All Posts from October 23, 2006

Terra, Kemira to form UK jv

Featured, News

Terra Industries Inc., Sioux City, and Kemira GrowHow Oyj, Helsinki, announced Oct. 19 that they have entered into a Memorandum of Understanding (MOU) which sets out their agreement in principle to create a new joint venture to operate the fertilizer and associated process chemicals businesses of both companies in the United Kingdom. The MOU is a non-legally binding agreement and is subject, inter alia, to clearance from the UK competition authorities, negotiation of definitive documents, and lender consent. It is not subject to the approval of shareholders in either Terra or Kemira.

The parties say the jv is designed to secure a sustainable, long-term base for manufacturing fertilizer and process chemicals in the UK. Both businesses produce ammonium nitrate, which is the main nitrogen fertilizer consumed in the UK. Terra Nitrogen (UK) Ltd. is the largest UK producer of AN, and Kemira GrowHow UK Ltd. is the UK’s largest producer of compound fertilizers. The jv would provide a complete fertilizer offering for agricultural customers. Both businesses are also leading producers of process chemicals and have well-established and highly-skilled workforces of approximately 400 per company.

The jv is expected to be held 50/50 by Terra and Kemira and to own and operate the sites of Terra’s facilities on Teesside and Severnside and Kemira’s site at Ince. The parties expect to create significant cost and operational synergies that would enhance their ability to service and compete in increasingly challenging markets.

“Our markets are increasingly global and UK operators face growing competition from low-cost producing countries,” said Mike Bennett, Terra president and CEO. “In this environment, the joint venture will position our combined UK fertilizer and process chemicals operations to achieve long-term stability and success by reducing overheads and allowing us to optimize our product mix, among other synergies.”

“We expect this joint venture to allow both our companies to continue to provide high quality products and services to our agricultural and industrial customers, while significantly expanding our opportunities,” said Heikki Sirvio, Kemira CEO. “By securing a long-term manufacturing base in the UK, we are investing in the future.”

The parties expect to submit a competition filing to the UK Office of Fair Trading by the end of October. Both say they are committed to working with employees and their representatives, including signatory unions, through the coming months.

PotashCorp increases stake in SQM, pays $75.5 M for 6.1 million shares

Featured, News

Potash Corp. of Saskatchewan Inc. last week acquired another 2 percent in Sociedad Quimica y Minera de Chile S.A. (SQM), bringing its total stake up to 27 percent. While some analysts speculated that this might signal a takeover attempt by PotashCorp, the company said it simply saw an opportunity to add to its investment and took it, acquiring 6.1 million shares at a cost of US$75.5 million. PotashCorp and Yara International are two of the major shareholders in SQM.

There was a slight uptick in SQM stock earlier in the week, with some citing the PotashCorp buy as one reason. SQM results have improved each quarter for the past 21 straight quarters. Its results for third quarter 2006 will be released Oct. 24.

In other SQM news, Soquimich European Holdings B.V. (SEH), a unit of SQM, and Yara Italy SPA, a unit of Yara International ASA that forms a part of the controlling group of SQM, in September executed in Italy a sales and purchase agreement by which SEH sold to Yara all rights that SEH had in the Italian society Impronta S.R.L., which represents 50 percent of the total rights in Impronta. The agreement involves a payment of Euros 623,000 paid in cash.

Impronta will continue with the distribution of SQM’s specialty plant nutrients in Italy.

Agrium reduces guidance

News

Agrium Inc. on Oct. 20 revised guidance for the second half of 2006 to $0.20 to $0.25 earnings per share, down from $.65-$.75, which was given in August. The reduction is due to several issues, primarily in its wholesale business, including:

  • a longer than expected start-up of the Vanscoy potash capacity expansion, lowering production volumes in the third quarter and the month of October by about 215,000 mt relative to previous expectations, thereby temporarily almost doubling average production costs in the third quarter over last year’s level. Agrium expects to be at the new full operating rate by mid-November;
  • production interruptions at a number of facilities late in the third quarter and in the fourth quarter, including issues with equipment at the Fort Saskatchewan facility that resulted in an accelerated turnaround, as well as an expected accelerated turnaround at the Profertil facility, both previously scheduled in 2007. As a result, Agrium now expects to be able to run these facilities without interruption in 2007;
  • weaker than expected phosphate margins resulting from continued high iron content ore from the Kapuskasing phosphate rock mine and poor phosphate demand. Agrium is focusing on new options to lower Canadian phosphate costs by early 2007;
  • lower than forecasted domestic North American nitrogen results due to higher cost carryover of ammonia inventory and lower than expected North American nitrogen prices and volumes. Lower gas costs in the fourth quarter are not expected to be reflected in results until late in the fourth quarter and early 2007;
  • the Kenai nitrogen facility is expected to shut down October 23, 2006, due to lack of gas supply and will not likely restart until some time in early 2007, resulting in higher fixed cost charges in the fourth quarter;
  • second-half retail results are expected to be lower than previously forecasted across all product lines;
  • approximately $11 million in additional charges expected in the fourth quarter, of which $6 million relates to undiscounted accruals for environmental remediation provisions.

