Compass Minerals to expand Ogden SOP capacity

OREANDA-NEWS. April 29, 2015. Compass Minerals will increase SOP production capacity at its Ogden, Utah, facility to 550,000 st/yr, up from current levels of 400,000 st/yr, by 2017.

Of the new capacity, about 325,000st will come from Ogden's solar evaporation ponds with another 225,000st produced using a proprietary process that converts MOP into higher-value, low-chloride SOP. Compass plans to spend \\$80-90mn on the expansion, which will also increase the plant's compaction capabilities. Compacted SOP typically garners higher prices than other grades and is favored in North America, the company said. Compass remains the sole domestic producer of SOP and US offshore imports of the product have been about 75,000t in recent years.

Compass continued to rely on MOP-based production in the first quarter of 2015 to make up for a less-than-expected pond-based production from the 2014 evaporation season. Plant nutrient sales volumes, which include micronutrient products, for the quarter actually dropped 9pc from the same time in 2014 to 97,000st because of production limitations. However, a 23pc rise in average sales prices to \\$759/st resulted in a 28pc jump \\$20.8mn in the segment's operating profit. SOP sales prices specifically increased 19pc year-over-year from \\$616/st to \\$730/st. Compass introduced a \\$50/st price increase at the beginning of 2015, which was widely accepted because of strong demand and tight supply in North America.

"Our ability to increase and hold price has enabled us to withstand higher production costs at Ogden," Compass chief executive Fran Malecha said.

Compass expects to sell 80,000-90,000st of plant nutrients in the second quarter of 2015 at average prices of \\$750-780/st. It reduced its full-year sales volume expectations to 380,000-410,000st, down from 390,000-420,000st. Compass sold 396,000st of fertilizer in 2014, a 26pc increase from 2013.

Higher production costs are expected for 2015 as Compass keeps utilizing MOP-based production. The company expects costs to ease in 2016, assuming a return to normal yields from its 2015 pond evaporation season.

The producer forecasts stable SOP prices over the next year, with upside limited by flat-to-weak MOP prices. Exceptional drought in the key SOP market in California could also potentially affect demand, but so far Compass has not seen any impact to its business.

"The longer the drought goes, the more uncertain I think it is for everybody. We'd love to see some increase in both the rainfall and snowpack and get back to a more normal situation out there," Malecha said. "But at this point we aren't seeing a negative from the California drought."

The company's first quarter profit grew 21pc year-over-year to \\$60.6mn. Similar to its fertilizer business, Compass' salt segment saw higher prices offset lower year-over-year sales volumes.