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Compass Minerals acquires Big Quill
Sulfate of Potash (SOP) and salt producer Compass Minerals, Overland Park, Kan., has acquired Big Quill Resources Inc., Canada’s leading SOP producer, in an all-cash transaction valued at C$56 million (US$56.3 million), subject to customary post-closing adjustments. Located on Big Quill Lake near Wynyard, Sask., Big Quill produces high-purity SOP for non-agricultural specialty applications, as well as for nutrients used by growers of high-value crops and turf.
“Big Quill is an innovative, entrepreneurial business with unique production capabilities, technical expertise, and non-seasonal applications that will both broaden and strengthen Compass Minerals’ specialty fertilizer segment,” said Angelo Brisimitzakis, Compass Minerals president and CEO. “We expect this acquisition to be immediately accretive. In addition, we plan to expand Big Quill’s production and sales of high-value, specialty products over time.”
The Wynyard site, with an annual capacity of approximately 40,000 st, produces much of its SOP by extracting naturally occurring sulfate from the brine of Big Quill Lake and combining it with potassium chloride purchased through a very long-term, advantaged supply agreement. Big Quill’s 2010 revenues are expected to be approximately C$23 million, with EBITDA of approximately C$7 million. Compass Minerals funded the purchase with cash on hand.
All of Big Quill’s some 35 employees will remain with the company, as will management, including company leader Dennis Puff.
Big Quill’s operations began in the early 1980s as a pilot facility for Potash Corp. of Saskatchewan Inc. Management acquired the facility in 1991.
Compass Minerals’ existing SOP unit, Great Salt Lake Minerals Corp. (GSLM), has been operating on the shores of the Great Salt Lake near Ogden, Utah, since 1970. GSLM has been increasing its capacity and expects to produce up to 350,000 st/y of SOP in 2011, up from 300,000 st/y in 2010. Capacity expansion is expected to continue over the next few years, reaching 550,000-570,000 st/y in 2015.
CHS 1Q income up 68 percent; wholesale fertilizer volumes grow 57 percent
CHS Inc. reported a 68 percent increase in net income attributable to CHS operations for the first quarter ending Nov. 30, 2010. CHS cited higher average values for energy, grains, oilseeds, crop nutrients, and processed oilseed products. Net income was $201.7 million on sales of $8.1 billion, up from the year-ago $120 million on sales of $6.2 billion.
The company’s Ag Business segment recorded increased volumes and earnings during the first quarter of fiscal 2011, primarily driven by stronger global grain demand, which boosted CHS grain marketing, crop nutrients, and local retail business performance.
The Ag Business, which includes crop nutrients, reported income before taxes of $150.7 million on sales of $5.54 billion, compared to the year-ago income of $91.7 million on sales of $3.74 billion.
Wholesale crop nutrient revenues totaled $558.9 million, up from the year-ago $281.1 million, due to higher volumes and fertilizer prices. The average fertilizer selling price was up $84/st, or 27 percent from the year-ago period. Wholesale crop nutrient volumes increased 57 percent. CHS attributed the uptick to a better fall season in 2010 compared to a late season in 2009.
CHS said earnings from the wholesale crop nutrient business improved $12.9 million compared to the year-ago quarter, mostly due to increased volumes and improved margins. Earnings from the country operations, which include elevators and agri-service center business, increased $30.2 million, primarily as a result of higher grain volumes and increased retail margins, including acquisitions made in the past year.
Fertilizer demand was up about 1 million st year over year based on CHS purchase and sales contracts as of Nov. 30, 2010, which were 1.92 million st and 1.79 million st, respectively. Purchase and sale contracts as of Nov. 30, 2009, were 909,000 st and 804,000 st, respectively. Crop nutrient inventories were valued at $164.3 million as of Nov. 30, 2010, versus $112.4 million as of Nov. 30, 2009.
CHS saw increased energy income of $57.3 million, up from the year-ago $14.3 million, while processing income was off at $19.4 million from $30.8 million.
Proposed Idaho nitrogen plant could get boost from Chinese contractor
China National Machinery Industry Corp. (Sinomach), the People’s Republic of China’s third biggest contractor, has expressed an interest in helping Southeast Idaho Energy (SIE) finance and construct a $2 billion nitrogen fertilizer and sulfur complex near American Falls west of Pocatello. The project has been hindered by a tightening of the U.S. credit market.
