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Israel considers new ammonia plant
Tel Aviv — Israel’s Industry and Trade Ministry has issued a request for information from Israeli and international companies on setting up an ammonia plant in southern Israel. The request is part of an effort by the ministry to speed up the removal of the Haifa Chemicals ammonia storage facility in Haifa. The request notes that the proposed plant would use natural gas from Israeli offshore fields. The ministry is looking to shut down an existing storage facility for imports as soon as possible, and has asked for information from interested parties to establish a production plant based on local natural gas supplies. Israeli demand for ammonia is 120,000 mt/y, and more than 90 percent goes to the local fertilizer industry. Israel currently imports all of its ammonia needs. Earlier this month, the country’s Industry and Trade and Environmental Protection Ministers agreed to move the current ammonia storage facility from its location in Haifa to the south. The facility is owned and operated by Haifa Chemicals, and is located in the Haifa Bay industrial zone in close proximity to population centers. The existing facility stores 12,000 mt, and there has been strong opposition to its location in a metropolitan area from environmental groups and the Haifa Municipality. There has been a growing movement supporting the closure of the facility, and the municipality actually went to court to get it moved. A Haifa court put off a decision on the matter until May. Environmental and security experts warned in recent years of the potential hazards of the facility to the nearby civilian population. A commission appointed in 2006 recommended improving the protection of the facility and the banning of the entry of vessels transporting ammonia into Haifa port during war time. In 2010 a team of experts from government ministries and private consulting firms studied various alternatives and found that the facility was well protected by international standards, but was located closer to population centers than is customary The team recommended that an ammonia production plant be set up that would supply the needs of the local fertilizer and other industries. Officials at the Environmental Protection and Industry and Trade Ministries said that the determining factor was the fear of missile attacks in the Haifa region, and that was the main reason for the decision to shut the facility down and find an alternative location. Late last year Ratio Oil Exploration said it was considering building an ammonia plant in the northern Negev region that would use natural gas from the huge offshore discoveries. Ratio is a partner in the Leviathan offshore field, which was discovered in December 2010. The field has estimated reserves of 20 trillion cubic feet. The cost of the plant is put at $500 million and would be able to meet all domestic needs and export as well.
Glencore to acquire Viterra; Agrium and Richardson agree to purchase certain Viterra assets
Glencore International PLC and Viterra Inc. announced on March 20 that they have signed a definitive agreement in which Glencore has agreed to acquire all of the issued and outstanding shares of Viterra for C$16.25 per share. The transaction values Viterra’s equity at approximately C$6.1 billion on a fully diluted basis. The transaction will be funded out of Glencore’s existing cash resources and available credit facilities.
As noted in earlier reports, the deal also involves Agrium Inc. and Richardson International, a privately held grain trader and input retailer based in Winnipeg. Agrium reported that it has entered into a definitive agreement with Glencore to acquire the majority of Viterra’s Agri-products business, and Richardson announced that it has agreed to acquire more than C$900 million worth of Viterra’s grain handling assets, crop input and processing facilities, and related working capital.
“The acquisition of Viterra reflects our strong belief in the importance and future potential of the Canadian and Australian grain markets,” said Chris Mahoney, director of Agricultural Products for Glencore. “This is an exciting opportunity to deliver the real benefits that can be generated through the combination of Glencore’s and Viterra’s respective assets, people and know-how to both farmers and customers in Canada, Australia and further afield.”
"Viterra employees created a worldclass agri-business, of which I am very proud,” said Mayo Schmidt, Viterra’s president and CEO. “This has been recognized by Glencore and its partners, and this transaction creates value and opportunities for employees, our communities, farmers and customers in all the markets we serve.”
In a statement, Glencore said the acquisition is consistent with its strategy of strengthening its position as one of the global leaders in grain and oilseeds markets.
“Viterra’s Tier 1 portfolio of assets in Canada and Australia will allow Glencore to build upon its position as one of the world’s largest commodity suppliers and provides the opportunity to leverage Glencore’s extensive global networks, expertise and best practices in order to create additional value across its agricultural businesses,” Glencore said.
Under the agreement, Agrium will acquire approximately 90 percent of Viterra’s Canadian retail facilities, all of its Australian retail facilities, as well as their minority position in a nitrogen facility located in Medicine Hat, Alberta. Agrium valued the acquisition price from Glencore at approximately C$1.15 billion, plus working capital, in a back-to-back purchase and sale arrangement.
