional raft of sanctions, including further economic sanctions, imposed against Russia following its invasion of Ukraine.

U.K. Transport Secretary Grant Shapps on March 1 instructed all U.K. ports from “today” to deny access “to any vessel that is flagged, registered, owned, or operated by – or connected to – Russia.”

The U.K. is the first country to make such a move, but the E.U. is considering a ban on Russian ships entering the bloc’s ports.

“By banning Russian ships from our ports, we are further isolating Russia and crushing its economic capabilities, starving Putin’s war machine,” Shapps said.

The British Ports Authority clarified that the U.K. port ban does not affect Russian seafarers on ships not connected to Russia.

The U.K. authorities will also gain new powers to detain Russian vessels, according to the U.K. Foreign, Commonwealth, & Development Office and Department for Transport.

Urea and DAP supplies will be the most impacted. Russia was the source for 17 percent of the U.K.’s urea imports and 38 percent of its DAP imports last year. The U.K. imported 715,166 mt of urea and 127,323 mt of DAP in 2021, according to Trade Data Monitor.

Tim Morris, Chief Executive of the U.K. Major Ports Group, the trade association representing larger commercial ports in the U.K., said Russian trade made up only about 2-3 percent of total traffic that moves through U.K. ports, as cited by a BBC news report. However, Morris added there are some particular concentrations in trade in commodities like oil, liquefied natural gas, and some agricultural products.

According to U.K. media reports citing Shapps, the U.K. government is preparing “further detailed sanctions against Russian shipping.”

Euro Gas Prices Hit Record Level before Easing Amid Traders, Shippers Unease

Europe, News, News Briefs

European benchmark gas futures this week eased back on gains after hitting a first-time record of €200 a megawatt- hour (approximately $222 at current exchange rates), amid the escalating violence in Ukraine following Russia’s invasion of the country on Feb. 24 and tough new Western sanctions targeting Moscow.

After trading within the €100 per megawatt-hour during the first half of this week, the benchmark front-month European natural gas futures contract soared to €200 per megawatt-hour on the Dutch TFF in Amsterdam on the morning of March 3, its first time on record.

However, subsequent trading saw the front-month contract (currently April) ease to €147.5 a megawatt-hour by 4:59 p.m. GMT, down 10.899 percent on the day.

As of 1.0 pm (GMT) on March 4, the front-month contract was up at €188.635 a megawatt-hour, up 17.294 percent on the start of the day’s trading.

The gas price swings come against a backdrop of already steep price hikes over the past 12 months in Europe and historically low gas inventories across the region.

“In the short-term, this crisis is adding to the ongoing energy crunch, particularly in Europe,” said Jarand Rystad, the CEO of Oslo-based independent energy research and business intelligence company Rystad Energy, in a research note on March 3, as cited by Bloomberg.

While Western penalties on Russia are not specifically targeting Russian natural resources, traders and shippers are shying away from dealing with Russian suppliers, including the energy trading arm of state-run oil and gas producer Gazprom PJSC, according to a Bloomberg report.

Russian gas continues to flow through pipelines to Europe, including those transiting Ukraine – that is, as of March 3 – with reports that flows had increased since the invasion last week.

The European Commission is set to propose measures next week that outline how the European Union could wean itself off Russian gas, which makes up around 40 percent of the imports (GM Feb. 25, pp. 1 and 34). However, it likely would take years to implement.

Poland Says Could Last at Least a Month without Russian Gas Deliveries

Natural Gas, News, News Briefs, Poland, Russia

Poland faces no threat of natural gas shortages if Russia halts Polish deliveries, but if Russia were to stop supplies to the whole of Europe it would cause “some trouble” for Poland, the country’s Polish Press Agency reported, citing Pawel Majewski, CEO of the country’s state-owned oil and gas group, PGNiG, who was speaking to local radio broadcasters last weekend.

Majewski said Poland could last “at least a month” if Russian gas supplies were to be halted, but he did not specify whether he meant supplies to Poland or to Europe.

Nord Stream 2 Bankruptcy Reports

Germany, News, News Briefs, Russia

Nord Stream 2 AG, the operator of the controversial Russian gas pipeline under the Baltic Sea from Russia to Germany, said this week it could not confirm reports that it has filed for bankruptcy amid a raft of international sanctions against Russian assets, according to a Bloomberg report.

Nord Stream 2 AG is owned by Zug, Switzerland-based Gazprom International Projects LLC, a subsidiary of Russia’s state-run gas producer Gazprom PJSC.

In a statement, cited by Bloomberg, Nord Stream 2 AG said it had “only informed the local authorities that the company had to terminate contracts with employees following the recent geopolitical developments leading to the imposition of U.S. sanctions on the company.”

The U.S. imposed tougher penalties on Nord Stream AG and its corporate leadership last week.

Following Russia’s invasion of Ukraine, Germany suspended its certification of the pipeline (GM Feb. 25, p. 1), which was completed in December following delays due to earlier sanctions on insurers and vessels involved in building the project. According to Germany’s Vice Chancellor Robert Habeck speaking on Feb. 24, as cited by Bloomberg, the pipeline is unlikely to start “in the medium term.”