A subsidiary of Refined Energy Holdings of New York, SIE plans for the Power County Advance Energy Center to produce up to 500 tons per day of anhydrous ammonia, up to 1,800 tons per day of granular urea, and up to 1,600 tons per day of UAN using clean coal gasification technology. Construction at one time was targeted to begin in 2011.
In an aggressive expansion mode, Sinomach officials have told SIE that they want the project’s contract for engineering, procurement, and construction in exchange for helping to bankroll it. Sinomach had more than $14 billion in sales last year and has been active in more than 130 countries in Asia, Africa, Latin America, Russia, and Eastern Europe.
Last September, the Power County Planning and Zoning Commission in American Falls agreed to extend a permit renewal for SIE’s project (GM Sept. 20, 2010). SIE officials sought the permit renewal to give themselves more time to work with investors to finance the project, saying that credit lending had tightened significantly as a result of the nation’s economic downturn.
An area of approximately 450 acres in a heavy industrial zone two miles southwest of American Falls has been designated for the complex. Up to 1,350 construction workers would be employed during a three-year construction phase, and as many as 150 employees would be hired to operate the plant. Some engineering work has been under way.
Ramesh Raman, CEO at Refined Energy Holdings, declined to comment about reports that Sinomach was interested in investing in the Power County Advance Energy Center.
Founded in 1997, Sinomach has more than 70 overseas offices and branches, with more than 80,000 employees. It has averaged more than 30 percent annual growth in recent years, with total business revenue exceeding $15 billion in 2008. Sinomach would also like to develop a 10,000-to-30,000-acre technology zone for industry, retail centers, and homes south of Boise’s airport.
TFI outlines regulatory concerns to House committee
The Fertilizer Institute (TFI), in a Jan. 7 letter to the House Committee on Oversight and Government Reform, outlined three key issues of regulatory concern currently facing the fertilizer industry. These include the U.S. Environmental Protection Agency’s (EPA) efforts to establish numeric nutrient criteria for Florida waters; EPA’s proposed Total Maximum Daily Load (TMDL) limit for nutrients in the Chesapeake Bay watershed; and EPA’s promulgation of regulations to control stationary source greenhouse gas (GHG) emissions.
The letter from TFI President Ford West was sent in response to a December invitation from Rep. Darrell Issa (R-Calif.), chairman of the committee, asking TFI to identify “existing and proposed regulations that have negatively impacted job growth in your members’ industry.” Issa noted in his Dec. 8 invitation to TFI that federal agencies promulgated some 43 major new regulations in fiscal 2010.
TFI referred to EPA’s Water Quality Standards for the State of Florida’s Lakes and Flowing Waters as a “highly controversial and precedent setting rule,” saying it “represents the first time EPA has attempted to displace a state’s efforts to manage nutrient impacts by establishing federal numeric nutrient criteria.” TFI said the rule “would have a devastating impact on Florida’s already fragile economy,” and warned in the letter that EPA has stated its intention to adopt a similar approach in the Chesapeake Bay and Upper Mississippi River Basin watersheds.
TFI also reiterated its criticism of the scientific data and methodologies used in formulating the Florida waters rule. TFI asked the committee to request that EPA conduct an independent economic analysis of the rule and commission a thorough scientific peer-review of the rule by its Science Advisory Board, and urged the committee to “withhold any funding for EPA to implement the rule” until both studies are completed and their results incorporated into the rule.
Regarding EPA’s efforts to regulate GHG emissions, TFI said its primary concerns focus on the GHG Mandatory Reporting Rule, the Prevention of Significant Deterioration Rule, and the Title V Greenhouse Gas Tailoring Rule. The first, according to TFI, is of concern in part because EPA has refused to remove from reporting requirements for ammonia and nitric acid production facilities the CO2 process emissions that are consumed on-site for urea production. “These process emissions are not released to the ambient air from the facility and their reporting exaggerates the GHG footprint for the facility,” TFI states in the letter.
TFI’s criticism of the PSD and Title V Greenhouse Gas Tailoring Rules centers on a number of issues, including what TFI claims is EPA’s “rewriting of the Clean Air Act” to tailor the rule’s applicability to larger GHG sources. TFI also states in the letter that there is a lack of clarity in terms of what manufacturers must do to meet these new regulations, and claims that EPA has provided no guidance on how controls will be implemented and what will constitute best available control technology (BACT).
“This rulemaking would primarily impact nitrogen and nitric acid production, but also impacts phosphate production to some extent,” TFI states in the letter. “While the BACT implementation process could result in substantial economic harm to TFI members, a robust economic analysis is not possible at this point given the lack of clarity and transparency thus far in the process.”
