Oklahoma City-LSB Industries Inc. reports that the Golsen Family LLC (GFLLC) has established a trading plan under which some 100,000 shares of LSB stock can be sold during a one-year period beginning Sept. 16, 2010. The stock price cannot be less than $19 per share. The plan is part of the GFLLC long-term estate and tax planning strategy. All of the outstanding membership interests in GFLLC are beneficially owned, directly or indirectly, by Jack Golsen (LSB CEO and chairman of the board) and members of his family, including Barry Golsen (president and member of the board) and Steven Golsen (president of certain subsidiaries of the company).
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BHP unit donates $250,000 to Pakistan relief
Houston-BHP Billiton Petroleum, part of BHP Billiton Corp., has donated US$250,000 to support relief work for victims of the recent Pakistan flood disaster. Funds will be donated from the UK-based charitable company BHP Billiton Sustainable Communities. The donation will be made to the United Nations World Food Programme (WFP) – the world’s biggest humanitarian agency – and directed immediately to WFP’s emergency relief operations in Pakistan. The funds will help to provide food assistance to people across the country whose lives have been severely impacted by one of the worst natural disasters in Pakistan’s history. “BHP Billiton is committed to helping communities where we operate, particularly in times of need. We are proud to support the work of the World Food Programme.” said J. Michael Yeager, chief executive of BHP Billiton Petroleum. The company has operated the Zamzama gas field in the Dadu district of Sindh province since 1998.
Management Briefs – September 6, 2010
Dr. Rick Ringer, associate professor, Illinois State University College of Business, was honored with the “Friend of Growmark” award at the cooperative’s annual meeting in Chicago in late August. The award was established in 1989 to recognize outstanding leadership and commitment to agriculture, and friendship to the Growmark System.
Also at the meeting, five FS member cooperatives were recognized for business performance improvement. The cooperative with the highest degree of improvement was Ag View FS, Inc., Princeton, Ill. Mark Orr is the manager and Ron Pierson is president.
Ranking second was Lincoln Land FS Inc., Jacksonville, Ill. Keith Hufendick is the general manager, and Joe Pickrell is the president. Conserv FS Inc., Woodstock, Ill., with David Mottet, manager, and John Henning, president, was in third place. Fourth place was held by Vineland Growers Co-operative Ltd., Jordan Station, Ont., George Mitges, manager, and Phil Tregunno, president. Ranking fifth was Southern FS Inc., Marion, Ill. Alan Kirby is the manager, and Rollo Burnett is the president. Growmark measures the improvement based on return on invested capital. Each cooperative’s return on invested capital improvement is measured over a five-year timeframe in comparison to other cooperatives in the system.
Intrepid Potash Inc.’s board of directors on Aug. 30 increased the number of directors from five to six and elected Chris Elliott as a Class I director. He will serve as an independent director. Elliott has approximately 23 years of work experience in the agriculture industry. Since 2007, he has been the president and co-owner of Accuform Technologies LLC, an agriculture product development company. He is also president and CEO of Agricultural Co. of America Partners LP, a company that owns and manages agriculture real estate and operates farms producing a variety of crops over a diverse geographic spectrum. Elliott previously served as president and CEO of Nutra-Park Inc., an agriculture plant growth regulator company, from 2002 to 2006.
Karin Dorrepaal will join DSM on Sept. 1 as senior vice president in the corporate strategy & acquisitions department, reporting to Hein Schreuder. At the end of 2011 she is to succeed Schreuder, who is at present executive vice president corporate strategy & acquisitions, reporting to Feike Sijbesma, CEO and chairman of the managing board. Dorrepaal, a Dutch national, has had several non-executive roles since leaving the executive board of Schering AG in Berlin. At Schering, she was responsible for business diagnostic imaging, as well as the global supply chain and procurement. Prior to joining Schering she was with Booz Allen & Hamilton (now Booz & Co.) for 14 years, where she was a leader of the Life Science practice. She holds a PhD in Medicine, as well as an MBA.
