All Posts from March 8, 2024

LSB Delays El Dorado Fertilizer Capacity Expansion; Updates on Multiple Low-Carbon Projects

Ammonia, Featured, Japan, Low-Carbon, South Korea

LSB Industries Inc. on March 5 announced that it is delaying its $400-$500 million capacity expansion at its El Dorado, Ark., complex. The company also gave an update on its multiple low-carbon projects.

“We have elected to delay the expansion of the production capacity of our El Dorado facility,” said Mark Behrman, LSB President and CEO. “After reviewing numerous factors, including current commodity market conditions and the other initiatives we have underway, we’ve determined that delaying the El Dorado expansion enables us to more effectively deploy resources to our other projects, while allowing us to maintain the strength of our balance sheet.”

Behrman told analysts in an earnings call that the full project would have cost $400-$500 million, but there are three pieces to it and the company does not have to do the whole project all at once, but can instead go “plant-to-plant.”

The three major components include debottlenecking the ammonia plant to increase capacity by 60,000-75,000 st/y, expanding the site’s large nitric acid plant, and building a facility that could produce 600,000-700,000 st/y of UAN.

Despite the delay, Behrman said LSB will continue to work with the USDA on timing and eligibility for a grant under the Fertilizer Production Expansion Program (FPEP) for the El Dorado expansion. The company has already completed an environmental assessment requested by USDA.

“We made meaningful progress in 2023 in achieving our vision to be an industry leader in the energy transition,” said Behrman, noting LSB’s collaboration with INPEX, Air Liquide, and Vopak Exolum Houston to develop a world-scale low-carbon ammonia production and export facility on the Houston Ship Channel (GM Oct. 6, 2023).

“This project will be transformative to LSB’s growth profile given the anticipated demand for clean energy,” Behrman said. “In the fourth quarter of 2023 we achieved an important step in the project development process when we selected KBR to provide the technology licensing and proprietary engineering design for the ammonia loop portion of the plant. We also recently selected an engineering firm to perform the pre-FEED on our ammonia loop. We expect to complete the pre-FEED during this year’s third quarter.”

The project would produce 1.1 million mt/y of blue ammonia, and LSB is working to secure offtake customers for the ammonia production. “Based on our ongoing conversations, we expect offtakers to come from Japan and South Korea,” Behrman said. “More recently, though, we have had conversations with potential European offtakers, and are encouraged, as we now believe Europe to be a viable target market as well.”

Behrman said LSB also continues to make good progress in the advancement of its carbon capture and sequestration project with partner Lapis Energy at LSB’s El Dorado facility (GM Feb. 24, 2023).

“We are focused on completing that project in the first quarter of 2026, subject to the EPA’s approval of our application for a Class VI injection well permit,” he said, adding that LSB has been receiving strong expressions of interest in potential long-term offtake agreements for the low-carbon products from El Dorado.

Lapis will capture and sequester more than 450,000 mt/y of CO2 produced at El Dorado. Behrman noted that Lapis will receive a 45Q tax credit of $85 per ton of CO2 sequestered, but they will also buy the CO2 from LSB.

“At the same time, we will be producing more than 375,000 mt/y of low-carbon ammonia, which we believe we will be able to sell at a premium,” he said. “All combined, this should equate to an estimated $15-$20 million in annual incremental EBITDA for LSB.”

LSB said it is also collaborating on the evaluation and development of a pilot program that would combine LSB’s low-carbon ammonia and Amogy’s ammonia-to-power engines (GM May 26, 2023). Amogy is to test a tugboat with an engine retrofitted for ammonia as a fuel during the third quarter.

Intrepid Posts 4Q Loss, Expects 2024 Uptick in Potash Production; XTO Deal Adds Boost

Earnings, Featured, Potash

Intrepid Potash Inc. reported a fourth-quarter net loss of $37.3 million on sales of $56.7 million, compared to the year-ago $3.98 million and $66.7 million, respectively. Adjusted EBITDA was $7.1 million, down from the year-ago $23.1 million.

