All Posts from May 22, 2020

Chemtrade 1Q Impacted by Impairments, Lower Volumes, Prices

Canada, News, News Briefs

Chemtrade Logistics Income Fund, Toronto, reported a first-quarter net loss of C$97.9 million compared to the year-ago loss of $29.3 million. The company said the increase was primarily due to a few non-cash items, including a $56 million impairment on water solutions products and higher net finance costs due to a $47.4 million loss from the change in the fair value of convertible debentures and an unrealized foreign exchange loss of $9.6 million.

Revenues were down at $366.9 million from $384.4 million, with the company citing lower volumes of sulfuric acid and lower prices for caustic soda and hydrochloric acid.

Adjusted EBITDA was up, at $80.9 million from $44 million.

“Our first-quarter results were not significantly affected by COVID-19,” said Mark Davis, President and CEO. “However, we are seeing reduced demand for some of our products in the second quarter and expect this to continue for the balance of 2020.

“For Chemtrade, the most significant effect is reduced gasoline demand stemming from a reduction in driving miles,’ he added. “The reduced gasoline demand has a material effect on our regen services. However, not all of our products are affected. For example, we expect that demand for our water products should remain stable.

“In addition to the operational steps, we also took a number of financial steps,” Davis continued. “Our proactive reduction of our monthly distribution increased our liquidity by about $55 million on an annual basis. In light of the current uncertain economic climate, we also negotiated an amended covenant package on our senior credit facility, which provides us with additional covenant room over the next two years.”

Davis told analysts that after 13 years of maintaining a distribution rate of $0.10 per month, the company reduced the monthly distribution by 50 percent. He expects the company will generate enough cash this year to meet all of its obligations and sustain its current distribution rate.

Davis said the company’s two largest concerns regarding COVID-19 are its effect on the oil and gas industry and the ability for Chemtrade and its customers to perform maintenance turnarounds safely during COVID. He expects refineries to run at historically low rates but continue to operate. This impacts the company’s regen sulfuric acid business, which is about 40 percent of the overall volumes in the Sulfur Products & Performance Chemicals segment.

“We believe refineries will operate in Q2 at rates approximately 35 percent lower than last year, which is essentially the lowest rate our refinery customers can operate without fully shutting down their facilities,” Davis said. He expects rates to improve during the year, but for 2020 to be about 15 percent below earlier guidance.

He added that merchant sulfuric acid demand is also down due to the general reduction in the industrial manufacturing activity. He also expects a gradual improvement during the year.

Davis expects demand for ultra-pure acid for the semiconductor industry to continue unaffected by COVID.

SQM 1Q Income Off 44 Percent; Specialty Fertilizer Outperforms Lithium

Chile, Lithium, News, News Briefs, Potassium Nitrate, Potassium Sulfate, Specialty

SQM Inc., Santiago, reported a 44 percent drop in first-quarter net income to $45 million ($0.17 per share) on revenues of $392 million, versus the year-ago $80.5 million ($0.31 per share) and $504.2 million, respectively. Gross profit fell to $107.7 million from $145.5 million. Adjusted EBITDA was $132.9 million, down from $169.2 million.

The drops were driven by the Lithium segment, which saw a near 50 percent drop in prices; a 19 percent decrease in volumes, to 8,600 mt from 10,600 mt; and a 58 percent dip in revenues, to $65.3 million from $155 million.

SQM said COVID-19 particularly impacted the company’s ability to sell during the end of the first quarter, particularly in the lithium market, where auto manufacturing and the need for lithium batteries was hard hit. However, the company believes its volumes should be higher in the remaining quarters of the year. By contrast, fertilizer products were deemed essential in most places, and demand was not as significantly impacted.

SQM told analysts that the first quarter would be its worst of the year. The company intends to continue plans to expand both lithium production and market share. It continues to call 2020 production 65,000-70,000 mt.

It was the first time since 2015 that Specialty Plant Nutrition (SPN) gross profit exceeded that of Lithium, according to Bloomberg. SPN accounted for 36 percent of SQM’s gross profit, versus only 12 percent for the Lithium segment.

SPN volumes were off 9 percent, to 233,600 mt from 255,800 mt. Potassium nitrate-based volumes were off 27.6 percent, to 138,300 mt from 165,900 mt. The company said it is no longer reasonable to believe that demand growth in the water-soluble potassium nitrate market will reach the expected 5-6 percent. Average prices in this business line also dropped about 4 percent versus the year-ago quarter.

