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TFI, railroad association spar over chemical security
The Fertilizer Institute on March 12 issued a pointed response to recent statements made by the Association of American Railroads calling on chemical companies to stop manufacturing dangerous chemicals that AAR claims can be “replaced by safer substitutes or new technologies.”
The AAR statement came in the wake of a Feb. 26 hearing before the House Homeland Security Committee on the Chemical Facility Anti-Terrorism Act of 2008. “We can no longer continue to risk the lives of millions of Americans by using, transporting and storing highly toxic chemicals when there are safer alternatives commercially available,” said AAR President and CEO Edward Hamberger. “It is time for the nation’s big chemical companies to stop making the dangerous chemicals that can be replaced by safer substitutes or new technologies currently in the marketplace.”
The statement was the latest volley from a railroad industry that no longer wants to transport toxic-by-inhalation products such as chlorine and anhydrous ammonia. AAR has actively lobbied Congress to limit its liability in the event of accidents involving these chemicals, or to remove altogether its common carrier obligation to transport TIH materials. Railroad companies have also drastically raised their fees for hauling TIH chemicals.
Without mentioning anhydrous ammonia specifically, Hamberger said “the threat of a terrorist attack would be greatly reduced and America would be a safer place” if chemical companies stopped manufacturing dangerous products or used safer technologies as substitutes. “Railroads would no longer be required by the federal government to transport some of the most highly toxic chemicals around the country,” he said. “Millions of Americans who live in cities or towns near chemical plants or railroad tracks would be safer. Trucks filled with those toxic chemicals would no longer be on our roads and highways. And many manufacturing facilities and water treatment plants would no longer store large quantities of the very chemicals that make attractive targets for terrorists.”
Hamberger concluded the AAR statement by tersely calling on “the big chemical companies to do their part to help protect America. They should stop manufacturing dangerous chemicals when safer substitutes are available. And if they won’t do it, Congress should do it for them in the Chemical Facility Anti-Terrorism Act of 2008.”
TFI last week said it takes “vigorous exception” to Hamberger’s remarks. “Chemicals, such as anhydrous ammonia fertilizer, are essential to growing food for millions of Americans,” TFI said in its March 12 statement. Noting the role of anhydrous ammonia in the production of urea, UAN, DAP, and MAP, as well as its many industrial uses, TFI said there is simply not a substitute for the product.
“Ammonia is the least costly and most effective source of nitrogen fertilizer for American farmers,” TFI said. “It is the cheapest source of nitrogen on a per-pound basis and corn is the largest consumer of direct applied anhydrous ammonia. One railcar of ammonia produces approximately 128,000 bushels of corn, which can be used to feed approximately 1,600 head of beef or produce 345,600 gallons of ethanol. It is clear that ammonia plays a major role in meeting the nation’s food and energy needs.”
TFI also pointed out the fertilizer industry’s safety record with regard to anhydrous ammonia. “TFI’s ammonia shipping members take seriously their obligation to safely and securely store and transport anhydrous ammonia,” said TFI President Ford West. “Our members are actively working within the framework of the Federal Railway Administration rulemaking process to develop new tank cars for ammonia, they are engaged in rigorous training of emergency responders, and they have worked closely with Congress, the Department of Homeland Security, the Department of Transportation, the Environmental Protection Agency, and other federal and state agencies on safety and security issues for anhydrous ammonia. We are proud of our safety record.”
West concluded TFI’s statement with some saber rattling of his own, noting that the deadly railroad accidents in Minot, N.D., in 2002 and in Graniteville, S.C, in 2005 were deemed by the National Transportation Safety Board to be the result of railroad operational and infrastructure failures. The Minot derailment resulted in an ammonia spill that killed one local resident, while the Graniteville accident caused a release of chlorine gas that killed nine.
“Perhaps the public would be served better if the railroads were required to ensure that they are doing everything possible to keep rail tank cars safely on the tracks,” West said. “The TFI suggests that the AAR refocus its efforts on doing whatever is necessary to continue the safe and secure delivery of these critical materials. TFI and its ammonia shippers remain committed to working closely with the AAR and its railroad members in these efforts.”
Agrium opts against Kenai coal gas project
Calgary-Agrium Inc. said March 13 that it has determined that current economics are not sufficient to proceed with a gasification facility to supply coal-based syngas to its Kenai nitrogen facility. The mothballing of the facility will be completed shortly. Agrium continues to advance other gasification opportunities and has a nitrogen off-take agreement with Faustina Hydrogen Products LLC in Louisiana, with an anticipated startup in 2011. In Alberta, Agrium is currently reviewing gasification opportunities of syngas derived from byproducts of bitumen upgrading. Additionally, Agrium continues to examine other gasification possibilities.
