UPDATED: 08/08/2018 — see Change Log

OWNER: EuroChem Louisiana LLC (EuroChem Group)
PROJECT: Greenfield nitrogen fertilizer plant[memberful does_not_have_subscription=”1314-ammonia-industry-annual-subscription,1311-ammonia-industry-monthly-subscription,3338-ammonia-industry-30-day-subscription”]

COST (reported): $1.5 billion
JOB CREATION (reported): 200 permanent, 2,000 construction
START-UP DATE (reported): Not announced

CAPACITY	USGS[1]	COMPANY[2]	PERMIT[3]	ADJUSTED[4]
Ammonia		None given	[Membership required]	[Membership required]
Units: stpd, stpy, mtpd, mtpy = short/metric tons per day/year. [1] United States Geological Survey (USGS) Mineral Yearbook, Nitrogen gives capacity in metric tons per year, calculated as “engineering design capacity adjusted for 340 days per year of effective production capability,” rounded to three significant digits. Source: most recent year, Table 4: Domestic Producers of Ammonia, http://minerals.usgs.gov/minerals/pubs/commodity/nitrogen/. [2] No capacity data yet from company announcements or press reports. [3] [Membership required]. Sources: linked below. [4] [Membership required]. See Methodology.

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SUMMARY STATUS: Planning phase
EuroChem has been planning an ambitious entry into the US fertilizer industry, developing one of the largest nitrogen complexes on the continent. However, there’s been no public news of progress since 2017. The company didn’t announce many details but the vast scale of the project was disclosed in permit documents, including applications for air and water permits in 2016, both of which are ongoing. EuroChem announced a MOU toward an EPC contract in April 2015. Awaiting the full EPC award announcement and a final investment decision from EuroChem’s board.

PLANT I:
COST: $1.6 billion
JOB CREATION: 200 permanent, 2,000 construction
START-UP DATE: 2022 earliest estimate, originally 2017
LIKELIHOOD: Possible — see Methodology

PLANT II:
COST: $1.965 billion
JOB CREATION: 200 permanent, 2,000 construction
START-UP DATE: 2024 earliest estimate
LIKELIHOOD: Unlikely — see Methodology

CAPACITY	USGS[1]	COMPANY[2]	PERMIT[3]	ADJUSTED[4]
Ammonia			PLANT I: 2,700 mtpd GROSS 705 mtpd NET PLANT II: 2,700 mtpd GROSS	PLANT I: 985,500 mtpy GROSS 257,325 mtpy NET PLANT II: 985,500 mtpy GROSS 0 mtpy NET TOTAL: 1,971,000 mtpy GROSS 257,325 mtpy NET
Urea			PLANT I: 3,500 mtpd NET PLANT II: 3,500 mtpd GROSS 2,400 mtpd NET (granulated)	PLANT I: 1,277,500 mtpy NET PLANT II: 1,277,500 mtpy GROSS 876,000 mtpy NET TOTAL: 2,555,000 mtpy GROSS 2,153,500 mtpy NET
Nitric Acid			PLANT II: 1,250 mtpd GROSS	PLANT II: 456,250 mtpy GROSS
Ammonium Nitrate			PLANT II: 1,600 mtpd GROSS	PLANT II: 584,000 mtpy GROSS
UAN			PLANT II: 3,550 mtpd	PLANT II: 1,295,750 mtpy
Units: stpd, stpy, mtpd, mtpy = short/metric tons per day/year. [1] United States Geological Survey (USGS) Mineral Yearbook, Nitrogen gives capacity in metric tons per year, calculated as “engineering design capacity adjusted for 340 days per year of effective production capability,” rounded to three significant digits. Source: most recent year, Table 4: Domestic Producers of Ammonia, http://minerals.usgs.gov/minerals/pubs/commodity/nitrogen/. [2] No capacity data yet from company announcements or press reports. [3] Air permit documents. Sources: linked below. [4] Adjusted Capacity is in metric tons per year assuming operations for 365 days per year; based on permit documents. See Methodology.

FEEDSTOCK: Natural gas
END PRODUCTS: Ammonia, Urea, UAN

RESEARCH NOTES:
In July 2013, EuroChem announced that it was considering building its first US-based fertilizer plant, a $1.5 billion ammonia-urea greenfield. The company said it would make its investment decision “within the next year.” We’re still waiting for that final investment decision.