In its criticism of the Chesapeake Bay TMDL, TFI referred to the rule as “yet another attempt by the EPA to set precedent; this time by establishing a TMDL for an area that encompasses 64,000 square miles in seven jurisdictions.” TFI states in the letter that EPA failed to address concerns raised by industry during the Chesapeake Bay TMDL rulemaking process.
TFI states at the conclusion of the letter that the U.S. fertilizer industry provides high paying jobs in manufacturing plants, retail and wholesale businesses, and in related industries such as rail, barge, and truck transportation. “It is therefore critical that any legislative or regulatory actions do not jeopardize the domestic fertilizer industry, which is such a vital link in food production, food security, and the U.S. economy,” the letter says.
Another Canadian rail strike looms
Toronto, Ont.-A strike is once again looming at Canada’s two largest railways as workers represented by the Canadian Auto Workers Union (CAW) have overwhelmingly voted to take strike action at both CN Rail and Canadian Pacific (CP) Railway if contract issues are not resolved by specified deadlines. CAW represents about 6,100 employees at CN and CP, consisting of approximately 3,400 shopcraft, clerical, and intermodal employees and 575 owner-operator truck drivers at CN and a subsidiary, and 2,100 mechanical workers at CP. According to press reports, a series of voting meetings held in early January throughout the country resulted in 82-100 percent of the CN workers favoring a strike, while 89 percent of the CP votes came out in favor of a strike. CAW set a strike deadline of Jan. 25 at 12:01 a.m. for CN, and Feb. 8 at 12:01 a.m. for CP. CAW representatives stated that the CP labor dispute centers on both monetary and non-monetary issues, including CP’s plans to close its Ogden shops in Calgary. The details of the union’s disagreement with CN were not disclosed. “Our members have spoken loudly and clearly about their issues and concerns, and this high strike vote is a strong indication that our members are absolutely serious in addressing these concerns at the bargaining table,'” said CAW President Ken Lewenza. “Workers at CN and CP will enjoy the full support of the union as they fight concessionary demands and secure a decent contract.” A spokesman for CN said he was confident that new collective agreements could be reached without a disruption to service. Negotiations between CAW and the railways started last fall with collective agreements set to expire at the end of 2010, and are slated to resume on Jan. 17 in Montreal. In October 2010, CN reached a tentative, three-year contract with the Teamsters Canada Rail Conference (TCRC), which represents 2,700 conductors, year-persons, and traffic coordinators, after TCRC threatened a strike over modifications proposed by CN to alter mandatory rest periods for workers (GM Oct. 12, Sept. 27, 2010). Fertilizer industry sources view labor disputes at the two major railways with concern since past strikes and lockouts have caused significant disruptions to chemical and fertilizer shipments, as was the case in early 2007 when some 2,800 unionized workers at CN went on strike over a disputed pay raise (GM Feb. 12, 2007).
CHS acquires Idaho retailer
St. Paul, Minn.-CHS Inc. said Jan. 7 that its division operating as Bingham Cooperative has reached an agreement with Land View Inc. to acquire its retail agronomy operations in American Falls, Idaho. The agreement was effective on Dec. 16, 2010, and brings an additional 13,000 st of dry and liquid fertilizer storage to Bingham Co-op, expanding its ability to serve producers in the trade territory. “The additional storage will give us the ability to better serve our cooperative members in southeastern Idaho,” said Allen Young, chairman of the board, Bingham Co-op. “As our customers’ operations grow in size,” added Bingham Co-op General Manager Mike Jensen, “it is critical our local cooperative operations grow as well, so we can keep up with their changing needs and expectations.” “The acquisition is a good one for Bingham Co-op on many levels,” explained John McEnroe, senior vice president CHS. “And it aligns with our core commitment to always return value to our member-owners.” The Bingham Co-op agronomy office has re-located to the former Land View office at 220 Fort Hall Avenue. CHS said patrons of both organizations should expect a smooth transition, including continuity of staffing.
