All posts by mickeybarb@charter.net

Ag Investment at Risk From Banking Woes, Says Corteva Agriscience CEO

News, News Briefs

Corteva Agriscience sees investment in agriculture in jeopardy from market chaos, company CEO Chuck Magro told attendees March 14 at the World Agri-Tech Innovation Summit in San Francisco. “The macro economic volatility we are currently experiencing – along with the banking situation we just saw – has potential to stifle innovation in agriculture,” said Magro. “We can’t allow that to happen.”

He said Corteva plans to increase investment in R&D and innovation by about 30% by 2025, up from roughly $1.2 billion today.

TFI Praises House Bill to Lower Energy Costs

News, News Briefs, U.S.

House Republicans on March 14 introduced the Lower Energy Costs Act (H.R.1), which includes provisions to reform and streamline the permitting process under the National Environmental Policy Act (NEPA). The bill will be considered on the House floor in late March, and was praised by several industry trade groups, including The Fertilizer Institute (TFI).

Introduced by House Energy and Commerce Committee Chair Cathy McMorris Rodgers (R-Wash.), House Majority Leader Steve Scalise (R-La.), Natural Resources Committee Chair Bruce Westerman (R-Ark.), and Transportation and Infrastructure Committee Chair Sam Graves (R-Mo.), the bill proposes to increase domestic energy production by reversing a number of Biden administration policies.

These include measures to limit the ability of states to block projects such as pipelines that run through their waters, and to repeal portions of the Inflation Reduction Act that provided funding to address climate change and pollution.

The bill also proposes to streamline energy infrastructure and exports and boost the production and processing of critical minerals. In addition, the bill contains language to limit the president’s authority to block cross-border project permits, such as Biden’s blocking of the Keystone XL pipeline.

TFI President and CEO Corey Rosenbusch said the bill would speed up a “burdensome, costly, and time-consuming permitting process that needlessly delays critical projects, including phosphate and potash mining.” Rosenbusch said the bill provides a streamlined and simplified permitting process for hard rock mining and other critical projects.

“Mining and permitting reform are vital to the fertilizer industry, as potash and phosphate are two of the three essential crop nutrients critical to crop production,” Rosenbusch said in a March 14 statement. “Delays are measured in years and in the millions of dollars, with those paying the price being consumers who are already struggling with the rising costs of everyday goods.”

As examples, Rosenbusch referenced a permit to mine phosphate in Florida that took nearly 10 years and tens of millions of dollars in expert fees, studies, legal analysis, and legal fees. He also referred to a mining expansion permit for an existing mine that has yet to be approved after more than 12 years and a cost of more than $25 million.

“Farmers need an affordable and abundant supply of fertilizer,” Rosenbusch said. “We strongly support legislation that can make environmental reviews more efficient, reduce duplicative regulatory burdens, provide clear paths to approval, and put timelines in place to ensure our farmers have the fertilizers they need to grow the food on which we all depend.”

The bill was blasted by Congressional Democrats, including Senate Majority Leader Chuck Schumer (D-N.Y.). “H.R.1 will lock America into expensive and volatile dirty sources of energy and will set America back a decade or more in our transition towards clean, affordable energy,” Schumer said in remarks on the Senate floor. “The package is a wish list for Big Oil, gutting important environmental safeguards on fossil fuel projects.”

K+S Sets New Intermediate Production Target for Bethune Ramp-Up

Germany, News, News Briefs, Potash, Saskatchewan

K+S Group has set new intermediate production targets for its ramp-up of its Bethune potash mine in Saskatchewan.

“The next focus is 2.6 million mt/y, and we already have finished the design for the next step,” K+S Chairman and CEO Burkhard Lohr told analysts at a company earnings call on March 15. “Then, the next target is 3.2 million mt/y, and as we have previously stated, the final step is 4 million mt/y.”

K+S Potash Canada announced a long-tem plan to boost potash production at its Bethune facility to 4 million mt/y last May, with the final production capacity intended to grow continuously over the next couple of decades (GM May 27, 2022).

K+S previously has said most, if not all, of the anticipated additional production capability is coming from secondary mining at the Bethune site, with the potential increase for technical reasons limited to no more than 50,000-150,000 mt/y (GM May 13, 2022).