Intrepid reported a full-year net loss of $35.7 million on sales of $279.1 million, down from 2022’s net income of $77.2 million and sales of $337.6 million. Adjusted EBITDA was $41.6 million, down from 2022’s $141.8 million.

“Intrepid’s fourth quarter saw the continuation of strong demand for our potash and Trio® with our combined 2023 sales volumes up approximately 16% compared to 2022,” said Intrepid Executive Chairman Bob Jornayvaz. “Slightly lower fertilizer pricing and higher costs associated with our current potash production profile again proved to be headwinds to our margins in the fourth quarter, although we are on track to start to see the first step-change to higher potash production beginning in the second half of 2024. Moreover, fertilizer pricing has remained resilient, and we expect to see steady sales through the spring application season.”

Jornayvaz highlighted Intrepid’s December announcement that it had entered into the Third Amendment to the Cooperative Development Agreement with XTO (GM Dec. 15, 2023). He said Intrepid has already received the first $50 million for its commitments under the Amendment.

The Amendment also stipulates that Intrepid will receive an additional guaranteed, one-time $50 million payment upon certain events, Jornayvaz said, with XTO required to pay additional amounts in the event of certain additional drilling activities, up to a maximum of $100 million.

“This is a milestone development for Intrepid and the cash infusion significantly helps de-risk our outlook,” he said. “Our current balance sheet is close to fully funding our 2024 capital program, providing a cash runway until we see the positive impacts to our unit economics associated with the higher potash production rates.”

The company took a $42.8 million impairment charge during the quarter, with $31.9 million related to its conventional langbeinite mine (East Mine); $9.9 million related to the remaining assets at the West Mine, which has been in care and maintenance since 2016; and $1.0 million related to various water recycling assets.

“Intrepid’s primary strategic priority has been to revitalize our potash assets and I’m very pleased to share that we are on track to successfully achieve this goal,” he continued. “We still have a couple projects to bring online over the next few months, but our potash production outlook is improving, highlighted by the significantly improved brine grades we’re already seeing in our harvest ponds at HB from the Eddy Shaft project.”

Jornayvaz said Intrepid is still “a few quarters away from seeing the first inflection to higher production from our HB mine and we want to be clear that our investments are designed to sustainably support higher potash production over the long-term.” Jornayvaz told analysts in an earnings call that potash production will be up at least 10-15% in 2024 compared with 2023, with an additional 15-20% increase expected the following year and higher upside looking long-term.

“As for our other growth opportunities, we recently received the final permit for our sand project at Intrepid South and we continue to make progress on our lithium resource at Wendover,” he added. “Overall, we’re optimistic on Intrepid’s future and we’ll be laser-focused on getting appropriate value back in the stock.”

Intrepid CFO Matthew Preston told analysts that the company expects first-quarter 2024 sales volumes in the 65,000-75,000 st range at an average net realized sales price of $385-$395/st. He put first-quarter Trio sales volumes at 80,000-90,000 st at an average net realized sales price of $290-$300/st.

Potash  4Q-23 4Q-22 2023 2022
Sales ($000)   28,557  43,756 155,920 191,378 
Gross Margin ($000)4,33320,90735,04994,769
Sales Volume (000 st)45 50 258  222
Production Vol. 000 st)79 106224       270
Avg Realized Price ($/st) 431693 466   713
Trio 4Q-234Q-2220232022
Sales ($000)21,13017,265102,182 117,826
Gross Margin ($000)(2,378)3,429(3,995)39,123
Sales Volume (000 st)4928228197
Production Vol. 000 st)5751216226
Avg Realized Price ($/st)292  461321 479
Oilfield Solutions4Q-234Q-2220232022
Sales ($000) 7,0455,73221,31028,668
Gross Margin ($000)2,666 1,3155,7927,516

BHP Inks Tentative Potash Sales Agreements for Jansen

Canada, Featured, Potash

BHP Group Ltd. has signed non-binding sales agreements for potash production from both phases of the group’s mine under construction in Jansen, Sask., according to a Reuters report citing Chief Commercial Officer Ragnar Udd. He declined to name the companies.

