All Posts from April 26, 2024

Competition Bureau Sees “Substantial Anti-Competitive Effects” in Bunge/Viterra Deal

Canada, Featured

Canada’s Competition Bureau announced on April 23 that it has concluded that the proposed $8.2 billion acquisition of Viterra Ltd. by Bunge Ltd. (GM June 16, 2023) is likely to result in “substantial anti-competitive effects” and a “significant loss of rivalry” between Viterra and Bunge in agricultural markets in Canada.

The Bureau’s concerns are outlined in a report submitted to the Minister of Transport. The report will inform Transport Canada’s public interest review of the proposed transaction as it relates to national transportation, which must be completed by June 2, 2024. The final decision regarding the proposed transaction will be made by the Governor in Council based on advice from the Minister of Transport.

The Bureau determined that the transaction is likely to harm competition in markets for grain purchasing in Western Canada, as well as for the sale of canola oil in Eastern Canada.

The Bureau also found that Bunge could materially influence the economic behavior of G3 Global Holdings, a major competitor to Viterra. As a 25% minority shareholder of G3, Bunge has access to G3’s confidential competitively sensitive information. If the deal is allowed to go through, Bunge will have an incentive to “influence G3’s economic behavior to the detriment of competition,” the agency said in its report.

Combining Bunge and Viterra would create a trader big enough to take on industry elites Minneapolis-based Cargill Inc. and Chicago’s Archer-Daniels-Midland Co. The deal is the culmination of Bunge CEO Greg Heckman’s transformation of the once-troubled St. Louis-based crop trader into a cash-rich oilseeds champion.

Bunge said in an April 23 statement that the “localized concerns” are “misplaced” and that the company “looks forward to working with Transport Canada and the Bureau to provide further information addressing these points.” The agribusiness company said it still expects the transaction to close in the middle of this year.

Anglo Rejects BHP Takeover Bid; Deal Could Boost Potash Competition

Featured, London, Potash, South Africa

Anglo American Plc on April 26 rejected a $39 billion takeover proposal from mining giant BHP Group, saying it significantly undervalues the company, Bloomberg reported.

Under the proposed all-share deal, Anglo would first spin off controlling stakes in South African platinum and iron ore companies to its shareholders before being acquired by BHP. The total per-share value of the nonbinding proposal was about £25.08, BHP reported on April 25.

Anglo’s rejection was widely expected. Analysts and some Anglo investors had seen BHP’s proposal as well below the sort of price that would bring the 107-year-old miner to the table. BHP will now have to improve its offer if it wants to start talks.

“The BHP proposal is opportunistic and fails to value Anglo American’s prospects,” Anglo Chairman Stuart Chambers said in a statement.

Just two years ago, Anglo was trading at almost £43 a share, but it has been battered by major operational and market setbacks. Anglo shares were steady in London after jumping 16% on April 25.

A tie-up with Anglo would give BHP roughly 10% of global copper mine supply ahead of an expected shortage that many market watchers predict will send prices soaring. If successful, the transaction would mark a return to large-scale dealmaking for BHP, while potentially flushing out other suitors aiming to boost their exposure to the metal that’s closely linked to the global energy transition.

Anglo has long been viewed as a potential target among the largest miners, particularly because it owns attractive South American copper operations at a time when most of the industry is eager to add reserves and production. Still, suitors have been put off by Anglo’s complicated structure and mix of other commodities, from platinum to diamonds, and especially its deep exposure to South Africa.

BHP had sought to navigate that challenge by insisting that Anglo separate its two South African units as a condition of a takeover. That suggestion was also dismissed by Anglo on April 26, with the company saying it was unappealing to its investors.

“The proposed structure is also highly unattractive, creating substantial uncertainty and execution risk borne almost entirely by Anglo American, its shareholders, and its other stakeholders,” Chambers said.

Within 24 hours of BHP’s pursuit coming to light, South Africa – as many have always expected in a deal involving Anglo – has started to move to center stage. South Africa’s state-owned pension fund is Anglo’s biggest shareholder and yesterday the country’s mines minster signaled his opposition to the deal.

Both BHP and Anglo have spent billions as they each move into the fertilizer business. BHP reported on April 18 that its Jansen Stage 1 potash project in Saskatchewan remains ahead of its initial schedule and is now 44% complete (GM April 19, 2024). The first production target is the end of calendar year 2026. Capital expenditures are expected to be $5.72 billion with capacity of 4.15 million mt/y. Stage 2 is expected up in fiscal year 2029 and would add another 4.36 million mt/y and $4.86 billion in capital expenditures.  

In the meantime, Anglo has been working hard to identify “the right partner, structure, and opportunity,” to help share the cost of its giant Woodsmith polyhalite project in North Yorkshire in northeast England (GM March 1, 2024). Operations are expected to initially be 5 million mt/y, with the company seeing a clear pathway to 13 million mt/y. First production is expected in 2027.

