All Posts from August 25, 2023

Australian Fertilizer Suppliers Agree to Contract Changes

Australia, Featured, News

The Australian Competition and Consumer Commission (ACCC) on Aug. 21 announced that fertilizer suppliers have agreed to amend their contracts after an ACCC investigation into unfair contract terms.

“We initiated an investigation after receiving complaints that fertilizer suppliers were using contracts in a way that could disadvantage farmers,” ACCC Deputy Chair Mick Keogh said. The ACCC said it obtained copies of standard form fertilizer supply agreements and identified potentially unfair contract terms in those agreements.

ACCC said all fertilizer suppliers that it engaged with during its investigation cooperated and changed the contract terms to address the ACCC’s concerns.  

ACCC said a term in a standard form contract may be unfair where it creates a significant imbalance in the parties’ rights and obligations under the contract, is not reasonably necessary to protect a party’s legitimate business interests, or is likely to cause financial or other harm to the other party if enforced.

Some of the potentially unfair terms identified by the ACCC included terms giving the supplier the right to unilaterally vary the quantity to be delivered to the buyer or to terminate the agreement if the supplier believed it would not be able to supply the goods. Some terms restricted buyers’ rights to raise issues about defects with the goods.

Under the new unfair contract term laws that come into effect on Nov. 10, 2023, the ACCC will be able to take court action to seek pecuniary penalties for breaches of the law. The maximum penalty will be the greater of $50 million or three times the value of the benefit derived, or, if that value cannot be determined, 30% of the company’s turnover during the period it engaged in the conduct.

“This is an important reminder to all businesses in the agricultural sector of the need to review their standard form small business contracts and remove unfair contract terms now, or they risk significant penalties when the new laws take effect,” Keogh said. The new unfair contract terms provisions will also expand the definition of a “small business” to include businesses with up to 100 employees or up to $10 million in annual turnover. 

“We will continue to monitor traders in the fertilizer industry and, more broadly, across the agricultural sector, and we will investigate if we have concerns with contract terms,” Keogh added. “If a small business thinks an unfair contract term is being included or enforced in their agreement, we recommend they obtain independent legal advice to understand the options available to them.”

An ACCC spokesperson told Green Market the investigation was an industry-wide compliance exercise, so it would not be naming individual traders. It said it does not comment on the specifics of its investigations or potential investigations.

Heat Blamed for Ammonia Tank Explosion, Leak

Ammonia, Featured, Midwest, News

An ammonia tank explosion around 2:30 p.m. Aug. 23 at the Three Rivers FS location in Manchester, Iowa, was caused by excessive heat, according to the Telegraph Herald, citing Manchester City Manager Tim Vick. The explosion caused at least one other tank to tip over and leak, according to local reports. Early reports stated that two tanks tipped over.

While no injuries were initially reported, six people were eventually treated at Manchester’s hospital and one was admitted, according to Radio Iowa citing Delaware County Emergency Management. Nearby residents were asked to shelter in place for about an hour while the threat was being assessed.

Much of Iowa was under an excessive heat warning during the week. Several daily temperature records were set, including 100 degrees in Des Moines on Aug. 23, 101 in Sioux City on Aug. 22, and 98 in Waterloo on Aug. 22.

Founded in 1930, Three Rivers FS is based in Dyersville and has nine locations in northeast Iowa. The cooperative had not responded to inquiries at press time.

No Injuries Reported as Fire Destroys APF Plant in Texas; No Flammable, Explosive Fertilizer On Site

Featured, News, Texas

An American Plant Food Corp. (APF) fertilizer blending facility at Bartlett, Texas, north of Austin, was destroyed by a fire that started on Aug. 20 around 8:30 p.m. The fire lasted well into the night with firefighters opting to let the fire burn out.

APF Technical Director Dr. Larry Unruh told Green Markets the goal was to keep the fire contained so it would not spread to the town or local corn fields in this drought-stricken area. The fire did spark a six-acre grass fire behind the facility, which was contained early on Aug. 21.

APF said there were no injuries to employees or firefighters and confirmed that there were no flammable or explosive fertilizers stored at the facility. Local firefighters said they had visited the site in the past and were prepared. APF said that in a situation like this, employee and community safety are the company’s top priorities.