In March 2017, however, the company provided its first comments on the project since April 2015, confirming that EuroChem intends to build the plant and expects to make its decision “within the next two years,” with the precise timing dependent on “market conditions.” For some analysis on those market conditions, see my March 2017 EuroChem update.

Don’t write off this issue. We have a plot of land, we carried out a feasibility study, the matter concerns nothing but the market conditions. We will certainly build it, but when — it will be an internal solution. We have a plan to build three or four plants. First we are building in Russia, and within the next two years will decide upon [the Louisiana plant].
EuroChem CEO Dmitry Strezhnev, Russian Construction: EuroChem to decide on plant construction in USA within two years, 03/14/2017

Over the last few years, EuroChem’s ambitions have grown: this is now a huge project.

According to permit documents filed with LDEQ, the site will include two world-scale ammonia plants: Plant I will produce ammonia and urea, and Plant II will produce urea and UAN.

Construction activities are planned to commence in 2017, with the construction of Plant I along with supporting utilities and loading operations anticipated to be completed in 2019. Construction of Plant II is anticipated to commence upon start-up of Plant I.
Louisiana DEQ: EuroChem LPDES permit application, 12/12/2016

Given that construction is not close to beginning, as of H2 2018, I estimate the earliest possible start-up date for Plant I would be 2022, with Plant II in 2024.

With potential annual output of over 3.5 million metric tons of product, once Plant II is operational, EuroChem’s Edgard nitrogen complex could be one of the largest in North America – second only to CF Industries’ Donaldsonville complex by ammonia capacity.

EuroChem submitted its initial Title V and PSD air permit application in September 2015, and then submitted a substantially revised application in November 2016, “in order to reflect the most current facility design.” In December 2016, EuroChem also submitted its LPDES water permit application, estimating its water use at 15 million gallons per day for Plant I alone, and 26 million gallons per day for both plants. LDEQ has yet to issue any final permits.

The November 2016 air permit application included a great deal of new emissions modeling data but, of note, two alterations from the original documents illustrated EuroChem’s broader strategic plans.

First, EuroChem has renamed one area of the plant “Imported Fertilizer Storage,” with an anticipated throughput of 2 million tons per year. Second, EuroChem has added a new area of the plant called “Imported Ag Products,” which includes receiving, handling, and loading operations for imported “grains and other agricultural products received by ship, barge, truck or rail,” which will be stored in silos “and then loaded out via marine vessels.” These two plant areas demonstrate EuroChem’s ambitions for the Edgard complex to function as an international storage and distribution hub, as well as a production site.

EuroChem Louisiana LLC was established as the operating entity, although permit documents state that EuroChem Trading USA Corporation will “construct, operate and maintain” the new plant.

EuroChem Trading USA is one of the group’s established distribution arms; it is based in Tampa, FL, and it already does significant business: North America represents 10% of total group sales – more than 1 million metric tons of fertilizer in 2014 – according to EuroChem’s 2014 Annual Report, and “almost a quarter of our nitrogen sales in 2013.” The Louisiana plant is therefore the “next logical step to establish our production closer to our customers.”

EuroChem plans for the Edgard facility to “serve as both a manufacturing and distribution center,” selling into “the US and other markets.” EuroChem has not released further details of its distribution plans out of Louisiana, but it already has significant global assets, including ports on the Black Sea, Barents Sea, and Gulf of Finland, as well as two Panamax freighters (75,000 ton capacity), and distribution arms across the globe, including in Mexico and Brazil.

In a move that seems to anticipate a need to further derisk the Louisiana investment, in October 2015, EuroChem announced that it had purchased Bentrei Fertilizer, a marketing and distribution company based in Tulsa, OK. This allows EuroChem to use Bentrei’s “established relationships with local customers as the Group seeks to expand its presence in the US.”

In fiscal 2015, Bentrei distributed “over 1 million short tonnes of product to more than 530 customers.” I don’t know to what extent EuroChem has worked with Bentrei in the past, but EuroChem’s permit documents state that “EuroChem already imports into the U.S. around 610 thousand [metric] tons of urea and 660 thousand tons of UAN on an annual basis.” These combined sales numbers wouldn’t be enough to distribute all of the Edgard plant’s potential output, but they make an excellent start – especially for Plant I.

EuroChem’s original 2013 announcement implied four years of planning and construction – at that time, Plant I was the only plant being talked about.