According to Udd, BHP seeks to turn the agreements into binding contracts, typically lasting one year, as production comes online in late 2025 or early 2026. The mining group expects to ramp up to 4.35 million mt/y capacity in two years (GM Feb. 23, p. 30). The second phase, approved by BHP in late October last year (GM Nov. 3, 2023), will boost Jansen’s annual output capacity to some 8.5 million mt when fully ramped up.

BHP plans to sell potash to distributors rather than directly to retail companies that resell to farmers, Udd said. Selling to distributors reflects the fact that BHP does not own a potash distribution network, he said, and allows it to focus on what it does best, namely production.

BHP CEO Mike Henry told participants at the BMO 2024 Global Metals, Mining & Critical Minerals Conference in Miami on Feb. 27 that the group has seen strong market interest in Jansen potash and that its marketing team had secured “sufficient MOUs with buyers around the world to more than cover sales as the mine ramps up.”

Responding to a question about selling to the US market, Udd said he would not give specifics about BHP’s US plan but said the group is “quite comfortable” with its ability to compete there.

The group is spending an estimated $5.7 billion on Jansen Stage 1 and gave the go-ahead last October for a further $4.9 billion investment on Jansen Stage 2. This is on top of an initial capex spend of some $4.5 billion before the project’s first phase was even approved.

Longer-term, Jansen has the potential for two additional expansions to reach an ultimate production capacity of 16-17 million mt/y, subject to studies and approvals.

BHP hopes to expand its presence in Canada beyond the giant Jansen project. The “impressive” stability of the country’s fiscal and policy regime “allows us to continue to invest in Canada and hopefully beyond potash,” Udd told Bloomberg TV in Toronto on March 4.

NextEra Eligible for Full $125 M Forgivable Loan for North Dakota Green Fertilizer Project

Ammonia, Clean Ammonia, Featured, Hydrogen, Low-Carbon, Natural Gas, U.S.

The North Dakota Industrial Commission on March 4 announced that NextEra Energy Resources Development has accepted terms for a $50 million forgivable loan under the state’s Clean Sustainable Energy Authority (CSEA) Fertilizer Development Loan Program, while Prairie Horizon Energy Solutions has declined the terms for a $75 million loan.

At its Jan. 24 meeting, the Industrial Commission approved a CSEA recommendation to authorize $50 million in loan funding to NextEra and $75 million to Prairie Horizon for fertilizer production facilities in Stutsman and Stark counties, respectively (GM Jan. 26, p. 1). The CSEA recommendation also provided for an applicant to receive the full $125 million if the other applicant were to decline funding.

“A subsidiary of NextEra Energy Resources LLC has accepted the conditional forgivable loan commitment,” a NextEra spokesperson told Green Markets. “Completion of the loan transaction is subject to execution of definitive documents. We look forward to the prospect of potentially producing anhydrous ammonia locally and at scale to benefit the North Dakota agriculture sector.” The company added that it is pleased with the allocation of the full loan amount.

The fertilizer loan was authorized by House Bill 1546 during the November 2023 special session, which required the production of hydrogen “by the electrolysis of water” and directed the CSEA to forgive the loan “upon completion of construction of the fertilizer production facility.” The forgiven loan will be paid from the Strategic Investments and Improvement Fund, which receives its funding from oil tax revenue and royalties from state-owned minerals.

CSEA’s Technical Committee had given Prairie Horizon a slightly higher rating than NextEra. Prairie Horizon received 41.75 out of 50, with NextEra’s receiving 39.13. Both projects were called “feasible with conditions.” Both Prairie Horizon and NextEra’s projects would be built with an eye toward eventually constructing a “bolt-on” urea plant.

