All Posts from September 15, 2017

New India Tender Under Discussion

Breaking Industry News

Sources reported late Friday, Sept. 15, India time that discussions are currently underway to call another urea tender. The new tender could be called as soon as this weekend, but more likely after Monday, Sept. 18. The news was received after the Green Markets Sept. 15 issue went to press.

Sources said STC will most likely call the next tender. The poor showing of available tonnage in the IPL tender that closed on Sept. 8 has left India with a urea shortfall of about 1.5 million tons for the rest of the year.

It is unusual for any of the Indian buying houses to call a tender before the ship-by date of a recent tender. Award winners in the IPL tender have until Oct. 23 to ship their product. Sources reported, however, that the bulk of the tonnage awarded to one trader is already being loaded. Other award winners are also reportedly lining up prompt shipments of their cargoes. If the full 327,000 mt gets loaded soon, sources said a new tender would not compete with the cargo awarded under the IPL tender.

SQM Firms Up Australian Lithium Deal

Australia, Chile, News, News Briefs

Sociedad Química y Minera de Chile SA (SQM), Santiago, said Sept. 11 that it and subsidiary SQM Australia Pty Ltd. have finalized a purchase agreement with MH Gold Pty Ltd., Montague Resources Australia Pty Ltd., and Kidman Resources Ltd. (sellers) to acquire 50 percent of the assets in the lithium mining project called Mount Holland (GM July 14, p. 29), located in the State of Western Australia. Pending compliance with conditions, which include government approval of the transfer of mining rights, SQM Australia has committed to grant Kidman up to US$21.5 million in credit, which will be used by Kidman to continue the development of the Mt. Holland project.

Once the conditions are met, SQM Australia will pay the sellers a price of (a) (i) $5 million, plus (ii) $10 million in capital contributions to the project on behalf of the sellers, and (b) (i) a deferred price amounting to $25 million, plus (ii) $30 million in capital contributions to the project on behalf of the sellers. This price is subject to certain adjustments described in the agreement, including the repayment of credit.

SQM Australia has also committed to make capital contributions of $10 million and $30 million, together with the contributions from the sellers, to finance the development of the project.

In compliance with the conditions, SQM Australia and the sellers will sign, among others, a joint venture agreement for the development, construction, and operation of the mining project, a concentration plant, and a refining plant to produce lithium carbonate and lithium hydroxide, and the agreements allowing the jv to explore and exploit lithium on the mining property of the sellers not included in the agreement.

“We are convinced that the capabilities we have developed in over 20 years producing and commercializing lithium products will be fundamental to successfully develop this project together with our partners,” said Patricio de Solminihac, SQM CEO. “Mount Holland enters our portfolio of lithium projects in Chile and Argentina as a very low-cost project with large reserves. We continue to see strong fundamentals in the growth of this market, and that encourages us to continue looking for new projects where we can add value using our experience and capabilities.”

Bunge Buys Control of Palm Oil Processor

News, News Briefs

Bunge Ltd., White Plains, N.Y., announced Sept. 12 that it has entered into a definitive agreement to acquire a 70 percent ownership interest in Malaysian palm oil processor IOI Loders Croklaan from IOI Corp. Berhad for $946 million, comprising €297 million and $595 million in cash. Bunge said the transaction expands its value-added capabilities, reach, and scale across core geographies to establish Bunge as a global leader in B2B oil solutions.

Bunge said Loders is an established leader in the growing $33 billion semi-specialty and specialty B2B oils market. Its portfolio includes the full range of palm and tropical oil-derived products, with strength in confectionery, bakery, and infant nutrition applications. Loders serves global food industry customers in more than 100 countries around the world and reported fiscal year 2016 revenues of $1.6 billion. The transaction is expected to close within a year.

IOI will retain a 30 percent ownership interest and customary protective rights. As part of the transaction, for a period of five years after closing, Bunge will have the right to purchase the remaining interest in Loders from IOI, and IOI will have the right to sell its interest to Bunge.

