All Posts from August 19, 2022

Verde Partners with Lavoro in Brazil

Brazil, News, News Briefs

Verde AgriTech, Belo Horizonte, Brazil, announced on Aug. 16 that it has formed a strategic partnership with Latin American agricultural input distributor Grupo Lavoro, under which Lavoro will distribute Verde’s products in Brazil. Verde’s multi-nutrient potassium products, BAKS® and K Forte®, are sold internationally as Super Greensand®. Verde has launched its Bio Revolution technology, which also allows it to incorporate microorganisms to its products.

Verde’s 2022 guidance provides for sales of 1 million mt, with revenue of C$109.09 million, EBITDA of C$49.06 million, and net earnings per share of C$0.87. The 2023 guidance provides for sales of 2 million mt/y.

Verde said it currently operates Plant 1 with a capacity of 600,000 mt/y, with Plant 2 on track for commissioning in third-quarter 2022 with an additional capacity of 2.4 million mt/y. With the addition of Plant 2, Verde said capacity will be over 3 million mt/y and it will be Brazil’s largest potash producer by capacity.

Plant 3’s construction is planned for 2023 and is expected to add 10 million mt/y, which Verde said will allow it to produce up to 16.4% of the current national demand for potash.

SQM 2Q Income Soars, Still Misses Estimate

Chile, Earnings, Lithium, News, Potash Muriate, Potassium Nitrate, Potassium Sulfate, Specialty, Sulfate of Potash

SQM Inc.’s second-quarter net income soared to $859.3 million ($3.01 per share), or 857%, compared to the year-ago $89.8 million ($0.31 per share), however, it still missed the analyst average estimate (Bloomberg Consensus), which was $876.8 million. Revenues were $2.6 billion, up 342% over the year-ago $588 million and also topping the analyst estimate of $2.3 billion. Gross profit was $1.3 billion, up from $185.9 million. Adjusted EBITDA was $1.32 billion versus the year-ago $210 million.

“We are very pleased with our results for the first half of the year,” said Ricardo Ramos, SQM CEO. “These results were related to favorable market conditions related to fertilizers, iodine, and lithium, and decades of investment, hard work, R&D, and know-how. In fact, this year we are celebrating 25 years in the lithium industry. During this time, we have become a great partner to the government in this ‘public-private’ alliance with CORFO. As a result of our operations during the first half of the year, over US$2.2 billion are going to public coffers due to the lithium operations.

“We are close to reaching 180,000 mt of lithium carbonate capacity, and as mentioned previously, we are not stopping there,” he added. “Today, we are working to complete a lithium carbonate capacity of 210,000 mt of sought after, top quality, value-added product, which will be produced right here in Chile. We remain committed to reducing our usage of brine and water through technology and continuous innovation. This new capacity will let us produce high value-added lithium products to power more than 5 million electric vehicles.”

Lithium represented 73% of SQM’s six-month gross profit and 40% of revenues. The company said the average lithium price surpassed $54,000 mt, and that sales of electric vehicles in China in June more than doubled the year-ago month. SQM expects lithium demand to grow at least 35% this year, adding that new lithium supply outside of SQM has been delayed and slow to come online.

Second-quarter Specialty Plant Nutrition (SPN) revenues were up 52%, to $330.3 million from the year-ago $217.2 million on higher prices for all products, particularly potassium nitrate, though total SPN volumes were off 22%, to 230,100 mt from 296,200 mt. Potassium nitrate-based volumes were off 21%, to 138,300 mt from 174,300 mt.

SQM said prices increased almost 10% compared to the first quarter, and that as a result of historically high prices, demand in the agricultural potassium nitrate market could decrease about 10% this year compared to global demand last year. As a result, SQM believes 2022 potassium nitrate sales volumes will be lower than 2021.

Six-month SPN revenues were up 47%, to $605.6 million from the year-ago $411.2 million. Volumes were off 24%, at 440,800 mt compared to the year-ago 576,700 mt. Potassium nitrate-based volumes were down 22%, to 262,600 mt from 337,500 mt.

Second-quarter Potassium Chloride and Potassium Sulfate (MOP/SOP) revenues were up 209%, to $182.4 million from the year-ago $59 million. Volumes were off 4%, to 177,600 mt from 184,500 mt.

SQM reported record-level prices in the MOP market with average prices of over $1,000 mt during the quarter, up 28% from the first quarter. However, in recent weeks, it said it had seen higher stock levels in the market that are pressuring prices, especially in Brazil, a market important to the company.

SQM believes average prices could decrease during the remainder of the year compared to those in the second quarter. However, the company still believes 2022 total MOP/SOP sales will reach approximately 750,000 mt.

Six-month MOP/SOP revenues were up 148.6%, to $296.5 million from the year-ago $119.3 million, while volumes were off 17.4%, to 319,300 mt from 386,800 mt.

