All Posts from June 9, 2023

IPL Takes Hit on Increased Gas Shortfall Sourcing Costs for Phosphate Hill

Australia, Earnings, News, Phosphate

Incitec Pivot Ltd. (IPL) reported on June 6 that it expects the additional cost of sourcing shortfall gas for its Phosphate Hill plant in Queensland will be A$15-$20 million for the remainder of the fiscal year ending Sept. 30. This brings the total FY2023 EBIT impact from sourcing shortfall gas to A$75-$90 million (approximately US$50-$60 million at current exchange rates) as of June 6.

IPL had previously estimated the impact of the curtailments for FY2023 at A$60-$70 million. IPL said the increase follows a notice from gas supplier Power and Water Corp. (PWC) of a reserve shortfall under the gas supply agreement for Phosphate Hill. IPL said the expected full-year production from Phosphate Hill remains unchanged at 900,000-930,000 mt.

Gas for the Phosphate Hill plant is currently supplied under a long-term contract between IPL subsidiary Southern Cross Fertilisers Pty Ltd. and PWC. PWC also indicated that the gas reserve shortfalls are expected to be ongoing beyond FY2023 for the remainder of the term of the gas supply agreement with IPL, which runs until mid-2028.

To date, IPL said it has been sourcing replacement gas from a mix of third-party sources to make up the shortfall and to ensure operation of the Phosphate Hill plant. It said it intends to continue sourcing replacement gas from third parties and is assessing options for alternative gas supply for the plant.

PWC sources gas primarily from Eni Australia’s Blacktip gas field in the Northern Territory. Eni has notified that based on newly acquired interim data, there is an unexpected potential reduction in the gas reserves available from the Blacktip gas field.

Turkey’s Gübretaş Posts 1Q Loss Following Drought, Earthquakes

Earnings, News, Turkey

Turkish fertilizer company Gübretaş swung to a loss in the first quarter ending March 31, 2023, as drought and the major earthquakes on Feb. 6 took a toll on fertilizer consumption and purchases.

The company reported a net loss of 210.1 million liras (approximately $9.75 million at current exchange rates) for the quarter, down from a net profit of 575.7 million liras in the same prior-year period, according to Bloomberg, citing a company statement. First-quarter sales fell by nearly 10% year-over-year, to 7.14 billion liras.

Drought conditions in the country in January and February led to fertilizer consumption being deferred, and the earthquakes made it harder for orders to be delivered in time, Gübretaş reported. The company added that Turkish fertilizer suppliers with high-cost inventories also started “harsh price” competition.

Gübretaş has 1.085 million mt/y of total fertilizer production capacity at Yarimca and Izmir, with a total warehouse capacity of 450,000 mt, according to the company’s 2021 annual report. The company is majority-owned (75.95%) owned by the Central Union of Turkish Agricultural Credit Cooperatives, according to its website.

Federal Judge Rules Idaho Phosphate Mine Approval Must be Vacated

Featured, News, Pacific N.W., Phosphate

The US Bureau of Land Management violated federal environmental laws when it approved a plan by P4 Production LLC, a subsidiary of Bayer AG, to develop an open-pit phosphate mine in Idaho, and the agency’s decision must be vacated, a federal court ruled on June 2.

The US District Court for the District of Idaho had ruled in January that the BLM violated the National Environmental Protection Act and the Federal Land Policy and Management Act when it issued a final environmental impact statement and 2019 record of decision for the Caldwell Canyon Mine Project (GM Jan. 27, p. 1).

The Center for Biological Diversity, Western Watersheds Project, and WildEarth Guardians sued the agency, alleging that it did not take a hard look at potential selenium pollution from the Caldwell Canyon Mine (GM May 20, 2022), nor did it consider the mine’s impacts on the threatened greater sage grouse. The plaintiffs asked the judge to vacate the approval as a result.

On June 2, the court agreed with the plaintiffs that the statement and record should be vacated, Bloomberg Law reported. The opinion by Judge B. Lynn Winmill rejected the BLM’s argument that its decision should just be remanded without being vacated.

