All Posts from July 15, 2022

Southwestern Fertilizer Conference – Management Brief

Management Briefs

The 96th annual Southwestern Fertilizer Conference in Nashville, Tenn., on July 10-14 attracted 2,170 industry attendees from approximately 833 companies and 17 countries.

The conference inducted three individuals into its Hall of Fame: Grady Goodpasture, former president of Goodpasture Inc.; Larry Murphy, former president of the Fluid Fertilizer Foundation; and L.W. “Bill” Lohry, founder of Nutra-Flo Company and founding member of the Fluid Fertilizer Foundation and the Fluid Journal.

The conference also noted key industry representatives who have passed away in recent years, including Bob Shaw of Knox Fertilizer; Chuck Locker of Ben-Trei; Mohamed Belhoussain of OCP; Charles “Mac” Macaluso of Darling Ingredients; Jerry Southwell of Yara; Cody Massey of Brandt; Jerry Christian of CF Industries; Jimmy Pursell of Pursell Farms; industry consultant Mike Orr; and Ray Hoyum of Advantage International.

Hocking Divests Industrial Cleaning Segment

Houston, TX, News, News Briefs

Hocking International, Houston, on July 8 announced the divestiture of its Industrial Cleaning segment to State Contract Manufacturing, a division of State Industrial Products Inc., Cleveland, Ohio. All products and customers have been transitioned to State.

Industrial products, consisting primarily of cleaning chemicals and automotive lubricants, were the primary business of Hocking International at its inception 46 years ago. However, Hocking said that it is now solely focused on product formulation, manufacturing, and fulfillment services for agriculture, golf, and landscape customers, providing innovative solutions for some of the largest retailers and distributors in the industry.

“Hocking International has grown and evolved over the years into one of the leading private-label manufacturers of liquid fertility products for the Agriculture and T&O industries,” said Hocking CEO Greg Crawford. “The divestiture of our Industrial Cleaning segment will allow us to further focus on our core businesses and on providing world-class products and service to our customers.”

Emergency Board Appointment Urged to Avoid Looming Rail Strike

Featured, News, Transportation, U.S.

Twelve rail unions are threatening a possible strike against the country’s Class 1 railroads on July 18 unless a Presidential Emergency Board (PEB) is appointed by President Biden to help resolve the labor dispute. An update on the dispute was provided at the Southwestern Fertilizer Conference in Nashville, Tenn., on July 12 by Dan Keen, Assistant Vice President, Policy Analysis, for the Association of American Railroads.

Disagreements over wages and health care benefits have prevented the railroads and their unions from negotiating a new contract since January 2020. The National Mediation Board (NMB), an independent federal agency that mediates railroad and other labor agreements, agreed earlier this year to mediate.

The parties failed to meet an agreement under NMB mediation, however, prompting the NMB last month to release the railroads and unions from mediation and begin a 30-day cooling off period, Freight Waves reported. That 30-day period ends after midnight on July 18.

Keen said Biden is almost certain to appoint a PEB before the cooling off period ends, as has been the practice in prior railroad labor disputes. A PEB would then have another 30 days to conduct hearings and issue a report, during which work stoppages are prohibited, Keen said.

According to the National Carriers’ Conference Committee (NCCC), which represents the railroads in collective bargaining, any work stoppage is also prohibited for another 30 days following the publication of PEB’s report.

The narrowing timeline before the July 18 deadline, however, has prompted some organizations to press Biden for action. Suzanne Clark, President and CEO of the U.S. Chamber of Commerce, penned a July 6 letter to Biden urging him to appoint a PEB promptly to “prevent any disruption to America’s rail service.” The letter was copied to Secretary of Labor Marty Walsh and Secretary of Transportation Pete Buttigieg.

“The U.S. business community faces enormous challenges today from record inflation, labor shortages, and ongoing supply chain disruptions due to the COVID-19 pandemic,” Clark said in the letter, adding that further disruptions “would be disastrous for U.S. consumers and the economy, and potentially return us to the historic supply chain challenges during the depths of the pandemic.”

