Itafos Inc., Houston, on Sept. 22 announced that it has
entered into credit facilities with a syndicate of lenders, led by RBC Capital
Markets as sole bookrunner and sole lead arranger, pursuant to which the
lenders have advanced a US$85 million term loan to the company and made
available a US$35 million letter of credit (LC) facility and an US$80 million
asset-based revolving credit facility (ABL).
Itafos said that together, the new credit facilities will
provide enhanced financial flexibility and a non-dilutive source of capital, as
well as the ability to refinance its existing debt.
“The refinancing announced today represents the achievement
of another important strategic milestone for the company. The new debt
facilities will improve the company’s financial performance because of the
significantly reduced interest rates and creates more flexibility for funding
of the long-term growth of the business,” said G. David Delaney, Itafos CEO.
The term loan, LC, and ABL all mature on Sept. 22, 2025.
Upon closing the refinancing, the term loan will have an outstanding balance of
US$85.0 million, the ABL US$65.0 million, and the LC US$32.8 million.
Interest shall accrue on outstanding borrowings at a rate
equal to Term SOFR on the term loan and LC, plus a margin ranging from 4.25%-5.25%
per annum based upon the total net leverage ratio of the company and its
subsidiaries. The initial borrowings are at a rate of 4.25%.
ABL interest shall accrue on outstanding borrowings at a
rate equal to Term SOFR plus a margin ranging from 2.25%-2.75% per annum, based
upon the average excess availability under the ABL.
Previous interest rates ranged from 8.25% per annum plus
LIBOR to 18%.
Sev.en Global Investments, Prague, a Czech Republic-based
family-owned investment group, has recently signed a deal to buy ASX-listed bankrupt
sulfate of potash (SOP) junior Salt Lake Potash (SO4), Perth, according to a
Sept. 19 report in the Australian
Financial Review. The sale price was not immediately available, and Sev.en
had not responded to inquiries at press time.
Salt
Lake had hoped to be Australia’s first SOP producer with its Lake Way project
in Western Australia, however, mounting debt and a delayed ramp-up eventually
caused creditors to take over last year (GM
Oct. 22, 2021). At full
production, SO4 had planned an output of 245,000 mt/y, and at one point it
reported 224,000 mt/y of binding offtake agreements for five- and ten-year
terms (GM March 26, 2021; Dec. 20, 2019).
Brazil’s privately-held fertilizer company,
Galvani Fertilizantes, Sao Paulo, recently gave an update on two major
fertilizer projects (GM May 13, p. 36),
saying it expects to spend R$2.5 billion ($482 million).
The company expects to spend R$200 million ($38.6
million) at its plant in Luis Eduardo Magalhães in Bahia state to double
production to 1.2 million mt/y by 2024. In an interview with Bloomberg, Galvani CEO Marcos Stelzer
said the value will come from equity contributed by the Galvani family.
Some R$2.3 billion ($443 million) will be
invested at the Santa Quitéria phosphate-uranium project (GM Oct. 19,
2018) in Ceara. The amount will be a combination of Galvani equity, issuance of
debt, and the share of a stake in the project, though the latter will not
include an independent public offering (IPO).
When brought online, the Santa Quitéria project
would produce 1.05 million mt/y of phosphate, which would serve the Matopiba
region. In addition, the project is expected to produce 220,000 mt/y of
dicalcium phosphate for the feed industry, which Galvani said represents 50% of
all demand in the North and Northeast regions and 22% of national demand.
The Santa Quitéria project, which is expected up
in 2026, is being carried out in partnership with Industrias Nucleares
Brasileiras (INB), a state-owned company. Uranium production of an estimated
2,300 mt/y, which will be separated from the phosphate, would go to INB. The
mine is currently in the environmental licensing phase.
Together, the two projects will boost Galvani’s
fertilizer output to 2.2 million mt in 2026, up from 600,000 mt in 2021. That
would represent more than one-third of the nation’s current phosphate output.
In addition to these two projects, Galvani said
it also plans to start exploring for a phosphate mine in Irecê in Bahai.
Phosphate from this project would be transported to the Luis Eduardo Magalhães unit,
with the end product then shipped through the port of Pecem in Ceara. The total
investment for this project is put at R$340 million ($65.6 million), which will
come from Galvani’s own capital.
The Galvani family retained the production unit
in Luis Eduardo Magalhães and the mining units in Angico dos Dias and Irecê, as
well as the Santa Quitéria project, when it sold its minority stake in Galvani
Indústria to Yara International ASA, Oslo, in 2018. The Galvani retained assets
were valued at US$95 million as of Aug. 31, 2018.