Market Watch
AMMONIA
AMMONIA
U.S. Gulf/Tampa: While prices for September went up to $425-$435/mt DEL, sources last week were predicting that by the time October rolls around, they could slip again. Others noted the recent drop in natural gas prices, which they say will give ammonia producers some leeway should nitrogen prices begin to fall.
Eastern Cornbelt: Anhydrous ammonia remained at $550-$560/st FOB in the region for prompt or prepay tons.
Western Cornbelt: The Western Cornbelt ammonia market remained at $550-$560/st FOB regional terminals for prompt tons, with fall prepay offers in the $560-$570/st FOB range.
Southern Plains: Steady fertilizer movement was reported on preplant wheat. Sources said efforts were underway to pressurize the western leg of the Magellan ammonia pipeline after months of hydrotesting. One industry source said expectations are that product will be available the second week of September at Conway, Kan., and possibly in Clay Center, Kan., the week after.
The upswing in spot prices continued to spark caution on the part of some buyers. “We are playing a fairly conservative position right now,” said one. “Our coverage is adequate, but not long. We will fill in some holes with spot tons if the need arises and as we liquidate our positions.” He noted as well that forward pricing ideas are mixed. “For every bullish attitude, there is an offsetting bear,” he said.
The anhydrous ammonia market was quoted at $490-$500/st FOB regional production points, with reference levels at the $540-$545/st FOB level at pipeline terminals in Kansas. Effective Aug. 23, Agrium’s ammonia postings moved to $545/st FOB Clay Center, Kan., $540/st FOB Conway, Kan., $535/st FOB Mocane, Okla., and $495/st FOB Borger, Texas.
South Central: The ammonia market had firmed to $495-$540/st FOB regional terminals, with the low at Memphis, Tenn., and the upper end FOB Henderson, Ky.
India: FACT closed its 7,500 mt tender Sept. 1, with Transammonia apparently taking the prize.
The Trammo price of $372/mt CFR has an estimated netback of $345-$347/mt FOB.
The offers from the Arab Gulf producers showed they were swinging from the fences. The estimated netbacks on their offers were just under $390/mt FOB.
Tender results follow.
FACT Ammonia Tender 7,500 mt
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Company
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US$/mt CFR
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Transammonia
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372.00
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PIC
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412.90
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Qafco
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414.00
|
|
Sabic
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415.00
|
Sources speculate the Trammo tons could come from Iran or Oman. Transammonia ?Çô working through its European office ?Çô has done deals with Iranian suppliers in the past. And Indian buyers have not been averse to taking Iranian tons.
In general, the Iranians offer their ammonia and urea for a few dollars off the Arab producers’ desired prices. The difference, sources say, is because of the embargo against using U.S. dollars to purchase Iranian products. The buyer usually has to work through a financial middle man ?Çô usually in the UAE ?Çô to handle the currency transfers.
The return of FACT to the buying market came as a relief to many producers who have been looking for more public spot buyers to help show how much the market has moved.
The last time FACT was seriously in the market was in January, when it sought to secure up to 100,000 mt in 7,500 mt lots.
Middle East: The FACT/India tender confirmed all the talk of recent weeks that the price was moving up.
Then a purcha
The Week in Fertilizer Stocks
SPOT BARGE PRICES
PotashCorp gives more reasons to reject BHP; speculation continues; insider trading alleged
PotashCorp said Aug. 23 that after careful consideration, its board of directors voted unanimously to reject BHP Billiton’s unsolicited offer to acquire all of the outstanding shares of PotashCorp for US$130 per share in cash. The board unanimously recommends that PotashCorp shareholders reject the BHP offer and not tender their shares.
“The PotashCorp board of directors is unanimous in its belief that the BHP Billiton offer substantially undervalues PotashCorp and fails to reflect both the value of our premier position in a strategically vital industry and our unparalleled future growth prospects,” said PotashCorp President and CEO Bill Doyle. “The board thoroughly reviewed the formal offer documents in connection with BHP Billiton’s unsolicited offer and concluded that the offer is wholly inadequate and is not in the best interests of the company, its shareholders, or other stakeholders. We strongly urge shareholders to reject BHP Billiton’s opportunistic offer and not tender their shares.”