Volumes were up 4 percent for the Potassium Chloride and Potassium Sulfate segment, to 129,000 mt from 124,600 mt, though revenues were off 2 percent, to $43.3 million from $44.1 million. Average prices were just over 5 percent lower than year-ago levels. Gross profit from the segment represented 4 percent of company-wide gross profit.

SQM said it continues to expect to sell more potash in 2020 than it did in 2019. It expects to sell close to 700,000 mt in 2020, with very important volumes going into the Brazilian market.

EarthRenew Begins Engineering for Upgrade of Organic Fertilizer Plant

Canada, News, News Briefs, Specialty

EarthRenew Inc., Toronto, said on May 19 it has commenced detailed engineering work for the redevelopment of its Strathmore, Alta., facility. The work is expected to be completed in four months, to be followed by construction and commissioning in the second half of 2020, provided that the company secures sufficient funding. The timeline is expected to allow EarthRenew to deliver fertilizer products for the spring 2021 planting season.

EarthRenew has an engineering services contract with Laporte Engineering Inc., Montreal, to redevelop the fertilizer plant at the site. Engineering services, as well as construction and commissioning, are expected to cost between $7.8-$8 million. The retrofit facility is projected to be capable of producing 10 mt of finished product per hour across multiple organic fertilizer product formulations. The first phase of the project will include CCm Technologies’ bolt-on processing technology to increase nitrogen content for a higher-value fertilizer.

EarthRenew turns livestock waste into an organic fertilizer to be used by organic and traditional growers in Canada and the U.S. Located on a 25,000 head cattle feedlot, the flagship Strathmore plant is capable of producing up to four megawatts (MW) per hour of low-cost electricity powered by a natural gas-fired turbine. The exhausted heat from the turbine is used to convert manure into certified organic fertilizer.

Unigel Hopes to Restart Brazilian Nitrogen Plants in 2020

Ammonia, Ammonium Sulfate, Brazil, News, News Briefs, Urea

Unigel Group CEO Roberto Noronha told Valor Economico that his company hopes to restart the Bahia (Fafen-BA) and Sergipe (Fafen-SE) nitrogen plants this year. Proquigel Química SA, a unit of Unigel, agreed to lease the two plants from Petróleo Brasileiro SA (Petrobras), Rio de Janeiro, late last year (GM Nov. 22, 2019). Unigel said putting the plants back into production is a priority, and that it is currently negotiating access to natural gas feedstock with Petrobras and other suppliers.

The Fafen-BA plant is located at the Camaçari Petrochemical Complex, Bahia state, with a total urea production capacity of 1,300 mt/d. It also sells ammonia, carbon dioxide, and Arla 32. Fafen-SE, located in Laranjeiras, Sergipe state, has a total urea production capacity of 1,800 mt/d. It also sells ammonia, carbon dioxide, and ammonium sulfate.

The leasing arrangement includes the maritime terminals for ammonia and urea in the port of Aratu in Bahia.

Gensource Adds Bank to Finance Team

France, Germany, News, News Briefs, Potash, Saskatchewan

Junior miner Gensource Potash Corp., Saskatoon, said that it has added France’s Societe Generale, Paris, to its financial team. The banking firm will be joint lead arranger alongside KfW IPEX-Bank, Frankfurt, Germany, for the senior debt facility for the Tugaske Potash Project.

“These two lenders are major players in the greenfield project finance in mining and agriculture sectors and have demonstrated success in financing fertilizer projects all over the world,” said Gensource President and CEO Mike Ferguson. He said the addition of Societe Generale is another significant step towards completing the financing that will move Tugaske to construction this year.

In January, Gensource said the Tugaske project is in the detailed project finance stage, with a goal to reach financial commitments in late spring 2020 and have construction commence thereafter (GM Jan. 31, p. 27). Also in January, the company announced that Helm Ag, Hamburg, Germany, and its North American subsidiary, Helm Fertilizer Corp., Tampa, are offtakers for 100 percent of its 250,000 mt/y Tugaske project’s production in the Vanguard area of Saskatchewan.

Micronutrients Recycled from Batteries Studied for Fertilizer Use in Australia

Australia, Lithium, News, News Briefs, Specialty

Lithium Australia, Perth, has committed to larger-scale testing of mixed metal dust, or MMD, from alkaline battery recycling after initial small-scale tests showed positive results from retrieved micronutrients, such as zinc and manganese, on greenhouse wheat trials.