Rail labor unions have criticized railroads for implementing “precision scheduled railroading” procedures in recent years in an effort to increase efficiencies, but at the expense of jobs and service. Major rail carriers have cut roughly 45,000 positions in the past six years, according to an April 2022 report from the Surface Transportation Board (STB).

Precision scheduled railroading was also criticized by The Fertilizer Institute (TFI) in testimony submitted to the STB in April concerning rail service issues that have hindered fertilizer deliveries this spring (GM April 29, p. 1).

Greg Regan, President of the AFL-CIO’s Transportation Trades Department, said rail workers are being “ground to dust” after going three years without a raise and being asked to work long hours to meet surging demand. “The reality is railroad executives continue to make record profits off the backs of rail workers after shrinking the total workforce by 30% since 2015,” Regan said, cited by Freight Waves.

GOP Lawmakers Press Biden to Waive Import Duties on Fertilizer

Featured, Morocco, News, Phosphate, Trinidad and Tobago, U.S., UAN

Approximately 30 Republican members of Congress are urging the Biden administration to lift import duties on phosphate fertilizer from Morocco and place a moratorium on any new duties on UAN imports from Trinidad and Tobago.

A July 14 letter signed by 31 members of Congress, including senior lawmakers on the House and Senate agriculture committees, said the nation’s farmers are facing high fertilizer prices, tight fertilizer supply, and rising inflation, threatening food security.

“Our country’s farmers and agricultural producers are making decisions on what to plant today based on fertilizer prices rather than typical market fundamentals,” the letter states. “Coupled with inflation at the highest it has been in 41 years and a Consumer Price Index for food up 14.6%, the rising cost of fertilizer will increase food insecurity and geopolitical tensions domestically and abroad.”

The letter follows the final affirmative determinations in June by the U.S. Department of Commerce (DOC) in antidumping (AD) and countervailing duty (CVD) investigations of UAN imports from Russia and Trinidad (GM June 24, p. 1). DOC and the U.S. International Trade Commission (ITC) initiated their investigations in July 2021 in response to petitions filed by CF Industries Holdings Inc. (GM July 2, 2021).

The ITC made an affirmative preliminary determination in August 2021 and is scheduled to make its final determination on July 18, 2022. If the ITC’s final determination is affirmative, then DOC will issue AD/CVD orders on UAN imports from Russia and Trinidad, which will remain in place for at least five years.

The DOC and ITC last year (GM March 12, 2021) issued AD/CVD orders on imports of phosphate fertilizer from Morocco and Russia in response to a complaint filed by The Mosaic Co. on June 26, 2020 (GM June 26, 2020).

While noting that the U.S. is a “major producer” of nitrogen and phosphate fertilizer, the letter from Republican lawmakers said U.S. farmers “still significantly rely on imports” to meet fertilizer demand for crop production.

“While under normal circumstances, action by the Commerce Department and the ITC in the form of duties may be warranted. We do not want foreign governments to distort trade with the U.S.,” the letter states. “However, we certainly are not in normal circumstances. Duties on some of our most reliable trading partners is the last thing we need amid a global food crisis.”

Referring to the fertilizer duties as “inflationary tariffs,” the lawmakers said fertilizer supply and availability in the U.S. is “at a crossroads where farmers are applying lower-than-recommended soil nutrient rates for fear they cannot break even.” The result, the letter states, is that productivity will decline.

“The bottom line is that fertilizer is critical to national security and national defense,” the letter concludes. “Its affordability is also critical to wrangling out-of-control inflation. As such, we strongly encourage you to take immediate action to waive duties on fertilizer imports from Morocco and Trinidad and Tobago.”