Bunge has entered into a $900 million, unsecured, delayed draw, three-year term loan agreement with Sumitomo Mitsui Banking Corp., which may be used to finance the acquisition.

Bunge CEO Soren Shroder, in an interview with Bloomberg, said the company has long communicated its plans to expand into the oil business, and the timing of the announcement does not have anything to do with recent speculation about industry consolidation. In May, Bunge rebuffed an attempt by Glencore plc, Baar, Switzerland, to acquire Bunge (GM May 26, p. 24). After the IOI news, Bunge shares tumbled as much as 7.7 percent, the biggest intraday decline in four months, according to Bloomberg, as investors saw a Bunge-Glencore deal less likely.

Shroder said Bunge is also interested in further consolidation, eyeing grain origination and oilseed crushing, mainly through partnerships and regional opportunities.

Tessenderlo Starts Production at New Plant

Amthio, Featured, France, News

Tessenderlo Group reported on Sept. 12 that its new liquid fertilizer plant in Rouen, France, has successfully started the production of Thio-Sul® and has already shipped its first products to its customers. The liquid fertilizer Thio-Sul® (ammonium thiosulfate/ATS) is used for broad-acre crops, as well as arboricultural and vegetable crop cultivation.

“Thanks to the excellent teamwork and fruitful collaboration between our French and American colleagues from Tessenderlo Kerley Inc. in Phoenix, we were able to get our new unit up and running just one year after we broke ground,” said Tessenderlo Kerley International Business Unit Manager Geert Gyselinck. “This marks a new milestone in the history of Tessenderlo Group as it is the group’s first Thio-Sul® plant located outside the United States. With the new factory, we are further expanding our local presence in the market of liquid fertilizer solutions for precision agriculture. The plant, which employs some 20 people, will service both European and overseas markets. It will enhance our leading position in the broad-acre crops market thanks to the improved proximity it will provide to our end customers.”

Tessenderlo Group is also currently completing the construction of a Thio-Sul® plant in East Dubuque, Ill. The completion date is expected to be in the final quarter of 2017. The company said both of the new plants in Rouen and East Dubuque will enable it to further strengthen its position in the global agro market.

Canada Approves PotashCorp, Agrium Merger

Canada, News, News Briefs, Phosphate, Potash

The Canadian Competition Bureau (CCB) on Sept. 11 granted unconditional regulatory approval for the proposed merger of equals by Potash Corp. of Saskatchewan Inc. and Agrium Inc. by issuing a no-action letter. The issuance of the letter satisfies the Canadian regulatory condition of the closing of the proposed merger.

The CCB concluded that the proposed transaction is not likely to lead to a substantial lessening or prevention of competition with respect to potash fertilizer, phosphate fertilizers, and nitric acid. The CCB found that global prices of potash are correlated with prices in Canada, and that customers can source potash from multiple suppliers.

The companies previously received unconditional clearance for the merger in both Brazil and Russia. The regulatory review and approval process continues in the U.S., China, and India, and the parties expect to close the transaction by the end of the fourth quarter of 2017.

The U.S. has posed concerns over nitric acid and super phosphoric acid. India and China are interested in PotashCorp shedding offshore minority stakes (GM Sept. 8, p. 1). Those include 28 percent of Arab Potash Co., 32 percent of Chile’s Sociedad Quimica y Minera de Chile SA (SQM), 14 percent of Israel Chemicals Ltd. (ICL), and 22 percent of Sinofert Holdings, the largest fertilizer import and distributor in China, and one of its largest fertilizer manufacturers.

The market value of these four investments was $4.8 billion, or $6 per PotashCorp share, as of market close July 26, 2017. ICL shares fell sharply Sept. 10 on the Tel Aviv Stock Exchange in response to reports that PotashCorp may have to sell off its stake. The share price partially recovered, but still closed down nearly 1 percent for the week.

Upon closing the merger transaction, the new company will be named Nutrien and will be the largest global provider of crop inputs and services.