Initially residents were encouraged to stay indoors as much as possible on Aug. 21, but the Texas Commission on Environmental Quality monitored the air and said it was safe. Local schools were allowed to be in session.

Unruh said the cause of the fire is under investigation and it is too early to assess the monetary damage. Luckily, he said it was the end of the fertilizer season and the inventory level at the plant was only 10-20%. He expects it will take about a month to clean up the site.

He said there will be salvage fertilizer from the site and it will be made available to local farmers at reduced prices. In the meantime, he said APF will make sure local needs are met, providing fertilizer from its other locations at discounted freight. He expects the company will find a place for the location’s three employees.

Founded in 1964, APF has served the greater Bartlett community for almost five decades. The company has ten additional locations in Texas.

Mississippi Phosphates Plant Site Proposed as Dry Bulk Storage, Tank Terminal

Di-Ammonium Phosphate, Featured, Florida, News, Phosphate, Phosphoric Acid, South Central

The US EPA, the US Department of Justice (DOJ), and the Mississippi Department of Environmental Quality (MDEQ) on Aug. 22 announced a proposal to enter into a Bona Fide Prospective Purchaser Agreement with Seven Seas Terminals LLC for the purchase of the former plant portion of the Mississippi Phosphates Corp. (MPC) Superfund Site in Pascagoula, Miss.

Seven Seas, which is based in Gulfport, Fla., and was incorporated in October 2022, plans to purchase and redevelop the former MPC manufacturing plant area at 601 Industrial Road in Pascagoula as a dry bulk storage and tank terminal operation. The demolition and construction work will require several years and is anticipated to create 25-30 jobs when complete.

Under the agreement, which is subject to a 30-day public comment period ending on Sept. 20, 2023, Seven Seas will conduct a Removal Action under EPA oversight that includes demolition of the sulfuric acid plants; demolition and/or reuse of the phosphoric acid plant, diammonium phosphate (DAP) plant, and two bulk storage warehouses; installation of an impermeable cap as a containment control for the area proposed as a tank terminal operation; sampling of soils under demolished structures and slabs; removal, treatment, or containment of contaminated soils outside of the capped area; and payment of EPA’s oversight costs.

Seven Seas will also allow the EPA continuing access to the water treatment plant, laboratory, shops, and other buildings/equipment at the plant to support EPA response actions on other portions of the site. The agreement will provide Seven Seas with legal protections against Superfund liability for legacy contamination at the site.

MPC manufactured DAP fertilizers at its Pascagoula facility from the late 1950s until it filed for bankruptcy in October 2014 (GM Nov. 3, 2014). As a result of former phosphate ore processing operations, including phosphoric and sulfuric acid plants, the soil at the site is contaminated, primarily by heavy metals, radium-226, and low pH.

Groundwater beneath the former plant contains elevated metals concentrations and low pH, generally located in the central portion of the property. The EPA placed the site on the Superfund National Priorities List in January 2018 and is overseeing the ongoing cleanup of the site. 

The federal register notice and instructions for submitting public comments are posted at www.federalregister.gov/documents/2023/08/21/2023-17943/mississippi-phosphates-corp-superfund-site-pascagoula-mississippi-notice-of-proposed-settlement.

Panama Canal Traffic Restricted Due to Low Water Levels

Asia, Europe, Featured, Latin America, News

Low water levels have led local authorities to restrict travel through the Panama Canal, forcing ships to reduce drafts since late May and causing a backup of vessels waiting to transit the waterway, Bloomberg reported.

The canal is one of the world’s most important trade arteries, providing a shortcut between the Atlantic and Pacific oceans. Heat and drought have caused water levels to fall to a seven-year low at Lake Gatun, the largest of two lakes that supply water to the canal. Panama’s rainy season extends from May to December, but the canal region is enduring one of its driest years on record.

Vessels have been waiting almost four days on average, with some reportedly delayed as much as 20 days, when typical travel through the site takes little more than a day, according to Clarkson Research Service, a unit of the world’s largest shipbroker. More than 120 ships were waiting to enter the canal this week, up from 90 normally, and as many as 160 ships were in the queue earlier this month, the Washington Post reported.