Winmill said the standard the BLM applied when assessing the project’s impact on the habitat of the greater sage-grouse population wasn’t as strict as the currently applicable standard, which calls into question whether the BLM can reach the same decision on remand, Bloomberg Law reported. The BLM also did not take a requisite hard look at the direct, indirect, and cumulative impacts of the project on the sage grouse, Winmill said.

The judge also ruled that BLM failed to consider the indirect effects to public health by sending the phosphate rock to be processed at the Soda Springs plant, which would produce the herbicide glyphosate for use in Roundup products. The plant was listed as a Superfund site in 1990.

According to Winmill, the BLM tried to avoid the seriousness of its violation by attributing the concerns about human health and environmental impacts to historic processing activities at the plant and not current operations. But “simply stating that no further analysis is necessary because the harm is from historic practices ignores the problem contained with the FEIS,” Winmill said.

P4 Production argued as intervenor that vacating the BLM’s approval would cost its parent company more than $3 billion, Bloomberg Law reported. But P4 failed to establish that those are concrete losses, Winmill said, adding that the calculations were “vague and conclusory.”

The BLM and P4 also failed to demonstrate that equity demanded a more tailored remedy than vacatur, Winmill said.

BLM approved the Caldwell Canyon Mine in August 2019 (GM Aug. 16, 2019) after issuing a final environmental impact statement three months previously. The project is designed to develop three leases on Schmidt Ridge in Dry Valley, about 13 miles northeast of Soda Springs.

P4 argued that the mine is crucial and is needed for the company’s elemental phosphorus plant operations near Soda Springs, formerly owned by Monsanto Inc. Company officials said the Caldwell Canyon Mine would sustain about 185 mining jobs and 585 plant jobs for about 40 years, and would aid the region by providing $47 million annually in payroll, taxes, royalties, and purchases, as well as sustaining support and service jobs.

P4 would use mining methods at the Caldwell Canyon Mine similar to those used at the company’s Blackfoot Bridge Mine. Work would begin in time to transition from the Blackfoot Bridge Mine near the Blackfoot River, where ore is projected to be depleted in less than seven years.

In total, mining and support facilities would disturb about 1,559 acres – 153 acres of BLM public land, seven acres of previously disturbed US Forest Service land, 230 acres of Idaho State Endowment land, and 1,169 acres of private land. The expected mine life would be 42 years, followed by an expected two years of reclamation.

Ammonia Pipeline Damaged in Ukraine; Russia, Ukraine Blame Each Other, Dispute Injuries

Ammonia, Featured, News, Russia, Ukraine

Explosions damaged a portion of the Tolyatti-Odessa ammonia pipeline in the Kupiansk district of Ukraine’s Kharkiv region, according to June 5 news reports. Ukraine authorities said Russian missiles were responsible, claiming no ammonia leak occurred and no injuries were reported. Russia blamed Ukrainian saboteurs, however, and said a number of civilians were injured.

Oleh Syniehubov, the governor of Ukraine’s Kharkiv region, posted on social media that the pipeline had been “depressurized as a result of enemy strikes,” but later said there was “no threat of dangerous substances” spreading over the Kupiansk district based on reports from emergency response teams deployed to the region.

The Tolyatti-Odesa ammonia pipeline is the world’s longest, stretching approximately 1,534 miles from Russia’s Togliatti on the Volga River to three Black Sea ports. Russia used the pipeline to transport ammonia for export, but it has been shut since Russia’s invasion of Ukraine in February 2022. Russia reportedly transported two million mt of ammonia through the pipeline in 2020.

Syniehubov said Russian shelling hit the pipeline near the villages of Masyutovka and Zapadne. Moscow disputed that account, however, stating on June 7 that a Ukrainian “sabotage” group had blown up the pipeline, according to a report in the Moscow Times.

“A Ukrainian sabotage and reconnaissance group blew up the Tolyatti-Odesa ammonia pipeline” near the village of Masyutovka in the northeastern Kharkiv region on Monday evening, the Russian Defense Ministry said, adding that civilians had been injured. Footage posted on social media appeared to show white smoke or vapor coming out of the pipeline.

