All Posts from March 31, 2023

OCI Plans Strategic Review at Urging of Activist Shareholder

Featured, News, The Netherlands

OCI NV said on March 28 that it will conduct a strategic review after one of its largest shareholders, activist investor Jeff Ubben, urged it to consider asset sales to unlock value, according to Bloomberg.

The Dutch chemical producer will “examine all potential suggestions” put forward by Ubben, OCI CEO Ahmed El-Hoshy said in a phone interview Tuesday. Ubben, whose firm, Inclusive Capital Partners, owns 5% of OCI, said the company is worth about 90% more than its current stock price.

In a letter to Executive Chairman Nassef Sawiris on Tuesday, Ubben said OCI has assets that would be attractive to oil and gas majors moving to cleaner energy forms. OCI is “both misunderstood and under-analyzed,” he wrote. The company’s shares rose as much as 14% in early trading Wednesday and were up 13% at 11:10 a.m. in Amsterdam, giving it a market value of €6.3 billion ($6.8 billion).

“We believe that OCI will struggle to achieve its full and fair value in its current structure,” Ubben wrote in the letter, a copy of which was seen by Bloomberg. “With such a valuable company at such a disconnected stock price, the status quo for OCI is clearly not working.”

OCI has an opportunity to lead the energy transition to decarbonize ammonia and methanol-based fuels, according to Ubben. The company should consider options for its methanol business and low carbon ammonia project in Beaumont, Texas, as well its Iowa Fertilizer Co. unit, he said.

El-Hoshy said he agrees with Ubben that OCI is undervalued. “Our DNA has always been focused on value creation and maximization over our history,” he said.

San Francisco-based Inclusive Capital also holds a stake in Fertiglobe Plc, the Middle Eastern fertilizer venture that OCI jointly controls with Abu Dhabi National Oil Co. Fertiglobe went public in a 2021 initial public offering, a deal that Ubben said showed the value within OCI’s portfolio. Fertiglobe’s stock has risen 56% since its listing.

“This IPO was a good first step to demonstrate value,” Ubben wrote. “To unlock further value, OCI should consider additional share listings or a sale.”

Ubben commended OCI management for positioning the company to generate “meaningful financial, environmental, and social value,” but said OCI should consider how to best harness this value to further return capital to shareholders.

Iowa Fertilizer may achieve a substantially higher valuation in a strategic sale and would be of great value to pure-play fertilizer producers, like Nutrien Ltd., seeking nitrogen production in the US Corn Belt, according to Ubben. Nutrien said it does not comment on speculation.

“We welcome the dialogue with our shareholders, and will evaluate the merits of the views and ideas of our stakeholders, including In-Cap,” OCI said in a statement late Tuesday.

Ubben left the hedge fund he founded, ValueAct Capital Management, in 2020 and started Inclusive Capital. The firm, which focuses on social and environmental investing, has previously taken positions in electric-truck company Nikola Corp., power generator AES Corp., and bioenergy firm Enviva Inc.

Earlier this year, it emerged that Ubben had taken a stake in German drugs and agriculture company Bayer AG, whose shares have slumped since its troubled takeover of agriculture giant Monsanto Co.

Green AN Project Advancing in Washington State

Ammonia, Ammonium Nitrate, Green Hydrogen, News, News Briefs, Nitric Acid, Pacific N.W.

Pacific Green Fertilizer Corp., a Delaware corporation owned by Swiss-based Atlas Agro, is planning a green nitrogen plant for Richland, Wash., that will be focused on ammonium nitrate (AN) production. The company inked a real estate purchase and sale agreement with the Port of Benton, a municipal corporation in Washington, on March 8.

Pacific Green’s development plan is for a 1 million square foot fully renewable hydrogen production facility to form ammonia, nitric acid, and AN. The company has not yet indicated approximate capacity goals. The capital expenditure is put at $1.2 billion and the company expects the facility to employ 160. The project’s timeline is for groundbreaking is 2024, with the plant to be operational in 2026-2027.