PotashCorp has already detailed reasons against the deal (GM Aug. 23, p. 1), but has added some additional ones. PotashCorp says the consideration represents a 13.1 percent discount to the closing price of PotashCorp common shares on Aug. 20, 2010. The company notes that since BHP’s unsolicited approach on Aug. 17, PotashCorp common shares have consistently traded above the offer price. PotashCorp believes that the performance of the common shares during this period is a strong indicator that the market believes that the BHP offer undervalues the common shares.
PotashCorp also noted that its financial advisors have each provided a written opinion to the board that the consideration being offered pursuant to the BHP Billiton offer was, as of the date of such opinions, inadequate, from a financial point of view, to shareholders (other than BHP and any of its affiliates). These assessments came from BofA Merrill Lynch, Goldman, Sachs & Co., and RBC Capital Markets.
Superior offers or other alternatives are expected to emerge, according to PotashCorp, which says it has been working to evaluate a range of strategic alternatives that may enhance shareholder value. PotashCorp said it has been approached by, and has initiated contact with, a number of third parties who have expressed an interest in considering alternative transactions. Discussions are being pursued with several of these third parties in order to generate value-enhancing alternatives.
PotashCorp also says the BHP offer is coercive and not a permitted bid under PotashCorp’s newly-enacted shareholder rights plan.
As it has in the past, PotashCorp stressed that greenfield potash investment economics are unattractive at current potash prices. As a result this makes PotashCorp, with its estimated 20 percent of world potash capacity and oncoming brownfield capacity, a particularly valuable asset. The company says BHP also does not adequately value PotashCorp’s stakes in ICL (14 percent), APC (28 percent), SQM (32 percent), and Sinofert (22 percent).
And with its growing brownfield capacity, PotashCorp says it has an unmatched ability to capture a disproportionate share of future growth opportunities. PotashCorp said that it is conceivable that if it were able to utilize its full operational capability of 17 million mt by 2015, it could generate in excess of $10 billion of EBITDA from potash sales alone.
PotashCorp also notes that the BHP offer is substantially inferior to control premiums for other marquee Canadian-based resource companies.
Vale out of the running
Brazil’s Vale S.A. on Aug. 23 said that rumors about a bid to acquire a fertilizer company or about negotiations with the purpose of making a bid to acquire a company are totally unfounded. Speculation had been circulating in the marketplace in recent days that Vale might be interested in making a bid on PotashCorp.
Speculation continues as to who else might be on the list of potential PotashCorp suitors, with Chinese firms, including Sinochem, prominently mentioned. Sinochem owns a majority in Sinofert Holdings Ltd., of which PotashCorp owns 22 percent. Chinese firms have been investing in start-up potash projects in The Congo and Ethiopia.
Sources note that China, which has a contentious relationship with BHP over iron ore sourcing, would not want the same for potash.
BHP philosophy of full-out production
Industry watchers continued to react to what a BHP acquisition of PotashCorp could mean for the industry. Many industry veterans give Bill Doyle and PotashCorp credit for taking the potash industry away from the days of full-out production and low or no profits. “The potash industry world-wide, was literally giving the stuff away,” said one industry veteran last week. “Not only did Doyle bring discipline to the market for potash, but in due course the producers of nitrogen and phosphate followed suit …. Much has been made about the 500 million dollar man, but nothing has crossed the airways about Bill’s restoring sanity worldwide in balancing supply and demand. He should have been rewarded!”
Another source said with the big build-up in brownfieldpotash reserves that prices may go lower anyway. He noted that after spending money for all those expansions, bankers and shareholders are going to expect those properties to be run, not remain idle. Potash producers, however, say potash demand is getting back on track and the extra potash will be needed.
Does BHP just want potash?
