OCI NV, Amsterdam, reports that its Iowa Fertilizer Co. (IFCo) anhydrous ammonia plant has achieved a record 116 percent of nameplate capacity after its mid-summer turnaround at the Wever, Iowa, complex. The plant also significantly improved gas efficiency.
“We took advantage of the low season during the summer and have already completed planned turnarounds at OCI Nitrogen, Sorfert, and IFCo,” OCI Executive Director and CEO Nassef Sawiris told analysts on Aug. 30. In August, the company took down one urea train in Egypt for a turnaround.
“We have now also reached the end of our capex program and have no further commitments for growth capex for the remainder of 2019 or in 2020. Therefore, we are about to reach our run rate capacity from the fourth quarter this year,” he continued.
Sawiris noted that the Sorfert turnaround in Algeria has allowed ammonia capacity to go up to 100 percent, which has not been achieved on a regular basis in the past.
“Looking ahead, seasonal summer prices of nitrogen fertilizers have been higher than the year before for the second time in a row,” added Sawiris. “I believe this is due to a healthier operating environment and tightening supply. Inventories at this time of year remained lower than previous years, which bodes well for the outlook. It is widely expected that corn acreage in the U.S. will increase next spring, and we see distributors wanting to have adequate product available in store rather than delaying purchasing decisions until next season.”
The company sees very few urea capacity additions in the coming years in combination with low exports from China. While ammonia prices have been weak this year, Sawiris noted that new capacity is being absorbed and no new merchant supply is expected until 2022. He added that the outlook for DEF is robust.
In other news, OCI expects its planned joint venture with Abu Dhabi National Oil Co. (ADNOC) (GM June 21, p. 1) to combine their Middle East and North African (MENA) businesses to be concluded by the end of September. “The jv will create scale and become the largest dedicated seaborne exporter of ammonia and urea globally,” said Sawiris. “It will be another step forward in the consolidation of this still fragmented industry.”
Financially, Sawiris said the jv will have margins above industry average, very low leverage and finance charges, and that it is well-invested with a young asset base that ensures low maintenance costs and high gas efficiency. “We also expect substantial synergies, over $60-$75 million. These are mostly straightforward commercial or logistics synergies, which we expect to achieve within a short time frame.”
OCI expects jv annual revenues of $1.74 billion with an EBITDA of around $800 million, based on 2018 pro forma figures. OCI and ADNOC will own a 58 percent and 42 percent stake, respectively. Sawiris will head the jv.
OCI said it has mandated J.P. Morgan to assist with the evaluation of strategic options (GM March 8, p. 1) for its methanol group, including the sale, merger, or spin-off to shareholders. A final decision is expected in early 2020. The company confirmed incoming interest about its methanol business earlier this year after it was reported that SABIC had been making inquiries.