Incitec Pivot makes friendly offer for Dyno Nobel
Dyno Nobel said March 11 that it has entered into a definitive agreement with Incitec Pivot Ltd. (IPL) under which IPL proposes to acquire all the shares in Dyno Nobel that it does not currently own. IPL bought 13 percent of Dyno Nobel in 2007 (GM Archives), prompting speculation that it would eventually seek to buy the remainder of the company.
Dyno Nobel’s board of directors unanimously approved the agreement.
The agreement values Dyno Nobel ordinary shares at A$2.80, implying a market capitalization for Dyno Nobel of A$2.3 billion and an enterprise value of A$3.3 billion.
“A combined IPL and Dyno Nobel will help strengthen Dyno Nobel’s position as one of the top two global explosive companies, and allow IPL to drive further shareholder growth through the expected ongoing global demand for explosives and fertilizer products,” said Peter Richards, Dyno Nobel CEO.
Dyno Nobel says the combination has compelling strategic merit, enabling both to benefit from the unique exposure to the explosives industry during a sustained commodities boom and the global fertilizer industry’s outlook for continued growth. Dyno Nobel says the merged group will be able to leverage Dyno Nobel’s significant North American manufacturing capacity and extensive distribution platform to increase sales into the fertilizer market. Completion of the Cheyenne, Wyo., expansion is expected in mid-2008.
Dyno Nobel has recently been in the news regarding its Moranbah ammonium nitrate project in Australia. The company suspended the project in December (GM Dec. 17, p. 1), but just last month said it is rethinking that decision (GM March 3, p. 1).
IPL, a major Australian fertilizer maker and supplier, has been doing well and on March 6 it said it expects 2008 earnings before interest and tax (EBIT) to be between $700-$730 million, an increase of up to 135 percent on 2007. It said the improved outlook is largely attributable to an increase in earnings from manufacturing flowing from higher international DAP prices, partly offset by adverse currency movements, higher sulfur costs, and lower production volumes at IPL’s plant at Phosphate Hill in North West Queensland.
IPL’s earnings guidance is that the average DAP price will range between US$760-$790/mt in 2008. It cited strong demand, supply disruptions in China, and record high input costs of phosphate rock, ammonia, and sulfur.
It said its Phosphate Hill production has been adversely impacted by railway line outages due to floods, the current interruption to metgas feedstock supply at the Mt. Isa sulfuric acid plant, and scheduled maintenance turnarounds. It is now expected that IPL’s ammonium phosphate production in 2008 will be approximately 900,000 mt, compared with the 2007 production of 978,000 mt. IPL said to mitigate future interruptions in phosphate production, it is investigating a range of capital investment opportunities to address the transport and storage of sulfur and sulfuric acid as well as the debottlenecking of the Mt. Isa sulfuric acid plant. These initiatives are expected to cost about $25 million in 2008 and 2009.
Viterra reports $41.2 M in 1Q net income; input prepay at $276.9 M as of Jan. 31
Viterra reported net earnings of C$41.2 million ($.20 per share) on sales of $1.3 billion for the first quarter ending Jan. 31, 2008, versus the year-ago $7.9 million ($.09 per share) and $447.6 million. “As we mark the beginning of our first fiscal year as a combined company (Saskatchewan Wheat Pool and Agricore United), we’ve been able to optimize the returns available in today’s robust commodity markets and deliver strong results this quarter,” said Mayo Schmidt, Viterra president and CEO. “It is a time of optimism in our industry. With our expanded asset base and the expertise of our people, we are preparing for the coming spring selling season with anticipation. We are well positioned to help our farm customers reap the benefits of these market conditions through superior product offerings, strategic marketing opportunities and quality agronomic services.”
The Agri-Product segment, which includes input sales, saw gross margins up at $47.1 million on sales of $165.9 million, versus the year-ago $12.3 million and $80 million, respectively. Viterra said that higher sales in the sector were attributable to stronger fertilizer sales, which benefited from higher selling prices as world supply and demand drove continued price increases. Fertilizer volumes for the quarter were also unusually high as farmers, buoyed by strong cash flows associated with improved commodity markets, were in a position to purchase product earlier in the year to mitigate the risk of higher prices in spring. Higher volumes for the quarter are expected to be offset by lower sales volumes in the spring. As a result, Viterra expects overall volumes for the year to be flat. However, overall sales values are expected to be higher due to stronger selling prices.
