LSB Industries Inc. President and CEO Daniel Greenwell told analysts on April 26 that he believes the habit of selling product for fall fill tons at very low prices at or after the Southwestern Fertilizer Conference will be moderated from past practices, since the channel is being more highly served by core producers. “We ask ourselves, why sell a large portion of our production at low prices, when the opportunity to enhance margin exists by developing strategies to better utilize storage facilities. Selling cheap at early dates has been a bad habit of the industry for numerous years. We see that activity starting to change, and we support that.”
He added that producers are being more disciplined. Iowa Fertilizer Co. recently said it had no plans to participate in a summer fill program (GM March 23, p. 1).
Greenwell believes both second-quarter and second-half 2018 will be stronger than the year before. He said the distribution channel for fertilizer products has gone through some significant changes during the past 12 months, and will continue to mature during the remaining portion of 2018.
Greenwell also believes further industry consolidation should occur. “Significant synergies can be obtained and more diverse operations will have better operational flexibility and product diversity,” he added. “Larger platforms will compete more effectively. We expect to participate in that consolidation. We’ll continue to upgrade our business and enhance our onstream rates.”
Greenwell also spoke out on logistic woes. “I think what we’ve seen certainly from the railroads is timeliness or the ability to turn cars. I think – not just our industry, but everybody in the country has seen a deterioration of rail services, and we’ve implemented some better rail tracking management, things like that.” He added that rail service is still relatively poor right now, although the company has not seen inflation in the costs.
He noted that the trucking industry is suffering from a lack of drivers, and that while he would expect higher trucking costs, the company has not seen anything material at this point.
LSB reported that its El Dorado, Ark., ammonia plant has been running so well that the company has decided to shorten the planned September turnaround for the plant from 25 days to 12. This decision will cut capital expenditures from $35 million to $32 million and contribute to margin by adding back in 13 production days. The company said the plant had a 100 percent onstream rate in the first quarter, and produced between 1,300-1,350 st/d.
The Cherokee plant, which ran at 85 percent in the first quarter and went down for repairs and instrument enhancements, will have a 35-day turnaround in late July.
In other news, LSB said it continues to sell non-core assets. It said it is currently in negotiations to sell several pieces of real estate that it believes can generate approximately $6 million in additional cash, and hopes to have more information next quarter.