Company-wide SQM six-month net income was $1.66 billion ($5.80 per share) on revenue of $4.62 billion, up from the year-ago $157.8 million ($0.55 per share) and $1.12 billion, respectively. Gross profit was $2.46 billion, up from $322.5 million, while adjusted EBITDA was $2.51 billion versus $375.1 million.

ADM Expands St. Paul Fertilizer Terminal

Featured, News, Northern Plains

ADM has expanded its fertilizer terminal in St. Paul, Minn., with the addition of a new 40,000 st fertilizer warehouse and blender to better serve farm-direct and wholesale customers in the Northern Plains and Western Canada.

The new warehouse and blender more than doubles the 30,000 st terminal capacity that ADM has been operating at the St. Paul Port Authority’s Southport terminal since 2006 at a facility leased from Alter Logistics Co. The expansion was completed on July 1, and a ribbon-cutting ceremony was held on Aug. 5.

“The St. Paul facility is the newest leg of our strategy to be a world-class supplier of fertilizer,” said Scott Nagel, President of ADM-Benson Quinn in St. Paul. “It strengthens our global supply chain logistics infrastructure to help ensure we continue to reliably procure and deliver high-quality fertilizer. It is ADM’s robust logistics network that enables us to rapidly respond to changing market conditions like what we have been experiencing over the last year.”

The 40,000 st expansion reportedly includes seven large storage bins for bulk products, three micro bins, and a high-capacity blending and loadout system. ADM received $1.8 million from a Minnesota Department of Transportation port development assistance grant for the project, and just under $1 million from private sources, the Twin Cities Pioneer Press reported.

The new facility is one of 28 river and inland fertilizer terminals operated by ADM across the US and Canada. The company has another Minnesota fertilizer terminal location at Winona.

Louisiana’s Ascension Parish Evaluated as Site for CF/Mitsui $2 B Blue Ammonia Plant

Blue Ammonia, Featured, Louisiana, News

Ascension Parish, the home of CF Industries Holdings Inc.’s giant Donaldsonville nitrogen complex, is under evaluation as the site for the $2 billion blue ammonia plant planned by CF and Mitsui & Co. Ltd. The initial announcement about the project only stated that the plant would be in the US Gulf Coast region (GM May 6, p. 1).

The export-oriented plant would produce 1.7 million tons per year of blue ammonia. Earlier this month, CF announced a $198.5 million plan to add carbon capture and sequestration capability to its existing ammonia production facility in Donaldsonville (GM Aug. 12, p. 29).

Louisiana Economic Development (LED) announced on Aug. 17 that Ascension Parish was under evaluation. LED estimates the project would result in 311 indirect jobs, for a total of 414 new jobs in the Capital Region. It would create 103 new local jobs, with over $10 million in permanent payroll and significant local economic activity during construction.

LED said to secure the project, the State of Louisiana is offering CF a competitive incentive package that includes the services of LED FastStart, which was recently ranked the No. 1 statewide workforce development program in the nation.

Additionally, CF would be eligible for a performance-based award of up to $6 million to be paid out over four years to reimburse verified project development and infrastructure expenditures. The company is also expected to utilize the state’s Quality Jobs and Industrial Tax Exemption programs.

“This massive proposed investment from CF Industries would create good-paying jobs and strengthen Louisiana’s position as a leader in the clean energy transition,” said Gov. John Bel Edwards. “This would be another big step toward our goal of making Louisiana carbon-neutral by 2050. We thank CF Industries for its continued commitment to Louisiana, and look forward to working with company, parish, and regional economic development leaders to move the project forward.”

“CF Industries has long appreciated the partnership we have had with the State of Louisiana and Ascension Parish, both as we have expanded our operations over the years and now as we decarbonize our production processes and consider new capacity growth. We look forward to working with them further as we continue to evaluate our proposed blue ammonia production facility,” said Tony Will, CF President and CEO.

CF and Mitsui expect to begin a front-end engineering design (FEED) study once the site and technology provider for the new plant are finalized. A FEED study typically takes 9-12 months from the start date to complete.

A final investment decision by the companies is expected to occur in 2023. Construction and commissioning of a new world-scale capacity ammonia plant typically takes approximately four years from that point.

Koch to Increase Dodge City UAN Production

Featured, News, Southern Plains, UAN

Koch Fertilizer, Wichita, reported on Aug. 16 that it is planning a $30 million optimization project at its Dodge City, Kan., nitrogen plant to increase UAN production by 35,000 st/y.

“We are dedicated to being our customer’s long-term supplier of choice by providing the products they value most,” said Scott McGinn, Koch Fertilizer Executive Vice President. “This project will increase production to meet growing UAN demand locally, as well as across western Kansas and eastern Colorado.”