Richardson will acquire 23 percent of Viterra’s Canadian grain handling assets, certain agri-centers, and certain processing assets in North America for C$0.8 billion in cash, subject to specified purchase price adjustments, including payment for working capital. The assets to be acquired by Richardson include 19 country elevators and the crop input centers co-located with those elevators, which Richardson said will complement its Pioneer network of grain elevators and crop input centers across Western Canada.
Richardson’s agreement with Glencore includes the purchase of a 25 percent ownership interest in Cascadia Terminal (Vancouver); a Viterra terminal in Thunder Bay, Ontario; the Can-Oat Milling business, with oat processing plants in Portage la Prairie, Manitoba, Martensville, Sask., and Barrhead, Alberta; and 21st Century Grain Processing, which has an oat processing plant in South Sioux City, Neb., and a wheat mill in Dawn, Texas.
Glencore noted that the purchase of Viterra is not conditional on Glencore’s agreements with Agrium or Richardson being completed.
"We believe our Crop Production Services Retail business can provide
Canpotex and Sinofert sign new contract
Canpotex Limited on March 20 signed a contract with Sinofert Holdings Limited to supply 500,000 mt of potash in the second quarter of calendar 2012. The new contract includes an option to increase this tonnage by an additional 200,000 mt for delivery during that same period. Pricing is unchanged from the previous second-half 2011 contract.
The contract is the third concluded under the three-year Memorandum of Understanding signed with Sinofert in October 2010. Steven Dechka, Canpotex’s president and CEO, said this latest contract demonstrates the continued confidence Sinofert has in Canpotex’s ability to meet the growing needs for potash in the important China market.
Sinofert is China’s largest integrated agricultural company and a long-term business partner of Canpotex.
Urea, UAN loading halted at some Oklahoma terminals
Koch Fertilizer LLC notified customers on March 9 that it had suspended urea loading until further notice out of its Enid, Okla., plant. Also on March 9, CF Industries notified customers that it had suspended UAN loading until further notice out of its Woodward, Okla., facility.
On March 12, CF sent out another notice to customers that it had resumed loading of UAN-32 and UAN-28 at its Woodward facility, but supplies were still under allocation.
No other details were provided, and neither company responded to requests for more information. Industry sources noted, however, that production problems have been rumored at some Oklahoma production facilities in recent weeks. One industry source commented that Koch has been working to increase production rates at the Enid facility, but the plant has so far underperformed. That assessment was not confirmed by Koch.
Koch completed upgrades to the Enid facility in 2009 that were projected to provide an additional 140,000 st/y of urea to the market and significantly enhance the plant’s rail load-out capability (GM March 30, 2009). Urea capacity at the Enid facility prior to the upgrade was 350,000 st/y. The plant also produces ammonia (1 million st/y) and UAN (102,000 st/y).
CF’s Woodward nitrogen facility in recent years underwent a $180 million upgrade to boost UAN capacity by some 1,500 st/day, to 825,000 st/y. The Woodward facility also produces 440,000 st/y of ammonia, but only 100,000 st of that is available for sale as a finished product, with the rest upgraded to UAN.
The Woodward facility also produces 70 percent urea liquor for use in cattle feed supplements and blasting agents, and 40 percent urea for use in NOx abatement.
Icahn attacks CVR management, but says he will walk away if not enough shares are tendered on March 23
Billionaire investor Carl Icahn issued an open letter to CVR Energy Inc. shareholders March 14, addressing some negative press about himself, as well as promising to walk away from the deal on March 23 if less than 36 percent of the outstanding shares are tendered by that date. “…we will respect the views of shareholders and move on to pursue other opportunities,” he said.
Icahn said a piece by a news organization was “so fraught with inflammatory rhetoric and reasons not to tender your stock that I would not be surprised if it was written by a PR firm paid for by CVR.” He said that a charge that he “burned” other shareholders to achieve a 35 percent return in 2011 was outrageous and ill-informed. He said returns achieved in 2011 were for all shareholders, not just his firm.
Icahn said his firm almost invariably targets companies where managements have repeatedly failed to deliver. “It is often only outside activists that can force them to change direction for the benefit of you, the shareholders,” he said.
