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Investors eye strategic options for Gavilon

Featured, Midwest, News

Gavilon Group LLC, Omaha, Neb., the U.S. commodity trading firm, whose largest shareholder is hedge-fund firm Ospraie Management LLC, has hired Morgan Stanley to explore strategic alternatives.

“Gavilon has strengthened and firmly established its position as a leading, global commodity company with a robust pipeline of growth opportunities,” according to a statement from Gavilon. “The company has decided to explore a broad range of strategic alternatives that may further its growth and create additional value for our stakeholders.” Strategic alternatives many times means a possible sale.

In 2008, ConAgra Foods Inc. completed the sale of its commodity trading and merchandising operations conducted by ConAgra Trade Group – which included ConAgra’s lucrative fertilizer trading business, based in Savannah, Ga. – to an investor group led by Ospraie Special Opportunities Fund, which also included global growth investor General Atlantic LLC and a private investment fund managed by Soros Fund Management LLC (GM June 30, 2008). ConAgra Trade Group was sold for approximately $2.8 billion, net of transaction costs and subject to post-closing adjustment. Another major Gavilon investor includes Orascom Construction Industries of Egypt.

Thereafter, Gavilon has grown, acquiring related businesses. Its largest acquisition came in 2010, when it acquired grain and fertilizer company DeBruce Companies, Kansas City, Mo. (GM Oct. 25, 2010).

Today, Gavilon counts some 300 facilities and regional offices worldwide, linking agriculture, fertilizer, and energy supply with global demand. It provides origination, storage and handling, transportation and logistics, marketing and distribution, and risk management services to tens of thousands of customers each year. The company employs 2,000 people around the world and is ranked America’s 19th largest private company by Forbes. Gavilon’s history dates back to 1874, when Peavey Co. built its first grain facility. In 1982, Peavey was acquired by ConAgra Foods and later became part of ConAgra Trade Group, which was sold to the investor group in 2008.

PotashCorp reports 2nd highest annual income; 4Q North American potash volumes off 47.5 percent

Featured, News, Potash Muriate, Saskatchewan

Potash Corp. of Saskatchewan Inc. said Jan. 26 that its earnings for the year ending Dec. 31, 2011, were the second highest in history. Net income was $3.08 billion ($3.51 per diluted share) on sales of $8.71 billion, up from the prior year’s $1.77 billion ($1.95 per share) on sales of $6.53 billion.

Fourth-quarter net income was up at $683 million ($.78 per share) on sales of $1.86 billion, compared to the year-ago $508 million ($.56 per share) on sales of $1.81 billion.
However, volumes for all major fertilizer products were off in the fourth quarter, with potash gross margins falling from the year-ago period. They were offset by better margins for nitrogen and phosphates.

Fourth-quarter potash gross margins were $486 million on sales of $718 million, down from the year-ago $536 million on sales of $831 million. With dealers limiting purchases, fourth-quarter potash sales volumes of 1.58 million mt fell well short of the 2.38 million mt in the year-ago quarter. Actual sales into North America were down 47.5 percent, to 422,000 mt from 804,000 mt. Offshore sales were off 26 percent, to 1.16 million mt from 1.57 million mt. The overall average potash price was up, at $431/mt from the year-ago $323/mt. The North American average was $514/mt versus $384/mt, while the Offshore average was $401/mt versus $292/mt.

Fourth-quarter phosphate margins were up at $163 million on sales of $606 million, compared to the year-ago $137 million on sales of $521 million. Overall, phosphate tons sold dropped during the quarter, to 890,000 mt from the year-ago 965,000 mt. Average prices were up, at $631/mt from $495/mt.

Fourth-quarter nitrogen margins were $241 million on sales of $541 million, up from the year-ago $153 million on sales of $461 million. The company said UAN volumes at Geismar, La., were impacted by limited availability of carbon dioxide necessary for production, an issue that will be rectified once the idled ammonia plant at Geismar returns to production in the third quarter of 2012. The company also said a 70,000 mt ammonia expansion at Augusta, Ga., starts up this fall, and the company is looking at further debottlenecks at Lima, Ohio, as well as continuing to look at Augusta.

While U.S. gas prices have been on the wane, PotashCorp noted that its gas costs were up 13 percent during the quarter over the year-ago period. This was due to rising prices in Trinidad, where prices are indexed to Tampa ammonia prices. PotashCorp told analysts that the gas contract at its Trinidad Number 3 ammonia plant expired last May with supplies continuing, but that the terms are under negotiation. The company said it is obvious that the gas supplier is going to have to recognize what is going on in North America regarding gas prices in future negotiations. Number 3 is the company’s smallest plant in Trinidad, representing about 16 percent of its gas use.