Russia has sought a resumption of ammonia exports through the pipeline and has made that one of several conditions in negotiations to extend the UN-brokered Black Sea Grain initiative, which allows safe passage of Ukrainian grain shipments to help alleviate food shortages caused by the war.

The grain deal was renewed for two months in May and is set for renewal again on July 17, but the pipeline explosion may complicate the deal, Bloomberg reported on June 8. The pipeline is “integral” to Russia’s involvement in the deal, Kremlin spokesman Dmitry Peskov said, according to Interfax. “This complicates things in terms of continuing the deal,” Peskov said.

Russian Foreign Ministry Spokeswoman Maria Zakharova said Ukraine was “the only country that has never been interested in resuscitating the pipeline,” the Moscow Times reported. Zakharova accused Kyiv of “dealing a blow to UN efforts to combat world hunger,” and said it would take up to three months to repair the pipeline if crews could access the site.

Should Russia exit the grain deal, the pace of Ukraine’s exports would be considerably slowed, Bloomberg reported. Ukraine would only be able to ship via rail, road, and smaller river ports, which presents additional challenges after some of its European neighbors banned purchases of the country’s grain until mid-September.

Ukraine has said it will consider reopening the Tolyatti-Odesa pipeline if Russia agrees to a comprehensive prisoner swap. In the meantime, a new export port facility being built by Togliattiazot JSC in Taman, opposite Crimea, is slated to begin operations this year and is intended to replace the pipeline.

The incident at the pipeline occurred less than 48 hours after the Kakhovka Dam on the Dnipro River was destroyed, flooding nearby areas and threatening the Zaporizhzhia nuclear power plant. Russia and Ukraine also blamed each other for the dam’s breach.

Grupa Azoty, PKN Orlen Ink Potential Puławy Deal

Ammonium Nitrate, Calcium Ammonium Nitrate, Featured, News, Poland, UAN, Urea

Polish fertilizer and chemical producer Grupa Azoty SA on June 6 reported that it and Polish oil refining and petrol retailer PKN Orlen SA have signed a cooperation and non-disclosure agreement on the potential acquisition of Azoty subsidiary Zakłady Azotowe Puławy. Both Grupa Azoty and PKN Orlen are state controlled.

The Puławy unit is Azoty’s most profitable, and its production includes ammonium nitrate and urea, as well as caprolactam and melamine. The announcement follows speculation over the past month that Azoty may need to sell its prized Puławy subsidiary to improve its financial position, along with reports that PKN Orlen was eying a potential acquisition of the unit (GM June 2, p. 26).

Azoty had warned that it may breach debt covenants at the end of the second quarter (GM May 26, p. 26) after reporting a group net loss of Pln555 million (approximately $132.6 million at current exchange rates) for the first quarter of 2023 (GM May 19, p. 5).

Azoty said it has faced a number of challenges in recent months, including duty-free imports of nitrogen fertilizers produced outside of the European Union from cheaper feedstocks, as well as previously soaring energy prices in Europe and the continued supply/demand disruptions caused by Russia’s invasion of Ukraine.

Azoty reported this week that it was negotiating with its financial institutions about the suspension of selected covenants, but re-iterated that its liquidity is not threatened, according to a Polish Press Agency report, citing a company statement.

Tomasz Hinc, President of the Management Board of Grupa Azoty, said in a statement that merging Pulawy into PKN Orlen “would increase the Orlen Group’s participation in the fertilizer sector and enhance its efficiency and competitiveness on the European market through numerous synergies.

“For farmers and other customers of the two companies, the merger would mean a better and broader range of fertilizer products and easier access to products in demand at a given time, achieved through enhanced production flexibility,” he added.

“Integration of two large nitrogen fertilizer producers would increase their production efficiency and strengthen their ability to even better respond to market needs,” said Daniel Obajtek, CEO and President of the Management Board of PKN Orlen.

Puławy’s fertilizer-related production capacity includes 1.24 million mt/y of ammonia, 1.19 million mt/y of urea, and 1.2 million mt/y of UAN, according to the Green Markets database. In addition, the subsidiary in 2020 commissioned a new AN/CAN fertilizer plant with total production capacity of up to 820,000 mt/y (GM July 10, 2020). One production line is for granulated AN (32% N) with 1,200 mt/d capacity, while the second is for CAN-27 production at 1,400 mt/d.

