All Posts from September 29, 2023

India Spat Spills into Boardroom of Canadian Fertilizer Company

Ammonia, Canada, Featured, India, News, Nitrogen, Potash

For even some of the smallest Canadian companies with ties to India, day-to-day business has been complicated by a worsening diplomatic feud between the two countries (GM Sept. 22, p. 1), according to a Bloomberg report.

Fertilizer junior Karnalyte Resources Inc. abruptly canceled plans to meet with its Indian Board Members as the governments of Canada and India trade barbs over the killing of a Sikh leader on Canadian soil. The Saskatoon-based company, which has floated plans for both a potash mine and nitrogen plant, counts two Indian executives and one Indian banker among its Board members.

“We were preparing to welcome our Board colleagues from India for a visit to Canada this week, but they cancelled their trip due to the tensions that arose and quickly escalated last week,” Karnalyte’s Interim CEO Danielle Favreau said in an email. “We hope to be able to reschedule their visit soon.”

Gujarat State Fertilizers & Chemicals Ltd., one of India’s largest fertilizer and industrial chemicals manufacturing companies, is also one of Karnalyte’s largest shareholders. Should Karnalyte’s proposed potash mine start producing, most of its output will go to the state-owned Indian firm.

Karnalyte’s Chairman is Vishvesh Nanavaty, who is also Gujarat State Fertilizer’s CFO, while Director Dilip Pathakjee works as a Senior Vice President for the Indian firm, according to the Canadian company’s website. Another Karnalyte Board member, D.C. Anjaria, is from India and has international banking experience.

Karnalyte’s long-proposedWynyard Potash Project in Saskatchewan, which dates to at least 2011 (GM Feb. 14, 2011), would have Phase 1 production of 625,000 mt/y of granular potash, with two subsequent phases taking total production up to 2.125 million mt/y (GM Feb. 4, 2022). Karnalyte has also explored the development of a small-scale nitrogen project that would produce 700 mt/d of ammonia and 1,200 mt/d of urea, which would target independent fertilizer wholesalers in central Saskatchewan.

The diplomatic standoff threatens to further spill over into Canada’s and India’s economies. A proposed early-stage trade deal is in jeopardy, potentially hurting India’s efforts to woo the West and serve as a supply-chain alternative to China. Indian students may start avoiding Canada for higher education after New Delhi issued a safety advisory for “anti-India” activities. This could affect a sector that brings in about C$22 billion ($16.3 billion) annually in revenues for Canada. 

Both nations have already expelled senior diplomats from the other side in a tit-for-tat escalation. Canada plans to reduce embassy staff as security threats rise in the South Asian country, while New Delhi stopped issuing visas to Canadian citizens.

The Sikh community is but one part of vast and complex human and commercial ties between the two countries, encompassing hundreds of thousands of Indian students, a few billion dollars in bilateral trade, and significant Canadian investments in Indian businesses.

Canadian entities over the past decade have invested tens of billions of dollars in Indian public equities, real estate, and most recently green energy. Any slowdown in that momentum will come at a time when global foreign direct investment (FDI) flows are running low, especially in India.

Despite these concerns and the issue at Karnalyte, the conflict did not stop two new Canada-India business deals from happening this past week, according to Bloomberg.

Canadian private equity firm Brookfield Asset Management signed its second partnership with Indian renewable energy company Axis Energy Ventures to develop projects in the country for as much as $845 million. The two will seek to provide clean energy solutions to a range of clients, including government entities, corporations, and green hydrogen producers, the companies said in a joint Sept. 28 statement. Axis will put its existing projects in the new venture, while Brookfield will provide the investment.

The two are counting on India’s rapidly growing market for clean energy, as the fossil fuels-dependent economy seeks to meet its climate targets. The government’s goal to expand green power capacity nearly three-fold, to 500 gigawatts by the end of this decade, has attracted investments from a range of overseas investors, including Brookfield, although the flow of capital must increase substantially for the nation’s goals to materialize.      

Brookfield said it already has more than 16 gigawatts of renewable projects in operation or in the works in India. It had collaborated with Hyderabad, India-based Axis previously to develop 1.8 gigawatts of solar and wind assets. 

In addition, India’s Uno Minda Ltd. reported on Sept. 28 that it raised its stake in joint venture Minda Westport Technologies, from 50% to 76%. The jv with Vancouver-based Westport Fuel Systems will make hydrogen components. West Fuel makes fuel systems and components that allow engines to run on gaseous forms of fuel such as CNG, LNG, and LPG, rather than liquid petroleum.