The company first started secondary mining at Bethune in 2019, using what it described at the time as “new technology” for the company (GM May 17, 2019).

The Bethune mine and processing plant has a basic nameplate production capacity of about 2 million mt/y. K+S this week confirmed that total potash production volumes at Bethune were 1.9 million mt in 2021 and 2.1 million mt last year.

Lohr told analysts at this week’s earning call that the secondary mining will provide for an increase in potash output of 100,000-150,000 mt per annum. However, because K+S will have a maintenance break of three weeks at Bethune in the third quarter of 2023, Lohr said output at Bethune will remain at the same volume this year as seen in 2022.

EU Proposes New Sanctions on Belarus: Some Call for Exemptions on Potash, Other Fertilizers

Belarus, Europe, News, News Briefs, Potash

The European Parliament this week urged European Union (EU) Member States to adopt new sanctions on Belarus over its continuing crackdown on opposition within the country to the current presidential regime and its support for Moscow’s war in Ukraine.

The adoption of proposals made by the EU in January that would toughen sanctions on Belarus and would align them with those already imposed on Russia, and also – according to a Bloomberg report – could include tougher restrictions on Belarus’ potash sector, have been delayed by differences between EU countries over food security. Some Member States, according to reports, are calling for exemptions for potash and other fertilizers, although the exact nature of these exemptions is unclear.

EU officials noted that Belarus has continued to export potash to markets like China and Brazil, despite EU and US sanctions, and the blocking of its former key export route for seaborne shipments via Lithuania since Feb. 1, 2022.

Lithuania is among the countries that want the sanctions package to include stronger restrictions on potash exports and fewer exemptions, according to the report, citing unidentified people familiar with the matter.

But countries like Spain and Portugal believe stricter sanctions would harm poorer countries in terms of their access to food.

Despite the Member State differences, the EU hopes to agree to the new sanctions on Belarus by the end of March, according to reports.

The EU imposed a full ban on imports of Belarusian potash into the Bloc on March 2, 2022 (GM March 4, 2022), closing loopholes under earlier EU sanctions on Belarusian potash imposed in June 2021 that came into force on June 25, 2021 (GM July 2, 2021; June 25, 2021). The sanctions also included, among other things, a ban on the trading and transit of potash across EU territory.

In June of last year, the EU, as part of its sixth sanctions package against Russia and Belarus, also implemented direct sanctions against Belarus’ state-run potash producer OJSC Belaruskali and its potash marketing/export arm JSC Belarusian Potash Co. (BPC) (GM June 3, 2022). The new sanctions were adopted on June 3.

The US imposed sanctions on Belaruskali in August 2021 (GM Aug. 13, 2021), and on BPC in Dec. 2021, giving the marketing/export company until April 1, 2022, to wind down transactions (GM Dec. 3, 2021). Belaruskali’s own wind-down period expired on Dec. 8, 2021.

Belarus – officially, at least – has not been able to export potash or NPKs via the Lithuanian port of Klaipėda since Lithuania’s government terminated the railway transit contract between the country’s state-owned railway company Lietuvos Geležinkeliai’s (LTG) and Belarus’ state-owned Belaruskali over national security concerns in the wake of the EU and US sectoral sanctions (GM Jan. 14, 2022).

But since then, Belaruskali and BPC have sought to secure other routes to market. The Belarusian authorities have repeatedly emphasized the need “to make the maximum use of Russian ports” to ship Belarus’ goods.

In an attempt to mitigate the loss of shipping via the port of Klaipėda, Belarus last year was reported to have increased “substantially” its exports to China by rail in 2022, which included more than 1 million mt of potash, according to an Interfax report on Jan. 5, citing Belarus Transport and Communications Minister Alexei Avramenko, as quoted by BelTA (GM Jan. 6, p. 28).

As noted above, Belarus also has continued to ship potash to certain other markets, including Brazil.

Belarus no longer reports export data. Based on year-to-date import data (some December import data is not yet available), imports of potash from Belarus for 2022 show a 57% decline over 2021, to 3.977 million mt from 9.267 million mt, according to Trade Data Monitor (GM March 3, p. 27 ).

Based on the import data, though not final, Green Markets’ Research Director Alexis Maxwell estimates that Belarusian 2022 potash exports will be some 4.3-4.5 million mt.

