Could Poland fertilizer agreement signal a merger?

Zaklady Azotowe Pulawy (ZAP), Poland’s largest fertilizer producer, and Zaklady Chemiczne Police (ZChP), the country’s second-largest fertilizer producer, today signed a business cooperation agreement.

With the two groups in the midst of privatisation, I wonder if potential purchasers might look to merge the two groups, with all the consequent savings in overheads. ZAP produces nitrogen fertilizer, melamine and caprolactam, while ZChP produces nitrogen phosphorus potassium (NPK) fertilizer and titanium dioxide (TiO2) so there are obvious synergies in terms of prduct portfolio.

Any moves entailing job cuts or plant closures will attract fierce opposition in Poland, where social considerations have stymied previous attempts to rationalise outdated operations.

According to ICIS news, the agreement would initially address possible joint activities in optimising production processes, investing in and repairing fertilizer and ammonia units, and pushing ahead with environmental protection and energy initiatives, the companies said.

It replaced a previous cooperation agreement drawn up in 2008, which was abandoned because of the economic downturn.

Yara takes part in Odessa, Ukraine privatisation

Odessa port

Norway's Yara has applied for tender documents in Ukrainian privatisation. Brave western chemical companies are keen to enter fast-expanding eastern markets even if they are volatile. Yara is teaming up with the Libyan Government!

According to chemie.de, "Yara International ASA has, through a subsidiary, applied to the State Property Fund of Ukraine (SPFU) for receiving the documents for the tender announced by SPFU for the privatisation of Odessa Port Plant (OPP) to be held on September 29.

Yara has filed this application as a member of a consortium also comprising Kulczyk Holding S.A., representing a privately owned investment group, and the Libyan Investment Authority (LIA), an investment fund being 100% owned by the Libyan Government. The filing is only to pre-qualify the consortium for a possible participation in the tender and implies no binding obligations on any of the parties to the consortium. Should the consortium decide to participate in the tender, Yara will hold a minority position in the possible buyer of OPP.

OPP owns and operates two ammonia and two urea plants in Yuchny, Ukraine, with combined annual capacities of approx. 1.1 million tonnes of ammonia and 0.9 million tonnes of urea. In addition OPP owns and operates a major terminal for ammonia and urea, exporting products produced by other Ukrainian plants as well as by some Russian plants.

Libya closes in on Ukraine chemicals plant and farm project

Ukraine has invited Libyan companies to bid for a large fertiliser factory, Prime Minister Yulia Tymoshenko said after talks with her Libyan counterpart, Al-Baghdadi Ali al-Mahmoudi, according to interactiveinvestor.com.
"Ukraine has been trying to sell the Odessa Port chemicals plant for years and had been previously stopped by presidential decrees. This time round, President Viktor Yushchenko is expected to let the auction go ahead later this year.
Libya agreed in May to grow wheat on 100,000 hectares of Ukrainian land and export it back to the North African country, in a deal analysts said was fraught with complications including the purchase of leased lands."

Ukraine is to create a free-trade zone for Libyan investors, according to the forum www.for-ua.com. Prime Minister Yulia Tymoshenko and Secretary of the General People's Committee of Libya al-Baghdadi Ali al-Mahmudi agreed that they may have found a starting point for removing trade barriers between the states that may lead to the creation of free trade zone.

Crisis hit Zaklady Chemiczne Police loses CEO

Poland’s beleagurered second-largest fertilizer producer, Zaklady Chemiczne Police (ZChP) has lost its CEO. According to Reuters Ryszard Siwiec, stepped down last Thursday citing personal reasons.

"Siwiec is the second top official to resign after Police, hit by bad currency bets, high expenses and falling demand, reported losses of $151 million in the last two quarters. The head of the supervisory board Wojciech Drozdz stepped down on Monday."

In June, ICIS news reported that Police was in the process of appointing three new directors to work with the CEO in implementing a crisis-period strategy.

Of the previous four-member management board only CEO Ryszard Siwiec was still in place following the emergence of liquidity difficulties at the company.

Picture credit http://www.biznes.stetinum.pl/pl/wiadomosci/szczecinskie_firmy/Police_bez_prezesa_Ryszarda_Siwca

Iraq petrochemicals industry has a bright future?

Just found a fascinating article on the potential for chemical industry growth in Iraq. It is very difficult to get accurate information out of this country, so the report by the Global Arab Network, quoting the Iraqi National Investment Commission is well worth reading.