German regulator Bundesnetzagentur halted the certification process in November, after requesting the Nord Stream holding company to re-organize its legal structure to conform with German Law (GM Nov. 19, 2021).

Austrian oil and gas company OMV AG, which owns a 75 percent stake in polyolefins and fertilizers major Borealis AG, said on March 1 it will review its involvement in the Nord Stream 2 pipeline.

OMV also reported its Executive Board has decided not to further pursue negotiations with Gazprom on the potential acquisition of a 24.98 percent interest in the Achimov 4A/5A phase development in Russia’s Urengoy gas and condensate field, and to terminate the Basic Sale Agreement of Oct. 3, 2018.

The oil and gas company’s move increases speculation that OMV and Borealis may pull the plug on negotiations with EuroChem Group AG for the acquisition of Borealis’ nitrogen business, which includes fertilizer, melamine, and technical nitrogen products. Zug, Switzerland-based EuroChem is controlled by Russian billionaire Andrey Melnichenko.

Late last week, Upper Austria’s Economy Minister Markus Achleitner said Borealis should “reconsider” talks with EuroChem on selling its fertilizer business (GM Feb. 4, p. 1) after Russia’s invasion of Ukraine, the minister told Linz, Austria-based newspaper Oberoesterreichische Nachrichten, according to a Bloomberg report (GM Feb. 25, p. 31).

“In the light of these terrible acts, everything is up for review. That is why this merger needs to be questioned,” Achleitner is cited as saying.

EuroChem began exclusive negotiations to acquire Borealis’ nitrogen business after submitting a binding offer in early February. The offer valued Borealis’ nitrogen business on an enterprise value basis at €455 million (approximately $505 million at current exchange rates).

Missile Hits Building of Yara’s Ukraine Office; CEO Calls for Reduced Dependence on Russia

News, News Briefs, Russia, Scandinavia, Ukraine

Yara International ASA reported on March 1 that on the morning of Feb. 26 a missile hit the building of the Yara Ukraine office in the country’s capital Kyiv, but none of the company’s employees had been physically harmed, and all were accounted for.

Noting that Russia and Ukraine are world powers in a global and fragile food system, Yara President and CEO Svein Tore Holsether said it is essential to reduce the dependency on Russia.

The CEO warned about the long-term consequences of the war in Ukraine on global food supply, which will impact both the rich and the poor parts of the world.

“We are extremely concerned about the grave situation which is now unfolding in Ukraine and stand fully behind the Norwegian government’s condemnation of the Russian military invasion. At the same time, we are sourcing a considerable amount of essential raw materials from Russia, used for food production worldwide,” he said.

Holsether highlighted Ukraine is one of the world’s leading agricultural nations and the world’s second biggest within grains. He said Ukraine’s farmers are now entering a crucial stage in the agricultural season in which input factors such as fertilizer, seeds, and water will determine the yield of the coming harvest.

“The most extreme calculations indicate that if fertilizer is not added to the soil, the crops can be reduced by 50 percent by the next harvest,” warned the CEO.

He also noted that Russia is one of the largest producers of wheat, and has enormous resources in terms of fertilizer nutrients, as well as supplying 40 percent of Europe’s natural gas.

Holsether said Yara is both “a provider of solutions to the agricultural sector in Ukraine and a big buyer of raw materials from Russia,” and that the company “always complies with current regulations, sanctions, and its own guidelines.

“Free flow of goods across borders has been possible in a time with higher geopolitical stability. Now, with the geopolitical conditions out of balance, the biggest sources of raw material to Europe’s food production are being subject to limitations, and there are no short-term alternatives,” the CEO warned, adding that one potential consequence is that “only the most privileged part of the world population gets access to enough food.”

Holsether noted that while higher food and fertilizer prices may positively impact Yara’s bottom line in the short-term, long-term value creation for private companies can only be achieved through a sustainable food system with food being affordable and accessible to the world population.

“A world with unstable food supply is a world with famine in parts of the world, increased mortality, armed conflict, migration, riots, and destabilized societies, which can further accelerate geopolitical tensions,” said Holsether.

“It is therefore crucial that the international community come together and work to secure world food production and reduce dependency on Russia, even though the number of alternatives today is limited.

“This constitutes a difficult dilemma between continuing sourcing from Russia on a short-term basis or cut off Russia from the international food chains,” the CEO said, adding that the last option may have “considerable” social consequences. He believes these considerations are not to be taken by individual companies but need to be made by national and international authorities.

“The urgency now lies in helping Ukraine and the Ukrainian people. At the same time, we are pleading for the Norwegian and international governments to get together and protect the global food production and work together to decrease dependency on Russia,” said the CEO.

Severodonetsk Azot Production Halt

News, News Briefs, Ukraine

Ukrainian fertilizer plant Severodonetsk Azot, part of Group DF, stopped production following the outbreak of hostilities in the country, according to an Interfax report, citing a March 1 statement by owner Group DF.

The statement was issued following media reports that the plant’s warehouses containing ammonia were “booby-trapped,” according to the Interfax report. Group DF said all ammonia had been processed ahead of the production stoppage and all finished products had been taken off the premises.