WASDE report sees tightening grain markets
Washington-The latest USDA World Agricultural Supply and Demand Estimates (WASDE) report, released Jan. 12, gave a boost to agriculture markets on news of tighter supplies for corn, soybeans, and wheat. The WASDE report projected ending U.S. corn stocks for 2010/11 at 745 million bushels, down 87 million bushels from last report and 963 million bushels lower than year-ago estimates. The corn stocks-to-use ratio was projected at 5.5 percent, the lowest since 1995/96, while the 2010/11 marketing-year average farm price for corn was projected higher at $4.90-$5.70 per bushel. U.S. oilseed production for 2010/11 was estimated at 100.5 million tons, down 1.2 million tons from last month. Soybean production was estimated at 3.329 billion bushels, down 46 million bushels from last report based on reduced harvested area and lower yields. The soybean yield was estimated at 43.5 bushels/acre, down from last year’s record of 44 bushels/acre. Soybean ending stocks were projected at 140 million bushels, down 25 million from last month. The report projected the 2010/11 U.S. season-average soybean price range at $11.20-$12.20 per bushel. U.S. wheat ending stocks for 2010/11 were projected 40 million bushels lower this month, as a reduction in expected feed and residual use was more than offset by higher projected exports. The marketing-year average price received by wheat producers was projected at $5.50-$5.80 per bushel, up slightly from last month. The U.S. 2010/11 rice crop was estimated at 243.1 million cwt, up 1.5 million, or 0.6 percent from the previous estimate due to increased yields. The average rice yield was estimated at 6,725 pounds/acre, up 56 pounds/acre from last month, but down 360 pounds/acre from the previous year. The U.S. cotton 2010/11 supply and demand estimates showed only minor revisions from last month. U.S. cotton production was raised 47,000 bales, while exports and ending stocks were unchanged from last month. The release of the report prompted midweek rallies in share prices for fertilizer companies such as CF Industries, Agrium Inc., the Mosaic Co., and Potash Corp. of Saskatchewan.
Speculation swells over possible Burrup sale
Perth, Australia-There was much speculation in the Australian press last week that receivers might sell the majority stake owned by Pankaj Oswal in Burrup Holdings, which owns Burrup Fertilisers Pty Ltd., an 850,000 mt/y ammonia producer. Some of this arose from reports that major creditor ANZ, which says it will lose no money on this investment, had appointed corporate advisor Flagstaff Partners to represent it. Reportedly, several major fertilizer players have come forward expressing an interest in Burrup. However, an alternative argument is that receivers PPB Advisory can use cash flow and dividends to repay debt, rather than opting for a sale. Yara International ASA last week reiterated that the receivers are in no position to sell its 35 percent stake. Reportedly, Yara has the right of first refusal, as well as a 20-year ammonia offtake agreement. Yara told Green Markets that it is comfortable with the set of agreements it has around the company. Last week Yara also responded to reports that Oswal attempted to pump $20 million into the venture to avoid litigation. “Pankaj Oswal has continued to produce misleading information ever since Yara rightly led the way in seeking to expose concerns about alleged financial irregularities within Burrup. As a Burrup shareholder, Yara has every right to be concerned about financial irregularities which the receivers have confirmed to exist, and we are not going to respond in detail to this latest smokescreen. It is important to point out, however, that PPB Advisory is not in a position to sell Yara’s shares in Burrup Holdings and the so-called ‘good will offer’ was never made to Yara but to Burrup. Mr. Oswal would be better served by returning to Australia and answering the growing number of serious questions that now exist regarding his activities in the lead-up to and following the appointment of receivers to Burrup.”
Yara acquires remaining shares in Yara Nipro
Oslo, Norway-Yara International ASA has exercised a call option and purchased the remaining 60 percent of shares in Yara Nipro Pty Ltd. from the founders. Yara Nipro is the market leader in bulk liquid fertilizers for many crops in Eastern Australia, and sales volumes have increased by 125 percent since Yara purchased a 40 percent ownership in January 2008. Yara Nipro represents a business that is complementary to the already strong position held by Yara within the horticultural segment in Australia, and Yara Nipro’s operations will be integrated with those of Yara Australia. Yara Nipro has concentrated on irrigated high productivity agriculture and high performance large-scale farms, and in more recent years expanded operations into horticulture, wheat, and sugar cane. With only about 3 percent of the fertilizer in Eastern Australia supplied by liquids, there is huge potential for further growth. “Yara Nipro’s unique liquid fertilizer concept makes it particularly attractive in regions of water scarcity like many parts of Australia. The innovative technology and business model fits well with Yara’s aim to provide the best crop nutrition solution for the global challenges facing farmers today,” says Head of Yara Downstream Egil Hogna. In the financial year ending June 2010 Yara Nipro had a turnover of A$46 million and an EBITDA of A$5.6 million.