According to the size of the plant, the company said peak electricity demand is between 220-300 MW, with Pacific Green exploring additional energy storage to help reduce the peak demand burden. The company said logistics is highly focused on the final product shipment to farmers, with minimal import of resources. It expects to use 10 railcars per day and/or 25 trucks, with rail highly preferable.

The Port of Benton has agreed to assist the company in securing rail access via spur to the Southern Connection 16-mile rail line to Kennewick, Wash. The port has a barge slip on the Columbia River.

The company said it would prefer to purchase land rather than lease, with an ideal site having access to rail and reasonable proximity to interstate or suitable state highways. It said if no rail option is available, the company is open to using barges to ship its products to farmers and distribution centers.

“We can focus on building new, green nitrate assets in the optimal locations,” the company said on its website. “We will build our factories in the market, near the farmer, providing security of supply and avoiding the traditional inter-continental shipping of fertilizer with an associated time, cost, and carbon emissions.”

Pacific Green said by 2030 it will build and license a number of renewable fertilizer plants, build a new generation of fertilizer distribution in attractive markets, and leverage its position as a large, low-cost hydrogen producer to help incubate hydrogen businesses.

Atlas Agro is focused on producing green AN fertilizer. It said most of the world’s nitrogen fertilizer capacity is for urea, which is a carbon-containing fertilizer that cannot be made green as it contains a CO2 in the molecule. The company touts AN as a superior fertilizer, saying it can directly be consumed by crops, unlike urea, which must be converted to nitrates by soil bacteria. This conversion process acidifies the soil, the company said, leading to burned roots.

The company added that AN has 90% lower volatilization loss than urea, provides a higher yield and better crop quality, and is more conducive to precision farming.

As a new entrant into the fertilizer sector, Atlas Agro said it does not have to worry about cannibalizing existing polluting assets or the costs involving in closing down unprofitable plants.

Atlas Agro said it is currently working closely with partners on project development in the US, Brazil, and Paraguay, and encourages anyone interested in zero-carbon nitrogen or explosives to reach out to the company.

Atlas Agro’s business model focuses on utilizing clean energy sources to power electrolyzers that will split water into hydrogen and oxygen. The company said its goal is to establish fully renewable production of three major nutrients—phosphate, potash, and nitrogen.

The local newspaper, Tri-City Herald, reported that the company indicated it will rely on nuclear power to fuel the operations, but this could not be confirmed with Atlas Agro this week.

The company put down a $400,000 deposit for land at the Port of Benton, and the exact acreage will be determined in connection with the company’s pre-development activities. Under the agreement, the company can buy up to 260.1 acres. The first 150 acres are priced at $1.39 per square foot, which would equate to a total of $9.08 million. Beyond 150 acres, the price is $2.09 per square foot.

Prior to closing the deal, the buyer would have to receive all approvals necessary from local governmental authorities with respect to permitting, construction, zoning and/or land use matters, as well as satisfying the requirements of the Washington State Environmental Policy Act. The deal must close by March 1, 2026.

Atlas Agro North America has opened an office in Richland. It has hired staff and is looking for more in the areas of general management, project development, sales, finance, and strategic operations.

Nutrien Says Fert Supply to Stay Tight in 2023

News, News Briefs, Potash, Saskatchewan

Shipments out of major exporters Belarus and Russia are still at least partially constrained and a lot of alternative outlets for product have been exhausted, Nutrien Ltd. CEO Ken Seitz said in an interview at Bloomberg’s New York headquarters on March 29.

“Looking at 2023, we think there’s going to continue to be challenges which create a gap in the market,” he said. Seitz added that the Canadian company is monitoring conditions and will continue to adjust its planned ramp-up of potash production as farmer demand changes.

Seitz also commented on relations with BHP Group Ltd., which is developing the $5.7 billion Jansen project close to Nutrien’s mines near Saskatoon, Sask. The two firms held talks about a potential partnership two years ago, and BHP was said in January to have been interested in doing more deals, at the right price, with companies such as Nutrien.