Canada to Scrutinize Bunge-Viterra Deal Over Port Concerns

Canada, Featured, News

Bunge Ltd.’s proposal to acquire Glencore-backed Viterra (GM June 16, p. 1; May 26, p. 30) will undergo a public review in Canada, including with members of the port and marine industry, to ensure fair transportation pricing and access.   

The $8.2 billion deal to create an agricultural trading giant is of “significant national interest in Canada’s transportation sector and the broader supply chain,” as both companies hold ownership interests in port terminals throughout the country, said Pablo Rodriguez, Canada’s Minister of Transport, in a Sept. 26 statement.

The transaction will be scrutinized under the mergers and acquisitions provisions of the Canada Transportation Act and has a completion deadline of June 2. “Healthy competition in the transportation sector is necessary to ensure fair pricing and access for users, especially for Canadian farmers,” said Rodriguez.

Transport Canada has up to 250 days, or until June 2, 2024, to complete the public interest assessment. The two companies had anticipated the deal would close in mid-2024 subject to regulatory approvals and approval by Bunge shareholders. Bunge shares were down 1.56% in New York at close on Sept. 26.

Bunge’s global holdings include 56 crush plants with a total crushing capacity of 57 million mt; 26 port terminals; 47 oil refineries; and 17 grain mills. Viterra markets 134 million mt of commodities from more than 270 storage facilities, with global holdings that include 15 crush plants with a total crushing capacity of 18 million mt; 29 port terminals; seven biodiesel plants; eight grain mills; and two sugar mills. 

Brazil Potash Says Mura Indigenous People Support Autazes Potash Mine; Prosecutor Disagrees

Brazil, Canada, Featured, News, Potash

Canada-based Brazil Potash, whose subsidiary Potassio do Brasil is developing the Autazes Potash Project in Amazonas State in Brazil, said on Sept. 26 that the Mura Indigenous people have voted to support the construction of the project. The company said this was a major milestone and the vote came after the Mura completed full, prior, and informed consultations.

Advancement of the $2.5 billion, 2.2 million mt/y project has been delayed to gain the approval of the Mura (GM Sept. 1, p. 27). Brazil Potash is a subsidiary of Canadian investment firm Forbes & Manhattan.

“Given the project’s location in Amazonas State on land deforested by prior owners, it is particularly important this project is developed on a sustainable basis by ensuring key stakeholders’ voices, such as the Mura, are heard and respected,” said Adriano Espeschit, Brazil Potash President.

“It is also important to note this project is of global importance as it will contribute meaningfully towards achieving global food security by ensuring farmers in Brazil, who export the highest net amount of agricultural goods globally, will have a secure domestic source of potash fertilizer,” he added.

“The Autazes Potash Project has received unanimous support from the leaders of the Mura People in Autazes,” said Jose Claudio dos Santos Pereira, Coordinator of the Mura Indigenous Council (CIM).

“For us, this is of great importance as it symbolizes the future and economic improvement of Autazes and the state of Amazonas,” he continued. “However, it’s crucial to emphasize that the Mura people understand that we are cooperating with federal justice, and we have no intention of opposing [the project]. We recognize that Institute of Environmental Protection of Amazonas (IPAAM) is the licensing authority and that they must carry on the process.”

Brazil Potash said it still needs the National Foundation of Indigenous Peoples (FUNAI) to complete their review of the company’s Indigenous Consultation Study (ECI), which is one of the last items needed prior to issuance of the Installation License required to start project construction. FUNAI is the Brazilian government’s indigenous people’s agency.

However, federal prosecutors based in Manaus maintain that the vote was not unanimous and that Mura community leaders were misled into signing minutes the company construed as an approval of the mine, according to a Reuters report. Prosecutors also said an August lower court ruling is in effect that suspended the mine’s license, but this is disputed by Brazil Potash, which cited an earlier April ruling by a superior court approving a preliminary license as granted by IPAAM (GM April 14, p. 27).

“You have a few people who decided not to support the project, but they are by far the minority,” Brazil Potash CEO Matt Simpson was quoted as saying in an interview with the news service.

The company said its project is not located on indigenous land, but it is within six miles of two indigenous reserves. Following International Labor 169 protocols, the Mura decided which tribes would be consulted, the consultation format, and vote support threshold. The company said the Mura consulted with 36 tribes ranging from those located close to the project to some over 45 miles away. More than 200 Mura participated in the vote, and the company said more than 60% approved the mine.

Brazil Potash said benefits to the Mura include direct employment, funding, and support to start new businesses that will contribute to the project and local communities, and the implementation of several initiatives to improve general well-being as determined by the Mura’s well-being program.