Belarus’ exported 11.8 million mt of potash in 2020, according to Trade Data Monitor. Almost 10.7 million mt of this total was shipped via the Biriu Kroviniu Terminalas (Bulk Cargo Terminal [BKT]) terminal in Klaipėda port, according to LTG (GM July 2, 2021). Belaruskali owns a 30% stake in the BKT terminal.

In a separate development, Lithuania’s Ministry of Foreign Affairs and Ministry of Transportation are calling on the European Commission to expand sanctions against Belarus to include Belarusian urea after a crackdown on sanctions’ evasion schemes (GM March 10, p. 1).

The moves follow the seizure by Lithuanian authorities of “thousands of tonnes” of Belarusian urea that had entered Lithuania on trains that were headed for the port of Klaipėda, according to a report by the Organized Crime and Corruption Reporting Project (OCCRP). The Lithuanian government is also considering a ban on all rail shipments from Belarus, as well as from Russia.

European Commission Clears Acquisition of Borealis Nitrogen Business by Agrofert

Europe, News, News Briefs, Nitrogen

The European Commission (EC) on March 13 said it had approved unconditionally the Czech Republic’s chemicals and fertilizer company Agrofert’s acquisition of Vienna-based Borealis AG’s nitrogen business.

Borealis received a binding offer from Agrofert last June for the acquisition of its Nitrogen business, which includes fertilizer, melamine, and technical nitrogen products (GM June 3, 2022).

The Commission concluded that the transaction would raise no competition concerns in the European Economic Area (EEA), according to a Commission media release announcing the clearance.

Based on its market investigation, the Commission found that the transaction would not significantly reduce competition in markets for nitrogen fertilizers, AdBlue non-toxic liquid used as exhaust fluid for diesel engines, and technical nitrogen products such as aqueous ammonia and weak nitric acid.

It also found that the transaction would not raise concerns in relation to the distribution of nitrogen fertilizers in the Czech Republic and Slovakia.

During its investigation, the Commission said it examined the horizontal overlap between the companies’ activities in the nitrogen fertilizer market, in particular in the production and sale of calcium ammonium nitrate fertilizers.

The Commission found that “the market is wider than the territory of Member States, as customers source these products from all over the EEA, and that various types of nitrogen fertilizers are substitutable.”

Moreover, it found that the merged entity “would continue to face several strong competitors and it would only have moderate combined market shares. In addition, the merged entity would be constrained by imports from outside the EEA.”

Prague-based Agrofert is one of the leading European nitrogen fertilizer producers, with production facilities in the Czech Republic, Germany, and Slovakia, and distributes nitrogen fertilizers in the Czech Republic, Hungary, and Slovakia, to a lesser extent, in Croatia, Poland, and Romania. It also produces and sells AdBlue and various technical nitrogen products.

By adding Borealis’ production assets in Austria, Germany, and France, as well as a comprehensive sales and distribution network utilizing the Danube River, this business combination would well complement Agrofert’s existing capabilities in serving its customers across Europe, Borealis said in an earlier statement.

The Czech company’s offer for the Borealis nitrogen business valued the business on an enterprise value basis at €810 million (approximately $861.9 million at current exchange rates).

Borealis pulled out of an earlier agreement to sell its nitrogen unit to EuroChem Group AG following Russia’s invasion of Ukraine in February last year and the resulting imposition of sanctions by the European Union (EU) on Russia (GM March 11, 2022). The EuroChem offer valued the Borealis Nitrogen Business on an enterprise value basis at €455million.

Borealis AG is majority-owned (75%) by Austrian oil and gas company OMV AG.

Grupa Azoty Warns of FY2022 Inventory Revaluation, Impairment Hit

Ammonia, Earnings, News, Poland, Urea

Polish fertilizer and chemicals group Grupa Azoty SA will take a Pln468 million (approximately $105.9 million at current exchange rates) hit to FY2022 group EBITDA from inventory revaluation and a Pln963 million group EBIT hit from impairment charges, Poland’s PAP news agency reported, citing a market filing by the company.

The inventory revaluations result from changes to market prices, and were booked at Pln64 million for Azoty and at Pln404 million at the subsidiary companies.

The impairment charges include Pln88 million at Azoty – on the plastics business – as well as charges at the Azoty Puławy SA (melamine and plastics businesses) and at the Zakłady Chemiczne Police SA (fertilizers and pigments) subsidiaries, according to the report.