It describes the country's existing oil and chemical infrastructure and points out the projected requirement for millions of new homes - a key driver for chemical-industry production. With the West now pulling out, stability will be the key to future developments.

Here is a list of plants in Iraq according to the free ICIS plants and projects database:

Basrah Petrochemical Complex	Iraq	Basrah	Caustic soda	6500 tonne/year	Operating
	Basrah Petrochemical Complex	Iraq	Basrah	Chlorine	6000 tonne/year	Operating
	Basrah Petrochemical Complex	Iraq	Basrah	Ethylene	132000 tonne/year	Operating	Thyssen Rheinstahl Technik GmbH
	Basrah Petrochemical Complex	Iraq	Basrah	Polyethylene high density	30000 tonne/year	Operating
	Basrah Petrochemical Complex	Iraq	Basrah	Polyethylene low density	60000 tonne/year	Operating
	State Company of Fertilizers Southern Region	Iraq	Khor al Zubair	Ammonia	350000 tonne/year	Not known	Mitsubishi Heavy Industries Ltd - (MHI)
	State Company of Fertilizers Southern Region	Iraq	Khor al Zubair	Ammonia	350000 tonne/year	Not known	Mitsubishi Heavy Industries Ltd - (MHI)
	State Company of Fertilizers Southern Region	Iraq	Khor al Zubair	Urea	560000 tonne/year	Not known	Mitsubishi Heavy Industries Ltd - (MHI)
	State Company of Fertilizers Southern Region	Iraq	Khor al Zubair	Urea	560000 tonne/year	Not known	Mitsubishi Heavy Industries Ltd - (MHI)

Here are some excerpts from the report:
"The southern oil regions are anchored by Basrah and the ports. In Basrah, the State Company for Petrochemical Industry (SCPI) operates the country’s largest petrochemical processing facility, plus a fertilizer company. However, much of the infrastructure of the plants is now outdated. Throughout the 1990’s, the Basra complex lacked access to new technology, spare parts or investment. Investment is needed to transform the Basra complex into a state-of-the-art facility.

"Existing infrastructure makes Basra an obvious location for the industry to expand. In addition, Iraq’s primary deepwater port is nearby at Umm Qasr. Basra is also linked by rail and expressway to Baghdad, with the Al Daura Refinery and northern Iraq.

"The demand for petrochemical products in Iraq is substantial. The range of possible products that could be produced in Iraq will find a ready market, whether it be fuels, lubricants, plastics, fertilizer or chemicals in both international and local markets.

"Examples of growing demand are below:
Production needs (PVC pipes, gaskets and injection moldings)
The Iraqi National Investment Commission believes that the construction industry will be booming for years to come. For example, the Ministry of Reconstruction and Housing estimated a domestic need to build three million new homes by 2015. In addition, the World Bank estimated that Iraq will need $18 billion in infrastructure projects before 2007. With this high level of construction happening in Iraq, PVC pipes and other plastic building components will be in high demand.

"The Ministry of Oil plans to double refining capacity by the end of 2010, which points to a sizeable increase in demand for soft and hard plastics used in refinery facilities.

"Product packaging
As domestic production of foodstuffs and other products increases and diversifies, product packaging will have to meet this increased demand. Boxes, crates, packaging, film, tape and additional products made from plastics and other derivatives will be in demand.

"Agriculture
There is great potential to increase production in the agricultural sector. As agricultural production expands, the need for fertilizers will need to keep pace. There are also export opportunities for fertilizers. Agricultural plastic film used to increase crop yield can also be produced in the Basra petrochemical complex; demand for the product should grow in tandem with demand for fertilizer.

"Basic Plant and Port Infrastructure
A large petrochemical complex in Basra includes several plants, producing propane, butane, liquefied natural gas, ethylene, high- and low-density polyethylene, chlorine, PVC, and hydrochloric acid. The seven-unit complex is operational and an independent review identified the potential for ISO 9000 quality control certification.

"Basra offers significant port capacity for exports and would allow for industrial clustering as has occurred elsewhere in the world. Basra’s location and superior access to crude oil suggest such a strategy.

"The plant will be assisted by the implementation of plans by the Ministry of Transport to develop a huge deep-water port to the south of Basra with a design capacity of 100 berths, for which bids have been issued. The new port will greatly increase access to the Gulf. The project includes a rail link to Khor Zubayr, and a highway and underwater tunnel along the border with Kuwait; plans to further develop Khor Zabayr and Umm Qasr ports are also underway."