 

Petrobras Plans Sale of ANSA, UFN-III

Brazil, Featured, News

Brazil-based multinational petroleum company Petróleo Brasileiro SA (Petrobras), Rio de Janeiro, said on Sept. 11 that it has initiated the disclosure phase to divest 100 percent of its assets in Araucária Nitrogenados SA (ANSA) and in the Nitrogen Fertilizer Unit III (UFN-III).

ANSA is a wholly-owned subsidiary of Petrobras, with a nitrogen fertilizer unit in operation. The facility is located in the State of Paraná, near main consumer markets and the Presidente Getulio Vargas refinery (Repar), and has a production capacity of 1,975 mt/d of urea, 1,303 mt/d of ammonia, and 450 m3/d of ARLA 32, an automotive liquid reducing agent. The facility also produces 200 mt/d of carbon dioxide, 75 mt/d of carbon pellets, and 6 mt/d of sulfur.

UFN-III, under construction since 2011, is located in the State of Mato Grosso do Sul, near main consumer markets and the Gasbol gas pipeline. The nitrogen complex is 81 percent complete. The plant’s production capacity will include 3,600 mt/d of urea, 2,200 mt/d of ammonia, and 290 mt/d of carbon dioxide. The ammonia technology is KBR and urea is Stamicarbon. Completion of UFN-III will be the responsibility of the buyer.

Petrobras reportedly sought to sell UFN-III to a Sinopec-led consortium of Chinese companies in March (GM March 17, p. 17). A year earlier, Petrobras was reportedly seeking a partner to assist in the resumption of construction, according to Bloomberg.

Potential investors in the two properties are expected to sign a confidentiality agreement by Sept. 29, 2017. Investors must be in a consortium formed with producing companies in the nitrogen fertilizer sector and hold at least US$1 billion in assets under management.

Petrobras said there are strong fundamentals in the Brazilian fertilizer sector, driven by growth in agribusiness. It noted that Brazil still presents a production deficit in fertilizers, with 24 million out of 34 million mt of NPK consumption imported in 2016. It said the urea production capacity of the two offered units would represent about 40 percent of Brazil’s 2016 consumption.

Petrobras said it will not be offering a long-term natural gas supply contract with the assets, with gas supply the sole responsibility of the potential investor. ANSA uses 430,000 m3/d of natural gas, while UFN-III will use 2.2 million m3/d. Other ANSA inputs include 1,000 mt/d of asphalt residue (RASF), 50 mt/d of fuel oil, and 60 mt/h of steam.

Banco Bradesco BBI SA has been retained as the company’s exclusive financial advisor on the transaction. More information is available at http://www.investidorpetrobras.com.br/en/press-releases.

In other news, Petrobras on Sept. 8 extended a deadline for the signing of confidentiality agreements to Sept. 29 for the full sale of its exploration, development, and production rights in seven sets of shallow-water fields (total of 30 concessions) located in the states of Ceara, Rio Grande do Norte, Segipe, Rio de Janeiro, and Sao Paulo. Petrobras said the extension is due to market’s interest in the process.

Also on Sept. 8, the company signed a Memorandum of Understanding with Shell Exploration Co. (West) BV, a Royal Dutch Shell subsidiary, to establish mutual long-term collaboration with an operational focus, in assets which are already operated in partnership between the two companies. Petrobras and Shell are currently partners in ten exploration and production consortia, each one operating in five blocks.

BHP Holds Open House on K Port Facility

News, News Briefs, Potash

While BHP has indicated that it will delay an expected 2018 announcement about proceeding with its Jansen potash mine in Saskatchewan (GM Aug. 25, p. 1), it continues to pursue its options regarding the possible export of potash. The company was scheduled to hold a public open house on Sept. 14 to inform the community and interested parties about a potential potash export facility at the Port of Grays Harbor’s Terminal 3 in west Hoquiam, in British Columbia. Following a presentation, attendees were to have the opportunity for questions and discussion with BHP representatives.

