Petrobras to Restart Fertilizer Plant; Inks Closer Ties with China

Petrobras’s Executive Board has approved initial steps for the reactivation of its fully-owned unit, the Araucaria Nitrogenados (ANSA) fertilizer plant. The company said last August it was in the final stages of studies for the resumption of production at the plant (GM Aug. 18, 2023).

The plant, located in Parana state alongside the President Getulio Vargas Refinery, has been dormant since 2020 (GM Jan. 17, 2020). At the time, Petrobras said it was mothballing the facility due to recurring losses and a failure to find a buyer. The plant has a production capacity of 720,000 mt/y of urea and 475,000 mt/y of ammonia, as well as 450,000 cubic meters per year of ARLA 32.

Petrobras also owns a partially completed nitrogen fertilizer complex, Unidade de Fertilizantes Nitrogenados III (UFN-III), in Três Lagoas, Mato Grosso do Sul state, as well as plants at Bahia (Fafen-BA) and Sergipe (Fafen-SE) that it leased to Unigel (GM Aug. 14, 2020), which are currently not in operation due to market conditions.

Petrobras also reported that it has signed a Protocol of Intentions (POI) covering several areas with China National Chemical Energy Company (CNCEC). The agreement will last for two years and will be immediately activated with the joint analysis of fertilizer and petrochemical assets. Renewable energy and energy transition are some of the areas included in the agreement.

The partnership also foresees the evaluation of potential commercial agreements in the areas of oil exploration, production of fertilizers from natural gas and other sources, production development, refining, biorefining and petrochemicals, engineering, construction, and services, in addition to research, development, and innovation.

Nutrien Confirms LATAM Divestment Plans

Nutrien Ltd. on April 12 confirmed earlier reports that it is seeking to sell its retail operations in Argentina, Chile, and Uruguay in order to focus on Brazil and other global markets (GM April 5, p. 1). The Canadian company is prioritizing key markets in a bid to boost returns for investors, a spokesperson said in an emailed statement to Bloomberg.

Nutrien, which has been in South America for more than a quarter century, is working to recover after sharply missing profit expectations in the last three months of 2023 amid plunging fertilizer prices that hurt retail results.

In full-year 2023, Nutrien recognized a $465 million non-cash impairment primarily to goodwill relating to its Retail – South American assets, mainly due to the impact of crop input price volatility, more moderate long-term growth assumptions, and higher interest rates.

Nutrien told analysts last fall that it had paused additional investments in Brazil until there is greater stabilization of the market (GM Nov. 3, 2023). “We will utilize this period to integrate recent acquisitions and optimize our cost structure,” said Pedro Farah, Executive Vice President and Chief Financial Officer.

Previously, the company had been on a buying spree, particularly in Brazil. By mid-July 2022 it expected to surpass its stated target of $100 million of adjusted EBITDA in Brazil by 2023. After its latest acquisition at the time of Casa do Adubo SA (GM July 22, 2022), it expected Latin American sales to reach $2.2 billion and move the company’s Brazil footprint from five states to 13.

Nutrien expected the Casa do Adubo SA deal to take it to 180 commercial units in Latin America, including customer-facing retail branches and experience centers, five industrial plants, and four fertilizer blenders. In addition, Nutrien said it would have more than 3,500 employees in the region, including more than 700 crop consultants serving growers in Argentina, Brazil, Chile, and Uruguay. In late 2021, it increased its plans for blending plants in Brazil from four to 12 (GM Dec. 17, 2021), which it said would be able to cover 10% of local demand.

Nutrien had 48 retail outlets in Argentina, 12 in Chile, and six in Uruguay as of late 2021 (GM Dec. 17, 2021). The company had not responded to inquiries at press time for an update.

Nutrien said in its annual report that Argentina’s currency controls meant it lost money when it transferred currency out of the country because it had to use a more expensive exchange rate. New President Javier Milei has promised to scrap the controls as he seeks to deregulate the economy.

Nutrien’s exit from the Argentine retail business comes as the country seeks to cheapen the herbicide and fertilizer market for farmers by reducing import taxes on both inputs. Other companies have also abandoned Argentina’s tough business environment in recent years, including HSBC Holdings PLC and Walmart Inc. Bayer AG ditched its Argentine soy seed business in 2021.