Azoty said the impairment charges will not impact EBITDA.

The polish group has said it will continue a temporary shutdown of the ammonia and urea production plants of its Azoty Zakłady Chemiczne “Police” subsidiary at Police until March 31 (see Markets).

Azoty late last week also reported that subsidiary Azoty Puławy SA halted caprolactam production and its melamine III plant as of March 10 for an indefinite period.

It said the stoppages are due to “the supply/demand situation on the European market.”

Grupa Azoty, KGHM Consider Expanding Sulacid Cooperation

News, News Briefs, Poland, Sulfuric Acid

Polish fertilizer and chemicals group Grupa Azoty SA reported that it had held talks with copper and silver-producing major KGHM Polska Miedź SA on expanding their cooperation on sulfuric acid production and on Azoty’s involvement in the expansion of the Police sea port.

Azoty in its March 15 media statement provided no further details on the sulfuric acid production cooperation.

Police port, which has access to the Baltic Sea via the Szczecin Lagoon and Świna Strait, serves as the Azoty group’s maritime import and export transportation base. Police is Poland’s fourth largest port.

A major project is underway at the port aimed at improving the port’s accessibility from the shore and sea and increasing its transshipment capacity by over 400,000 mt/y.

The port expansion is a key element in Azoty’s flagship polymers project, which as of mid-February was more than 99% complete, the group said.

Located at Police, the polymers project is one of the largest chemicals projects in Europe. Built at a cost of $1.8 billion, the polymers complex will comprise a propylene dehydrogenation plant and a polypropylene production plant, with an annual capacity of up to 437,000 mt/y.

Russian Fertilizer Export Shipments by Rail Down 21% in Jan.-Feb., Report Says

News, News Briefs, Russia

Russia’s transport of fertilizers for export by Russian Railways fell by 21% in January and February combined compared with the same period last year, to 4.7 million mt, according to an Interfax report, citing company documents.

Export shipments of fertilizers via Russian Railways in February totaled 2.2 million mt, down 11% compared to January 2023 and 20% compared to February 2022.

The February 2023 export shipments included 800,000 mt of fertilizers sent to Latin America, 220,000 mt of potash to China, and 160,000 mt of fertilizers to other Asian companies, according to the report.

Fertilizer shipments to the EU reached 200,000 mt, with 600,000 mt to Switzerland, the traditional registration jurisdiction for foreign traders of goods from Russian manufacturers.

Export shipments to CIS countries reached 140,000 mt.

Exports through border crossings in January and February combined were down almost 57% on the year, to 950,000 mt, while exports through ports increased by 1% to 3.7 million mt.

International transit shipments of fertilizers increased to 1.4 million mt in the two months, compared to just 150,000 mt in the same year-earlier period, according to the report.

Domestic shipments of fertilizers increased 14% to 5.8 million mt.

K+S FY2022 Results Best in Company History

Earnings, Germany, News, Specialty

K+S Group posted a 120% rise in EBITDA to €2.42 billion (approximately $2.58 billion at current exchange rates) for the 12 months to Dec. 31, 2022, up from €1.1 billion, and beating the average analyst estimate of €2.38 billion.

Revenues increased 77%, to €5.68 billion from €3.21 billion the previous year.

Adjusted net profit for the full year came in at €1.49 billion compared with just €311.7 million (the FY2021 figures exclude impairment effects).

K+S said in a March 15 earnings statement the result was the best in the company’s history. It cited significantly higher average prices in the Agriculture customer segment and for Industrial products containing potash, which more than offset lower sales volumes and higher costs as driving the profit and revenues boost.

The company also highlighted that by concluding long-term gas supply contracts at an early stage, cost increases for energy “in the mid three-digit million euro range” were avoided.

“Due to our long-term supply contracts, 90% of our natural gas demand in Europe (6 TWh) was hedged at around €40/MWh. Compared to the average TTF natural gas price of about €120/MWh in 2022, we saved more than €400 million of opex,” the company said at a company earnings presentation on March 15.

K+S said the hedging ratio of 90% for 2023 is about €50/MWh, and >70% for 2024 is at about €40 /MWh, and about 10% for 2025.