“If BHP’s bid for Anglo American results in a deal, it could boost competition in the potash market later this decade by creating a diversified player that can challenge the existing oligopoly,” said Alexis Maxwell, Green Markets Director of Research.

“Acquiring Anglo’s Woodsmith mine – now awaiting Board approval – could add 5 million mt of a specialty potash product to BHP’s book,” Maxwell added. “Additional capital spending on the unproven specialty potash blend, Poly4, remains unclear after a $1.7 billion writedown on the project in 4Q (GM Feb. 24, 2023), but it could be around $9 billion.”

OCP Considers Bond Sales, IPO of Chemicals Unit

Ammonia, Carbon, Featured, Green Ammonia, Morocco

Morocco’s state-owned phosphates giant, OCP Group SA, is teeing up bond sales and could potentially list its chemicals business as part of a plan to raise billions of dollars for decarbonization efforts, according to a Bloomberg report.

OCP aims to raise between $5-$7 billion through 2027 via bond sales as well as an initial public offering of its chemicals unit, a person with knowledge of the matter said. The firm could raise several hundred millions by listing its OCP Nutricrops unit, the person said, asking not to be identified discussing confidential information.

No final decisions have been made on valuation or timing. OCP didn’t respond to requests for comments.

The government owns more than 90% of the firm, which controls the world’s biggest known phosphate deposits and is the state’s most-prized asset. It is seeking money to finance 130 billion dirhams ($12.3 billion) in investments over the next three years, primarily in projects that will aid a transition to carbon neutrality and end its status as the world’s top ammonia importer.

The firm aims to produce 1 million mt of green ammonia by 2028, rising to 3 million mt by 2032. It kicked off its funding plans this week, mandating BNP Paribas SA, Citigroup Inc., and JPMorgan Chase & Co. to sell a dollar-denominated private bond.

Morocco has announced plans to sell down stakes in state entities as it navigates the economic shock waves from Russia’s war in Ukraine.

Casablanca-based OCP has been evaluating a listing of its Nutricrops business since its inception in 2022 (GM April 5, 2024; July 15, 2022). Those plans were accelerated after the unit obtained 30 billion dirhams in fertilizer production and marketing assets under a carve-out earlier this year and Morocco launched a national green hydrogen roadmap.

OCP has said the carve-out was essential to securing resources the group needs to achieve its ambitions. The assets transferred to Nutricrops include three fertilizer plants that are wholly owned by OCP, as well as its interests in two others it co-owns with Koch Ag, Energy Solutions, and local institutional investors.

Valudor Products Announces Acquisition of LidoChem

California, Canada, Featured, Latin America, U.S.

Valudor Products LLC, a California-based distributor of chemical raw materials in the agricultural and industrial sectors in the US, Canada, and Latin America, announced on April 22 that it has acquired the assets of LidoChem Inc., Hazlet, N.J., effective immediately.

LidoChem markets chemical raw materials, and through its Performance Nutrition® division, develops and distributes specialty fertilizers. The company sells bio pesticides, patented chelated micronutrient solutions, specialty performance fertilizers, lawn fertilizers, turf fertilizers, soil amendments, and surfactants.

Valudor said the newly created entity will operate under the Performance Nutrition® brand. The transaction was led by Monroe Capital LLC. The terms were not disclosed.

“This acquisition will bring positive synergies to all customers which will enjoy a more robust offer from a larger distribution network,” said Alberto Machado, CEO of Valudor. “It is part of our strategic plan and will accelerate the growth of Valudor Products by increasing our leadership position in the distribution of raw materials and brings an incredible opportunity to penetrate the attractive specialty fertilizers market.”

Headquartered in Encinitas, Calif., Valudor was founded in 2004 and has 22 employees. The company has a portfolio of more than 80 different chemicals sold from over 20 distribution centers across the US to customers in the fertilizer, animal feed, and industrial sectors.

 “Under Valudor’s stewardship, I am confident that the LidoChem team will have a tremendous opportunity for continued success and growth,” said Lisa Pucillo, President of LidoChem. “When we founded LidoChem over 40 years ago, my co-founder, the late Don Pucillo, and I agreed that our employees were the company’s most valuable assets.”

Yara 1Q Income Falls, Misses Estimates; Increased Deliveries Offset by Lower Prices

Ammonia, Asia, Brazil, China, DAP/MAP, Earnings, Europe, Featured, India, Latin America, NPK, UAN, Urea

Yara International ASA reported first-quarter net income of $16 million on revenue of $3.31 billion, down from the year-ago $105 million and $4.16 billion, respectively. Yara did not come close to analyst projections (Bloomberg Consensus) of $162.5 million in net income and $3.76 billion in revenue.