Fertilizer sales were $155.4 million for the quarter, up from the year-ago $71.7 million.
Viterra said higher equipment sales were posted due to increased purchases of on-farm fertilizer bins to manage storage. Strong fall fertilizer applications also resulted in additional service income.
Producer prepayments for spring agri-products were $276.9 million as of Jan. 31, 2008, compared to $55.7 million at the same time last year.
While seed sales were down for the quarter, Viterra explained that during the year-ago period there was a big rush to buy canola seeds. However, now all crop commodities are seeing higher prices, so farmers are being more flexible regarding their crop mix.
Viterra said more than 75 percent of the Agri-Products annual sales occur between mid-April and the end of June. With the acquisition of AU, Viterra expanded its retail facility network from 100 to 276 facilities and acquired an additional 57 percent ownership in Westco, becoming the sole owner of this fertilizer wholesaler and manufacturer.
| Agri-Product Sales C$M | 1Q-08 | 1Q-07 |
| Fertilizer* | 155.4 | 71.7 |
| Crop Protection | 1.8 | .7 |
| Seed | .8 | 3.0 |
| Equipment | 7.9 | 4.5 |
| Total | 165.9 | 80.0 |
* Includes retail and Westco
CVR Energy reports $57 M net loss for 2007
CVR Energy Inc., the owner of the Coffeyville nitrogen plant and refinery, reported a net loss of $57 million ($.66 per diluted share) on sales of $3.0 billion for the year ending Dec. 31, 2007, compared to net income of $191.6 million ($2.22 per share) on sales of $3.04 billion.
CVR had a fourth-quarter loss of $15.9 million ($.18 per share) on sales of $1.15 billion, versus the year-ago net income of $20.8 million ($.24 per share) and $708.4 million.
CVR stressed that its operating income provides the best measure of its business because of the assortment of one-time and non-cash items affecting net income. Annual operating income was $204.3 million in 2007, down from 2006’s $281.6 million, while fourth quarter 2007 was up, at $41.8 million versus the year-ago $14.6 million.
Fourth-quarter results reflected the impact of non-cash share-based compensation of pretax $32.2 million, a one-time pretax expense of $10.0 million arising from the termination of management agreements in conjunction with the company’s successful initial public offering, and $7.2 million in net flood-related expenses. In addition, full-year comparisons were adversely affected by a planned major turnaround and expansion at the refinery, as well as significant downtime and costs associated with the flood.
CVR said 2007 was a transitional year, with the company emerging from it as a stronger company. “CVR Energy experienced a remarkable 2007,” said Jack Lipinski, CVR CEO. “We successfully executed a major turnaround and capital expansion program at our Coffeyville, Kan., refinery early in the year; rapidly recovered from a flood during the summer that affected both our petroleum and nitrogen fertilizer businesses; and then executed a successful initial pubic offering of CVR Energy on the New York Stock Exchange in the fall.”
CVR Energy’s nitrogen business reported operating income of $46.6 million on sales of $165.9 million for 2007, up from 2006’s $36.8 million and $162.5 million, respectively. Fourth-quarter nitrogen income was $11.7 million on sales of $50.8 million, versus the year-ago $2.8 million and $34.3 million. CVR Energy nitrogen segment figures differ from those of the newly-filed CVR Partners LP due to intra-company sales. For example, CVR Energy sells petroleum coke to Partners and buys hydrogen from it.
CVR Partners recently filed to sell limited partnership units (GM March 10, p. 1), with 87 percent of the company remaining in the hands of CVR Energy.
| Operating Data | 4Q-06 | 4Q-07 | 2006 | 2007 |
| Ammonia Avg Plt Gate Price | 301 | 408 | 338 | 376 |
| UAN Avg Plt Gate Price | 144 | 236 | 162 | 211 |
| Production Volumes 000 st | 4Q-06 | 4Q-07 | 2006 | 2007 |
| Ammonia | 85.4 | 81.8 | 369.3 | 326.7 |
| UAN | 168.1 | 144.3 | 633.1 | 576.9 |
| Total | 253.5 | 226.1 | 1,002.4 | 903.6 |
| Sales Volumes 000 st | 4Q-06 | 4Q-07 | 2006 | 2007 |
| Ammonia | 20.5 | 33.5 | 117.3 | 92.1 |
| UAN | 167.8 | 141.3 | 645.5 | 555.4 |
| Total | 188.3 | 174.6 | 762.8 | 647.5 |
Agrium extends UAP offer; 12 stores concern FTC
Calgary-Agrium Inc. said March 14 that it extended its previously announced tender offer for all the common shares of UAP Holding Corp. until midnight New York time on Wednesday, April 30, 2008. The offer was previously set to expire March 14. Agrium extended the offer because all the conditions to completion of the offer have not yet been satisfied. In particular, the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act has not yet expired or been terminated. As of 5:00 p.m., March 13, approximately 31.34 million shares of common stock of UAP have been tendered in and not withdrawn from the offer. In addition, Agrium announced that it intends to voluntarily withdraw its notification and report form from the Federal Trade Commission later March 14. As a result of informal discussions with FTC staff, Agrium believes the FTC’s concerns are limited to approximately a dozen UAP stores, out of about 370. Agrium plans to work with the FTC in an attempt to eliminate the stores of concern. Agrium plans to re-file its notification and report form when it believes the FTC’s concerns have been fully addressed and remedied. The company remains highly confident of a successful close to the transaction. It expects the close in early summer.