Nutrien Assessed $84 M for Geismar Cleanup

Featured, Louisiana, News, Phosphate, Saskatchewan

Nutrien Ltd., Saskatoon, is being assessed up to $84 million for cleanup work and a $1.5 million civil penalty to settle alleged violations of the Resources Conservation and Recovery Act at the former phosphate operations at its Geismar, La., complex. The agreement was announced on July 14 by state and U.S. EPA officials.

Legacy PCS Nitrogen Fertilizer LP manufactured phosphate products in Louisiana for agriculture and industry from the 1960s to 2018, including phosphoric acid and phosphate fertilizer.

The company must treat more than 1 billion pounds of acidic hazardous process wastewater, which will then be sent to a new water treatment plant. The result “will provide a protective solution for decades to come,” said Chuck Carr Brown, Secretary of Louisiana’s Department of Environmental Quality.

“This is a very important outcome, as the facility is located in an area prone to hurricanes, and the financial assurance secured will protect taxpayers from paying future closure and cleanup costs,” said Larry Starfield, Acting Assistant Administrator for EPA’s Office of Enforcement and Compliance Assurance.

“Safety and environmental protection are key priorities for Nutrien,” said Richard Holder, General Manager of Nutrien’s Geismar Operations. “We are committed to reducing the environmental impacts of our operations, and to developing products and innovative solutions that help growers enhance their productivity and sustainability.

“We have long been working with the U.S. Environmental Protection Agency and Louisiana Department of Environmental Quality to resolve issues relative to legacy phosphate operations at the site in Geismar,” he added. “Those operations were closed in December 2018. These settlements essentially document mitigation efforts that were initiated even before operations ceased.

“These agreements allow us to focus on new projects, like the potential construction at our Geismar site, of the world’s largest clean ammonia plant, and to further reduce our environmental footprint at the site,” he said. “We are proud community members in Louisiana and take our responsibility to care for the environment seriously. As such, we will continue to advance ongoing efforts in an environmentally protective manner. We have worked with state and federal authorities during this process, and these consent decrees and state orders document the resolution of issues arising from that work.”

Titan Machinery Acquires Heartland Ag Systems

News, News Briefs, Northern Plains

Titan Machinery Inc., the Fargo, N.D.-based network of full-service agricultural and construction equipment stores, announced on July 11 that it has entered into definitive purchase agreements to acquire Heartland Ag Systems, Heartland Solutions, and related affiliates, the largest Case IH application equipment distributorship in North America.

The purchase price was reported at approximately $110 million, subject to final working capital and other closing adjustments, with the amount comprised primarily of cash from the company’s balance sheet. The transaction is expected to close in August 2022, subject to customary closing conditions, with all of Heartland’s 340 employees joining Titan. Heartland’s management team is also expected to remain in place throughout and following the integration.

“This transaction is significant for Titan Machinery both in size and strategic fit,” said David Meyer, Titan Machinery’s Chairman and CEO. “Most importantly, this gives Titan Machinery access to the full product line of Case IH application equipment, including self-propelled sprayers and fertilizer applicators, along with incremental sales opportunities to package with tractors, tillage, and construction equipment to the commercial application customer.”

Founded in 1966, Heartland Ag Systems has exclusive distribution agreements across 17 states in the Midwest and Northwest regions, supported by 12 retail stores, six of which are within Titan’s existing footprint. The company also operates a commercial application equipment manufacturing facility at its Hutchinson, Minn., headquarters. In the full year period ended Dec. 31, 2021, Heartland generated revenue of $213.9 million and EBITDA of $15.3 million.

Titan said Heartland is well diversified, with a strong parts and service business that represents approximately 30% of full-year 2021 revenues and generated pre-tax margins of 4.2%, presenting a similar profile to that of Titan’s existing business. The transaction will equate to approximately $274 million in revenue, $0.43 in diluted earnings per share, and $19.5 million in EBITDA, Titan said.