According to Brazil’s Ministry of Agriculture,
85% of the fertilizers used in Brazil are imported. The National Fertilizer
Plan, launched by the federal government earlier this year, aims to reduce
Brazil’s dependence on imported products to 45% by 2030.
A
tightening and clarification of the European Commission’s (EC) sanctions on
Russia now makes it impossible to supply Russian potassium chloride and
compound fertilizers to third countries that use European services, such as
insurers and shippers. The new prohibition applies even if the cargoes are not
transiting European Union (EU) territory.
The
Commission on Aug. 29 published an updated text of clarifications on the
application of its sanctions for certain fertilizers produced in or exported by
Russia. This followed a tightening on Aug. 10 of the EU’s fifth package of
sanctions against Russia that were announced and implemented in early April.
On
April 8, Brussels imposed sectoral sanctions on the import into the bloc of
potassium chloride (CN 3104 20) and NPKs (CN 3105 20) and PKs (3105 60) and
other fertilizers containing potassium chloride of Russian origin (GM April 15, p. 1; April 8 p. 1). These
sanctions were in the form of a cap on the volume of these products that could
be imported into the EU.
The
April 8 restrictions did not apply to shipments until July 10 under contracts
signed prior to April 9, 2022, the day the sanctions came into force.
While
the April 8 measures did not target any other types of fertilizers of Russian
origin, they included an entry ban on Russian-flagged vessels and
Russian-operated vessels from accessing EU ports. They also banned Russian and
Belarusian road transport operators working in the EU.
That
initial ban did not apply to the transit of Russian potash and compound
fertilizers to third countries that used the bloc’s infrastructure. But on Aug.
10 the EC further tightened the sanctions by extending the ban to include
European operators’ activities related to the transit of sanctioned Russian
fertilizers – potash and compound fertilizers – that were heading for third
countries through the EU’s Member States.
Now,
under the new sanctions, the supply of Russian origin potash and compound
fertilizers to third countries, even without the use of the EU’s territory and
infrastructure, is understood to be considered a violation of sanctions.
All
activities relating to the provision of transport, transshipment, and trading
services by European companies, as well as related services, such as insurance,
financial, and brokerage services, along with technical assistance, are
prohibited under the new tightened sanctions.
The
latest decisions by Brussels would appear to contradict the EC’s earlier
statements about “making exemptions” for what it described as
“essentials” cargo, such as agricultural and food products and
humanitarian aid. That said, according to some sources, the latest EU measures
continue to allow for some exemptions.
The
move has taken insurers and shippers by surprise, and according to a circular
sent out to its members by the UK P&I club, one of the world’s largest
protection and indemnity insurance groups, as cited by the Insurance Journal, the insurance industry had previously assumed
the ban on transits and services would not apply to export destinations outside
the EU.
The UK
P&I club is a member of the International Group of P&I Clubs, which
collectively cover about 90% of the world’s oceangoing vessels for risks. Most
of the P&I clubs that comprise the international group are subject to the
jurisdiction of the EU, according to the circular as cited by the report.
As
previously reported, Russian President Vladimir Putin has said Russia is
prepared to donate 300,000 mt of fertilizer – mainly potash that has built up
in some European ports – to developing countries free of charge (GM Sept. 16, p. 28).
Rail workers on
Sept. 22 were scheduled to begin the voting process to ratify the tentative
agreements reached last week between Class 1 freight railroads and unions that
averted a potential strike or lockout on Sept. 16. According to multiple media
reports, however, many union members are unhappy with the deal, and
ratification is far from certain.
The negotiated
contract (GM Sept. 16, p. 1) gives
rail employees a 24% wage increase over five years, retroactive to Jan. 1,
2020, as well as an immediate bonus payout of $11,000 upon ratification. The
last-minute negotiations also secured concessions from railroads to amend
attendance policies, allowing workers three extra unpaid days off per year for
doctor’s appointment without penalty.
The Associated Press, however, reported this
week that a number of newly formed working groups of employees who are unhappy
with the agreement staged protests on Sept. 21 urging members of 12 unions representing
115,000 rail workers to oppose its ratification. At issue are ongoing concerns
about overworked employees and understaffing caused by the implementation of
Precision Scheduled Railroading (PSR) policies at major railroads.