“Economic development and stimulating international trade are two of the Port of Grays Harbor’s top priorities, and this project would bring significant economic opportunity to our community, resulting in private investment and job creation,” said Port Commissioner Stan Pinnick. “This open house is a chance for the public to learn more about potash, the proposed export facility at Terminal 3, and the potential economic impacts from company officials. We encourage everyone interested in the project to join us in learning the facts and exploring this opportunity.”

It would be some time before the port could expect any BHP potash. The earliest date for production would be 2023, according to BHP’s timeline, with the company eventually ratcheting up to 4 million mt/y.

Nepal Eyes Urea Plant

Nepal, News, News Briefs, Urea

Investment Board Nepal (IBN) is planning to call a tender to build a urea plant under a private-public partnership model in Dahlkebar, Dhanusha, in southeast Nepal, according to the Katmandu Post. The newspaper reports the tender is expected in the next few months after a committee, under the leadership of a member of the National Planning Commission, reviews a feasibility report prepared by a consortium of consulting firms and approved by IBN.

The committee is expected to make recommendations and advise whether the government would need to provide viability gap funding for the project. Reportedly, three feedstocks are under consideration: natural gas, electrolysis, and coal, with natural gas appearing to be the lower cost option with a cost of $665 million and a per mt production cost of $268/mt.

OCP 1H, 2Q Revenues Up, EBITDA Down; Higher Volumes, Lower Prices Reported

Africa, News, North Africa, Phosphate Rock

OCP, Casablanca, reported a 7 percent increase in revenues during the first-half ending June 30, 2017, to MAD23,152 million (US$2.33 billion), up from the year-ago MAD21,656 million (US$2.22 billion). EBITDA was off at MAD5,908 million (US$594 million) from MAD5,916 million (US$606 million).

The EBITDA margin was down to 26 percent from the year-ago 27 percent as the benefit of lower raw material costs, as well as increased rock and fertilizer volumes, were offset by the impact of lower phosphate prices. Production costs continued to improve as the ongoing ramp up of the slurry pipeline resulted in increased cost savings totaling MAD807 million in the first half of 2017, compared with the year-ago MAD436 million.

EBIT was also down at MAD3,094 million (US$311 million) from MAD4,073 million (US$418 million). OCP said the decline primarily reflected the commissioning of new facilities and their associated depreciation costs.

Gross profit increased to MAD15,124 million (US$1.52 billion) from the year-ago MAD14,440 million (US$1.48 billion).

“OCP consolidated its leadership position in the first half, achieving higher revenues, while maintaining solid profitability and an EBITDA margin ahead of the industry average,” said Chairman and CEO Mostafa Terrab. “This performance reflects our capacity and cost leadership position, together with our commercial flexibility, driving increased sales of customized products to high growth markets where OCP has created and developed demand.

“OCP is at the forefront of major structural shifts in the industry,” he added. “We have successfully cultivated new markets like Africa, which accounted for almost 40 percent of our first-half fertilizer exports, and have expanded our portfolio of customized products to represent more than a third of total fertilizer exports. These achievements, combined with lower production costs and our unique flexibility across the value chain, enable OCP to achieve industry leading performance across cycles and are clearly reflected in our financial results.”

The first-half revenue increase was supported by 28 percent growth in rock revenues and 17 percent growth in fertilizer revenues and reflects higher rock and fertilizer volumes, which the company said more than offset lower prices across all product categories. During the period, OCP achieved record fertilizer exports due to strong demand for customized product from the African market, where exports grew 44 percent as OCP expanded sales to all regions of the continent.

Second-quarter revenues increased 4 percent to MAD11,751 million (US$1.19 billion), compared to the year-ago MAD11,279 million (US$1.16 billion). Second-quarter EBITDA amounted to MAD2,567 million (US$262 million), compared to the year-ago MAD3,023 million (US$312 million), while EBIT was MAD1,193 million (US$122 million), down from MAD1,685 million (US$175 million). Gross profit increased to MAD7,645 million (US$777 million) from the year-ago MAD7,471 million (US$771 million).

