EuroChem

EuroChem

Industry	Fertilizers
Headquarters	Zug , Switzerland
Area served	Worldwide
Key people	Samir Brikho (Chairman) Vladimir Rashevsky (CEO) Kuzma Marchuk (CFO)
Products	Fertilizers
Revenue	US$6.2 billion (2020)
Operating income	US$1,177,888 (2019)
Net income	US$1,017,676 (2019)
Total assets	US$11,659,561 (2019)
Number of employees	27,000 (2020)[1]
Website	www.eurochemgroup.com

EuroChem (Russian: ЕвроХим) is a global producer of commodity and specialty fertilizers. It is a fertilizer manufacturer with its own capacity in all three primary nutrients – nitrogen, phosphates and potash.^[2][3]

It is headquartered in Zug, Switzerland.^[3] EuroChem has manufacturing, logistic and distributing facilities in Russia, Belgium, Lithuania, Brazil, China, Kazakhstan, Estonia, Germany and the USA.^[4]

The company's production facilities are located in Russia, Belgium, Lithuania and China. It has mining activities in Kovdor, Murmansk Oblast, Russia, Usolye, Perm Krai, Russia, Kotelnikovo, Volgograd Oblast, Russia, and Zhambyl Province, Kazakhstan.^[5]

According to the company, it is one of the world’s top-5 leading producers of nitrogen, phosphate, potash and complex fertilizers.^[6] In 2020, EuroChem had sales revenues of US$6,2bn, of which nitrogen US$1.9bn, phosphate US$2.4bn and potash US$0.6bn.^[4]

Assets[]

EuroChem produces nitrogen, phosphate and potash fertilizers, as well as complex fertilizers, iron ore and other industrial products.

It is a company with most production assets in Russia, which moved its headquarters to Zug, Switzerland, in 2015 "to be located in a neutral country to attract capital and talent, and grow globally".^[7] It operates production facilities in Russia and Europe (Belgium, Lithuania) and employs more than 27,000 employees globally.^[5][4]

Nitrogen assets

• Novomoskovskiy Azot (nitrogen fertilizers, urea)
• Nevinnomysskiy Azot (nitrogen and compound fertilizers, ammonia, industrial gases, organic synthesis products)
• EuroChem North-West (ammonia)
• EuroChem Antwerpen (nitric acid plants, NPK and AN/CAN units, nitrophosphoric acid plant)
• EuroChem Migao (potassium nitrate and complex fertilizers)

Phosphates assets

• Lifosa (phosphate fertilizers, premium-quality commercial DAP and feed phosphates)
• Phosphorit (phosphate fertilizers and feed phosphates)
• EuroChem-BMU (phosphate and compound fertilizers)

Potash assets

• EuroChem-VolgaKaliy - Gremyachinskoe deposit, Volgograd region (potash)
• EuroChem-Usolskiy Potash Complex - Verkhnekamskoe Deposit, Perm region (potash)

Ownership[]

EuroChem is 90% controlled by Andrey Melnichenko, who ranks 95th in the Forbes world billionaires list (7th wealthiest in Russia) with his estimated wealth of US$17.9bn as of March 2021 with the remaining 10% owned by EuroChem Group AG.^[8] Melnichenko also controls 92.2% stake in Russian coal producer SUEK.^[9]

History[]

According to S&P Global Market Intelligence (formerly SNL Financial), when EuroChem was founded 20 years ago, "the company was not much more than a pair of Soviet-era nitrogen plants and a dust bowl phosphate mine facing closure" but it was quickly transformed into Russia's biggest fertilizer producer and one of the world's largest largest high-tech fertilizer manufacturers.^[10]

Eurochem bought its first potash mining license in 2005, to develop Gremyachinskoe deposit, located near the town of Kotelnikovo, southwest of Volgograd. It followed up with the purchase of another license area a few years later - the Verkhnekamskoe deposit near Berezniki, Russia's potash stronghold, in 2008. Usolskiy Potash Project produced 2.223 MMT of potash in 2020.^[4]

In Kazakhstan, the company started mining phosphate rock from its Kok-Jon mine in the southeast of the country. Eurochem bought out the Kazakh government's stake in Sary-Tas, a Soviet-era fertilizer plant near Karatau, in the south of the country. The plant had been mothballed since the 1990s, but Eurochem modernized the facilities and built new plants to produce cheap fertilizer for sale in China, India, central Asia and Russia. The company also produces iron ore from its Kovdorsky mine near Murmansk, which is "byproduct", with the majority of the output bought by Chinese buyers.^[10]

According to Bloomberg, "the acquisition of a BASF SE plant in Antwerp by EuroChem for 830 million euros ($930 million) brought in new technologies" for the company. BASF sold its fertilizers activities in Antwerp, Belgium, to EuroChem on March 31, 2012.^[11] In July 2012, EuroChem completed the acquisition of K+S Nitrogen, a company marketing nitrogenous fertilizers with a focus on major customers in agriculture and special crops such as fruits, vegetables and grapes.^[12]

In 2013, EuroChem established a joint venture with Chinese fertiliser producer Migao in order to increase its presence in Asia, producing potassium nitrate and chloride-free complex fertilizers.^[13][14][15]

EuroChem’s US$1 billion ammonia plant, EuroChem Northwest, in Kingisepp, Russia, launched in June 2019, has a production capacity of 1 million tonnes (1MMT) per year, ensuring EuroChem’s full self-sufficiency in ammonia. The company approved the construction of EuroChem Northwest 2, a new 1.1 MMT ammonia and 1.4 MMT urea plant, on an adjacent site in Kingisepp, Russia.^[16][17]