NextEra’s $1.293 million facility is proposed for the Spiritwood Energy Park near Jamestown, producing 100,000 tons per year of green ammonia. Power would come from wind generation. NextEra is already heavily involved in the state, having invested $3.7 billion in North Dakota wind projects with another in the planning stages.

NextEra has been eyeing a possible fertilizer plant in the state for some time (GM June 2, 2023). It has also signed a Memorandum of Understanding (MOU) with CF Industries Holdings Inc. for a joint venture to develop a zero-carbon-intensity hydrogen project at CF’s Verdigris Complex in Oklahoma (GM April 28, 2023), and it is invested in clean technology developer and junior ammonia producer Monolith, Lincoln, Neb., which has plans to produce 275,000 mt/y of ammonia in Nebraska (GM July 15, 2022).

Though declining the terms of the loan, Prairie Horizon collaborator Marathon Petroleum Corp. (MPC) told Green Markets that the project will proceed. “The decision on this loan does not affect our current plans, which includes continued development of the Prairie Horizon project,” a spokesperson said.

Prairie Horizon’s $2.2 billion project would be sited in Dickinson and produce 419,750 tons of ammonia per year. Some 73,000 tons of ammonia production would come via electrolysis and be green. The project would also use natural gas, with that ammonia being blue. Capturing and storing carbon dioxide is part of the plans.

Prairie Horizon is a collaboration between MPC and TC Energy, both of which are a part of the Heartland Hydrogen Hub (HH2H), which was selected by the US Department of Energy for up to $925 million to produce low carbon hydrogen, decarbonize regional supply chains, and create clean energy jobs across Minnesota, Montana, North Dakota, South Dakota, and Wisconsin (GM Oct. 13, 2023). North Dakota already has one nitrogen plant. Dakota Gas Co., a subsidiary of Basin Electric Power Cooperative, Bismarck, produces 1,100 st/d of urea at its Great Plains Synfuels Plant near Beulah (GM May 25, 2018). It has ammonia capacity of 110,000 st/y and ammonium sulfate at 400,000 st/y. Diesel exhaust fluid (DEF) is produced there as well.


SQM 4Q Income Drops on Lower Lithium Prices

Chile, Earnings, Lithium

SQM Inc.’s fourth-quarter net income sank to $203.2 million, off 82.3% from the year-ago $1.15 billion, with revenues off 58%, to $1.31 billion from $3.13 billion, after a sharp worldwide drop in lithium prices. Gross profit was $400.7 million, down from $1.64 billion, while adjusted EBITDA fell to $427.6 million from $1.67 billion.

SQM’s full-year net income was off 48.5%, to $2.01 billion on revenues of $7.47 billion, down from 2022’s $3.91 billion and $10.71 billion, respectively. Gross profit was $3.08 billion, down from $5.74 billion, while adjusted EBITDA was $3.18 billion, down from $5.84 billion.

“Our fourth quarter 2023 results reflected record-high sales volumes in lithium business and increased sales volumes in iodine and potassium business lines when compared to the previous quarter and the same period last year,” said Ricardo Ramos, SQM CEO. “Despite a downturn in lithium market prices when compared to the previous year, our focus on operational efficiency and ability to successfully execute capacity expansion projects have facilitated notable production growth in lithium and iodine businesses over the past year.”

Ramos said SQM is continuing with its expansions in Chile and expects lithium carbonate capacity to reach 210,000 mt during the first quarter of this year. He said the company also celebrated first production of spodumene concentrate at its Mt. Holland operation site during the fourth quarter of 2023.

“In the iodine business, as a result of successful start-up of Pampa Blanca operation, record-high production volumes were achieved during the year, reconfirming SQM´s position as industry leader with ability to deliver growth ahead of competition,” he said.