He cited an article in the Journal of Applied Corporate Finance entitled "Is Carl Icahn Good for Long-Term Investors?" which he said concluded, among other things, that a significant number of his targets ended up being acquired or taken private within 18 months of his initial investment. He said the shareholders of those companies earned abnormal returns of almost 25 percent from the time of Icahn’s initial investment through the sale of the company. "I believe that as a result of our involvement, not only did all shareholders benefit, but that these companies became more productive and more competitive.”
“From our perspective as long-term and highly successful investors in the energy sector, we believe that the only way to release value at CVR is for the company to be sold or broken up at this time,” said Icahn. “With our tender offer, we are offering shareholders a win-win. If our offer is successful and our board nominees are elected, we believe that a sale of the company in an open auction process is possible, thus giving shareholders an opportunity for greater profit as a result of owning the contingent value right embedded in our offer. But even if we are unable to sell the company, you the shareholders will still have received $30 per share for a stock that closed at $26.78 on March 13 and has never closed above our offer.”
CVR Energy’s board of directors quickly responded, issuing their own letter. “Mr. Icahn’s actions and statements continue to surprise us. By his own admission today, CVR Energy is an unlikely target for Mr. Icahn. Mr. Icahn states that he targets ‘companies where managements have repeatedly failed to deliver,’ yet CVR Energy has delivered total returns to stockholders over the past three years of 588 percent, far exceeding both the S&P 500 and the average total return of our peer group. The same leadership team is still in place, and CVR Energy’s board and management continue to aggressively position the company for growth and are confident in the company’s prospects.”
CVR said several major news outlets have also looked closely at Icahn’s behavior, including The New York Times, The Wall Street Journal, and Institutional Investor. “We encourage stockholders to read these and other press articles and form their own conclusions about Mr. Icahn, his track record and his intentions with respect to CVR Energy. We believe that Mr. Icahn’s record with other companies where he has obtained a controlling influence serves as an important cautionary tale. Mr. Icahn’s volatile and disruptive tactics are a distraction from the fundamental strength of our business and the performance of our assets. We strongly urge stockholders to reject
Viterra acknowledges expression of interest; shares jump 46.5 percent in one week
Canadian-based grain and fertilizer company Viterra Inc. confirmed on March 9 that it has received expressions of interest from third parties. It said there can be no assurance that any agreement or transaction will result. The company said a further announcement will be made if appropriate. By March 15, the Canadian press said Viterra had further acknowledged that it had opened up its books for a full-fledged auction.
Reports identified a bidder as commodity trading giant Glencore International PLC, Switzerland. Others said a bidding war could develop for Viterra, with potential contenders being Cargill Inc., Archer Daniels Midland Co., and Bunge Ltd. In addition, others suggested that a Canadian company could either bid or be a part of a buying group, so as to relieve any regulatory concerns from the Canadian federal government. Under the Investment Canada Act, the government must approve major sales valued at over C$312 million to foreign companies. Such a sale must be found to have a “net benefit” to the country. The government ruled against BHP Billiton’s takeover attempt of Potash Corp.
of Saskatchewan Inc. in 2010. To date, Canadian companies mentioned as possible contenders – at least for some of Viterra’s assets – included Agrium Inc., a fertilizer producer and retailer; privately-held Richardson International, a grain trader and input retailer based in Winnipeg; and major Canadian pension funds.
On March 15, The Globe and Mail painted a scenario where Glencore, Agrium, and Richardson would buy Viterra and divvy up the assets. Agrium, which has been hungry to grow its retail business, would take the bulk of Viterra’s Canadian retail outlets, Richardson would take certain port assets and elevators, and Glencore would take the bulk of the rest of the assets in Canada and Australia. Glencore is reportedly not interested in the retail assets. As a result, Agrium could conceivably wind up with those in Australia as well.
Some of the same companies mentioned above, including Viterra itself, are also seen a contenders for Gavilon Group LLC. Glencore is also currently seeking Swiss coal and metals producer Xstrata Plc.
Much of the interest in Viterra derives from the Marketing Freedom Act, which changed grain trading laws in Canada. Western Canadian farmers may now sell their wheat and barley to any buyer they want for delivery after Aug. 1, 2012, rather than to the government monopoly, the Canadian Wheat Board. Viterra, which reportedly holds a 45 percent share of the Canadian grain handling market, is expected to soon grow that share to 50 percent as a result of the change in the law. EBITDA is expected to grow by some C$40-$50 million in 2014 as a result. In addition to grain-related assets in Canada and Australia, Viterra owns a burgeoning retail business in both countries, with approximately 260 locations in Canada and 25 in Australia, and a 34 percent stake in the Canadian Fertilizers Ltd. nitrogen plant in Medicine Hat, Alberta. Fertilizer has put in a stellar performance for the company in recent earnings reports, including the one inside this issue.