Going forward, OCP said phosphate demand continues to be strong amid stable crop fundamentals and lower input prices, which are supporting consumption among key import markets, namely India, Latin America, and Africa. It said for the second-half, the phosphate market remains supply-driven and price-sensitive to Chinese export behavior. OCP expects to continue to outperform the industry average.

OCP reported key achievements in the first-half at the Jorf Lasfar complex, including commissioning of the third fertilizer unit (JFC3), construction of a new sulfuric line and power plant, and commencement of the second drying line.

The company said 2017 represents a milestone year for the company as it completes the first phase of its industrial development plan, which will significantly expand fertilizer capacity, extend rock export capacity, and generate further significant operating efficiencies. It said these strategic initiatives will position OCP to be the chief beneficiary of a pickup in market conditions and help it capture a significant portion of phosphate incremental demand growth in the coming years.

Idaho Phosphate Companies Take Precautions in Response to Recent Quakes

News, Pacific N.W., Phosphate

More than 200 aftershocks have rumbled through Caribou County, Idaho, since a 5.3 earthquake jolted the Soda Springs/Afton, Wyo., region on Sept. 2, just south of the Greater Yellowstone Ecosystem. The unusual swarm of quakes – felt as far west as Pocatello and as far south as northern Utah – has rattled local residents and prompted area phosphate companies to take extra precautions.

The J.R. Simplot Co., Agrium Inc., and Monsanto operate open pit mines and processing plants in the phosphate-rich region. Simplot runs the Smoky Canyon Mine near Afton on the Wyoming/Idaho border and pumps its phosphate through a slurry line to its Don fertilizer complex west of Pocatello. Agrium’s Conda phosphate plant and Monsanto’s elemental phosphorus plant are located outside of Soda Springs and are supplied by mines on the Caribou/Targhee National Forest.

“We are pleased that the recent earthquakes in the area have not impacted the Smoky Canyon Mine or any of our other business interests in the area,” Simplot spokesman Josh Jordan told Green Markets. Jordan said Simplot is closely monitoring all systems, “and thankfully have found nothing irregular. We are committed to providing the safest possible environment for our employees and the communities we operate in, and will continue to move forward with these standards as a guide.”

Agrium spokesman Paul Poister said he knows Agrium employees have felt the tremors, but no workers have been injured and no damage done to Agrium’s facilities. “Having been through a few earthquakes, I know that it can be unnerving,” he said. “The effect on Conda Phosphate Operations has been little to none.”

Poister said there have been several minor trips of detectors at Agrium’s sulfuric acid plant due to the tremors, indicating that its equipment and safety systems are working as they should to protect people, the environment, and equipment. Agrium also uses survey prisms at its mine to monitor walls, but no movements resulting from the quakes have been detected. Poister said Conda has a “robust” wall stability monitoring program that requires specific action anytime there is movement, such as adding extra spotters at the mine to visually inspect areas of concern.

At Agrium’s gypsum stacks, operators have been doing visual reviews of the structural integrity of tailing pond dikes several times a day. “As a precaution, we have consulted an engineer for additional guidance,” Poister said. “Agrium is monitoring the situation closely and is prepared to take additional safety measures if or when they are required.”

Monsanto spokesman Trent Clark said his company’s laser reflectors and sensors on mine walls also have shown no impact to slope stability from the recent quakes.

“Our deepest mines go down around 400 feet. The epicenters of these quakes are over a dozen miles down,” Clark told Green Markets. “We’re fairly confident that the relationship, if any, is in the reverse: The quake activity in this area is historically responsible for some of the bending and folding that has exposed phosphate ore, not the other way around.”

Clark said he has received many inquiries as to whether the quakes might be caused or exacerbated by regional phosphate mining, but he noted that Dr. David Pearson, an Idaho State University assistant professor of geosciences, said there is no fracking in the area and phosphate mining is likely not contributing to the tremors.

“All of the earthquakes are between two and 14 kilometers in depth, which is much deeper than mining operations,” Pearson wrote Clark in an e-mail message.

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