And at least one union – the
International Association of Machinists and Aerospace Workers (IAM), which
represents 4,900 locomotive machinists, track equipment mechanics, and facility
maintenance personnel – voted last week to reject an agreement with the
National Carriers’ Conference Committee (NCCC), which represents the six Class
1 railroads in contract negotiations.
“IAM freight rail members are skilled
professionals who have worked in difficult conditions through a pandemic to
make sure essential products get to their destinations,” IAM said in a Sept. 14
statement. “We look forward to continuing that vital work with a fair contract
that ensures our members and their families are treated with the respect they
deserve for keeping America’s goods and resources moving through the pandemic.
The IAM is grateful for the support of those working toward a solution as our
members and freight rail workers seek equitable agreements.”
Two smaller unions have reportedly
already approved the new contract, the Associated
Press reported, and IAM remains at the negotiating table. Vote counting for
the nine other unions will last until mid-October, but the voting results from
the three largest unions, which represent approximately 60,000 rail workers,
are not expected until mid-November.
If any of the unions do reject their
contracts, the Associated Press
reported that Congress could still be forced to step in later this year to
avert another strike, which the Association of American Railroads (AAR)
estimates could cost up to $2 billion a day in economic losses. The risk for
union members who are unhappy with the agreement, though, is that any contract
imposed by Congress could end up being worse than the one negotiated with the
railroads.
“We are hopeful
that union membership will vote to approve the tentative agreement to ensure
freight rail in the US continues to operate,” said Corey Rosenbusch, President
and CEO of The Fertilizer Institute (TFI), in a Sept. 15 statement. “As we move
forward, it is also essential that rail carriers hire and retain the
appropriate employee staffing levels to support a strong economy. Staff
reductions in recent years have dramatically hurt rail service and made the
rail-labor contract negotiations more challenging.”
What
little Russian gas supply is still coming to Europe may be under threat. Reports
by Russia’s security service this week that they had thwarted a planned attack
by Ukraine on the TurkStream pipeline – a claim that Kyiv has denied – have
highlighted risks to the remaining Russian supply to Europe, Bloomberg reported.
The
pipeline is the only route that transports Russia’s gas to Turkey and Europe,
and is the only Russia-Europe gas conduit that has not had any disruptions this
year.
PJSC
Gazprom is currently sending about 80 million cubic meters of gas to Europe a
day – around 20% of the Russian gas major’s normal exports to the continent,
according to the report. Roughly half of that volume is currently flowing via
TurkStream, while the rest is crossing Ukraine. The key Nord Stream 1 pipeline
that supplies gas from Russia to Europe via Germany has been halted since Aug.
31 (GM Sept. 2, p. 35).
In his
biggest escalation of the war with Ukraine since Moscow’s Feb. 24 invasion,
Russian President Vladimir Putin this week ordered a “partial
mobilization” of reserve troops, approved a “sham referenda” of
Russian-controlled territories in Ukraine’s eastern and southern regions, and
once again raised the threat of a nuclear conflict.
European
natural gas prices fluctuated on Moscow’s bellicose comments, with the Dutch
TTF front-month gas (currently October), the European benchmark, closing at
€188.0 a megawatt-hour (MWh) on Sept. 22, some 0.938% down on the day. This was
also down on last week’s high of €214.285 per MWh reached on Sept. 15, and some
way off the all-time high of €345 per MWh hit in early March this year.
Bigger-than
expected inventories, ample supplies of liquefied natural gas, and intervention
by European governments (GM Sept. 16,
p. 29; July 29, p. 1) have all helped somewhat to ease the continent’s gas
supply anxieties in recent days.
But
West Lothian, Scotland-based utility management group DB Group (Europe) Ltd.
sees “with much in flux and the fundamentals currently unchanged,
confusion and volatility are likely to define the market for the following days,”
according to Bloomberg, citing a note
by the group.
In
European nitrogen fertilizer production news, following a Reuters report early this week that Yara International ASA, Oslo,
planned to halt production at its Tertre, Belgium, nitrogen complex “in the
next few days,” the Norwegian group told Bloomberg on Sept. 21 the company currently has no plans to halt
output at the Belgian plant.
“We are
producing at a slow pace, but the plant has not stopped production,” said a
Yara spokesperson. “We are planning on a weekly basis.”
The
complex produces ammonia, nitric acid, and ammonium nitrate fertilizers.
Yara
said in July it was implementing cuts to capacity due to high gas prices. The
company said as of July 19, it had curtailed several of its production plants
across Europe, amounting to an annual capacity of 1.3 million mt/y of ammonia
and 1.7 million mt/y of finished fertilizer. The company did not rule out
further cuts to production.