Koch said the project will further improve the facility’s reliability, as well as environmental and safety performance, through equipment and process upgrades.

“This investment strengthens the long-term vitality of the Dodge City site,” said Paul Liddle, Dodge City Plant Manager. “We continue to find ways to enhance our reliability and productivity, while using fewer resources and respecting the environment, which benefits our employees, our customers, and the community.”

Construction is scheduled to begin in early 2023, and the optimized processes are expected to be fully operational by the end of the year. While Koch does not discuss specific production capacities at its sites, Dodge City approximate capacities include ammonia 300,000 st/y, UAN 230,000 st/y, and ammonium nitrate 100,000 st/y, according to Green Markets data.

“This investment reflects Koch Fertilizer’s commitment to continued growth and reinvestment in our plants,” said McGinn.

The Dodge City investment follows three recent Koch Fertilizer expansion projects, which totaled $380 million and included Beatrice, Neb.; Fort Dodge, Iowa; and Enid, Okla. (GM Feb. 11, p. 1). The $90 million Beatrice project was completed in 2021 and added 75,000 st/y of UAN capacity.

The $140 million Fort Dodge and $150 million Enid projects are on schedule to be completed this year. The Fort Dodge project will add 85,000 st/y of ammonia capacity, while Enid is expected to allow the company to produce an additional 300,000 st/y of downstream products (urea, DEF, SuperU®, and UAN).

Board Proposes Wage Hike to Settle Rail Dispute

News, News Briefs, Transportation, U.S.

A Presidential Emergency Board (PEB) on Aug. 16 published a report outlining several recommendations to resolve longstanding contract differences between the US Class 1 railroads and 12 unions representing 115,000 rail workers.

The PEB was appointed by President Biden in July to avert a strike after earlier efforts by the National Mediation Board (NMB), an independent federal agency that mediates railroad and other labor agreements, failed to bring the two sides together on disagreements over wages, health care benefits, and scheduling (GM July 15, p. 1).

The PEB recommended a 22% wage increase, along with $5,000 in service recognition bonus payments, over the five-year life of the contract retroactive to Jan. 1, 2020, according to the Trains magazine News Wire.

The board also recommended what it called “modest improvements” in the existing health and welfare benefits package, including the expansion of hearing and speech therapy benefits, while also removing caps on employees’ monthly contributions to their health coverage, Bloomberg Law reported. It also would increase coverage for travel costs when rail workers are assigned to work away from home, among other changes.

The recommended 22% wage hike, which is the largest general wage increase for rail workers in nearly 40 years, is below the 28% increase that the unions sought, but above the railroads’ 16% proposed wage hike. The unions and the railroads have been trying to reach a contract for more than two years and were $9 billion apart in their wage proposals, the PEB report noted.

The PEB asked the railroads and unions to continue negotiations over issues regarding engineer and conductor scheduling. If no agreement can be reached, the report recommends the matter be referred to binding arbitration.

“The Board hopes that this may prove to be a ‘win-win’ in which the Carriers obtain a more efficient and reliable system for manning the locomotives, with both operational benefits and cost savings, and employees will obtain preferred schedules with more control over their personal lives when not otherwise scheduled,” the report said.

After its appointment on July 18, the PEB was given 30 days to come up with recommendations. The publication of the report now triggers a second 30-day cooling off period between the railroads – including BNSF Railway, CSX Transportation, Kansas City Southern, Norfolk Southern, and Union Pacific – and the unions. During this period, no work stoppage or lockout can be ordered.

The PEB’s recommendations are not binding for either party. If the plan is rejected, the workers will be free to strike at the conclusion of the 30-day period, Bloomberg Law reported, but Congress can intervene by passing legislation to require the parties to extend talks, or to even force a resolution.

The Association of American Railroads (AAR), which represents major freight carriers, applauded the PEB report as a “useful basis to reach a resolution,” and said the industry was prepared to propose agreements based on the recommendations. “In the interests of all rail stakeholders, now is the time for railroads and their unions to reach a contract,” AAR President and CEO Ian Jefferies said in a statement.

The Transport Workers Union of America declined to comment on the recommendations. In a statement to Bloomberg Law, freight railroad Union Pacific, however, said “it is in the best interest of all stakeholders for the parties to reach agreements that provide our employees with well-deserved pay increases and prevent rail service disruptions.”

Heringer Posts 2Q Loss on Lower Margins

Brazil, Earnings, News, Specialty

Grupo Heringer, Viana, Brazil, reported a second-quarter loss of R$94.7 million, down from the year-ago net income of R$144.7 million. The company cited lower margins, mainly impacted by high input costs and the sale of the Uberaba unit during the year-ago quarter (GM Feb. 26, 2021), which resulted in revenues of R$31 million at the time.