Nutrien didn’t say what it is planning to do with its 50% stake in nitrogen producer Profertil SA. Argentina state-run energy company YPF SA is the other partner. YPF, under new management appointed by Milei, is looking to divest assets to focus on shale drilling.

Nutrien said it would continue to support all customers and partners through its divestiture process.

FTC Chair to Hold Listening Session with Iowa Farmers

US Federal Trade Commission Chair Lina M. Khan is slated to participate in a Community Listening Session on April 20 in Nevada, Iowa, regarding the sale of OCI Global’s Wever, Iowa-based Iowa Fertilizer Co. LLC (IFCo) to Koch Ag & Energy Solutions LLC.

The hosts of the listening session are listed as the Iowa Farmers Union, State Innovation Exchange (SIX) and State Reps. Elinor Levin (D), Megan Srinivas (D), and J.D. Scholten (D).

“This is an opportunity to share your perspectives on the recent acquisition of Iowa Fertilizer Co. by Koch Industries, what it means for your family, your farm, and for the future of our rural communities in Iowa,” IFU said on its Facebook page. While spaces are limited and RSVP’s are requested, the 10:30-12:00 pm event at the Gatherings on 6th Street is expected to be streamed online.

Koch announced in December that it was buying IFCo from OCI Global for $3.6 billion (GM Dec. 22, 2023). Since that time, the IFU, all 36 members of the Iowa House of Representatives (GM Feb. 16, p. 1), some 18 farm and environmental groups (GM Jan. 26, p. 1), and Iowa Auditor Rob Sand (GM Feb. 2, p. 1) have asked the FTC, the US Department of Justice, and Iowa Attorney General Brenna Bird (R) to investigate the acquisition.

The fact that state and federal dollars helped fund the Iowa Fertilizer plant in Wever is a major contention, especially since the deal was sold to taxpayers at the time as helping to increase competition in the fertilizer market. IFU’s Board of Directors in February referred to the proposed sale as “a slap in the face for taxpayers who invested about $550 million (as well as $1.2 billion of Iowa Finance Authority bonds)” to build the plant.

“The stated justification for the tax subsidies was to increase competition in the nitrogen fertilizer supply – a critical input for corn, the Midwest’s major crop,” the IFU said in a February statement. “In fact, the Brandstad/Reynolds administration cited Koch Industries’ market dominance as the reason why the investment was necessary. Now we are on the cusp of those tax dollars being used to increase Koch’s anti-competitive stranglehold.”

Iowa State Senator Jeff Reichman (R) has expressed enthusiastic support for the deal (GM Feb. 9, p. 1).

CF, JERA Report Low-Carbon Joint Development Agreement

CF Industries Holdings Inc. and JERA Co. Inc., Japan’s largest energy company, on April 18 announced that they have executed a Joint Development Agreement (JDA) to explore the development of greenfield low-carbon ammonia production capacity at CF’s Blue Point Complex in Louisiana.

The JDA will guide JERA and CF’s evaluation of a joint venture agreement to build an approximately 1.4 million mt/y capacity low-carbon ammonia plant. JERA is contemplating a 48% ownership stake in the project as well as an agreement to procure more than 500,000 mt/y of low-carbon ammonia to meet demand in Japan.

CF and JERA had previously signed a Memorandum of Understanding to explore a potential joint project development and sales and purchase of low-carbon ammonia (GM Jan. 20, 2023). The two aim to reach a final investment decision on the proposed project within a year for commencing production in 2028.

“We are pleased to expand our relationship with JERA as our companies advance leading-edge decarbonization initiatives that will help JERA and Japan achieve their decarbonization goals,” said Tony Will, CF President and CEO. “We believe that JERA’s projects, which represent the first meaningful volume of what we believe will be substantial global demand for low-carbon ammonia as an energy source, will demonstrate the significant contribution ammonia can make to meet the decarbonization goals of hard-to-abate industries.”