Sources last week continued to question whether BHP would keep PotashCorp’s nitrogen and phosphate businesses. “They like to dig holes,” said one source. “They do not appear to like chemical processes.” Others agreed, and BHP, in a conference call Aug. 25, continued to add fuel to this fire. Asked how BHP could add value to PotashCorp, BHP CEO and Chairman Marius Kloppers gave as an example how BHP has been trimming off its own non-core assets. “And what we’d like to do is continue to spend more and more of our effort on these big basin-type assets.”
He said BHP has the skills to operate these potash mines and their associated infrastructure at the same high levels of utilization that is customary for the rest of the BHP portfolio. He also said PotashCorp is effectively almost a single commodity company, and that BHP could run it more effectively than PotashCorp could.
Jansen expansion quite imminent
Kloppers said last week that the next phase for its own greenfield Jansen project in Saskatchewan is “quite imminent,” and that it is putting the refrigeration plant on the surface to freeze the shaft. Jansen is initially targeted for 8 million mt/y of potash.
Agrium speaks up for Canpotex
BHP has said it prefers marketing its own product, leading many to question whether it would exit Canpotex, the export arm of the Saskatchewan potash producers. Agrium on Aug. 26 stated its public support for Canpotex. It said as a one-third owner, Agrium fully supports this world-class global potash marketing and distribution organization. It said Canpotex has developed an enviable rapport and reputation with customers globally and utilizes its extensive and low cost infrastructure to the benefit of its members and customers alike. “Agrium, through Canpotex, will continue to play an integral role in helping to meet the ever growing demand for potash, which is required to increase food production globally,” stated Agrium President and CEO Mike Wilson.
BHP annual earnings up 116.5 percent
BHP Billiton Group, which comprises both BHP Billiton Ltd. and BHP Billiton Plc, last week reported a 116.5 percent increase in profits for the year ending June 30, 2010, compared to the prior year. Profit attributable to members was US$12.7 billion on sales of $52.8 billion, up from the prior year $5.9 billion on sales of $50.2 billion. In general, BHP said it remains cautious on the short-term outlook for the global economy, and that its commodity price outlook is mixed.
Insider trading alleged in BHP-PotashCorp deal
The U.S. Securities and Exchange Commission has charged two residents of Madrid, Spain, with insider trading and obtained an emergency court order to freeze their assets after they made nearly $1.1 million in illegal profits by trading in advance of last week’s public announcement of the BHP offer for PotashCorp.
The SEC alleges that Juan Jose Fernandez Garcia and Luis Martin Caro Sanchez purchased – on the basis of material, non-public information about the impending tender offer – hundreds of “out-of-the-money” call option contracts for stock in PotashCorp in the days leading up to the public announcement. Garcia is the head of a research arm at Banco Santander, S.A. – a Spanish banking group advising BHP on its bid. Garcia and Sanchez jointly spent a little more than $61,000 to purchase the contracts in U.S. brokerage accounts. Immediately after BHP’s offer was announced publicly on August 17, Garcia and Sanchez sold all of their options for illicit profits of nearly $1.1 million.
“Garcia and Sanchez tried to move off-shore highly suspicious trading profits made just a few days before. When abusive market practices occur, as in the case against Garcia and Sanchez, we will act swiftly and decisively to deny wrongdoers the profits of their illegal activity,” said Daniel Hawke, SEC Chief of the enforcement Division’s Market Abuse Unit.
Acid plant problems crimp Phos Holdings 2Q; company upbeat for 2nd half
Problems with its sulfuric acid plants in the second quarter put Phosphate Holdings Inc. (PHI), the owner of Mississippi Phosphates Corp., in the loss column for the second quarter ending June 30, 2010. PHI reported a net loss of $4.9 million ($.58 per diluted share) versus the year-ago positive $104,000 ($.01 per diluted share).
Despite what the company called a good second quarter for phosphates, production problems held the company back. “Operationally, the second quarter of 2010 was challenging,” said Robert Jones, PHI CEO. “For the quarter, the company’s sulfuric acid production was approximately 66 percent of planned levels. Production rates at both sulfuric acid plants were impacted by problems with the interstage absorption coolers. Moreover, we had a boiler failure in one of our sulfuric acid plants, which shut that sulfuric acid plant down for 27 days during the quarter.”