Fourth-quarter nitrogen tons sold were down at 1.08 million mt from the year-ago 1.28 million mt. The average price per ton was up at $461/mt from $325/st.

“The drag of global economic concerns shook the confidence of fertilizer buyers and caused a greater decline in fourth-quarter demand than we had anticipated,” said PotashCorp President and CEO Bill Doyle. “However, we believe these short-term challenges do not change the more powerful drivers of our business. The return on fertilizer investment continues to be attractive to farmers world-wide and is expected to result in greater demand in the quarters ahead.”

The company noted that fertilizer buyers are typically more aggressive when product is needed and prices are rising, as evidenced through much of 2011. It said they pause in periods of market uncertainty and limited immediate demand, which is what occurred in the fourth quarter.

In North America, PotashCorp believes first-quarter potash volumes will

PCS Sales – Management Briefs

Management Briefs

PCS Sales on Jan. 24 announced several organizational changes, effective Jan. 1, 2012.

Derek Hardy was promoted to vice president, fertilizer sales – West. He was previously director, fertilizer sales – East. In his new position he assumes the responsibilities of Gary Snyder, who retired from the company after 33 years of service.

Andrew Cote was promoted to director, national accounts (feed sales). He was previously sales manager, fertilizer sales – South. John Fowler, previously sales rep. II, was promoted to sales manager, fertilizer sales – South. Paul Whitworth, previously sales rep. II, was promoted to sales manager, fertilizer sales – East. Luke Poletti was promoted from customer service representative to sales associate, fertilizer sales – South.

Brian Mark was promoted to senior sales director – Canada. He was previously sales director – Canada. Loran McDonald, previously sales rep., has joined the Transportation and Distribution Department as senior trucking and regulatory compliance coordinator.

Kyle Ortegren joined PCS Sales as sales rep. II. He comes to the company with experience as a sales account manager.

Effective Jan. 30, 2012, Robert Beck will be joining PCS Sales as senior director, industrial nitrogen and purified phosphates sales. He comes to the company with 20 years of experience in agricultural and industrial sales.

Yara just has a few days left on Burrup decision

News, News Briefs, Northwestern Europe

Oslo — Yara International ASA has through Jan. 31, 2012, to make a decision on whether or not to buy a 65 percent stake in Burrup Holdings Ltd. in Australia. As the 35 percent minority partner, Yara has the option to match the bid put in by Burrup gas supplier Apache Corp., Houston. Apache put in the high bid – reportedly $560 million – for the 65 percent stake back in December (GM Jan. 2, 2012, Dec. 19, 2011). At the time, Apache announced that it would both acquire the 65 percent stake and proceed with the development of a technical ammonium nitrate (TAN) plant in the site, to be developed by a consortium including Burrup Holdings Ltd. Apache said it was also negotiating to sell most of its interest in the TAN project to Orica, an Australia-based global supplier of mining explosives. Apache has supplied gas to Burrup Fertilisers since the plant commenced production in 2006. With a production capacity of 760,000 mt/y, the plant is one of the world’s largest ammonia production facilities. Yara has long-term offtake rights. The Australian media last week reported that Yara and Apache were in negotiations about Yara possibly acquiring a majority stake 51-49 percent share of Burrup.

Florida biosolid fertilizer plant explodes

News, News Briefs

West Palm Beach, Fla. — New England Fertilizer Co. (NEFCO) has a team of investigators on the scene here to determine the cause of an explosion at the biosolid fertilizer plant Tuesday morning, Jan. 24. One employee, identified as a chief operator, was transported for observation as a precaution and later reported out of the hospital and in good condition. “Operations are down and the facility will not be restarted until the cause of the explosion has been determined,” NEFCO spokeswoman Virginia Grace told Green Markets. She said General Manager Jim Sullivan is heading up the investigation and has been joined by others from the corporate office at North Quincy, Mass., and outside consultants from all over the country. A NEFCO statement reported, “An explosion inside the building took place while the plant was shut down for routine maintenance and cleaning.” There were no community or environmental impacts associated with the event. Sullivan said at this time the company is unable to provide any further specifics, as it is in the process of developing a comprehensive incident report to determine the cause. “We will not commence operations at this facility until we completely understand the situation, and we will not put the safety of any of our employees in jeopardy at this plant until all safety issues are resolved.” In the meantime, NEFCO has invoked a back-up plan to manage biosolids for the Solid Waste Authority while the processing facility is temporarily shut down. Grace added that any damage caused by the explosion appears to be confined to one of two process trains. Pending the outcome of the investigation, it is possible one train will be back in operation by the end of the week, Jan. 28. West Palm Beach city spokesman Chase Scott told the local press the explosion was forceful enough to blow off heavy metal doors. West Palm Beach Fire-Rescue was called to the plant at about 5:15 a.m. Scott said three people were on the job at the time and that the explosion happened during a routine maintenance and cleaning while the plant was shut down, but it is unclear whether that procedure sparked the event. "There’s some significant damage," he said. "They have large, heavy industrial doors on the east and west sides. They were peeled up or blown off by the explosion." The waste treatment plant produces pelletized biosolids for use as fertilizer.