“The relationship with BHP is good; we’re in the community together,” Seitz said, while declining to comment on whether the companies have been in talks more recently. “They’re focused on their work on Jansen project, we’re focused on the work that we’re doing, and that’s the focus at the moment.”

Mosaic Fertilizantes Volumes Up in Jan-Feb.

Brazil, Earnings, News, Phosphate, Potash

Mosaic Fertilizantes posted a 31% increase in sales volumes for January-February 2023 compared with last year, according to results released by Mosaic on March 29. Sales revenues for the segment were up 12%, to $971 million from the year-ago $870 million.

Mosaic’s Potash and Phosphate segments also saw volume increases, but sales revenues were down from the year-ago period.

For the first quarter 2023, Mosaic expects total potash sales volumes to be near the lower end of the previously guided range of 1.8-2.0 million mt, with realized MOP pricing at the mine in the range of $400-$440/mt.

First-quarter phosphate guidance remains unchanged, with sales volumes in the range of 1.7-1.9 million mt and realized DAP prices on an FOB basis in the range of $625-$675/mt.

Potash Jan/Feb 2023 Jan/Feb 2022
Sales Volumes in thousands of mt 1,100 1,048
Sales Revenues in millions $542 $604
Phosphates Jan/Feb 2023 Jan/Feb 2022
Sales Volumes in thousands of mt 1,066 999
Sales Revenues in millions $827 $873
Mosaic Fertilizantes Jan/Feb 2023 Jan/Feb 2022
Sales Volumes in thousands of mt 1,462 1,118
Sales Revenues in millions $971 $870

OCP Posts Record Earnings in 2002 Despite Lower Export Volumes

DAP/MAP, Earnings, Morocco, News, NPK, NPS, Triple Superphosphate

Casablanca-based OCP Group SA reported a 73% increase in net income for the year ending Dec. 31, 2022, to MAD28.2 billion ($2.76 billion), the highest since its establishment over a century ago. The earnings were boosted by higher global fertilizer prices following Russia’s invasion of Ukraine.

Full-year EBITDA increased 38%, to MAD50.08 billion ($4.93 billion) on revenues of MAD114.57 billion ($11.28 billion), up from MAD36.27 billion ($4.04 billion) and MAD84.3 billion, respectively, for the previous year, and in line with preliminary results released by the group at the beginning of March (GM March 3, p. 24).

Gross profit in local currency was up by 27%, reaching MAD70.38 billion ($6.93 billion) from MAD55.22 billion ($6.12 billion) last year. Revenue in local currency grew 36% year-over-year, with the group citing higher prices across all product categories, which more than offset lower sales volumes compared to FY2021.

“OCP was able to fully leverage the benefits of higher prices, while calibrating production to match the attendant lower volumes, and effectively managing through the anticipated sequential easing of prices in the second half of the year,” the company said in its March 28 earnings statement.

“The strong double-digit revenue growth in 2022 was led by a 44% increase in fertilizer revenues, which accounted for a record 64% of total revenues for the year, up from 61% a year ago,” the group noted.

Higher global prices for fertilizer products helped mitigate the impact of lower export volumes in most regions due to reduced demand amid lower farmer affordability. The group’s fertilizer sales volumes fell 11% year-over-year, to 9.3 million mt from 10.4 million mt.

OCP fertilizer exports by product

  FY2022 FY2021
Total (million mt) 9.3 10.4
Percentage of total    
DAP/MAP 66% 66%
TSP/NPS 27% 23%
NPK 7% 11%

Phosphate rock revenues were up 51% year-over-year in local currency, mainly reflecting improved prices. Phosphoric acid revenues in local currency increased by a modest 1%, OCP said, with lower export volumes offset by higher phos acid prices.

Fourth-quarter EBITDA declined by 40%, to MAD7.11 billion ($615 million) from the prior-year MAD11.79 billion ($1.30 billion). Gross profit for the quarter dropped by 18%, to MAD14.14 billion ($1.32 billion) from the year-ago MAD17.34 billion ($1.89 billion), while revenue fell by 6%, to MAD25.04 billion ($2.33 billion) from MAD26.65 billion ($2.91 billion).