First-quarter EBITDA was $435 million, down from the year-ago $489 million. Analysts had projected $508 million.

Yara shares dropped 6.4% after the news, the lowest intraday decline since May 2020, according to Bloomberg. Morgan Stanley said the miss, coupled with soft free cash flow and net working capital, implies consensus downgrades in 2024. Yara, however, said its financial situation is robust, with a clear capital allocation policy and overall objective to remain a mid-investment grade credit rating.

“This quarter’s results are down from same quarter last year as increased deliveries are offset by lower prices,” said Svein Tore Holsether, President and CEO. “Meanwhile, I am pleased to see that our effort to decarbonize is yielding results. This is crucial to future-proof our business and be able to meet growing demand for low-carbon solutions.”

Total deliveries were up 12%, to 7.27 million mt from the year-ago 6.55 million mt. The uptick was mainly driven by an increases in Europe, which were up 37%, and in Asia, partly offset by a decrease in Latin America, particularly Brazil.

Yara said that despite strong urea supply in 2023, prices are generally demand-driven with positive production margins for even swing producers. With farmer incentives at normal levels and 10-year consumption growth trending at 1.9% per year, it said demand fundamentals are supportive for upcoming seasons.

Yara said the peak of new urea capacity additions is over and supply is currently strong, primarily due to increased production in India and China. It added that industry consultant projections show significantly lower supply growth from 2024 onwards. Combined with strong demand fundamentals, it said this indicates a tightening supply-demand balance longer term.

“Total nitrogen imports to Europe are declining as European production is ramping up,” Holsether added. “However, Russian urea imports to Europe reached an all-time high last season and currently account for almost one third of total urea imports to the EU. While raw material sanctions and price pressure is taking a double toll on European industry, Russia is gaining market influence. That not only endangers European industry and the green transition, but it also makes European food production more vulnerable.”

Yara Production and Deliveries 000 mt 1Q-241Q-23
Production
Ammonia 1,741 1,380
Finished Fertilizers and Industrial 4,6114,043
Yara Deliveries
Ammonia Trade     433   401
Fertilizer   5,2534,643
Industrial 1,5821,500
Total Deliveries 7,268 6,554
Crop Nutrition Deliveries
Urea 1,4301,048
Nitrate1,103966
NPK 1,7211,757
CN 370 324
UAN 261185
DAP/MAP/SSP8666
MOP/SOP  8270
Other Products199  235
Total Crop Nutrition Deliveries5,2534,653
Europe Deliveries 2,2911,670
Americas Deliveries 1,8152,007
North America 746 726
Brazil 732 926
Latin America excluding Brazil     338356
Africa & Asia Deliveries  1,146 976
Asia 996718
Africa150 258
Industrial Deliveries   1,582 1,500

KBR to Provide Green Tech to Fortescue Project

Ammonia, Australia, Clean Ammonia, Green Ammonia, Low-Carbon, Norway

KBR announced that it will provide technology license, engineering design, and Front-End Engineering Design (FEED) support services for Fortescue’s Holmaneset green ammonia plan, which is slated to be built off the coast of Norway.

Led by Australia-based Fortescue, the Holmaneset green energy project is expected to produce 675 mt/d of green ammonia using electrolyzers that will use renewable energy as a feedstock.  The ammonia produced is expected to be shipped to domestic and European markets. Spain’s Técnicas Reunidas is also involved in the FEED study (GM Jan. 26, p. 28).

The European Union chose to significantly invest in the project in December 2023, awarding it a grant of €203.8 million as part of its Innovation Fund.

H2Carrier Pursues Green Ammonia in Norway

Clean Ammonia, Green Hydrogen, Low-Carbon, Norway

Norwegian developer H2Carrier has applied for permission to build two offshore wind farms to produce green hydrogen and ammonia. The project is set to be located on the northern coast of the Finnmark region and is expected to generate 1.55GW of wind power to be used in a floating vessel to produce green hydrogen and ammonia.

The total hydrogen output of the project is expected to equal 109,000 mt/y, with ammonia production totaling 610,000 mt/y. The project will not require leasing or purchasing land or storage tanks, and will instead use a floating vessel, the P2XFloater™, which contains its own desalination unit to produce the water that will be split in its electrolyzers to form hydrogen.

H2Carrier had partnered with Statkraft on studying wind locations for the P2XFloater (GM Sept. 9, 2022). H2Carrier received an Approval in Principal from DNV, the Norwegian registrar and classification society, for using the vessel for near-shore production.

Nitricity Starts Trial of Climate-Smart Fertilizer

California, Clean Ammonia, Low-Carbon, Nitrogen

California-based Nitricity launched a field test of its first climate-smart nitrogen fertilizer on April 19 in Madera County, California. The product is a partnership between Nitricity, Olam Food Ingredients, Elemental Excelerator, and the Madera/Chowchilla Resource Conservation District.