EuroChem’s initial permit application had said that “construction activities will commence in 2016, with the construction of Plant I along with supporting utilities and loading operation anticipated to be complete in 2019. Construction of Plant II is anticipated to commence upon start-up of Plant I,” and last “at least four years.” As stated above, the timeframe has certainly shifted back a few years, with construction yet to begin.

Permit documents do not specify the technology licensors for the Edgard facility, except that the urea plant will use the Stamicarbon process.

EuroChem had been discussing the project with Louisiana State since August 2012 and has secured State incentives, including a “$6 million performance-based grant to offset the costs of site infrastructure improvements,” workforce training program (LED FastStart), and unspecified tax exemptions. EuroChem’s original incentive package from the Louisiana Department of Economic Development required that “EuroChem must spend at least $150 million on the project and begin plant construction by the end of 2016,” although I do not know if this has been renegotiated for the revised schedule.

EuroChem’s budget numbers may optimistic, however. The company itemizes the cost for each plant while demonstrating the project’s social and economic benefits. Plant I ($1.6 billion total) includes an ammonia plant ($726 million), urea plant ($374 million), and infrastructure / other ($500 million). Plant II ($1.965 billion) includes plants to produce ammonia ($726 million), urea ($352 million), nitric acid ($127 million), ammonium nitrate ($55 million), and UAN ($55 million), as well as a lot more infrastructure / other ($650 million). The original cost estimate for the project had been around $1.5 billion, but that was just for one plant.

In April 2015, EuroChem announced a joint MOU with two Italian companies, Maire Tecnimont (which owns Stamicarbon) and SACE, under which each company will, respectively, “submit its proposal to undertake engineering, procurement and construction services” and “evaluate issuance of credit insurance policies” for five new ammonia-urea plants: the Louisiana plant, plus three in Russia (some already underway) and one in Kazakhstan.

In April 2015, EuroChem also announced its long-awaited decision on the proposed location: a 945 acre site on the Mississippi called Goldmine Plantation, in St John the Baptist Parish. By October 2015, this site had expanded somewhat, to 1,022 acres in total, including 69 acres of the Glendale Plantation (a few acres of which is technically in St Charles Parish).

The company had previously been considering two sites in Louisiana. In January 2014, EuroChem had paid $12 million to purchase a 2,105 acre site from the State of Louisiana: Point Clair Farm, in Carville, Iberville Parish. EuroChem had previously deposited the purchase amount in escrow, but actual payment was necessary for EuroChem to keep its options open in the face of other prospective buyers for the land. For Louisiana, the $12 million was “used as part of the current fiscal year budget.” EuroChem will now resell the Iberville property, having invested “about $500,000 in site studies and improvements.”

In March 2015, a Bloomberg article quoted EuroChem CFO Andrey Ilyin as saying “the decision on the project is delayed due to changes on the financial markets, namely affected access to credit resources … The ruble’s devaluation also made development of such projects more attractive in Russia.” Bloomberg published this article under the headline “EuroChem Shelves $1.5 Billion U.S. Plant as Sanctions Bite,” which was misleading. At the time, EuroChem reps claimed that the article suffered from “subjective interpretation by the Bloomberg translator.”

EuroChem was not targeted by sanctions, in part because it had recently reorganized as a Swiss holding company, and “is able to get financing from international banks.” The primary impact of sanctions on EuroChem’s operations may be the devaluation of the ruble – although falling global oil prices and a strengthening US dollar are perhaps more important drivers of that.

The weak ruble improves EuroChem’s ability to finance capital expansion projects within Russia, but not in the US. This is because EuroChem spends most of its cash in Russia, but earns most of its revenues in Europe, the Americas, and Asia: “Approximately 60% of Group CAPEX is incurred in Russian roubles,” whereas only about 20% of sales come from within Russia (in 2014, for example, 38% of sales came from Europe, 10% from North America, and 10% from Asia).

The company estimated that the devaluation of the ruble would save it an estimated $700 million US dollars in 2015: $511 million and $190 million in operating and capital costs respectively (see page 10 of EuroChem’s 2014 IFRS Results Conference Call presentation, from February 2015).

So, devaluation was a good thing for EuroChem: within the borders of Russia, it had more cash.

Whether the company will ultimately decide to spend its dollars on the new plant in the US, however, is another question, which may depend on future USD:RUB exchange rates, which I won’t try to forecast. EuroChem is already expanding massively within Russia, but investing capex in the US might be much less attractive from an economic perspective – I suspect, however, that EuroChem sees this as a highly strategic project.