The company reminded it is not making use of the German price cap, and thus “even if gas prices rise above the cap, we will not experience any significant negative impact due to our forward-looking hedging strategy,” it said.

For the fourth quarter, K+S reported a 14% increase in EBITDA to €559.2 million on revenues of €1.46 billion, up from the same prior-year period of €489.9 million and €1.07 billion, respectively. Revenues in the quarter increased 39% from a year-ago.

Adjusted net profit for the fourth quarter increased 43%, to €366.3 million compared with the year-ago €255.4 million (4Q 2021: without reversal of impairment losses and REKS gain included).

After the jump in profits, K+S intends to raise the full-year 2022 dividend to €1.0 per share versus the €0.20 paid in FY2021. It also plans after its May AGM to start a share buyback for up to €200 million.

Looking ahead, K+S expects EBITDA operating earnings to fall in FY2023 after the exceptionally strong FY2022. FY2023 EBITDA operating earnings are expected to range between €1.3-€1.5 billion.

The company expects “demand to increase” this year and an “attractive price level overall,” albeit at a lower level than in FY2022. K+S expects potash supply from Russia and Belarus to remain limited. At the same time, it sees costs, especially for energy, logistics, materials, and personnel, to continue to increase.

K+S FY2023 EBITDA guidance is below the average analyst estimate of €1.68 billion (Bloomberg Consensus).

Analyst Markus Mayer of Baader Bank, for one, considers the outlook too cautious.

In terms of individual customer segments, K+S’ Agriculture customer segment posted a 97% increase in revenues for the full-year 2022, to €4.47 billion, up from the year-ago €2.27 billion, boosted by the significantly higher prices and despite lower sales volumes.

The company noted potash prices rose “very significantly” in all sales regions in the first half of 2022 amid good demand and limited supply, while in the second half of the year, prices “normalized at a high level,” albeit with regional differences, as customers adopted a wait-and-see attitude.

The segment’s total sales volumes fell 7% to 7.11 million mt, down from 7.62 million mt the previous year.

K+S Agriculture Customer Segment

  4Q-2022 4Q-2021 % change FY2022 FY2021 % change
Revenues € million 1,114.6 800.3 +39 4,465.6 2,272.1 +97
Potassium chloride 722.5 494.3 +46 2,976.5 1,349.3 +121
Fertilizer specialties 392.1 306.0 +28 1,489.2 922.8 +61
             
 Sales volumes Million mt 1.89 1.96 (4) 7.11 7.62 (7)
Potassium chloride 1.20 1.14 (5) 4.44 4.69 (6)
Fertilizer specialties 0.68 0.81 (16) 2.67 2.94 (9)
             
Revenues            
Europe (€ million) 406.8 297.7 +37 1,671.6 950.9 +76
Overseas $ million) 722.3 584.5 +24 2,931.6 1,562.5 +88
             
Sales volumes Million mt            
Europe 0.66 0.80 (18) 2.81 3.23 (13)
Overseas 1.23 1.16 6 4.30 4.39 (2)
             
Average price (€/mt) 592.2 407.6   628.1 298.0  
Europe (€/mt) 617.7 372.1   594.1 294.0  
Overseas ($/mt 585.6 503.9   682.4 356.0  

K+S reported its Industry+ customer segment “with its wide range” of product applications, was characterized overall by a positive trend in demand, with prices rising for both potash and salt. Segment revenues increased 29% to €1.21 billion in FY2022, up from the previous year €941.0 million.

Full-year sales volumes for Industry+ fell 14% year-on-year, down to 6.83 million mt from 7.91 million mt. Of the total, de-icing salt sales volumes declined by 35% to 2.08 million mt, from 3.18 million mt the previous year.

Ammonia

Ammonia, Asia, Black Sea, Eastern Cornbelt, India, Market Watch, Middle East, Northwestern Europe, Southeast Asia, Southern Plains, Tampa, U.S. Exports, U.S. Gulf, U.S. Imports, Western Cornbelt

US Gulf/Tampa:

Most players expected Tampa ammonia prices to continue to erode in April after the $200/mt drop to $590/mt CFR for March. Sources cited both plentiful supplies of ammonia and low natural gas prices.

US Imports:

Ammonia imports for July-January fell 12.8%, according to US Census Bureau data, to 1.35 million st from the year-ago 1.54 million st. January imports slipped 21.4%, to 217,889 st from the prior-year 277,121 st.