“We are pleased to further advance our partnership with CF Industries,” said Yukio Kani, JERA Global CEO & Chair. “Finding cutting-edge solutions to the world’s energy issues requires commitment and partnership. With JERA’s dedication to low carbon fuel development and CF Industries’ expertise as one of the leading ammonia producers, we are confident in making tangible progress towards realizing a low-carbon ammonia value chain, and ultimately ensuring a decarbonized energy supply that is sustainable, affordable, and stable.”

JERA intends to replace coal with low-carbon clean ammonia in its existing thermal coal power plants to reduce CO2 emissions. JERA is currently conducting the world’s first commercial-scale demonstration test of fuel ammonia substitution (20% of heating value) at its Hekinan Thermal Power Station (GMMarch 15, p. 27).

ThyssenKrupp Seeks Buyer for Unigel Equipment

German industrial company thyssenkrupp Uhde has announced plans to seek a new buyer of electrolyzer equipment that was to be deployed to the $1.5 billion Unigel facility in Camaçari, Brazil. ThyssenKrupp has already been in contact with potential buyers for the electrolyzers that were assembled in Europe.

The Unigel facility, which was projected to make 10,000 mt/y of green hydrogen and 60,0000 mt/y of green ammonia, was originally scheduled to start up in late 2023 but has been halted due to Unigel’s financial troubles.

Unigel and creditors agreed to a restructuring plan in February after months of talks after the fertilizer producer missed bond payments (GM Feb. 23, p. 31).  The Brazilian company is seeking to restructure 3.9 billion reais ($792 million) in existing debt into new bonds and convertible notes. Unigel also previously announced enlisting Citi to find a new strategic partner for the Camaçari site.

Bayer Posts Open Letter on Roundup; Ag Groups Form Coalition

Bayer AG, reeling from major jury awards against it on Roundup, has issued an open letter on glyphosate, saying that American agriculture is at risk. The letter ran in major media outlets, including Politico, the Washington Post, the St. Louis Dispatch, the Jefferson City News Tribune and the Des Moines Register, as well as on Bayer’s own website at https://www.bayer.com/en/glyphosate-letter.

In the meantime, the formation of Modern Ag Alliance, a group of more than 60 national and state agricultural organizations, including the National Corn Growers Association and the American Soybean Association, was announced on April 9 to promote the ongoing use of glyphosate.

In its letter, Bayer stressed that Roundup has been thoroughly evaluated and certified multiple times by the US EPA, the European Food Safety Authority (EFSA), and all other leading safety and regulatory bodies around the world as safe to use.

“It has enabled millions of American farmers to have better yields and lower their weed control input costs – and the only group to categorize glyphosate as a probable carcinogen is an affiliate of the World Health Organization, which is not a regulatory body and did no original studies,” the letter states. “It puts other everyday things like drinking hot beverages, a barber’s occupational exposure, and eating red meat at the same level of safety hazard as glyphosate.”

Bayer said it wins court cases when juries have access to all the relevant evidence and scientific information. “So the litigation industry fights to prevent EPA’s rigorous analysis and science-based conclusion that Roundup is safe to use from being shown in court,” said the letter. “Instead, they rely on junk science to mislead juries.”

Bayer noted that it is the only domestic manufacturer of glyphosate. “If this keeps up, farmers will be left with two options – grow less food or rely on foreign supplies of the product,” the company said.

Bayer said it plans to continue to provide US farmers with Roundup to ensure a safe, abundant, and economical food supply. “But there’s a limit to what we can do,” it added. “We hope others will soon recognize how high the stakes go, well beyond one product or industry to touch upon fundamental American values and interests.”

Modern Ag, whose motto is “Control Weeds, Not Farming,” is a major backer of a bill that passed the Iowa Senate on April 2 that would grant immunity to pesticide companies from civil lawsuits related to damages caused by US EPA-approved pesticides (GM April 12, p. 27). Bayer lobbied for the bill and argued that Americans should be able to trust the EPA label as enough protection.

In addition to Iowa, Idaho, Missouri, and Florida are also considering similar bills, according to reports from Civil Eats. Additionally, CropLife America is seeking to pass a federal law barring states from passing their own laws that restrict pesticide use based on risks.