The tests, which were carried out at the company’s Envirostream Australia Pty recycling facility in Victoria, showed a “significant uptake” of the metals in wheat on local low-quality soil, Managing Director Adrian Griffin told Bloomberg, though it was a slower process in comparison to fertilizer-grade sulfate products. “We would anticipate that the results would be significantly better than that on more normal soils that we see in the wheat belts in Western Australia,” he said.

“We want to accelerate the trials as rapidly as we can,” Griffin continued. Along with domestic projects, the company is also considering rolling them out offshore. The trial mixtures would remain broad at this stage, rather than tailoring them for particular agricultural products and regions.

For future testing, the company is looking at blending the micronutrients with ammoniated phosphates.

With annual sales totaling around 6,000 tons nationally, alkaline batteries – used in typical household items – are notoriously under-recycled, according to Lithium Australia, citing research showing that 97 percent of batteries end up in landfills.

The company said it did not want to limit itself to recycling only lithium-ion batteries, but added alkaline so as to also eliminate those from landfills.

The company estimates that only 9 percent of lithium-ion batteries are recycled globally, with the Australian rate at less than 3 percent. It estimated that the volume of spent batteries worldwide will grow to 7 million tons a year in the next 10 years and the potential value of metal in domestic spent lithium-ion batteries could reach A$3 billion ($2 billion) a year in the middle of the next decade.

Yara Moves to Regional Organizational Structure

News, News Briefs, Scandinavia

Yara International ASA, Oslo, announced on May 20 that it will move from a segment structure to a regional organizational structure, effective June 1, 2020. The group’s operations will comprise four profit centers, of which three are regional units, with a fourth unit for global production plants and operational excellence, including health and safety. In addition, Yara will establish a new Farming Solutions global function.

“The new structure will sharpen our customer focus in each region, while also driving the transformation of our business for the future. It is a further milestone in executing our crop nutrition strategy as an integrated food value chain player,” said Yara International President and CEO Svein Tore Holsether.

The three regional units – Europe, Americas, Africa & Asia – will all have production, supply chain, and commercial operations, while the fourth unit for global production plants and operational excellence will operate Yara’s largest production plants at Porsgrunn, Norway, and Sluiskil, The Netherlands.

The units will produce and deliver existing Yara solutions, in addition to commercializing and selling new offerings under the guidance of Farming Solutions.

The Farming Solutions function will have a global mandate to drive the transformation of Yara’s core crop nutrition business, developing both existing and new solutions, including premium products, digital business, food value chain collaboration, and climate-neutral solutions.

Tove Andersen, currently EVP Production, will take up the position of EVP Europe. Chrystel Monthean, currently SVP Business Unit Latin America, will head up Africa & Asia as its EVP.

Lair Hanzen, currently EVP Brazil, will take up the position of EVP Americas, while Pål Hestad, currently SVP Production North Europe, will head up Global Plants & Operational Excellence as its EVP. Terje Knutsen, currently EVP Sales & Marketing, will take up the position of EVP Farming Solutions.

Pablo Barrera Lopez, currently EVP Strategy & Supply Chain, takes up the position of EVP Strategy & Communication, while Kristine Ryssdal, currently General Counsel, takes up the position of EVP HR & General Counsel.

Effective June 1, the Yara Group Executive Board will have the following members:

Svein Tore Holsether, President & CEO; Lars Røsæg, EVP & CFO; Tove Andersen, EVP Europe; Chrystel Monthean, EVP Africa & Asia; Lair Hanzen, EVP Americas; Pål Hestad, EVP Global Plants & Operational Excellence; Terje Knutsen, EVP Farming Solutions; Pablo Barrera Lopez, EVP Strategy & Communications; and Kristine Ryssdal, EVP HR & General Counsel,

Yara reported that Lene Trollnes, EVP People and Global Functions, has decided to leave the company to pursue opportunities outside Yara.

Yara said it will report its second-quarter 2020 results according to its existing segment structure, and thereafter report according to the new regional structure with four operating units. Restated financial figures for 2019 and first-half 2020 according to the new regional structure will be published ahead of the company’s third-quarter 2020 financial results.

Acron Swings to 1Q Loss on Ruble Devaluation

News, News Briefs, Russia

Acron Group, Moscow, swung to an IFRS net loss of $153 million in the first quarter of this year versus a $133 million net profit in the same prior-year quarter, on ruble devaluation.