Agrium said gas hedging is not expected to adversely impact gas costs or earnings in the second half of 2006 or early 2007. It does not expect Profertil S.A. to be impacted by the Argentine government’s recent imposition of an export tax on Argentine natural gas exports from the southern province of Tierra del Fuego to Chile, as Profertil S.A. has long-term gas contracts directly with domestic Argentine gas producers.

Agrium said it believes that the fundamentals for its wholesale and retail businesses in 2007 are very positive, despite these short-term items. It expects no significant synergies regarding its Royster-Clark purchase until 2007. More information will be provided at its third quarter conference call Nov. 2.

Iowa ammonia additive for nurse tanks only

Ammonia, News

Although some believe there’s a better way, Iowa retailers will have to settle for injecting the new anti-meth additive into anhydrous ammonia nurse tanks, according to state agriculture officials. The word isn’t out to everyone as yet, according to a spot check by Green Markets, but calcium nitrate is not approved for adding to transports or storage tanks. Several of those contacted suggested that larger volumes could be handled quicker and easier at the terminals where the tanker trucks are loaded.

State Plant Management and Technology Director John Whipple responded that only the nurse tanks were tested for stress corrosion cracking. “Calcium nitrate is not approved for transports or storage tanks,” Whipple concluded. “This also causes much less concern from the ammonia manufacturers since refrigeration and industrial ammonia cannot be contaminated.” He added that technical information concerning what compound, how much to add per ton, and how to inject it is on the Agribusiness Association of Iowa website at www.agribiz.com, along with FAQs and DEA results with the inhibitor testing for stress corrosion cracking and metallurgy. The state ag department will have the technical information posted on its website soon.

The go-ahead for voluntarily using calcium nitrate earlier this month (GM Oct. 16, p. 1) triggered a number of questions not restricted to where and when the additive should be injected. Whipple said his office was getting a flood of calls, and the Office of Drug Control Policy got inquiries from agriculture, government, and media organizations as far away as Cambridge, England.

Dealers contacted in several parts of the state were eager for more information to pass on to their customers. Jim Penney, general manager for seven Heart of Iowa locations, wants “to know what effect it’s going to have on our equipment. We’ve got some pretty expensive applicators and metering devices.” Kennon Gumm in the sales office at Northeast Iowa Co-op in Randalia thought that the additive may be okay for the time being, but is concerned that “the thieves may come up after awhile with a way to work around it.” Gumm would like to see if something could be done to be put it all together at the terminal where tanker trucks are loaded. Chad Remmers offered that the timing may be awkward, because the Cooperative Elevator Assn. at Ocheyedan staff was busy with fall fertilizing and harvesting and may not be able to handle the changes.

Meanwhile, Whipple was thinking “big time” about the amount of calcium nitrate that might be used each year. Whipple assumed that if only half the estimated 26,000 one thousand-gallon nurse tanks in Iowa were treated twice a year for 26,000 treatments, Iowa would use between 3,000 and 3,500 tons each year.

El Dorado wins $9.8 M jury award

News Briefs

Oklahoma City-El Dorado Chemical Co. (EDC), a unit of LSB Industries Inc., Oklahoma City, reported on Oct. 16 that it has received a unanimous jury verdict awarding $9.8 million in damages to EDC for the negligence of the defendants, Ingersoll-Rand Co. and DR Holding Corp., as general partners of Dresser Rand Co. (DRC). EDC will pay attorneys fees equal to 30 percent of its net recovery. The case claimed negligent failure by DRC to properly rebuild a hot gas expander for EDC’s DM Weatherly nitric acid plant; the failure caused millions of dollars in equipment damages and lost profits. The outage at one of EDC’s El Dorado, Ark., nitric acid plants occurred in late 2004 and lasted well into mid-2005. The case also claimed DRC’s negligent failure to rebuild a hot gas expander for other nitric acid plants located at EDC. The case was heard in Union County, Arkansas Circuit Court. It was not immediately known if the defendants will appeal. The Dresser-Rand Group Inc., Houston, said last week that it has no exposure or liability for any part of the jury verdict. To date, LSB has also received at least $5.2 million from insurers over the incident (GM Sept. 11, p. 12).

Fire causes $200,000 damage at Florida plant

Florida, News Briefs

Lakeland, Fla-A fire at the Florida Favorite Fertilizers plant at Lakeland caused an estimated $200,000 in damage on Oct. 16, according to an article in The Ledger, the daily newspaper in Lakeland. The cause of the blaze was believed to have been from heat generated by treated sewage sludge. The plant was bought earlier this year by Wedgworth’s Inc. of Belle Glade, and was expected to have gone back into operation late last week. The plant, which was built in 1921 and has had several owners, was declared a Superfund Site in 2000, after high concentrations of lead, arsenic, and toxaphene were found on the property and in a nearby ditch. That resulted in a cleanup of 4,750 tons of contaminated soil.