EuroChem, established in 2001, was a private Russian company until it reincorporated in Switzerland in 2014. It was completely owned, through a Cypriot holding company and other shell entities, by chairman Andrey Melnichenko and CEO Dmitry Strezhnev, who had respective shareholdings of 92.2% and 7.8% as of September 2012 (according to EuroChem’s $750 million Eurobond prospectus). However, unlike some oligarchies, EuroChem seems committed to financial transparency: it reports its results under IFRS with the explicit aim of building up investor confidence for its future IPO. In April 2015, EuroChem announced a new Board of Directors, including an independent Chairman. On top of these moves toward stronger corporate governance, EuroChem also seems to have a surprisingly robust commitment to health and safety, having made significant investments in environmental improvements across its operations.

EuroChem presently operates three nitrogen fertilizer plants, two in Russia and one in Belgium. As of 2015, its Russian plants, Novomoskovskiy Azot and Nevinnomysskiy Azot, have a combined ammonia capacity of around 3.0 million metric tons per year; the Antwerp plant purchases ammonia for upgrade to NPK/AN/CAN. EuroChem also operates three phosphate plants, two in Russia and one in Lithuania, with a combined capacity of around 2.4 million metric tons per year of DAP/MAP. It has two potash projects currently under construction, with a combined capacity of around 8 million metric tons per year. Additionally, it produces its own natural gas in Russia, through Severneft Urengoy, with a capacity of 1.1 billion cubic meters per year (providing about 25% of its annual ammonia feedstock requirements) and 50 billion cubic meters proven reserves.

EuroChem has been following an aggressive growth plan over the last few years, through both capex expansions and acquisitions, like the 2012 purchase of BASF’s nitrogen fertilizer plant in Antwerp. It completed a 117,000 mtpy expansion of its ammonia plant at Nevinnomysskiy in Q4 2014 ($80 million capex) and has announced “up to 1.0 [million mtpy] of new state-of-the-art ammonia capacity in Russia by 2017,” with a new $1 billion KBR Purifier ammonia plant at Kingisepp, which would be sufficient to “bring us to full self-sufficiency in ammonia production.”[/memberful]

View larger map with all ammonia plants.

ADDRESS: 1651 Highway 18, Edgard, LA 70049, United States

WEBSITE: http://www.eurochemgroup.com/

REGULATORY SOURCES:

• USGS: Minerals Yearbook, Nitrogen [RECENT / ARCHIVE]
• Air Permit Documents: LDEQ document search [LINK – search AI# 197717]

NEWS SOURCES:

• 03/14/2017: Russian Construction: EuroChem to decide on plant construction in USA within two years [LINK]
• 10/28/2015: Eurochem press release: EuroChem Acquires US Fertilizer Distributor [LINK]
• 04/28/2015: Eurochem press release: EuroChem Selects Site for Louisiana Fertilizer Project [LINK]
• 04/28/2015: The Advocate: EuroChem chooses St. John the Baptist site over Iberville Parish for $1.5 billion plant [LINK]
• 04/10/2015: EuroChem press release: Eurochem, Maire Tecnimont and SACE sign memorandum of understanding for the construction of five fertilizer plants [LINK or LINK (Tecnimont) or LINK (SACE)]
• 03/23/2015: The Advocate: EuroChem, Louisiana officials dispute Iberville plant delay or considering Russia [LINK]
• 03/22/2015: Bloomberg: EuroChem Shelves $1.5 Billion U.S. Plant as Sanctions Bite [LINK]
• 02/05/2015: Louisiana Voice: Russian firm spends $12M for state land it doesn’t intend to use; pledged emissions credits that were key to deal vanish [LINK]
• 05/15/2014: LaPolitics.com: From Russia With Controversy: Lawmakers second guess red money keeping budget in black [LINK]
• 01/27/2014: The New Orleans Advocate: EuroChem acquires Iberville plant site [LINK]
• 07/24/2013: John Helmer (independent Moscow correspondent): Andrei Melnichenko goes to the precipice, risking EuroChem for the benefit of the State of Louisiana, and himself [LINK]
• 07/10/2013: Louisiana Economic Development press release: EuroChem Announces Fertilizer Project In Louisiana That Will Result In More Than 1,500 New Jobs [LINK]
• 07/10/2013: Eurochem press release: EuroChem announces fertiliser project in Louisiana [LINK]