“The increased parts, service, and technical capabilities we bring to the commercial application customers in our highly productive core Agriculture footprint, combined with the long-term business relationships Heartland has developed with the commercial application customers, will be a win/win for Titan Machinery, Heartland, Case IH, and the hundreds of commercial application providers in our core markets,” Meyer said.

“We see immediate revenue synergies to be captured in the first full year of operation, and we expect to generate additional growth and margin expansion as we enhance our combined network,” Meyer added. “We are excited to add Heartland’s experienced leadership team and look forward to a bright future together as we welcome the entire Heartland organization to the Titan Machinery family.”

Buckeye Completes Bear Head Clean Energy Acquisition

Eastern Canada, Green Ammonia, Green Hydrogen, Houston, TX, News, News Briefs

Buckeye Partners LP, Houston, reported that on July 13 it closed on the acquisition of Bear Head Energy Inc., Port Hawkesbury, Nova Scotia, which is developing a large-scale green hydrogen and ammonia production, storage, and export project in Point Tupper, Nova Scotia, with hydrogen electrolyzer capacity of over two gigawatts. The facility is near Port Hawkesbury in Cape Breton, Nova Scotia.

“Buckeye’s intention with this acquisition is to develop a large-scale green energy production, distribution, and export hub,” said Buckeye CEO Todd Russo. “Given the project’s unique features and the geographic advantages of the region, including its status as one of the top locations globally for wind energy generation, we believe that this has the potential to become one the world’s premier green hydrogen production facilities.

“As Buckeye continues to evolve into a more diversified energy company, acquisitions like Bear Head represent an opportunity for us to invest in growth that aligns with our customers’ evolving needs and ESG priorities while leveraging our existing expertise and capabilities,” he added.

According to Bear Head, it has already invested more than US$150 million in engineering, development, and site construction, including roads, drainage, site leveling. and pouring LNG tank foundations. It said the LNG foundations can be repurposed as ammonia storage tanks. It said the 251-acre site is already fully permitted as an LNG facility, and in addition to wind, it is in close proximity to tidal and hydro power, as well as industrial water sources.

Bear Head said it has a 68-acre water lot accessible year-round. It said marine berth and offloading facilities have been engineered and approved. It said the Straight of Canso provides an ice-free, deep, and protected harbor with direct access to the North Atlantic and short shipping distances to the Northeast U.S., Europe, and other global energy markets, with the location also competitive to Asian markets.

Morocco Mulls Sale of Stake in OCP; Greenlights New OCP Subsidiary

Featured, Morocco, News, Phosphate

Morocco may sell a stake in phosphates fertilizer major OCP Group SA as the cash-squeezed country seeks to benefit from record fertilizer prices, Bloomberg reported this week. The proposal is part of a wider move by the Moroccan government to sell interests in state-owned entities.

The Moroccan government owns a 95% stake in OCP, which saw its phosphate and derivatives sales double in the first five months of this year, to May 30, compared with the same year ago period, reaching MAD 47.62 billion (approximately $4.56 billion at current exchange rates), according to a Morocco World News report last week, citing new data from the country’s Foreign Exchange Office (GM July 8, p. 25).

The government in a decree has given the green light for OCP to set up a new company assembling several of the group’s subsidiaries under one enterprise, according to a separate Morocco World News report, citing the government’s Official Bulletin.

The new company – to be named OCP Nutricrops – will have a paid-up capital of MAD13.8 billion (approximately $1.3 billion), and it may tap debt markets and allow investors to buy shares, according to the report.

OCP Nutricrops will merge three of the phosphate fertilizer group’s wholly-owned Jorf Lasfar-based production subsidiaries into the new company: Jorf Fertilizers Co. I, Jorf Fertilizers Co. II, and Jorf Fertilizers Co. IV.

It will also incorporate Jorf Fertilizers Co. III, and Jorf Fertilizers Co. V. JFC III is 50% owned by OCP, and following the recently completed deal with the U.S.’s Koch Ag & Energy Solution LLC, is 50% owned by a Koch affiliate of U.S.’s Koch Ag & Energy Solution LLC (GM July 1, p. 29; March 4, p. 1).