Upstart urea company touts technology

News, News Briefs, Urea

Doral, Fla. — BioNitrogen Corp., which has a patent-pending technology to produce urea from biomass, last week unveiled a new website touting its technology and also named a new president. BioNitrogen says its small, modular plants – which can produce 15 st of urea per hour, or up to 124,200 st/y – can easily be located in high agricultural areas, where they can buy biomass (plant stalks, husks, household garbage, etc.) from farmers, and in turn sell them urea. The company says by-products created include fly ash, which can be sold to the cement industry, as well as electricity and water, which can be used in the production process. It also claims its process will recycle harmful greenhouse gases with virtually no negative impact on the environment and will qualify for carbon credits. The company also announced the appointment of Dr. Terry R. Collins, Ph.D., P.E., to the position of President and CEO, effective immediately, succeeding Jay Almedia, who will remain on the board of directors. The company says he has accumulated almost 20 years of professional experience in corporate engineering and plant operations management for major agricultural manufacturing companies, including Cargill, Anderson Clayton Foods, ACCO Feeds, Paymaster Oil Mill Co., and Archer Daniels Midland Co. He also held professorships over the past 13 years at four research universities, including the post of Associate Professor at the School of Industrial and Engineering Management, Oklahoma State University, as well as the Director of the Biodiesel Performance and Testing Laboratory. Collins earned his Ph.D. in Industrial Engineering and Management, with a specialty in Technology Transfer and Engineering Management, from Oklahoma State University. Earlier, he attended Texas Tech University, where he completed two B.S. degrees in the areas of Agricultural Engineering (with specialization in Manufacturing Systems), and Agricultural Processing and Material Handling. He then went on to obtain his M.S. in Industrial Engineering, also from Texas Tech University.

Nebraska fertilizer plant faces OSHA fine

Midwest, News, News Briefs

Omaha, Neb. — The U.S. Department of Labor’s Occupational Safety and Health Administration (OSHA) is proposing a $148,000 fine against fertilizer producer Loveland Products Inc. in Fairbury, Neb., for 25 safety violations, 14 of which relate directly to OSHA’s standard regulating the process safety management of highly hazardous chemicals. The citation stated that the employer failed to develop procedures for emergency evacuation, including procedures to account for all employees after an evacuation; failed to maintain an employee alarm system; and failed to have an ammonia detector in the reactor area with a local alarm to provide notification to the rest of the facility. OSHA initiated its inspection of the liquid-based fertilizer producer under both the agency’s site-specific targeting program for industries with high occupational injury and illness rates, and its process safety management national emphasis program for chemical manufacturers. OSHA’s PSM standard contains specific requirements for the management of hazards associated with processes using dangerous chemicals, and establishes a comprehensive management program integrating technologies, procedures, and management practices. Of 24 serious violations, OSHA reported, those related to process safety management include incorrect and incomplete process and implementation diagrams, a deficient process hazard analysis of the system, incomplete operating procedures, an inadequate mechanical integrity program for the system, inappropriate inspections and tests of the system, and a lack of hot work permits. OSHA also found compliance audits to be insufficient, and that the employer failed to follow up on compliance audit findings. Other serious violations, which occur when there is substantial probability of death or serious harm, involve electrical hazards as well as deficiencies with walking/working surfaces, overhead storage, an emergency action plan, hazard communication, and procedures for the lockout/tagout of energy sources. One other-than-serious violation with no penalty was issued for failing to document powered industrial truck training. Loveland Products Inc. has 15 business days from receipt of its citations and penalties to comply, request an informal conference with OSHA’s area director in Omaha, or contest the findings before the independent Occupational Safety and Health Review Commission.