Bayer received some good news earlier this month when a Missouri judge slashed almost $1 billion from a $1.5 billion jury verdict that was one of the largest in the six years the company has been fighting thousands of claims that its Roundup weedkiller causes cancer.

While Judge Daniel Green in Jefferson City, Mo., refused to grant Monsanto’s post-trial requests that he order a new trial or throw out the entire verdict, he instead slashed the punitive-damages portion of the award by more than 60% to about $550 million, according to Bloomberg, citing court filings.

Bayer’s Monsanto unit has been hit with multiple nine- and 10-figure verdicts over Roundup in the last six months. With so much legal exposure, the company’s new chief executive officer has faced difficult decisions about whether to spin off part of the pharmaceutical-agrochemical conglomerate or put a unit into strategic bankruptcy (GM March 15, p. 1).

Bayer, which bought Monsanto for $63 billion in 2018, said it will still ask Missouri’s appellate courts to review the entire verdict. “While the court reduced the unconstitutionally excessive damage award, the company believes that the court did not apply the law correctly on damages,” the company said in an emailed statement.

Jurors had awarded the three plaintiffs a total of $61.1 million in actual damages and $500 million each in punitive damages in November over claims that years of using Roundup on their lawns and gardens caused non-Hodgkin’s lymphoma.

The order reducing the verdict was expected because the US Supreme Court has said punitive damages must be proportional to compensatory awards underlying them and has limited punishment judgments to 10 times actual damages.

Green reduced the punitive damages to about $550 million to meet the Supreme Court threshold. He also ordered Bayer to post an $800 million bond to guarantee payment of the verdict if it’s upheld on appeal. Bayer had asked for a $50 million bond, court documents show.

In January, a state court jury in Philadelphia ordered Monsanto to pay more than $2.2 billion to a former landscaper. That award is also likely to be cut.

Two years ago, Bayer set aside as much as $16 billion to resolve more than 100,000 cases over Roundup. The conglomerate now faces a second wave of lawsuits alleging glyphosate and other elements of the herbicide are carcinogens. The company said earlier this month that it has won 14 of the last 20 cases to go to trial.

Bayer agreed to transition from the glyphosate version of Roundup to new active weed-killing ingredients in the US consumer market by the end of last year.

Norwegian Green Ammonia Project Secures PPA

Norwegian developer Fuella AS has negotiated a 15-year Power Purchase Agreement (PPA) for the SkiGA Project in Skipavika, Norway, with power producer Hafslund for up to 130 MW of renewable, emission-free power.  The power secured by the PPA will provide up to 100,000 mt/y of green ammonia, according to Hafslund.

The SkiGA project is projected to start production in 2023, and the PPA is conditional on a final investment decision (FID) for the ammonia project.

Partners Plan Green Ammonia Units in India

Reliance Industries Ltd., Larsen and Toubro, Greenko Group, and Welspun New Energy are planning to develop green hydrogen and ammonia units at the Deendayal Port Authority in Kandla, Gujarat, India. The mega project is estimated to attract investments of up to $12 billion, which would represent one of the largest investments in sustainable projects in India.

The project is targeting the production of 7 million mt/y of green ammonia and 1.4 million mt/y of green hydrogen by using electrolysis powered by renewable energy sources. Reliance, Greenko, and Welspun were all named as winners in India’s first auction for green hydrogen production subsidies in January, and are expected to receive 18.9-30 rupees per kilogram of hydrogen produced.

Martin 1Q Income Back to Black; Fertilizer, Sulfur Results Below Expectations

Martin Midstream Partners LP reported first-quarter net income of $3.3 million on revenues of $180.8 million, compared to a year-ago $5.1 million net loss and $244.5 million, respectively. The company reported adjusted EBITDA of $30.4 million, up from the year-ago $21.7 million.

“The partnership had a strong quarter resulting in adjusted EBITDA of $30.4 million compared to guidance of $31.6 million,” said Bob Bondurant, President and CEO of Martin Midstream GP LLC, the general partner of the LP. “Demand in both the marine and land transportation divisions remains robust leading to outperformance in the transportation segment when compared to our forecast.”