The group attributed the fourth-quarter downturn to less favorable market conditions compared with the same period in 2021, which resulted in lower prices and a contraction in demand.

For the months ahead, OCP sees “a seemingly balanced market in 2023, with a partial recovery of demand and relatively constrained supply.” The group highlighted an expected recovery in the Americas “due to crop prices that remain at high levels relative to fertilizer prices,” and a moderate recovery in demand in Europe, albeit with “hand-to-mouth” purchasing.

Additionally, OCP anticipates an increase in demand in Africa due to the group’s initiative “to prioritize this market and avoid demand destruction due to price.” The group also expects imports into India to remain stable amid government elections in 2024 and relatively low starting stocks.

On the supply side, OCP expects Chinese exports to reach higher levels this year than in 2022, but below the record set in 2021. The group said its new TSP capacities in Morocco will be deployed “gradually and coordinated with market recovery.”

For full year 2022, OCP plans to pay a dividend of MAD98.5 (approximately $9.74 at current exchange rates) per share, some 60% higher than the prior year. With the Moroccan state holding some 94% of OCP’s capital, Morocco’s government is set to receive a windfall of about $750 million from OCP dividends this year, according to Bloomberg.

Senate Passes Resolution to Overturn WOTUS; Biden Plans to Veto

Featured, News, U.S.

The US Senate on March 29 voted 53-43 to approve a resolution overturning the Biden Administration’s “Waters of the United States” (WOTUS) rule. The vote follows a similar resolution passed by the House in late February (GM March 3, p. 26), which called the new WOTUS definition “flawed” and “overreaching.”

“We are sending a clear, bipartisan message that Congress, even a divided one, will defend working Americans in the face of executive overreach,” said Sen. Shelley Moore Capito (R-W.Va.), a bill sponsor and the top Republican on the Environment and Public Works Committee. “I urge President Biden not to overrule the will of a bipartisan majority in Congress, and instead draft a new rule that doesn’t unfairly penalize millions of Americans and jeopardize future growth in our country.”

Sens. Joe Manchin (D-W.Va.), Catherine Cortez Masto (D-Nev.), Jacky Rosen (D-Nev.), and Jon Tester (D-Mont.) voted for the bill, as did Sen. Kyrsten Sinema (I-Ariz.). Not voting were Sens. Chris Coons (D-Del.), Dianne Feinstein (D-Calif.), John Fetterman (D-Pa.), and Minority Leader Mitch McConnell (R-Ky.).

The earlier House resolution passed on a bipartisan 227-198 vote. Because neither chamber’s vote reached the two-thirds threshold, however, the White House has said President Biden plans to veto, Bloomberg reported.

Officially announced on Dec. 30 (GM Jan. 6, p. 1) by the US Environmental Protection Agency (EPA) and the Army Corps of Engineers, the new WOTUS rule claims to restore protections that were in place prior to 2015 under the Clean Water Act (CWA), but with “updates to reflect existing Supreme Court decisions, the latest science, and the agencies’ technical expertise.” The rule was published in the Federal Register on Jan. 18 and took effect on March 20.

Republicans are seeking to replace the rule with a bill introduced by Rep. Mary Miller (R-Ill.) and Sen. Mike Braun (R-Ind.) earlier this month that would narrow the WOTUS regulation, excluding rain-induced “ephemeral waters” and other small waterways from federal jurisdiction under the CWA.

“I am introducing the Define WOTUS Act with Senator Mike Braun to protect my fellow farmers and stand against the disastrous Biden EPA, which is working to regulate every pond and puddle in America,” Miller said in a March 10 statement.

The debate over which water bodies should be classified as WOTUS – and therefore under CWA jurisdiction – has been raging for 15 years, with the definition narrowing or expanding depending on the administration. Critics said the Biden rule essentially reinstated an Obama-era regulation that provided an expansive view of what qualifies as federal navigable waters, including wetlands and other smaller bodies of water.