In a statement, Azoty and PKN Orlen outlined a number of synergies from the planned integration. These include “an attractive product mix and improved competitiveness” against European and non-EU players, as well as “intra-group feedstock balancing” particularly aimed at “more efficient ammonia management.”

PKN Orlen said it will start due diligence in July and expects to complete the Puławy acquisition by the end of 2023. The potential merger aligns well with PKN Orlen’s new focus on petrochemicals, according to analysts.

PKN Orlen already owns Polish fertilizer producer Anwil SA after gaining full control of the company in 2012. Since then it has invested in new production facilities, the latest of which is a third nitrogen fertilizer plant under construction at Anwil’s existing production site in Włocławek in Central Poland.

When completed, the new facility will increase Anwil’s fertilizer production capacity by roughly 50%, to 1,461,000 mt/y, adding AN, ammonium sulfate nitrate, AN with sulfur, and CAN with magnesium to its portfolio. As of October last year, the plant was 92% complete and the producer anticipated commissioning by the end of July 2023 (GM Oct. 28, 2022).

Agreement Reached for Green Ammonia Project in Newfoundland

Eastern Canada, Featured, Green Ammonia, News

Port of Argentia Inc., a capital company that owns the heavy industrial seaport at Port of Argentia in Newfoundland’s Placentia Bay, announced on June 5 that it has reached a binding agreement on commercial terms with Pattern Renewable Holdings Canada ULC (Pattern Energy) for a planned renewable energy-to-green fuels project at Argentia.

Formerly the site of a US Naval Base, Argentia offers a strategic location near the main shipping lanes between North America and Europe, and is being redeveloped with a diverse group of port users and tenants involved in marine transportation, renewable energy, manufacturing, construction, offshore oil, mining, and other sectors.

Pattern Energy is taking a lease option on some 6,000 acres of industrial and forest lands owned by the Port. Should it exercise its option and proceed with the project, Pattern Energy will reportedly construct a 300-megawatt wind energy facility designed to power the production of green ammonia for export to global markets.

“Today we are announcing an agreement on Pattern’s wind energy-to-ammonia project which will generate significant wealth, business opportunities, and employment for our region for decades,” said Port Board Chairperson Genny Picco. “Pattern Energy is proving to be an ideal development partner, and we are excited about the benefits this project will bring in the years to come.”

Key commercial terms of the agreement include land lease rates, priority berthing charges, and a wind royalty on electricity sales. Argentia Capital Inc. (ACI), the Port’s 50/50 partnership with investment company Torrent Capital Ltd., was a signatory to the agreement, which includes commercial terms for ACI to co-invest in the renewable project as a Limited Partner, as well as receive a gross revenue royalty on ammonia sales.

“ACI is executing on its strategy of working with the Port to capture revenue streams from third party equity and royalty opportunities,” said Wade Dawe, President and CEO of Torrent Capital. “As a partner in ACI, Torrent will take the lead in raising the capital necessary for ACI to exercise its co-investment right in the renewables project.”

Pattern Energy’s plans also include additional phases that could include increasing wind energy production utilizing Crown Lands and the expansion of their ammonia production plant on site at Argentia.

“This agreement sets the stage for Pattern Energy to continue development on this exciting project,” said Dwight Ball, Chairperson of ACI. “Pattern has brought the Port, through its partnership in ACI, in as an equity partner, which will strengthen the Port in its role as the region’s key economic driver.

Incitec Pivot Ltd. – Management Brief

Australia, Management Briefs

Melbourne-based Incitec Pivot Ltd. (IPL), the Australian fertilizer and explosives producer,announced on June 6 that Jeanne Johns will be stepping down as IPL’s Managing Director and CEO. Paul Victor, IPL’s Chief Financial Officer, has been appointed Interim CEO while the Board undertakes a comprehensive search process for a permanent CEO.

Johns has served as IPL’s CEO since 2017. IPL said Johns will continue to work with the Board and Victor until June 30, 2023, to facilitate a smooth transition of her responsibilities. Liza Somers, IPL’s Chief of Staff, has been appointed as Interim CFO. Somers has been with IPL for 10 years, holding key leadership positions in the finance team.  