The group said the loss was primarily the result of non-cash items, in particular a $148 million foreign exchange loss from the revaluation of foreign currency-denominated assets and liabilities, due to a slump in the U.S. dollar-to-ruble exchange rate in the latest reporting period.

EBITDA was down 31 percent year-over-year, at $110 million. Revenues were 5 percent lower at $423 million compared with the year-ago, with the group citing lower global prices for most of its products.

“A weaker dollar to ruble exchange rate in the late first quarter has yet to result in higher operating profit, but generated a foreign exchange loss from the revaluation of the loan portfolio and negative net profit,” said Acron Chairperson Alexander Popov. “The loss is non-cash and, therefore, not representative. A weaker ruble coupled with growing output will prop up our financials in future periods.”

Acron saw a 1 percent increase in output of key product, to 1.948 million mt in the first-quarter versus a year ago. Sales volumes of key products increased 11 percent to 1.994 million mt, up from 1.8 million mt.

Popov noted that the 11 percent in sales volumes “almost offset” the decrease in global prices for complex fertilizers (-19 percent) and UAN (-31 percent), with first-quarter revenue falling just 5 percent short of the first-quarter 2019 revenue.

“That said, financials did improve quarter-on-quarter, with revenue up 7 percent and EBITDA up 11 percent on fourth-quarter 2019,” said Popov. “Despite the COVID-19 pandemic, we are seeing strong demand for fertilizers globally. Supplies of key products to the domestic market are our priority, and these increased 45 percent to 682,000 mt.”

Average Indicative Prices FOB Baltic Sea/Black Sea ($/mt)

  1Q-2020 4Q-2019 1Q-2019
NPK 16-16-16 252 270 312
AN 187 179 182
UAN 123 137 178
Urea 217 216 243
Ammonia 222 225 276

Acron said it had reduced its capex in view of the uncertain dynamics on global markets due to the COVID-19 pandemic. It said the capex reduction has affected the implementation rate of its flexible investment program and will help reduce its debt burden, but it did not provide any further details.

Acron’s net debt increased by 4 percent to $1.258 billion as of March 31, 2020, compared with the end-March 2019 position of $1.215 billion.

Acron Adds Granular Urea to Production Portfolio

Featured, News, Russia, Urea

Acron Group, Moscow, has commissioned a new 700,000 mt/y urea granulation unit at its Veliky Novgorod site in northwest Russia, and will enable the group to produce granular urea for the first time. Hitherto, Acron has only produced urea that is prilled or rotoform.

Acron put the project cost at $29 million, and said it includes an additional finished product warehouse capable of storing 15,000 mt of urea.

The Russian fertilizer group has been investing heavily in its urea production capacity. In late 2018, it commissioned its sixth urea plant at Veliky Novgorod (GM Nov. 30, 2018), and last year it launched an expansion of the Urea-6 unit. The completion of the expansion will take overall urea production capacity at Veliky Novgorod to 1.9 million mt/y by 2021. The expansion will increase the Urea-6 unit’s capacity to 735,000 mt/y from the existing 500,000+ mt/y (GM April 12, 2019)

The completion of the Urea-6 project will make Acron a major urea producer in both Russia and Europe, capable of producing up to 1.4 million mt/y of granulated and prilled urea and liquid UAN, the group said.

Australia’s Agrimin Secures Major Project Status for Mackay SOP Project

Australia, News, News Briefs, Specialty, Sulfate of Potash

Junior sulfate of potash (SOP) producer Agrimin Ltd., Nedlands, Western Australia, has secured major project status from the Australian government for its Mackay sulfate of potash (SOP) project, located near the East Pilbara town of Kiwirrkurra in Western Australia.

The major project status, which was approved for three years, will help Agrimin receive additional support from the Australian government. Highlighting the project’s significant to the economy, the Australian government said it is extending its help to the company to boost the development of the project, which will generate multiple jobs in the region

According to Agrimin, Lake Mackay is the largest known potash-bearing salt lake in Australia, comparable in size, but smaller than other such lakes – Great Salt Lake in the U.S. and Lop Nur in China.

In January, the company reported that it had upgraded its Mineral Resource estimate for the Mackay potash project to 123.4 million mt, up some 470 percent from the 26.1 million mt listed in a May 2018 Pre-Feasibility Study (PFS) (GM Jan 24, p. 27). The initial PFS foresaw SOP capacity of 426,000 mt/y, with all production shipped through the company’s Wyndham Port Facility, some 785 km from the project, to world markets.

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