Germany’s
largest ammonia and urea producer, SKW Piesteritz GmbH, is in the process of resuming
full production after a planned turnaround on one of its two ammonia lines,
after seeking government aid. The company had brought forward the turnaround
due to escalating natural gas prices.
But SKW
warned this week that it “fears for the international competitiveness of
Germany as a business location under these conditions,” the UK’s Financial Times reported.
SKW has
two ammonia plants, each with capacity to produce 0.54 million mt/y, three urea
plants with an aggregate capacity of 1.18 million mt/y, and one UAN unit with a
0.5 million mt/y production capacity, according to Green Markets’ capacity database.
Should
Germany be forced to ration gas for industrial use this winter, BASF SE said it
can reduce its gas consumption at its major Ludwigshafen production site to a
degree by curtailing individual plants or swapping gas for fuel oil at some
production stages, according to a report by the UK’s Guardian newspaper.
The
company already has reduced its production of ammonia at Ludwigshafen, and also
at its Antwerp, Belgium, site, instead buying in some ammonia from other
suppliers (GM July 22, p. 1; July 1,
p. 1).
In
Europe, BASF has ammonia production capacity of 910,000 mt/y at Ludwigshafen
and 610,000 mt/y at Antwerp, according to Green
Markets capacity database.
But,
because the 125 production plants at Ludwigshafen are an interconnected value
chain, there is a point at which a drop of gas supplies would lead to a
site-wide shutdown, according to the Guardian
report, citing a BASF spokesperson .
She
told the newspaper that once the company receives “significantly and
permanently less than 50%” of its maximum requirements, it would need to
wind down the entire site.
But
with German gas storage 87% full, there is increasing optimism that rationing
in the country can be averted this winter. Still, even then high gas prices
could force companies such as BASF to halt production.
Meanwhile,
Slovakia’s biggest producer of basic chemicals and a producer of nitrogen
fertilizer, Duslo a.s., has decided not to resume production after a scheduled
six-week maintenance turnaround due to high energy costs, according to a Bloomberg report, citing the Slovakian Denník N newspaper.
Duslo’s
CEO Petr Bláha said the company will resume production only after the Slovak
government approves the financial aid required to deal with high energy costs,
according to the report.
Duslo –
a unit of the Prague, Czech Republic-based Agrofert Group – halted production
in mid-August (GM Sept. 2, p. 29).
The
company manufactures granular and liquid nitrogen fertilizers in addition to
ammonia production, and a number of rubber-based chemical products. It also
operates one of Europe’s largest AdBlue plants. AdBlue is an essential additive
for diesel trucks to reduce levels of nitrogen oxides (NOx) pollution from
their engines.
Kenya
has adopted a new business stance towards Morocco following newly-sworn in President
William Ruto’s decision to rescind recognition of the disputed Sahrawi Arab
Democratic Republic (SADR), also known as Western Sahara, according to a report
by The North Africa Post, citing
Kenya’s Business Today newspaper.
Ruto wants to accelerate economic relations with Morocco, particularly in the areas of trade, agriculture, health, tourism, and energy, among others, and has taken the position that the United Nations’ framework is the exclusive mechanism for dispute resolution over any territorial issues, according to the report.
The
move also comes at a time of much tighter global fertilizer supplies and higher
prices, impacted in part to sanctions on exports from Russia and Belarus, as
well as fewer exports from China.
Morocco
has controlled around three-quarters of Western Sahara since 1975, and claims
the sparsely populated region as its own. The claim is bitterly opposed by the
Western Sahara Polisario Independence Movement, which still controls the
remainder of Western Sahara.
In his first full day in office on Sept. 13, Ruto publicly pledged to lower the price of fertilizer from the current Ksh6,100 to Ksh3,600 (approximately $50.2 to $29.6 at current exchange rates) per 50-kg bag, with the aim of improving the country’s food production and security. According to the report, Kenya will import 1.4 million bags of fertilizer from Morocco, with longer term arrangements being sought.
For its
part, Morocco considers Kenya as “an outstanding nation” with which
it can establish economic cooperation, especially in the fields of agriculture,
health, and tourism, and in the coming years, Kenyan tea (a major export)
“will be very present” in Morocco, according to the report, citing
experts.
Malaysia’s
Kuala Lumpur Commodity Exchange (KLCE) has announced its plans to launch new
fertilizer futures contracts that will be accessible for international market
users. The contracts will be available for trading once all trading conditions
are confirmed.