EBITDA fell to a positive R$24.1 million from the year-ago R$105.9 million, while revenues were up 90.2% on higher prices to R$1.08 billion from the year-ago R$568.6 million.

Second-quarter fertilizer volumes nudged up 1.8%, to 242,124 mt from the year-ago 237,769 mt. Conventional tons were up 6.1%, to 122,000 mt from the year-ago 115,000 mt, while specialty dropped 2.4%, to 120,000 mt from 123,000 mt.

Heringer remained in the plus column for the first-half results, posting net income of R$33.7 million compared to the year-ago R$137.3 million. EBITDA was R$109.3 million, down from R$209.7 million.

First-half revenues were R$2.31 billion, up 76.7% from the year-ago R$1.31 billion, though volumes were down 11.6%, to 543,363 mt from 614,319 mt. Both conventional and specialty volumes were off. Conventional dropped 12.6%, to 271,000 mt from 310,000 mt, while specialty were down 10.5%, to 272,000 mt from 304,000 mt.

BHP Updates on Jansen; 2023 Stage 1 Spend is $740 Million

Australia, News, News Briefs, Potash, Saskatchewan

BHP Group Ltd., Melbourne, reported on Aug. 16 that the production shafts at its Jansen potash project in Saskatchewan are complete. It said that the $5.7 billion Stage 1 project is on track and the company is working to bring forward first production into 2026. Stage 1 would produce 4.35 million mt/y of potash. The company said it is 8% complete.

BHP said it expects Jansen capital expenditures of $740 million for financial year 2023 for Stage 1. It said it will continue to focus on civil and mechanical construction on the surface and underground, as well as equipment procurement and port construction.

BHP is also assessing options to accelerate Stage 2, which would add another 4 million mt/y.

In addition to Jansen, BHP will study plans to expand its top-earning iron ore unit to 330 million mt/y of production, and is continuing to assess options to lift volumes in copper and nickel.

Yara Invests in Autonomous Tractor Tech

Eastern Cornbelt, News, News Briefs, Norway

Yara Growth Ventures, the investment arm of Yara International ASA, reported on Aug. 18 an investment in Sabanto Ag, Chicago. Founded by Craig Rupp in 2018, Sabanto Ag is bringing to market hardware kits to retrofit existing tractors for autonomous operations. This offering is complemented with software for operations planning and a farming-as-a-service business model.

“Getting to know Sabanto Ag, what impressed us most is their high-caliber team and how they were able to adapt their technology to various tractor makes and farming operations with unparalleled speed and capital efficiency,” said Björn Heinz of Yara Growth Ventures. “Going forward, we are excited to see Sabanto Ag alleviating key concerns in modern agriculture: high equipment cost and labor shortage.”

“We started Sabanto with our sights set on fixing the lack of labor and resetting the out-of-control capital expenses in agricultural machinery,” said Rupp, Founder and CEO. “We see a future of smarter, smaller, lighter, less expensive, and more sustainable swarms of autonomous equipment, substituting horsepower and weight for time. We’ve assembled a team of actual ag-experienced engineers and scientists, working alongside actual farmers, proving this isn’t a just a thought exercise.”

This Series A funding round was led by Fulcrum Global Capital with further contributions from Cavallo Ventures, DCVC Bio, Hico Capital, Johnsonville Holdings, and Trimble.

BHP Reports Record Profits on Commodity Prices, Upbeat on China Outlook

Australia, Earnings, News

BHP Group Ltd., Melbourne, posted its highest ever full-year profit on record commodity prices, and will push ahead with growth options on a stronger demand outlook in China.

CEO Mike Henry said China’s emergence from the COVID-19 lockdowns would provide a “tailwind” to the global economy, in a counterpoint to jittery sentiment on China following a swath of surprisingly weak data.

“We think that over the next 6-12 months, China, if anything, is going to provide some stability to global growth and will help offset some of the slowing that we see elsewhere,” Henry said. China typically accounts for more than 60% of BHP’s revenue.

BHP’s result was “better than expected,” Goldman Sachs Group Inc. analysts Paul Young and Hugo Nicolaci wrote in a note, cited by Bloomberg. But they warned that stronger currencies and weaker commodity prices were key downside risks, particularly if China’s property sector does not recover in the next year.

Rival miners have cautioned over a weaker outlook, and Rio Tinto Group last month reported a decline in first-half profits and halved its dividend. Gold giant Newmont Mining Corp. and copper producer First Quantum Minerals Ltd. have also warned investors in recent weeks on the impact of inflationary pressures.

BHP, which is developing the Jansen potash project in Saskatchewan (see related story), reported profit from operations of $34.10 billion on revenue of $65.1 billion for the year ending June 30, 2022, up from the year-ago $25.5 billion and $56.92 billion, respectively. EBITDA moved up to $40.63 billion from $35.07 billion.

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