Honeywell caprolactum move to impact NH3, AS

News Briefs

Morris Township, N.J.-An increase in caprolactum production at Honeywell Resins & Co.’s Hopewell, Va., facility should mean more anhydrous ammonia used and more ammonium sulfate produced, according to the company. The expansion, combined with ongoing production improvements, is expected to boost caprolactam production by up to 10 percent. The Hopewell facility produces more than 750 million pounds, or 340,000 metric tons, of caprolactam annually. Honeywell said it would get the extra ammonia either via increased production or sourcing elsewhere. It also expects to produce more AS as result of the upgrade, though the amount will depend on the exact increase in caprolactum production. “As global demand for caprolactam rises, especially in China, we are making the investments necessary to meet the demand for merchant supplies,” said Qamar Bhatia, vice president and general manager for Honeywell Resin & Chemicals, noting caprolactam consumption in China alone has grown from nearly 500,000 metric tons in 2002 to more than 700,000 metric tons in 2005. Demand in China is expected to outstrip regional supply through 2011. Bhatia said the expansion will include new production equipment at the Hopewell facility. Celebrating 50 years of caprolactam production in 2005, the Hopewell facility is the world’s largest single-site producer of caprolactam, which is used in the production of nylon fiber, films, and plastics; and ammonium sulfate, a co-product of caprolactam production that is used as a fertilizer and sold under the Sulf-N® brands.

Scotts producing 0-to-low phos fertilizer

News Briefs, Phosphate

Marysville, Ohio-Scotts Miracle-Gro Co. doesn’t expect cutting back on phosphate in some of its lawn fertilizer products will contribute much to eliminating runoff into the nation’s waterways, according to a top company official. “It will be a minor contribution to the overall flow of phosphorus,” Rich Martinez, chief environmental officer, told Green Markets. Recently Scotts and Lebanon Seaboard joined Maryland, Pennsylvania, Virginia, and the District of Columbia in an agreement to reduce phosphate in lawn fertilizers by 50 percent to help clean up Chesapeake Bay. Lebanon Seaboard has had zero phosphorus available in its Greenview slow release products for some time. Scotts’ Martinez remarked that runoff from healthy lawns is less of a concern than fertilizer being applied to off-target areas. He said what commercial or individual applicators need to do is keep the fertilizer on the lawn instead of walkways, driveways, and other hard surfaces. “We surveyed 400 homes and found residents thought water going into storm drains is treated instead of flowing directly into local streams or lakes,” Martinez reported. He said Scotts is in the process of eliminating the 3 percent phosphorus in its Turf Builder plus Halts (fertilizer plus crabgrass preventer) and Turf Builder with SummerGuard (insect control), and reducing Turf Builder and WinterGuard from 3 to 2 percent. Some of the changes have already been made, while others will take place as inventories are depleted. Scotts says this is a national program and will eventually lead to the change of all lawn products, except the specialty products such as starter fertilizer used for seeding.

Wilbur-Ellis inks deal to distribute Nitamin

News Briefs

Atlanta-Georgia-Pacific Resins Inc. said Oct. 19 that it has reached a long-term agreement with Wilbur-Ellis Co. to expand the availability of Nitamin® liquid fertilizers. Wilbur-Ellis will have the exclusive right to distribute Nitamin fertilizers to the specialty agriculture and commodity crop markets that Wilbur-Ellis currently serves in the United States, including Arizona, California, Colorado, Idaho, Indiana, Michigan, Minnesota, Montana, Nevada, New Mexico, North Dakota, Ohio, Oregon, South Dakota, Texas, Utah, Washington, Wisconsin, and Wyoming. Wilbur-Ellis will also distribute Nitamin technology for the turf market. Nitamin liquid is a slowly available nitrogen source developed by Georgia-Pacific that releases nitrogen to plants over a 60- to 90-day period.

Nachurs Alpine celebrates 60th anniversary

News Briefs

Marion, Ohio-Nachurs Alpine Solutions is marking its 60th year of providing nutrients to American farmers. “Nachurs Alpine was a pioneer in this business and we’re still leading the way in terms of sales, product quality and support,” said George Berg, company CEO and president. Nachurs Alpine represents the company created by the 1998 merger of Nachurs Plant Food Co., founded in 1946, and Alpine Plant Foods. While the company’s primary business is formulating seed-safe starter fertilizer for corn production, it also provides liquid fertilizer solutions for soybeans and many fruit and vegetable crops, as well as liquid chemical products for industrial applications. Headquartered in Marion, Ohio, Nachurs Alpine also operates manufacturing facilities in Corydon, Ind., and Red Oak, Iowa. In Canada, it operates under the name Alpine Plant Food, based in New Hamburg, Ont.

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