Jones said the acid plant problems had a corresponding unfavorable impact on DAP production, as the company produced 150,968 st – or 75 percent of planned production – of DAP in the second quarter.
PHI reported a second-quarter operating loss of $7.08 million, versus the year-ago income of $76,000. EBITDA was a negative $4.59 million, compared to the year-ago positive $3.05 million.
Total sales for the second quarter were up 45 percent, to $62.1 million from the year-ago $42.7 million. The average DAP sales price was up 45 percent, to $400.26/st from the year-ago $275.39/st. The company sold 152,434 st of DAP, with 84,888 st (56 percent) as exports and 67,546 st (44 percent) for the domestic market.
PHI said third-quarter DAP prices are up significantly. However, it cautioned that certain known issues in its sulfuric acid plants will not be addressed until a scheduled maintenance turnaround in November. PHI is projecting third-quarter DAP production between 155-165,000 st. While it can give no assurances, it anticipates that it will return to profitability in the third quarter.
“We view the second half of 2010 as promising,” said Jones. “With expectations of an early harvest and another large U.S. corn crop in 2011, fertilizer applications should be robust. Phosphate inventories throughout the chain are generally low. Demand for phosphates remains strong as India continues to purchase large phosphate volumes. South America restocking requirements are emerging and the U.S. market is strong.”
PHI had a first-half net loss of $2.3 million ($.27 per share) on sales of $122.2 million, compared to the year-ago loss of $11.4 million ($1.50 per share) on sales of $97 million. Six-month operating losses were $2.9 million versus the year-ago loss of $18.2 million, while EBITDA was a positive $2.6 million compared to the year-ago negative $12.8 million.
Ammonia pipe rupture causes fish kill
The Iowa Department of Natural Resources (DNR) confirmed that it is investigating a fish kill involving a mix of both large and small fish, including game and other species, from an anhydrous ammonia release on Aug. 19. The release, from a ruptured supply line in the storage tank area at South Central Co-op near Lacona, Iowa, resulted in the evacuation of nearly everyone in the community of 360 for several hours.
Ted Petersen with the DNR’s Des Moines office reported that high ammonia levels and dead or dying fish have been found in Mill Branch. He said the fish kill progressed downstream about two miles into Cotton Creek, and then into White Breast Creek about two miles east of Lacona. Petersen said he is checking ammonia levels, taking water samples, and looking for additional dead fish, and that others from the department are conducting a fish kill count. “The fire departments sprayed down the vapors to prevent them from becoming airborne,” he commented. “We thought the runoff was contained. However, it ran into an underground tile line which empties into Mill Branch creek.”
The co-op is constructing a temporary dam in Mill Branch to prevent any additional flow of ammonia-contaminated water into Cotton Creek. Co-op General Manager Neil Moon said he didn’t think that much ammonia escaped from the rupture before it was shut off. He estimated that a couple of hundred pounds may have been released. Moon said that investigators are still looking into what caused the break in the line, which is a part of the co-op’s anhydrous storage facility, consisting of a number of large supply tanks.
Still, he added, the emergency responders had a difficult time finding the break. “We had a lot of emergency responders on hand,” Moon explained. “They had to go in in protective suits and start turning valves until they got things shut down.” He said weather conditions help bring things under control, with the wind continually blowing to disperse the plume. “If it had been at night the situation could have been much more serious,” he added. The all-clear was given at approximately 1 p.m., about three hours after the pipe ruptured.
Two persons were reportedly taken to the hospital as a precautionary measure after they complained of breathing problems.
Air Products to pay $1.5 M penalty; company says no wrongdoing
Air Products LLC has agreed to pay $1.485 million in civil penalties to resolve hazardous waste mismanagement violations at its Pasadena, Texas, chemical manufacturing facility, according to a joint announcement by the U.S. Department of Justice (DOJ), the U.S. Environmental Protection Agency (EPA) and the state of Texas. The settlement resolves Air Products’ Resource Conservation and Recovery Act (RCRA) violations in transferring spent acid to the neighboring Agrifos Fertilizer Inc. manufacturing plant.