“As we enter into 2024, we anticipate another robust year of growth in lithium market, with global demand increasing by at least 20%, supported by electric vehicle sales growth globally and increasing demand for battery materials,” he added. “However, the excess in lithium and battery materials capacity seen during last year is expected to continue during this year, keeping pressure on lithium market prices.”

Ramos said SQM expects average lithium prices to remain relatively stable throughout the year and sales volumes to increase slightly during this year, subject to market conditions and any changes in the supply-demand balance.

Ramos noted the signing of a Memorandum of Understanding in December 2023 between SQM and Codelco (GM Jan 5, p.1) to jointly develop the Salar Futuro project and sustainably operate in the Salar de Atacama beyond 2030. “Together with the communities, we are working on the definitive documentation in the upcoming months and will inform the market once this process is concluded,” he said.

“Last year, SQM was included into both DJSI World and Emerging Markets indices, several years ahead of our internal goal,” he added. “This is the result of ongoing work and our commitments to increase the transparency and sustainability of our operations.”

Fourth-quarter Specialty Plant Nutrition revenues were off 18%, impacted by significantly lower prices versus year-ago levels, though volumes increased 13%.  The average price decreased almost 28% year-over-year, but SQM believes the market price may have reached its bottom and it should see less price volatility in 2024.

The company estimates potassium nitrate demand decreased about 8% in 2023, but it saw demand recovery in the fourth quarter and anticipates this momentum will continue into 2024, driving nearly a 10% increase in demand during the year.

Revenues were $223.7 million, down from $274.2 million, while volumes increased to 226,000 mt from 199,200 mt. Nitrate-based volumes were up 20%, to 127,000 mt from 106,300 mt, while Specialty Blends were up 24%, to 62,300 mt from 50,300 mt.

Full-year revenues were off 22%, to $913.9 million from 2022’s $1.17 billion, while volumes were off only 1%, to 840,200 mt from 847,800 mt. Specialty Blend volumes were strong for the year, up 12% to 243,500 mt from 217,900 mt, while nitrate-based volumes declined 7%, to 443,500 mt from 477,400 mt.

Fourth-quarter Potassium revenues dropped 37%, to $50.8 million from the year-ago $80.5 million due to significantly lower prices, while volumes increased 14%, to 112,500 mt from 98,600 mt. SQM believes that due to lower prices and increased supply, global potash demand grew about five million mt during 2023, reaching 65 million mt. It expects to see a similar demand growth during 2024 and said its sales for the year may top 600,000 mt.

Full-year revenues were off 36%, to $279.1 million from 2022’s $437.2 million, while volumes increased 13%, to 543,100 mt from 480,500 mt.

OCP Starts 2024 on Positive Note

Earnings, Phosphate

OCP Group SA increased sales in January by 17%, reaching more than MAD6.2 billion (approximately $615 million at current exchange rates) compared with January 2023, according to a report by Morocco World News, citing the country’s Office des Changes.

OCP’s phosphate exports are bouncing back after a tough 2023, which saw declining sales reflecting lower global prices for phosphate-based products after an exceptional year in 2022 marked by record prices for phosphates.

OCP reported a 20% drop in revenues for the year ended Dec. 31, 2023, to MAD91.28 billion from MAD114.57 billion in 2022 (GM March 1, p. 27).

JPMC’s Profits Fall in FY2023; Touts New Projects

Earnings, Jordan, Phosphate

Jordan Phosphate Mines Co. (JPMC) reported a 38% decline in post-tax profit of JD454 million (approximately $640.3 million at current exchange rates) on sales of JD1.23 billion for the year ended Dec. 31, 2023, according to Jordan’s Petra news agency, citing a company statement.

The FY2023 results compare with JD733.3 million and JD1.75 billion, respectively, for the previous year (GM Feb. 24, 2023). Sales were down 30% year-over-year.