“I would like to acknowledge and thank Jeanne for all her efforts and commitment to our company over the past five and a half years,” said IPL Chairman Brian Kruger. “She leaves the company in a very strong financial position and with a solid platform for future growth. Jeanne led the organization through the very challenging COVID-19 pandemic and has been instrumental in developing our decarbonization strategy that has received the strong support of our shareholders.”

Kruger said Jones also led the company through some significant transactions that will create long-term value for shareholders, including the urea offtake agreement with Perdaman Fertilisers and Chemicals Pty Ltd. (GM May 7, 2021) and the recently announced sale of the Waggaman, La., ammonia plant to CF Industries Holdings Inc. (GM March 24, p. 1).

Pursell, Marion Ag Form Marketing Agreement

Featured, News, Pacific N.W.

Pursell Agri-Tech LLC and Oregon agricultural retailer Marion Ag Service Inc. announced on June 6 that they have entered into a strategic marketing agreement that gives Marion market exclusivity to PurKote controlled-release fertilizers, which will be available through Marion Ag agronomic distribution and blending services within 11 states in the western US.

The two organizations have partnered to develop a predictive release software called MASterGraph, which will assist in developing custom-tailored nutrient delivery plans that improve crop, environmental, and financial outcomes for agricultural, turf, and ornamental customers.

“Our vision is to empower customers to succeed in feeding and beautifying the world,” said John Hockett, CEO of Marion Ag Service. “This partnership with Pursell brings that vision into focus and supports our strategic initiative of adding value to our products to increase our geographic reach. We have been working with Pursell controlled-release fertilizers since the mid-90s and are excited to solidify our partnership with them.”

Pursell has been focused over the last five years on developing its customer base east of the Mississippi, said Allen Sanders, Pursell’s Chief Operating Officer. This includes the launch of new production facilities in Savannah, Ga., (GM May 28, 2021) and St. Thomas, Ont. (GM Sept. 3, 2021), in addition to the company’s 150,000 st/y production plant in Sylacauga, Ala. (GM June 8, 2018).

“As we look westward, Marion Ag is the ideal partner to bring the significant market coverage and deep customer relationships needed to successfully develop those markets,” said Sanders. “Our long-standing relationship affirms that our two companies are a great fit culturally, and we know that this will be a great partnership.”

The marketing agreement will begin this summer, the companies reported, with Marion Ag providing a full suite of Pursell products to its customers in Q3 2023.

Based in St. Paul, Ore., Marion Ag is a family-owned business founded in 1976 by Bob Hockett. The company’s three core focus areas are Technical Services, Soil Health, and Nutrient Delivery. Marion received The Agricultural Retailers Association’s Retailers of the Year Award in 2022 (GM Dec. 2, 2022).

BRANDT Inc. – Management Brief

Eastern Cornbelt, Management Briefs, Specialty

Illinois-based BRANDT Inc., a professional agronomic retailer and manufacturer of specialty ag products, on June 5 announced a number of promotions and a reorganization of the company’s marketing function to support rapid global growth.

Rod Riech, current Marketing Director, Agronomic Services, is being promoted to Senior Marketing Director, North America, a new role in which Riech will help manage and lead BRANDT’s US marketing team. He will continue to report to Karl Barnhart, BRANDT Chief Marketing Officer.

Jared Brown, current Events Manager, is being promoted to Marketing Director, Agronomic Services, where he will be responsible for marketing and community relationships within BRANDT’s central Illinois retail business. In addition, Alex Lovdahl, current Customer Experience Manager, is being promoted to Marketing Director, Insights & Analytics, a new role designed to help bring a data-driven approach to marketing by identifying industry trends, leading research projects, and mining BRANDT’s customer and prospect databases. Both Brown and Lovdahl will report to Riech.

“I’m thrilled to announce these changes,” said Barnhart. “We’ve built an incredible marketing function, with creative, dedicated professionals who deliver every day. These changes reward the team’s good work, build a more responsive leadership structure, and enable us to support our business partners as we grow the business and delight our end customers together.”

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