As part of the settlement, Air Products has agreed to continue to manage the spent acid onsite and not ship it to Agrifos or any other facility not authorized to accept it. Air Products is currently in compliance with the RCRA requirements specified in the settlement. Air Products has agreed to notify EPA and the Texas Commission on Environmental Quality in the event that the spent acid is either disposed of or sent off site.
“This settlement eliminates the disposal of spent-acid waste from the Air Products facility into the environment,” said Ignacia Moreno, DOJ assistant attorney general. “By stopping this source of pollution, this settlement will reduce risks to human health and the environment.”
Air Products, a manufacturer of chemicals used in the manufacture of polyurethane and hydrogen gas, operates its facility on a 105-acre tract of property adjacent to the Agrifos fertilizer plant. For many years, the company purchased sulfuric acid from Agrifos and returned a spent acid stream that Air Products had generated in its operations. In April 2006, inspectors from EPA observed that the return acid stream was a spent acid that was being used in part to make land-applied fertilizer. Agrifos is not authorized to accept hazardous waste from other facilities.
“We are concerned that wastes from mineral processing and associated fertilizer production can pose a serious risk to our nation’s drinking water and the health of families,” said Cynthia Giles, assistant administrator for EPA’s Office of Enforcement and Compliance Assurance. “And we’re just as concerned when contaminated wastes from other facilities find their way to these operations. EPA is working to minimize or eliminate risks to communities and the environment from illegal hazardous waste operations at phosphoric acid and other high risk facilities.”
Air Products instituted modifications that will reduce the levels of contamination in the spent acid, as well as the construction of a $60 million regeneration plant that will stop the acid waste stream altogether. The regeneration plant construction was part of operational changes that were initiated prior to settlement negotiations and became effective as negotiations progressed.
The proposed settlement agreement, lodged in the U.S. District Court for the Southern District of Texas, is subject to a 30-day public comment period and approval by the federal court. Air Products acknowledged the settlement and said it would be divided $1.35 million to the U.S. and $135,000 to Texas.
Air Products said it has a 30-year commercial relationship with the neighboring facility whereby both companies exchanged sulfuric acid through dedicated enclosed pipelines as part of an acid exchange process benefiting both companies’ production operations. It believed the acid it exchanged was legitimate product that its Pasadena plant had been designed to produce. The company said in 2008 that the government told it that it did not view the acid as a product, but as a waste, and further discussions led to the settlement with no admission of wrongdoing. Air Products said the acid product status had never been noted before by any regulatory agency in prior facility inspections.
The company said it fully cooperated with the government and believed that it was in full compliance. It said it was in its best interest to settle so as to avoid litigation costs.
Air Products said the long-term viability of the neighboring facility (Agrifos) prompted it to decide to build its own sulfuric acid concentration plant, and that this was prior to receiving any government notification regarding the acid exchange. Air Products says the new plant improves the security of supply of raw materials and services the Pasadena operation by modifying the sulfuric acid use in the plant. The acid exchange arrangement ended when the new plant came up in early September 2009.
This case is part of EPA’s National Enforcement Initiative for Mining and Mineral Processing. Although Air Products does not conduct mining or mineral processing, the DOJ said it sent the spent acid stream to a facility that does – the Agrifos fertilizer plant. Mining and mineral processing facilities generate more toxic and hazardous waste than any other industrial sector, based on EPA’s Toxic Release Inventory. If not properly managed, these facilities pose a high risk to human health and the environment. Since 2003, EPA has been investigating 20 phosphoric acid facilities in seven states.
In a national enforcement effort, EPA has focused on compliance in the phosphoric acid industry because of the high risk of releases of acidic wastewaters at these facilities, which can cause groundwater contamination and fish kills. A 2007 incident at the Agrifos phosphoric acid facility in Houston released 50 million gallons of acidic hazardous wastewater into the Houston Ship Channel, and in 2004, 65 million gallons from the Mosaic Riverview facility were released into Tampa Bay, which led to a massive local fish kill.