For its
platform, KLCE has created a portfolio of financial-settled fertilizer futures,
including products for the Chinese and Middle East markets, according to a
Sept. 16 statement by the exchange. These products will be available on the
KLCE trading platform and sit alongside other agricultural products on the
exchange, including cocoa futures and options.
The
contracts will be cleared through KLCE Clearing, KLCEs dedicated overseas
clearinghouse.
“These
contracts build on KLCE’s expertise in developing agricultural products,
including our existing suite of fertilizer swaps. Customers using these
contracts will be eligible for capital efficiencies and margin offsets through
clearing services on KLCE Clearing,” said Chew Guo-liang, Executive
Director, Agricultural Commodities and Alternative Investments, KLCE.
Russian
ammonia and urea producer PJSC Togliattiazot’s long-standing plans to complete
an ammonia and urea transshipment terminal in the Russian Black Sea/Azov Sea
port of Taman have taken a further step forward, it reports.
The
producer this week said the public hearings on the project have been completed,
and the project documentation will be submitted for approval by the state
environmental authorities.
Togliattiazot is now targeting completion by 2026 of the transshipment terminal, which is expected to handle 2 million mt/y of ammonia and 3 million mt/y of urea, according to the Russian company. Total Investment is expected to be about RUB40 billion (approximately $655 million at current exchange rates), and will be financed by Togliattiazot.
Product
will be delivered to the terminal mainly by rail.
The new
transshipment facility will be strategically located on the Russian side of the
Kerch Strait, which connects the Black and Azov Seas, and according to the
producer, will be unique, as Russia does not as yet have a single ammonia
transshipment terminal.
The project’s construction first began in 2003, but was subsequently suspended due to reasons the company said were beyond its control. Togliattiazot resumed construction in 2015, and in 2018 had reported its plans for the transshipment terminal were back on track after it received the green light from Russia’s Federal Agency for Maritime and River Transport (FAMART) (GM Dec. 7, 2018). At that time, commissioning was planned for 2020.
Venezuelan fertilizer plant Monomeros Colombo Venezolanos, Barranquilla,
Colombia, has been returned to the control of the government of Venezuelan President
Nicolas Maduro, according to the governments of Venezuela and Colombia. A new
Board of Directors is in place, and a new plant manager has been named.
Since 2019, the plant was controlled by a Board appointed by
Venezuela opposition leader Juan Guaido (GM
June 14, 2019). Guiado’s control allowed the US Treasury Department’s Office of
Foreign Assets (OFAC) to lift sanctions on the fertilizer company and better
allow raw materials to be supplied.
The Maduro government has regained “total and absolute” control
of Monomeros, said Venezuela Oil Minister Tareck El Aissami on state television
on Sept. 22, according to Bloomberg.
El Aissami said the Monomeros plant was totally idle, rather than fully
productive when the Maduro was in control. He said the first boat carrying raw
materials to resume Monomeros’ operations would arrive in the coming hours. He
said the opposition “destroyed” the Monomeros facilities.
Monomeros’ production capacity decreased from 1 million mt
in 2017 to 600,000 mt in 2020 due to “bad administration” from the opposition
management, said Pedro Rafael Tellechea, Head of Petroquimica de Venezuela SA
(Pequiven), the parent company of Monomeros. He said in 2021, Monomeros began
reselling raw materials. Most, if not all of the production is believed to be
DAP/MAP.
Maduro appointed former Pequiven Western Plant Manager
Ninoska La Concha as the new Monomeros General Manager, and an arrest warrant
has been issued for former opposition-appointed General Manager Guillermo
Rodriguez Laprea. El Aissami said new evidence on mismanagement by opposition
leader Guaido is being presented to Venezuelan authorities.
“We have requested the initiation of an investigation in
Colombia against those responsible,” said El Aissami. “Sooner rather than later
we hope that they are captured, detained, and brought to justice in Venezuela”
Soon after the August inauguration of incoming Colombian
President Gustavo Petro, Columbia re-established relations with Venezuela and the
countries have since traded ambassadors. Petro and Maduro are expected to attend
a reopening of the border of the two countries on Sept. 26, according to Bloomberg, and the first flight of
Venezuelan airline Conviasa is expected to arrive in Bogota on Sept. 26.
Disclaimer of Warranty
All information has been obtained by Green Markets from sources believed to be reliable. However, because of the possibility of human or mechanical error by our sources, Green Markets or others, Green Markets does not guarantee the accuracy, adequacy, or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information.