On the Toronto Stock Exchange, Viterra shares closed Thursday, March 8, the day before it acknowledged acquisition interest, at $10.98. On Thursday, March 15, they closed at $16.09, an increase of 46.5 percent in one week.
Ammonia
U.S. Gulf/Tampa: The markets were quiet last week, with most of the attention to be focused on the upcoming Tampa business for April, sources said. Some contacts speculated that strengthening Black Sea ammonia might mean higher numbers for Tampa come April. In the meantime, there was speculation of some new barge business being worked in NOLA.
U.S. imports were off 7 percent in January, to 561,044 st from the year-ago 606,293 st. This matches the July-January drop as well – down 7 percent – to 4.2 million st from 4.5 million st.
Eastern Cornbelt: Sources said warm weather ushered in a flurry of ammonia activity in Indiana at mid-month. Sources tagged the prompt ammonia market at $630-$640/st FOB terminals in Illinois and Indiana, up from lows that had reportedly touched the $625/st FOB mark on a spot basis earlier in the month. Ammonia applications in the Illinois market have been steady since February, with some terminals reportedly out of open market spot tons last week.
Western Cornbelt: Sources pegged the anhydrous ammonia market in a broad range at $575-$610/st FOB Western Cornbelt terminals, down slightly from last report. The low end of the range was reported out of Nebraska terminals, with Iowa terminals quoted in the $590-$610/st FOB range, depending on location. Delivered ammonia in central Missouri was pegged at $620-$625/st from southern production points.
One Missouri source said ammonia movement had been stalled by wet conditions in his location, but he expected ammonia rigs to be rolling again by the weekend. Other locations reported steady fieldwork and a taste of summer weather last week. Record high temperatures on March 14 included 86 degrees in St. Louis, Mo., and 81 in Des Moines, Iowa.
Southern Plains: The ammonia market remained at $550-$570/st FOB in the Southern Plains, with the low out of regional production points and the upper end out of Kansas pipeline terminals. Sources described the market as quiet but with steady movement, particularly in western Kansas. One source said some pipeline suppliers were limiting spot sales in Kansas last week in order to honor contract tons being pulled at more northerly locations on the pipe.
A fair amount of preplant fertilizer work has been done on corn ground in the region, and one Kansas source said growers in his area will be planting by the third week of March if soil conditions are dry enough. A northern Texas contact said field conditions there remain critically dry, and the combination of 80-degree days and strong winds is not improving matters.
South Central: Ammonia pricing to the dealer was pegged at $605-$610/st FOB Memphis. Sources reported that prepay ammonia sales out of the Henderson, Ky., market had been done for as high as $675/st FOB in recent weeks, but spot and prepay tons were reportedly sold out there last week.
Black Sea: Reports are circulating that Koch cleared a cargo out of Yuzhnyy at $450/mt FOB. This represents a major jump in the Yuzhnyy price, and could signal a return of production by some of the major players in the area.
Several plants in the area have been closed for some time because of a soft international ammonia market and rising natural gas costs.
The last bit of known business in the area topped off at $400/mt FOB. The tons purchased are expected to head to the U.S. One trader noted that Tampa was the most likely destination.
If the tons go to Tampa, the delivered price could range from $520-$550/mt CFR.
For now, if the new price level holds, sources say the ammonia market could be on track for a serious rebound.
Middle East: The flow of ammonia out of the region is mostly tied to contracts. Sources say it had be
Urea
U.S. Gulf: Like the week before, urea started the week stable and moved up on Thursday. Most put the market early in the week at $525/st FOB, but said by close of business on Thursday it had reached as high as $543/st for prompt trades. One player was reportedly quoting as high as $555/st FOB.
Prompt barges were reported to be very hard to find, and first-half April were also reported to be moving up fast.
With extremely high temperatures and generally good weather over much of the nation, sources expected that the current run-up in prices might stick this time and not retreat as it has recently. Sources said buyers from northern areas have been coming into the market to fill up and are finding less product than expected.
Indeed, sources said the perception is that this is an early spring and buyers are starting to want product right away, not months away. Sources said first-half April prices were $510/st FOB and moving fast toward prompt pricing, and May was called $485/st FOB.