The Panama Canal Authority has cut the depth limit for large vessels from 50 feet to 43.5 feet and has reduced the number of booking slots for the biggest ships, Bloomberg reported. The restrictions mean that fewer tons are transiting the canal, which moves more than a half billion tons of cargo annually and serves as a vital route for Latin American commodities, including crops and fertilizer.

“There is very little slack, if anything at all, in terms of transiting more ships than right now,” said Peter Sand, Chief Analyst at Xeneta, which analyzes ocean and air freight markets. This has forced some shippers to seek alternate routes, Sand told Bloomberg, including the use of inland railways to offload goods shipped by container to the US West Coast, and to transfer them across the country.

About 40% of containers shipped from Asia to Europe also pass through the canal, according to Container xChange, a container logistics platform. This means the impact of sharply curtailed traffic through the canal could reach far beyond North America, Container xChange CEO and Co-Founder Christian Roeloffs told Bloomberg.

There isn’t much rerouting of dry-bulk cargoes yet, but that could become more of an issue if the dryness persists beyond September, when US corn and soybean exports pick up after harvest, said Bilal Muftuoglu, Director of Dry-Bulk Research at shipbroker Howe Robinson Partners. Given the congestion at the canal, fewer shipowners are willing to charter for the US Gulf to East Asia route, he said.

The Panama Canal restrictions have also pushed Atlantic freight rates higher for ships hauling refined fuel like gasoline and diesel, as well as liquefied petroleum gas, in part because container ships are being prioritized over other types of vessel when passing through the canal, Bloomberg reported.

With Panama’s rainy season ending in December and a developing and powerful El Niño underway, shippers are already preparing for further restrictions next spring.

Lower Volumes, Margins Pressure Tessenderlo

Earnings, Eastern Cornbelt, News, Sulfur

The Tessenderlo Group’s Agro segment reported a 64.2% drop in adjusted EBITDA for the first half ending June 30, 2023, to €43.5 million from the year-ago €121.6 million. Agro revenues declined 18.8%, to €443.5 million from €546 million.

The company said adjusted EBITDA was down for Crop Vitality, Tessenderlo Kerley International, and Violleau on lower sales volumes, while margins were under pressure following lower selling prices in combination with higher-valued stock. Adjusted EBITDA for NovaSource increased thanks to the contribution of the Lannate® product line acquired in second-half 2022.

The company reported that Violleau’s new organic fertilizer plant in Aisne, France, started up its new production line in July. Construction on new plants in Defiance, Ohio, and Geleen, the Netherlands, remain on schedule.

Defiance will produce liquid and sulfur-based fertilizers Thio-Sul®, KTS®, and K-Row 23®, as well as sulfite chemicals for industrial markets. Defiance is scheduled to start operations by the end of 2024. The Thio-Sul plant in Geleen is expected to be operational by mid-2024.

CFO Stefaan Haspeslagh told analysts that demand for the company’s sulfur-based liquid fertilizers is picking up in the second half.  He added that precision agriculture remains a hot topic and Tessenderlo is supporting trend. He said the company sees potash prices as bottoming out with possible price increases in the second half, though he said there is no problem with availability.

Company-wide adjusted EBITDA was down 17.1%, to €205.1 million from €247.6 million, while revenues were up 21.4%, to €1.63 billion from €1.34 billion. Bio-valorization adjusted EBITDA was down 30.6%, with Industrial Solutions up 9.6% and T-Power up 4.2%. The Picanol Group, which became a business unit in January 2023 in the Machine & Technologies segment, contributed €45.2 million.

Revenue for Bio-valorization and Industrial Solutions remained stable, while T-Power was up 5.8% and Picanol added €367.7 million.

BHP Posts Annual Results, Updates Jansen Progress

Earnings, News, Potash, Saskatchewan

Stage 1 of BHP Group Ltd.’s Jansen potash mine project in Saskatchewan is progressing “really well,” with first production now forecast from late calendar 2026, the Melbourne-based mining giant said as part of its financial results posted for the full year ended June 30, 2023, released Aug. 22.