“Despite facing challenges such as a notable decrease in global product prices, leading to an increase in the cost of sales as a percentage of revenue, the company demonstrated resilience, managing to generate commendable returns on capital investments,” JPMC said.

JPMC Chairman Mohammad Thneibat highlighted the company’s efforts to diversify its products, transitioning to manufacturing industries while prioritizing environmental sustainability.

As previously reported, JPMC recently launched several new projects in Aqaba, in southern Jordan. These include a JD400 million project to build a phosphoric acid plant in partnership with Turkish oil company Transpet Petrolcülük ve Enerji AŞ (GM Oct.  27, 2023). The proposed facility will have production capacity of 165,000 mt/y P2O5.

JPMC has also partnered up with Arab Potash Co. (APC) to establish a plant to produce new fertilizers, although few details are available. Other proposed projects under consideration by the company include a plant to produce phosphate feed additives.

JPMC last month also launched the second phase of its Gypsum Mountain greening project at its industrial complex in Aqaba. According to Petra, this phase involves the planting of 20,000 trees. The wider project aims to plant 50,000 forest and fruit trees in stages, transforming the area into an attraction and public park for local communities and visitors.

The Agricultural Retailers Association – Management Brief

Management Briefs, U.S.

The Agricultural Retailers Association (ARA) on March 6 named Rep. Jim Baird (R-Ind.) and Rep. Jimmy Panetta (D-Calif.) as its Legislators of the Year. The award is presented each year to lawmakers who ARA said have championed issues of importance to agriculture and agriculture suppliers.

Rep. Baird received this year’s award for his efforts to promote the Increased TSP Access Act of 2023 (HR 3036) and the Plant Biostimulant Act (HR 1472), said ARA President and CEO Daren Coppock, while Rep. Panetta was also awarded for sponsoring the Plant Biostimulant Act (HR 1472), which aims to establish a federal definition for plant biostimulants.

“Supporting American farmers means making sure they have access to affordable products and equipment to reduce their operating costs,” said Rep. Baird. “Since my first day in Congress, I’ve been committed to helping our farmers so they can continue doing what they do best – keep feeding our nation. I’m honored to be recognized with this award and will continue to be a relentless advocate for American agriculture.”

“Producers in California’s 19th Congressional District and across the country need access to the latest innovative tools in order to feed the world and better protect our environment,” said Rep. Panetta. “It’s an honor to receive the Legislator of the Year award from the ARA as we work to move forward impactful legislation, like my bipartisan Plant Biostimulant Act, to better encourage the adoption of these emerging agricultural products. I look forward to continuing to advance new technologies that will empower our farmers to usher in a new era of sustainable agriculture.”

The Agribusiness Association of Iowa – Management Brief

Management Briefs, U.S.

The Agribusiness Association of Iowa (AAI) Foundation announce on Feb. 26 that its building in Des Moines, Iowa, will be named after Bill Northey, who served as the Under Secretary for Farm Production and Conservation in the United States Department of Agriculture from 2018 to 2021 and as the Secretary of Agriculture of Iowa from 2007 to 2010.

Northey, who passed away on Feb. 5, 2024, also served as President and Chairman of the National Corn Growers Association from 1995 to 1997, and as CEO of AAI. Additionally, he was Co-founder and President of Innovative Growers LLC, an organization hatched from Iowa State University Extension Leadership to focus on the production of specialty grain products.

“Bill was a giant in agriculture. While he wanted to be known first as a farmer and conservationist, he was actively involved in many facets of public service to agriculture,” said Mark White, Board Chair of the AAI Foundation. “Just as another giant in Iowa agriculture, Henry Wallace, has a state ag building named after him, the Foundation board of directors felt that naming our building after Bill will ensure that he will never be forgotten.”

A Northey Memorial Fund has been established at the AAI Foundation. Memorials can be sent to the AAI Foundation, 900 Des Moines Street, Des Moines, IA 50309.

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