On August 2021, EuroChem scored a deal of $410 million with Norvegian chemical company Yara International to take on the Serra do Salitre phosphate project with 350 million tonnes of deposits in Minas Gerais state in the South-West of Brazil. By August 2021, the project is by half ready to be placed under production by 2023.^[18]

Environment[]

Technology[]

According to Bloomberg, the company has closed water or steam recycling at its facilities. It uses a technology which limits the water vapour release and enables byproduct heat to warm its fertilizers.^[6]

According to the company, Eurochem produces specialty fertilisers that allow slow release of nutrients into crops which limits adverse environmental impact. Its enhanced-efficiency fertilisers (EEFs) reduce nitrogen leaching into soil, decrease greenhouse gas (GHG) and hazardous emissions (nitrous oxide, ammonia) into the air and water upon application.^[19]

Its fertilizer, Entec 26, was recognized by a carbon exchange foundation in Switzerland, marking the first time the contribution of advanced fertilizers to reducing agricultural emissions was acknowledged.^[20]

EuroChem cooperated with Coca-Cola and other beverage companies at its nitrogen plants capturing CO2 produced each year and processing it using state-of-the-art purification technology to supply for production of carbonated drinks.^[6][21][22]

The Baltic Sea[]

EuroChem’s US$1 billion ammonia plant, EuroChem Northwest, in Kingisepp, Russia, officially launched in June 2019, was built on a brownfield site and features a closed water recycling system to prevent water discharge into the Baltic Sea. It uses 75% of waste water from EuroChem’s Phosphorit phosphate plant nearby.^[23]

The Helsinki-based John Nurminen Foundation, a Finnish foundation specialized in Baltic Sea protection, has been working with EuroChem on the Baltic Sea ecology since 2012.^[24][25]

Financing[]

In April 2013 the Russian newspaper Vedomosti reported that EuroChem was looking to take a loan of US$700 million to finance its current development projects.^[26] In August 2013, EuroChem announced that it has signed a new debut US$1,3 billion unsecured loan facility on a club basis. The proceeds were used to pay down the outstanding amount under EuroChem's 2011 US$1.3 billion pre-export facility.^[27]

S&P Global Market Intelligence (formerly SNL Financial) reported in 2015 that "the company has managed to tap investors in recent years, including a US$750 million project finance facility, a US$1.3 billion syndicated loan and a US$750 million Eurobond issue". According to Olivier Harvey, then-head of investor relations at the company, "despite the whopping US$7 billion price tag for both potash projects, much of the outlay can be funded over time by Eurochem's free cash flows", while "the devaluation of the Russian ruble was delivering huge cost savings to the company's CapEx program."^[10]

According to Fitch, in 2016, Eurochem "signed an agreement for a perpetual shareholder loan of up to USD1 billion" noting that its "diversification into all three nutrients (nitrogen, phosphate and potash), vertical integration and strong cost position support a business profile commensurate with an investment grade rating" and that its scale "is on a par with that of large fertiliser peers" such as CF Industries et al.^[2]

In February 2017, Andrey Melnichenko revealed that EuroChem was not planning an IPO in the next few years as the company "has sufficient funds to independently finance its investment program^[28]".

In June 2018, Moody's assessed that it "positively notes that EuroChem has a contractual loan agreement with its majority shareholder, which allows it to attract up to $1 billion of a perpetual zero-interest loan to support its liquidity." It noted that, according to its rationale, EuroChem's strengths included: (1) the company's strong business profile, underpinned by its large scale of operations, diversified product mix, and established positions in the global and regional fertilizer markets; (2) sustainable cost competitiveness, which supports relatively high margins, additionally helped by the weakness of the rouble; (3) potential for deleveraging; and (4) proved access to long-term external funding, including a shareholder loan facility, which support liquidity.^[29]

Litigation[]

Shaft Sinkers[]

In 2012, Eurochem filed suit against Shaft Sinkers, the London-listed South African mining engineering company that had been contracted to construct the shafts at the EuroChem-VolgaKaliy potash site. Soon after starting work on the cage shaft, things started to go wrong; the grouting technology that Shaft Sinkers used failed, and the shaft later suffered water inflow. According to EuroChem's Clark Bailey, the failure and the flooding of the shaft that led to the lawsuit delayed completion at Volgakaliy project by more than two years.^[10]

In 2015, EuroChem-VolgaKaliy won in the Swiss Arbitration Court, which awarded EuroChem-VolgaKaliy around $140m in damages and legal costs.^[30] In 2016, EuroChem settled US$1 billion suit against Shaft Sinkers over potash shaft failure. Shaft Sinkers was later declared insolvent, and its listing on the London Stock Exchange was withdrawn.^[31]

Ukraine anti-dumping duties[]

In September 2019, the WTO Appellate Body ruled that anti-dumping duties imposed by Ukraine on ammonium nitrate imports from Russia are violating WTO rules, specifically Article 5.8 of the WTO Anti-Dumping Agreement.^[32] The court thereby upheld Russia's claim that Kiev should have excluded EuroChem, arguing that its dumping had been minimal.^[33]

Peers[]

• The Mosaic Company
• Potash Corp
• K+S
• CF Industries
• Uralkali
• Phosagro
• Yara International
• Israel Chemicals
• Agrium

References[]