The nitrogen fertilizer is made using air, water, and renewable electricity. The liquid calcium nitrate solution has the potential to release significantly fewer GHG emissions than traditional fertilizers, Nitricity said, reducing the carbon footprint of the industry while also being cost-effective for growers.

The announcement comes after Chipotle Mexican Grill in December announced that it would be investing in the agtech startup (GM Dec. 15, 2023).

Uniper, SKW Piesteritz Partner on Clean Ammonia

Ammonia, Clean Ammonia, Europe, Germany, Hydrogen, Low-Carbon

Uniper and SKW Piesteritz GmbH signed a Memorandum of Understanding (MoU) on April 19 to collaborate on the supply, production, and logistics of ammonia and hydrogen derivatives. Under the agreement, SKW will supply Uniper with sustainably produced ammonia, followed by blue and green ammonia in the medium- to long-term.

The two companies will also collaborate on imports. Uniper will allow SKW to import green ammonia through its terminal in Wilhelmshaven. SKW Piesteritz will mirror the agreement by allowing Uniper use of its capacities at other European ports.

The agreement also covers the necessary distribution logistics, the expansion of production capacities, and the conversion of ammonia into hydrogen.

“The collaboration with Uniper allows us to further expand our commitment to environmentally friendly solutions that meet the diverse requirements of German industry and society,” said Petr Cingr, CEO of SKW. “At a time when the world is grappling with the challenges of sustainable industrial growth, this partnership is an essential building block.”

“With the state’s hydrogen strategy, we are opening up prospects that are beneficial for our companies,” added Dr. Reiner Haseloff, the State Premier of Saxony-Anhalt. “This agreement between Uniper and SKW Piesteritz is an example of how this can be accomplished.”

Headquartered in Düsseldorf, Uniper is a global energy company operating in more than 40 countries. With approximately 7,000 employees, the company plays a significant role in ensuring supply security across Europe, focusing primarily on its key markets in Germany, the United Kingdom, Sweden, and the Netherlands.

SKW is the largest producer of ammonia and urea in Germany, with a product range including a wide variety of specialized agrochemical and industrial chemical products. It has more than 850 employees in both Lutherstadt Wittenberg and Cunnersdorf, near Leipzig.

European LNG Operator Details NH3, CO2 Plans

Ammonia, Carbon, Clean Ammonia, Europe, Germany, Low-Carbon, Natural Gas

Enagas SA, Europe’s largest LNG terminals operator, is planning to enter the business of processing ammonia and CO2 as it seeks to gradually diversify away from natural gas distribution and into markets that will gain importance with the energy transition, Bloomberg reported.

“We intend to include in our strategic update, which will be presented within this year, our participation in the CO2 and ammonia businesses from the infrastructure point of view,” Enagas CEO Arturo Gonzalo said in an interview.

The move is part of the Madrid company’s effort to capitalize on its large gas infrastructure to create new sources of income linked to clean energy and carbon-emissions reduction, as profits from its regulated assets ebb.

Shifting from gas to ammonia is already an option included in the long-term offtake agreement for Germany’s first land-based, LNG import terminal, which Enagas is going to operate.

“We think there’s going to be an infrastructure side to these businesses. You’re going to need hardware, loading facilities, tanks,” Gonzalo said. “All of that can be provided by Enagas in the most competitive way.”

Liquid ammonia is denser than LNG, so readapting gas tanks would reduce their capacity to about 70%, but an LNG gas plant is still the “best place” to liquefy it, as well as to liquefy CO2, he said. “We have a very strong incumbent position also for these new molecules, so what we are working on is how to make our LNG plants evolve into multi-molecule facilities,” he said.

Enagas may also use smaller-volume vessels ranging from 10,000-20,000 cubic meters for the new operations, comparable to the 12,000-cubic-meter LNG bunkering vessel it operates in the southern Spanish port of Algeciras, according to Gonzalo.

The natural gas business is still the company’s priority, but as long as it has spare capacity or is able to build new capacity in its existing plants, Enagas is going to be in a position to enter these new businesses, Gonzalo said. “If there’s an attractive return in CO2 and ammonia that requires new capacity being built, then of course that we’ll consider that,” he added.

Enagas’s stake in Tallgrass Energy Partners LP is helping the Madrid-based firm build expertise in the CO2 business, as the US gas transportation company’s Trailblazer unit overhauls its pipeline system to transport CO2 for permanent sequestration, Gonzalo said.

The company has also slashed its annual dividend by 43% to €1 ($1.06) per share in order to fund its investment plan for hydrogen assets of about €3.2 billion, so “it’s not in a hurry” to sell its stake of about 30% in Tallgrass, he said. Gonzalo added that Enagas expects its regulated asset base, or RAB, to grow by about 10% annually through 2030.

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