Romania’s Azomureş to Resume Fertilizer Production in October

Ammonia, Europe, Featured, NPK

Romania’s biggest fertilizer producer, Azomureş SA, said it will resume the production of fertilizers at 50% of capacity starting in October.

The producer on Sept. 25 reported that it recently concluded contracts for the purchase of natural gas, which will allow for the restart of one of its two ammonia units and the resumption of fertilizer production at 50% of total capacity at its Târgu Mureș production site.

Azomureş said its intention is to keep producing ammonia, finished product NPK, ammonium nitrate, and CAN as long as conditions permit. The company cautioned, however, that the volatility of gas and fertilizer markets is still at historic levels so the future is uncertain.

“The purchase of natural gas was made despite the continuous challenges we see in the structure of local energy markets, as well as the additional charges that have just been announced, which will certainly increase our costs,” said Azomureş CEO Josh Zacharias.

Zacharias said the company believes ensuring fertilizer supplies for the next agricultural season (2023-2024) is “simply too important to be ignored” for the Romanian agricultural sector, “so it was time to act,” he said.

Azomureş has two ammonia units, Ammonia III and Ammonia IV, and Ammonia III will be restarted. The company’s total production capacity is 1.6 million mt/y, with 80-85% of output typically sold to the Romanian agricultural market.

Azomureş partially resumed production in late May/early June using imported ammonia (GM June 2, p. 27), but it is unclear how long production continued before it was halted. Ammonia production was suspended the previous summer due to soaring natural gas prices but Azomureş continued to produce fertilizers until the ammonia stock was depleted (GM June 24, 2022).

The Romanian producer’s parent company, Swiss Group Ameropa AG, in July (GM July 28, p. 28) completed the full refinancing of its main Revolving Credit Facility (RCF) in Romania for the amount of €542 million (approximately $600 million at then-current exchange rates). Ameropa said at the time the funds would be used to support the ongoing working capital needs of Ameropa-owned fertilizer companies in Romania, including Azomureş.

Orlen CEO Says Anwil Nitrogen Plant Ready by Spring

Ammonium Nitrate, Ammonium Sulfate, CAN-17, News, News Briefs, Nitrogen, Poland

Polish energy group Orlen SA expects fertilizer subsidiary Anwil SA to have larger volumes of nitrogen fertilizers available for the spring 2024 fertilizer season following the completion of its new nitrogen fertilizer plant in Włocławek in Central Poland, according to a Sept. 27 press release on Anwil’s website.  

Daniel Obajtek, Orlen CEO and President of the Management Board, said the new facility is at the “final stage of building,” and will limit the reliance on fertilizer imports and strengthen Poland’s food security. The plant is being constructed adjacent to Anwil’s two existing fertilizer production facilities, and was 97% complete in June (GM June 23, p. 30).

When fully operational, the new plant will increase Anwil’s fertilizer production capacity by roughly 50%, to 1,461,000 mt/y, adding four additional products to its portfolio, including ammonium nitrate (AN), ammonium sulfate nitrate, AN with sulfur, and CAN with magnesium.

Obajtek also reiterated Orlen’s interest in acquiring Grupa Azoty’s Zakłady Azotowe Puławy subsidiary and said an economic analysis of the potential acquisition is ongoing, according to a Polish News Agency report. The analysis is expected to be completed by the end of this year.

Orlen and Azoty signed a cooperation and non-disclosure agreement in early June for the potential acquisition of the business unit (GM June 9, p. 1). Puławy is Azoty’s most profitable subsidiary, and its production includes ammonium nitrate and urea, as well as caprolactam and melamine.

Obajtek said the consolidation of Poland’s fertilizer producers is necessary, and he believes it will result in numerous synergies and “pay off in stabilization of prices.”

Low Prices, Delayed Purchases Impact OCP’s 2Q

Earnings, Phosphate Rock, Phosphoric Acid

Morocco’s OCP Group SA on Sept. 27 reported an 82% slump in EBITDA for the second quarter ending June 30, 2023, to MAD2.99 billion ($297 million), down from last year’s MAD16.48 billion ($1.67 billion).

Revenue was down 37% year-over-year, to MAD19.28 billion ($1.92 billion) from MAD30.69 billion ($3.09 billion). Revenue was in line with the group’s preliminary results released at the end of August (GM Sept. 1, p. 25).

Six-month EBITDA declined 73%, to MAD7.67 billion ($752 million) from the year-ago MAD28.08 billion ($2.89 billion), while six-month revenue fell by 33%, to MAD37.56 billion ($3.70 billion) from MAD56.02 billion ($5.76 billion).