Jansen Stage 1, which is under development 140 kilometers east of Saskatoon, Sask., is currently 26% complete (GM July 28, p. 28). Once fully operational, the facility will have the capacity to produce 4.35 million mt/y of potassium chloride.

In addition, BHP said it expects to have the option to make a final investment decision on Jansen Stage 2 in its current financial year (July 1, 2023-June 30, 2024), following the completion of the ongoing feasibility study for Stage 2.

BHP said all major permits are in place, and it has the necessary port capacity should it decide to proceed. Stage 2 would add an additional 4 million mt/y capacity. First production under an accelerated Jansen Stage 2 scenario would still be in 2029, BHP CEO Mike Henry told analysts at a company earnings call on Aug. 22.

“The timeframe we are thinking of here is 2029 to early 2030. That is going to underpin the returns coming out of a faster Jansen phase 2,” he said, adding that this would be “around the time Jansen Stage 1 will be finishing its ramp-up.”

BHP in February (GM Feb. 24, p. 1) announced that it had accelerated the Stage 2 feasibility study a year earlier than previously expected (GM Sept. 9, 2022).

Responding to an analyst’s question about how the downward correction in potash spot prices might impact BHP’s decision to bring forward Jansen Stage 2, Henry said it would only have a bearing if the drivers of that potash correction are something BHP considers enduring, or if there was a change in the medium- to long-term market outlook.

“What we are really looking at to trigger Jansen Stage 2 is strong underlying fundamental economics around capex and projected returns on that timeframe,” he said.

The second aspect, he said, is continued execution of Jansen Stage 1 in line with or ahead of plan, and “that is what we are seeing.” Henry said the third aspect is the market window or market opportunities opening up.

“Given what has happened in Russia and Ukraine, the views around what that means for medium- to long-term growth out of Russia and Belarus means that market opportunity may indeed be stronger or opening up earlier than was originally anticipated,” he said. “There is no decision yet. The study continues, but we do want to position the company with the option to take an earlier sanction decision in the coming year.”

Despite the elevated steel, fabricated concrete, and fabricated steel structure inflation seen in North America, BHP said it has not seen any cost escalation for the Jansen Stage 1 project above the $5.7 billion capital expenditure previously budgeted.

Henry said the group has a lot of the contracts already in place for Jansen Stage 1, with $3.1 billion in contracts awarded to date. The excavation and lining of the two 1,000-meter shafts were completed in late 2022 (GM Nov. 4, 2022).

BHP on Aug. 22 reported its lowest annual profit in three years, with the group citing lower commodity prices and high inflation, partially offset by strong operational performance. Underlying profits for the financial year ended June 30, 2023, were $13.4 billion, down 37% from the $21.3 billion recorded one year earlier.

Annual revenues were down 17%, to US$53.8 billion from $65.1 billion in FY2022. BHP cut its dividend by almost half, to $1.70 from $3.25 the year before.

Heringer Posts 2Q Loss Despite Volume Surge

Earnings, News

Fertilizantes Heringer reported a second-quarter drop in earnings and revenue while volumes surged due to significantly lower fertilizer prices. However, the company said that from July on there has been a slight improvement in prices.

Heringer had a second-quarter loss of R$135.3 million (approximately $27.7 million), down 43% from the year-ago loss of R$94.7 million. EBITDA was a loss of R$137.5 million compared to the year-ago positive R$24.1 million. Revenue was R$877.3 million, down 18% from R$1.08 billion.

Second-quarter volumes moved up 49.4% to 361,648 mt from the year-ago 242,124 mt.
Conventional fertilizer volumes were up 89.4% to 231,000 mt from the year-ago 122,000 mt, while specialty fertilizer volumes were up only 8.8% to 131,000 mt from 120,000 mt.

Heringer posted a six-month net loss of R$266.9 million, off from the year-ago net earnings of R$33.7 million. EBITDA was a R$277 million loss, down from a R$109.3 million gain. Revenue was off just 2.1% to R$2.26 billion from the year-ago R$2.31 billion.

Six-month volumes were up 52.9% to 831,040 mt from 543,363 mt. Conventional tons were up 94.9% to 528,000 mt from the year-ago 271,000 mt, while specialty were up 11.4% to 303,000 mt from 272,000 mt.

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