The US Supreme Court heard oral arguments on the issue in October in Sackett v. EPA and is expected to rule on the case this year. The White House has pushed back against critics (GM March 10, p. 1), saying the new rule isn’t much different from the status quo, and any effort to overturn it would only increase uncertainty over water regulation and threaten economic growth, agriculture, and clean water in various jurisdictions.

Greenpoint Ag – Management Brief

Management Briefs, South Central

Greenpoint Ag (GPAH), Decatur, Ala., on March 30 announced the creation of Procurement Managers in the company’s CN Wholesale Department. Ross Trull will be Phosphates and Potash Manager, Jourdan Causseaux will be Nitrogen Manager, and Lanze Ezell will be running the Micronutrients and Biological book.

All three have been with GPAH since its inception. Trull and Causseaux were previously with Agri-AFC, Trull for more than a decade and Causseaux since 2016. Ezell was previously with the Alabama Farmers Cooperative system for 18 years.

Fertinal – Management Brief

Management Briefs, Mexico

Mexico’s Grupo Fertinal announced that Marbet Angulo Rodriguez, who has been serving as Commercial Director, was promoted to the position of CEO as of March 16, 2023. José Luis Valencia, who has been handling logistics for the company, will now be in charge of the Office of the Commercial Direction. The company said he has more than 20 years of experience in the fertilizer industry.

Meristem Crop Performance Group LLC – Management Brief

Eastern Cornbelt, Management Briefs

Crop inputs supplier Meristem Crop Performance Group LLC, Columbus, Ohio, announced on March 30 that Certified Crop Consultant Brewer Blessitt, CPAg, Ph.D., founder of Blythe Bayou Research and Consulting (BBRC), has joined Meristem to support product research and development.

Blessitt joined DuPont Pioneer (now Corteva) in 2013, first as a product agronomist and then as a technical product manager. He also worked as a Mississippi State University research associate for eight years. In addition to his role with Meristem, he will continue his agronomic consulting across 40,000 acres in the Southeast region.

“Dr. Blessitt will play a key role helping us widen the pathway for new, innovative technology that helps farmers increase nutrient-use efficiency, grow big, healthy plants fast, optimize genetic potential all season long, and gain more bushels for less,” said Mitch Eviston, Meristem Founder and CEO.

Russia Raises AN Export Quota; May Extend Fertilizer Quotas by Six Months

Ammonium Nitrate, Featured, News, Russia

The Russian government has increased the export quota for ammonium nitrate (AN) by 300,000 mt, according to an Interfax report, citing a government press service statement. The increase is aimed at allowing Russian fertilizer producers to export surplus product, provided that the needs of the domestic market are met in full, according to the statement.

The quota on AN exports was originally 225,000 mt from Jan. 1-March 31 and 828,500 mt from April 1-May 31. In late January, the government increased the AN export quota by 375,000 mt (GM Jan. 27, p. 1).

With this week’s increase, the total export quota for certain types of fertilizers that runs until May 31 will now exceed 12.6 million mt. In addition to AN, the current export quotes mainly apply to urea and UAN, as well as to compound fertilizers.

The Russian government is also looking to extend export quotas on certain types of fertilizer for another six months beyond May 31 to help support the domestic market, according to another Interfax report, citing Agriculture Minister Dmitry Patrushev.

According to this week’s report, Russia’s Industry and Trade Ministry and the Federal Anti-Monopoly Service are working on the extension of the current set of measures to Nov. 30, 2023, as well as on fixing the selling prices on the domestic market.

Russia first introduced quotas for the export of nitrogen and complex fertilizers on Dec. 1, 2021 (GM Nov. 5, 2021). They were due to expire on May 31, 2022, but the Russian government extended the quotas to run from July 1 to Dec. 31, 2022. Last December, Moscow extended the export quotas to run until May 31, 2023 (GM Dec. 23, 2022).

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