Bondurant said lower-than-forecasted margins in the company’s fertilizer and lubricants businesses, along with extended Gulf Coast refinery turnarounds, resulted in lower sulfur receipts, negatively impacting results compared to first-quarter projections. “However, current strength in our land and marine transportation divisions should result in meeting our annual adjusted EBITDA guidance of $116.1 million,” he said.

Adjusted EBITDA for the Sulfur Services segment, which includes fertilizer and sulfur, was down to $6.7 million from the year-ago $7.2 million, and some 46% down from guidance of $9.8 million. The company cited lower margins in its molten sulfur division coupled with decreased sulfur prilling fees as a result of Gulf Coast refinery turnarounds, offset by increased sales volumes.

Fertilizer adjusted EBITDA was $4.2 million compared to guidance of $6.6 million, while sulfur was $2.5 million versus $3.2 million.

“Looking towards the second quarter, we continue to see solid sales volumes and believe that should continue throughout the quarter,” Bondurant said in an earnings call. “We still see headwinds regarding margin expansion. And as a result, there is some chance we might not fully achieve our second-quarter fertilizer forecast.”

Total Sulfur Services sales volumes were up 22%, to 165,000 lt from the year-ago 135,000 lt. Sulfur volumes were up 24%, to 92,000 lt from 74,000 lt, while fertilizer was up 20%, to 73,000 lt from 61,000 lt.

The unit saw a 19% drop in operating income, to $3.69 million from the year-ago $4.6 million, while revenues were off 6%, to $33.7 million from $35.7 million.

“For the quarter, growth capital expenditures totaled $6.2 million with $4.8 million for improvements at the Plainview facility related to the DSM Semichem Joint Venture,” added Bondurant. The jv will produce electronic-level sulfuric acid (ELSA) for the semiconductor industry (GM Feb. 16, p. 26; Oct. 21, 2022).

“Maintenance capital expenditures were $11.2 million for the quarter, including $5.3 million in refinery turnaround costs,” he said. “These higher than historical quarterly capital expenditures contributed to our adjusted leverage increasing slightly from 3.75 times at Dec. 31, 2023, to 3.81 times at March 31, 2024.”

Martin declared a quarterly cash distribution of $0.005 per unit for the quarter.

Intrepid Potash Inc. – Management Brief

Intrepid Potash Inc. on April 17 announced that its Board of Directors has granted Bob Jornayvaz, Executive Chairman of the Board and CEO of the company, a temporary medical leave of absence, effective April 16, as he recovers from injuries sustained in a polo accident on April 6 in Florida (GM April 12, p. 26).

Matt Preston, Intrepid’s current Chief Financial Officer, has been appointed as acting Principal Executive Officer and Hugh Harvey, Intrepid’s co-founder, has been appointed as a Class III Director. The Board has also temporarily delegated all responsibilities of the Chairman of the Board to Barth Whitham, Intrepid’s Lead Director.

“Our thoughts and best wishes go out to Bob and his family as he recovers, and we are pleased to announce both the appointment of Matt Preston to acting principal executive officer and appointment of co-founder Hugh Harvey to the Board,” Whitham said. “Mr. Preston’s understanding of Intrepid’s operations, along with the addition of Intrepid’s co-founder and former director Mr. Harvey to our Board, will provide the necessary stability and continuity for Intrepid as we continue to execute on our strategic initiatives through this interim period.”  

In addition to being a co-founder, Harvey was a member of Intrepid’s Board from 2007-2022, including as the Executive Vice Chairman of the Board from 2010 to March 2020 and as Vice Chairman of the Board from March 2020 to February 2022. From 2007 until his retirement from Intrepid in 2020, Harvey served in various management roles, including Chief Technology Officer, Chief Operating Officer, and Executive Vice President of Technology.

Preston has been with Intrepid since 2008, serving as Chief Financial Officer since December 2021 and Principal Financial Officer since November 2019. Prior to becoming CFO, he served as Intrepid’s Vice President of Finance from November 2019 to December 2021 and Director of Budget and Forecast from April 2016 to November 2019. Prior to those roles, Preston served as Senior Manager of Budget and Forecast, Manager of Budget and Forecast, and Financial Analyst.

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