January imports were down 37 percent, to 642,051 st from the year-ago 1 million st. The drop for July-January was not as dramatic – 13 percent – to 3.64 million st, down from 4.17 million st.
Eastern Cornbelt: Granular urea prices had reportedly inched up to $560-$580/st FOB regional terminals, with the low quoted in the Illinois market and the upper end out of northern Ohio terminals. Sources tagged the Cincinnati urea market at the $560/st FOB level early in the week.
Western Cornbelt: Granular urea pricing continued to tick up in the Western Cornbelt region. Sources quoted the dealer market in the $560-$570/st FOB range out of most regional terminals last week, with the upper end of the range tagged at the $585/st FOB mark out of warehouses in western Iowa.
Southern Plains: Sources quoted the granular urea market firmly in the $565-$575/st range FOB Enid and Inola, Okla. One source said product availability has improved, although Koch alerted customers on March 9 that it had suspended urea loading at its Enid facility. March 7 urea postings from Koch included $575/st FOB Enid and Inola/Catoosa.
South Central: Urea pricing volatility continued to be the topic of choice among fertilizer contacts in the region. Most sources quoted the terminal market solidly at the $550/st FOB level in the region last week, up another notch from last report.
Southeast: Granular urea pricing in the Southeast was up significantly from last report. Sources quoted the dealer market in a broad range at $540-$570/st FOB port terminals last week, with the low confirmed for some spot tons out of the Norfolk, Va., market at midweek. Dealer reference levels were reported in the $560-$575/st FOB range out of most regional terminals as the week advanced.
India: Late last week IPL called a tender to close March 23. Sources say the tender call is less a signal that India needs the urea to jump-start its application season – it doesn’t – but rather more a desire to lock up the low-cost April and May urea production from Iran.
Reportedly, India is looking for prices no higher than $400/mt CFR to the west coast. This pricing idea is in line with the trend of lower prices seen last year.
In August 2011, offers in the IPL tender were in the $520s/mt CFR. By December of last year, the lowest price had dropped to $444/mt CFR, with an average price of $470/mt CFR.
The steady drop in the delivered price came as more Iranian urea became available for purchase. Indian buyers were more than willing to deal with the complexities of currency conversion if it meant dramatically lower prices for urea.
In the December tender, the Arab producers in the Gu
Nitrogen Solutions
U.S. Gulf: UAN barges were continuing to see strength, though not at the leaps and bounds often seen by urea. New trades were put in the $280-$290/st ($8.75-$9.06/unit) FOB range, with new quotes at $295/st ($9.22/unit) FOB plus.
UAN imports were off 51 percent in January, to 210,521 st from the year-ago 433,467 st. However, July-January imports are actually up 6 percent, to 2.08 million st from 1.97 million st.
Eastern Cornbelt: The UAN market was steady at $10.50-$10.89/unit FOB Eastern Cornbelt terminals, with the low FOB Cincinnati. Rail-delivered UAN-32 was quoted as low as $330-$340/st ($10.31-$10.63/unit) in the Ohio and Indiana markets.
Western Cornbelt: UAN-32 remained at $339.20-$345.60/st ($10.60-$10.80/unit) FOB most terminals in the Western Cornbelt region. Several contacts quoted the common dealer price at the $340/st ($10.63/unit) FOB mark last week.
Southern Plains: The UAN-32 market was reported in the $325-$345/st ($10.16-$10.78/unit) FOB range in the region, with the low out of production points and the upper end offered from resellers in the Kansas market. Sources talked of tight UAN supplies as well. “Today we have manufacturers on allocation,” said one source.
CF alerted customers on March 9 that it was suspending UAN loads out of its Woodward, Okla., plant until further notice. On March 12, CF sent out another notice to customers that it had resumed loading of UAN-32 and UAN-28 at its Woodward facility, but supplies were still under allocation.
South Central: UAN-32 pricing was up slightly from last report at $320-$340/st ($10.00-$10.63/unit) FOB regional terminals, depending on location, with the low end reported out of the Memphis market.
Southeast: UAN-30 was pegged at $285-$290/st ($9.50-$9.67/unit) FOB Norfolk or Wilmington, N.C., up slightly from last report. The dealer reference for UAN-32 was reported at the $310/st ($9.69/unit) mark FOB Savannah, Ga.
The UAN vessel market was reported in the upper $290s/mt CFR for new quotes.