OCP owns a 60% stake in JCF V.

OCP Nutricrops will have “flexibility and various options in terms of financing, and in particular in relation to opening up its capital,” according to the report, citing the decree. The new company’s turnover is projected to average MAD30.6 billion between 2022 and 2025, according to the report.

The main activity of OCP Nutricrops will be the production of phosphoric acid, phosphate fertilizers, and NPKs, as is the case currently, and according to the report, phosphate-based chemicals, and will aim to accelerate the implementation of the OCP Group strategy in the field of soil and plant fertilization solutions.

Monolith Raises More than $300 M in Latest Funding Round

Ammonia, Featured, Hydrogen, News, Western Cornbelt

Clean technology developer and junior ammonia producer Monolith, Lincoln, Neb., on July 14 announced its latest investment round of more than $300 million. The investment was led by TPG Rise Climate, the dedicated climate investing strategy of TPG’s global impact investing platform TPG Rise, with Decarbonization Partners, a partnership between BlackRock and Temasek, as co-leads.

Additional investment was also received from NextEra Energy Resources, SK, Mitsubishi Heavy Industries America, and Azimuth Capital Management. The existing investor group, including Azimuth Capital Management, Cornell Capital, and Warburg Pincus, will retain their majority ownership stake in the company.

In addition, Monolith recently received conditional approval for a more than $1 billion loan from the U.S. Department of Energy Loan Programs Office to expand its production facilities in Nebraska (GM Jan. 28, p. 1). However, the DOE loan is yet to close and is subject to satisfaction of final conditions.

Monolith is planning to produce 275,000 mt/y of ammonia at Olive Creek 2, (OC2), a $1 billion complex. Ammonia production would be integrated with a new 180,000 mt/y carbon black production facility. Monolith expects to sell its ammonia into the Cornbelt and the carbon black to tire manufacturers. The Goodyear Tire & Rubber Co. and Michelin North America have already stepped up. OC2 completion is eyed for 2026.

Monolith’s Olive Creek 1 plant is already producing carbon black and hydrogen in smaller quantities at its Hallam, Neb., site.

“Global decarbonization by 2050 will require bold steps and transformational partnerships, which we believe we’ve found in working with TPG Rise Climate and Decarbonization Partners,” said Rob Hanson, Co-Founder and CEO, of Monolith. “We’re eager to continue Monolith’s growth trajectory to support a high energy, low emissions future.”  

Monolith said it cleanly produces essential materials including hydrogen, carbon black, and ammonia by utilizing a proprietary breakthrough in commercial-scale methane pyrolysis, adding that it was the first U.S. manufacturer to produce clean hydrogen using methane pyrolysis at scale.

This latest round of funding will be applied toward further technological development that will offer next generation product capabilities and other corporate-level expansion. It will also enable Monolith’s continued development of a deep backlog of clean hydrogen, ammonia, and carbon projects with industry leading partners.

OCI to Pay €3.55 1H 2022 Dividend

Earnings, Europe, News

OCI NV, Amsterdam, on July 11 announced that it proposes a semi-annual cash distribution with respect to the first half of 2022 of €3.55 per share (or in total approximately about $760 million at current exchange rates, consisting of a $200 million base return of capital and a variable element). It will be paid to its shareholders in October.

In line with OCI’s guidance given during its first-quarter results publication, this is significantly higher than the semi-annual cash distribution of €1.45 per share with respect to the second-half of 2021 period, which was paid in June 2022.

OCI reported a 246% increase in adjusted net income attributable to shareholders of the company to $354.2 million for the first quarter ended March 31, 2022, up from the prior year $102.4 million (GM May 13, p. 28). Diluted earnings per share were $1.688, versus $0.488 a year ago.

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