US Exports:

Ammonia exports for January firmed 334.3% year-over-year, to 105,361 st from 24,259 st. July-January shipments moved 291.0% higher, to 829,589 st from 212,196 st a year ago.

Eastern Cornbelt:

Ammonia remained at $725-$750/st FOB in the Eastern Cornbelt, with the low confirmed at terminals in Illinois and Indiana and the high FOB Lima, Ohio.

Western Cornbelt:

Ammonia was steady at $670-$710/st FOB in the Western Cornbelt, with the low reported at Beatrice, Neb., and the high at Marshalltown, Iowa. Other terminal prices in mid-March included $685/st FOB Sergeant Bluff, Iowa, and Palmyra, Mo., and $700/st FOB Iowa terminals at Garner, Fort Dodge, and Washington.

Southern Plains:

Ammonia prices remained under pressure in the Southern Plains. The latest offers were quoted in the $570-$610/st FOB range, with the low reported at Pryor, Okla., and the high at Coffeyville, Kan. The Verdigris, Okla., ammonia market was pegged at the $590/st FOB level at midweek. Truck pricing out of Gulf Coast terminals slipped to $525-$540/st FOB.

Some sources speculated that ammonia could be purchased for as low as $520-$550/st FOB in Oklahoma as the week progressed, but those offers were not confirmed.

South Central:

The last offers for truck ammonia in the South Central region were quoted at $550/st FOB Midway, Tenn., with recent pricing out of Hopewell, Va., pegged at the $525/st FOB level. Truck pricing out of Gulf Coast terminals fell in the $525-$540/st FOB range.

Black Sea:

Buying interest in Turkey continues, although sources said that no new business was done since the $520/mt CFR deal from one week ago. Buyers are now pushing hard on $460/mt CFR. Sources said that level is likely to be achieved by the end of the month.

One trader noted the price of ammonia has been dropping in all major markets, even without the presence of Russian material from the Black Sea or Baltic ports. He speculated that prices could fall even more dramatically if Russia’s plans for the Tamar Peninsula port come to fruition on time. Under the development plan, the Tamar port is slated to export 2 million mt/y of ammonia beginning in January 2024.

India:

The market’s primary activity continues to be comprised of major importers taking product under long-term contracts. The latest estimated price into India was pegged at $450-$460/mt CFR, based on the reported $370s/mt FOB price from the Arab Gulf.

Middle East:

A reported sale from Oman to China at $455/mt CFR had an estimated netback to the Arab Gulf of $370-$380/mt FOB. Sources said the sale was the only non-contract material seen moving out of the area due to a general malaise in demand.

Suppliers in North Africa are also talking about lower prices. Sources said Algeria is engaged in talks in the low-$400s/mt FOB. The impact of these pricing levels is expected to be felt from Northwest Europe to Asia.

Northwest Europe:

No new spot deals were reported in the region. Even without sales to mark new prices, sources said the lower Arab Gulf price and willingness of North African suppliers to reduce their pricing expectations puts the estimated Northwest Europe price in the $450s/mt CFR.

Sources were careful to note that no deals have been done into the area in the $400s/mt CFR. The past week showed an average production cost of ammonia at $530/mt ex-plant. This amount is now too high for the estimated trading price out of Antwerp, but still lower than the price seen at the beginning of the month.

Asia:

Confirmed reports of a sale from Oman to China at $455/mt CFR shifted prices downward throughout the industry. An as-yet unconfirmed sale into Taiwan also came in at just under $500/mt CFR, one week after the price was reported in the $530s/mt CFR.

The market’s ever-lower prices will begin an end to Chinese ammonia exports, said one source. Once the price crossed the $600/mt CFR price in Asia, he noted, it became more difficult for the Chinese suppliers to justify the deals. The elimination of Chinese ammonia from the regional market could slow the price decline in the area.

South Korean ammonia imports for January-February totaled 186,000 mt, Trade Data Monitor reported, a 33% drop from the year-ago 277,000 mt. Indonesia supplied 98,000 mt, followed by Saudi Arabia with 53,000 mt.

February imports were reported at 83,000 mt, down from 113,000 mt in February 2022. Indonesia accounted for 66% of the market with 55,000 mt, while China supplied another 13,000 mt.