OCP Group Chairman and CEO Mostafa Terrab cited several factors for the downturn, including a significant decrease in prices across the group’s product portfolio following the exceptional conditions of 2022. Terrab also said delayed purchases impacted sales, particularly for phosphate rock and phosphoric acid.

OCP’s fertilizer revenues for the first half of the year were 27% lower in local currency compared with the same prior-year period. The group said lower fertilizer prices were partially offset by increased export volumes, sustained by improved global demand in contrast to the first half of 2022.

Six-month fertilizer sales were 4% lower year-over-year, at 4.3 million mt from the year-ago 4.5 million mt. Six-month revenues for the group’s phosphate rock segment declined 38%, while phosphoric acid revenues fell 61% year-over-year when measured in local currency.

Regarding the third quarter to date, Terrab said improved pricing amid stronger demand has resulted in a sequential pick-up in the group’s performance compared to the second quarter.

“In several importing regions the low stock-to-use ratios, reduced fertilizer application due to the exceptionally high prices in 2022, together with improved affordability for farmers indicates a sustained uptick in demand as we progress into the fourth quarter, building upon the recovery experienced in the third quarter,” he said.

OCP suffered no damage to any of its facilities or mining operations from the earthquake that hit the mountainous Al Haouz province of Morocco on Sept. 8, killing approximately 3,000 people and injuring at least 5,530 more (GM Sept. 15, p. 1). OCP also suffered virtually no disruption to production, and all personnel at the group’s facilities were reported safe.

Revenue by Product (US$ million)

Product 1H-2023 1H-2022 % change
Phosphate Rock 537 897 (40)
Phosphoric Acid 256 692 (63)
Fertilizers 2,555 3,659 (30)

Fertilizer Sales by Product

Product 1H-2023 1H-2022
Total Fertilizer Sales (million mt) 4.3 4.5
TSP 15% 14%
NPS/NPK 23% 31%
DAP/MAP 62% 56%
     

Government Shutdown Expected to Impact Ag Programs

Featured, News, U.S.

A government shutdown on Oct. 2 could have significant impacts on several key Agriculture Department programs, from farm loans benefiting small-to-midsize operations to WIC (Special Supplemental Nutrition Program for Women, Infants, and Children), USDA officials said this week.

USDA’s Farm Service Agency (FSA), which makes direct loans benefiting small and midsize farm operations, is expected to be impacted. FSA loans, used to buy land, livestock, feed, equipment, and supplies, includes a loan program essentially guaranteeing up to 95% of a principal loan amount, though farmers apply for them through conventional lenders.

“Now is the time when farmers are harvesting their crops and they’re seeking marketing loans, which allow them and assist them in ensuring that they get a decent price for their crop,” Agriculture Secretary Tom Vilsack said on Sept. 25. “When we have a shutdown, farm service agency offices in virtually every county of this country shut down and those loans are not available.”

Iowa Republican Sen. Chuck Grassley, who is pushing for more congressional progress on a five-year farm bill, said a shutdown would be particularly harmful with farm loans, WIC, and other USDA programs grinding to a halt.

“Government is supposed to be a service to the American people,” said Grassley. Shutting it down “prevents us from offering those services, and every effort should be made to avoid that happening.”

Vilsack said the impact would be immediate for WIC, which provides nutrition assistance for nearly 7 million pregnant and postpartum women, infants, and children. He said SNAP (Supplemental Nutrition Assistance Program) food assistance will continue, at least into October, but “there would be serious consequences to SNAP” if the shutdown extends longer than that.

Any shutdown would also add extra pressure to the end-of-year farm bill deadline. Vilsack warned that any technical assistance the USDA normally offers to legislators about the farm bill wouldn’t be available during a shutdown because the department will have no staffing to provide that help.

Moreover, the Congressional Budget Office told lawmakers it will cease work on Oct. 10 without funding. That could cause big issues for the farm legislation, as agriculture lawmakers say they’re already waiting for critical budget estimates they need to write the measure.

The funding for most major farm bill programs doesn’t end until early 2024, but agriculture leaders in both chambers are still hoping the usually bipartisan farm bill won’t be mired in the same controversy the House’s funding bills are experiencing.

“We hold out hope” that lawmakers can pass a farm bill before the end of the year, said Rep. Pete Aguilar (D-Calif), Chairman of the House Democratic Caucus. “It’s been a little delayed with this Republican chaos we’re seeing. We’re taking some calendar days away from the opportunity to work on a bipartisan farm bill.”

Despite the normal bipartisan history of the farm bill, there is concern that there is not enough money to go around for both commodity-related programs that benefit farmers and climate and WIC/SNAP spending. As a result, there is speculation that the normal five-year bill may see only a one or two-year extension.

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