N.D. anhydrous inspection changes hands

Ammonia, Midwest, News, News Briefs

Bismarck, N.D. — The North Dakota Department of Agriculture (NDDA) has taken over effective Jan. 1 the inspection of anhydrous ammonia tanks and facilities in addition to enforcing state laws and regulations and licensing of these facilities, and is equipped with upgraded computer software to make the task easier for both sides. The transfer from the insurance department was approved by last year’s state legislature, requiring any dealer, applicator, or user with storage for 6,000 gallons or more to obtain a license from NDDA. “As with our pesticide program, we intend to take a proactive approach to anhydrous ammonia regulation,” said Agriculture Commissioner Doug Goehring. “In the coming year, the department will conduct an extensive education and outreach effort to help anhydrous users better understand and comply with the law.” NDDA had Kelly Registration Systems modify the existing computer system to include such features as identifying inspection reports for an unlimited number of tanks at a specific location or under a specific licensee, printing all licensees and past inspection dates, using UPCs and product names to conduct business inspections, printing stop-sales notices, and producing administrative reports related to inspection activities and statistics, as required by the state. The Kelly system has been in operation for two years now for fertilizer, pesticides, feed products for registering feed retailers, fertilizer distributors, and anhydrous ammonia distributors. “The new program is going to be an enforcement platform for recording inspections of anhydrous ammonia facilities,” explained fertilizer specialist Spencer Wagner. “With Kelly fertilizer registrants have been able to submit online or they can send us in hard copies which we upload into the system. This provides a very efficient contact system and label review. It also puts it in to the public side of Kelly so any user can access the information, which would tell if the product is registered in the state, search it by name, dealer, and amount of nitrogen, phos, or potassium. They could put in ‘I want something with 20 percent’ and it would bring up every product available with this amount of nitrogen. With anhydrous, this database can quickly and efficiently find past inspections and information on those inspections, and that cut down on paper use as well. This is strictly an inspection database for us to look up what tanks and what facilities were last inspected in a given year. It also allows us to track the number of violations so we can categorize the violations that would indicate that additional training is needed or if the training information was sufficient to the user. The retail outlets can do everything online except for the onsite inspections.”

N.J. in second phase of strict fertilizer controls

News, News Briefs, Northeast

Trenton, N.J. — Under legislation passed and signed by Gov. Chris Christie last January, New Jersey is moving into the second and strongest phase of the most restrictive controls on lawn fertilizer in the country. Effective Jan. 5, the second phase of the new state fertilizer law requires fertilizer application by a certified professional. That means that professional fertilizer applicators must be trained and pass an exam to be certified to apply fertilizer. “This is to assure that they understand proper rate calculations, basic principles of grass culture and management, calibration of equipment, safety precautions, and implications for the environment,” according to Stephanie Murphy, Ph.D., and director of Rutgers soil testing laboratory. The third phase of the law will go into effect on Jan. 5, 2013, when all fertilizer for turf is required to contain a minimum of 20 percent slow-release nitrogen and zero phosphorus, unless a soil test demonstrates a need for more. The law already has established strict controls on the fertilizer that can be used, mandating product types and controlling when and when not to fertilize as a means of reducing nutrient runoff into the endangered Barnegat Bay and other waterways. “The purpose of the law is to reduce input of nutrients to water bodies, especially the Barnegat Bay,” according to Murphy. She added that phosphorus is the main concern for fresh water, while nitrogen is the major concern for the bay area. The first of the three phases, effective last January, provides definitions for the sale, use, and application of fertilizer. Lawn fertilizing with phosphorus or nitrogen is prohibited before March 1 or after Nov. 15, or at any time when the ground is frozen. The third and final phase of the law, effective next January, further defines label and content requirements and outlaws fertilizer products that do not meet new content standards set by the law.

BASF sells French stake to jv partner

Ammonia, Calcium Ammonium Nitrate, News, News Briefs, Western

Ludwigshafen, Germany — BASF on Jan. 20 signed a contract to sell its 50 percent share in PEC-Rhin in Ottmarsheim, France, to its joint venture partner GPN, a member of the French Total Group. PEC-Rhin produces CAN/AN (calcium ammonium nitrate/ammonium nitrate) fertilizers and the respective intermediates, ammonia and nitric acid. The company was established in 1966 and currently has about 180 employees. The sale of BASF’s fertilizer activities in Antwerp, Belgium, to EuroChem as announced in September 2011 is ongoing as planned, subject to approval by the appropriate antitrust authorities. The total transaction value for both deals is expected to be approximately €700 million. BASF plans to complete the transactions by the end of the first quarter of 2012.