TFI takes issue with Gulf hypoxia study
Madison, Wisc.-A new study that attempts to quantify the impact of increased corn acreage for biofuels production on the size of the Gulf of Mexico’s “Dead Zone” states that nutrient loading will worsen in the Gulf because of the U.S. government’s corn-based ethanol production goals. “This rush to expand corn production is a disaster for the Gulf of Mexico,” said Simon Donner, an assistant professor in the Department of Geography at the University of British Columbia and one of the study’s authors. By combining agricultural land use scenarios with models of terrestrial and aquatic nitrogen cycling, Donner and co-author Chris Kucharik of the University of Wisconsin suggest that if the U.S. were to meet its proposed ethanol production goal of 36 billion gallons annually by the year 2022, nitrogen loading from fertilizer carried by the Mississippi River to the Gulf of Mexico would increase by 10-19 percent. “The nitrogen levels in the Mississippi will be more than twice the recommendation for the Gulf,” Donner said. “It will overwhelm all the suggested mitigation options.” The study, published in the March 10 edition of the Proceedings of the National Journal of Sciences, concludes that increasing ethanol production from U.S. croplands without endangering water quality and aquatic ecosystems will require a substantial reduction in meat consumption. The Fertilizer Institute took issue with several of the study’s claims. “With the record corn acres, it’s not hugely surprising to see these kinds of stories coming out,” said Kathy Mathers, TFI’s vice president of public affairs. “It all harkens back to fertilizer use efficiency. Farmers are doing a better job now than they ever have in the past of making sure that these nutrients are getting to the plants.” Bill Hertrz, TFI’s vice president of Scientific Programs, said there are a number of factors driving this efficiency, including precision agriculture, better management techniques, and drought resistant hybrids. “The size of the Dead Zone doesn’t necessarily correspond to the use of fertilizers,” Hertrz told Green Markets. “The highest correlation is simply with the amount of water coming into the system, not with the amount of N or P.” Both Hertrz and Mathers were skeptical of the study’s conclusions. “The real point is that we shouldn’t tack this as a biofuels vs. hypoxia argument,” Hertrz said. “That’s clearly a tactic to drive public opinion about the use of biofuels.”
Sherritt fertilizer revs up in 2007, earnings off
Toronto-Sherritt International Corp. saw a slight increase in operating losses at its fertilizer business for the year ending Dec. 31, 2007. Losses were C$1 million on increased sales of $64.1 million, versus 2006’s losses of $800,000 and $47.9 million, respectively. Fertilizer volumes were up, at 198,429 mt from 2006’s 151,140 mt. Sherritt said increased revenues were offset by higher operating costs, amortization, and selling costs. Operating costs were impacted by higher maintenance spending associated with the bi-annual acid plant shutdown. Company-wide, Sherritt saw a 51 percent increase in 2007 net earnings to post a record at $370.4 million ($1.79 per diluted share) on sales of $1.34 billion, up from 2006’s $245.6 million ($1.42 per share) and $1.11 billion, respectively. Fourth-quarter net income was $83.5 million ($.36 per share) on sales of $323.6 million, versus the year-ago $78.6 million ($.47 per share) and $304.2 million.
Mosaic gets approval to file permit
Tampa-By a 6-1 margin, The Mosaic Co. received approval from the Hillsborough County, Fla., County Commission to file an application for a permit to expand its Four Corners Mine by approximately 1,500 acres. At the meeting on March 11, nearby residents sought to complain about noise and pollution from the mining, but were told they would have to wait until a hearing is held on the actual application. The company was expected to file in four-to-five months.