I now hand you over to your first speaker, Hans Zayed. Please go ahead.
Good afternoon and good morning to our U.S. audience. Thank you very much for joining the OCI and the third quarter 2020 conference call. With me today are Ahmed El-Hoshy, our Chief Executive Officer, and Hassan Badrawi, our Chief Financial Officer. As you have seen, we published our results this morning. On this call, we will review OCI's key operational events and financial highlights for the quarter, followed by a discussion of OCI's outlook. As usual, at the end of the call, we will host a question and answer session. As a reminder, statements made on today's call contain forward-looking information. These statements are based on certain assumptions and involve certain risks and uncertainties. Therefore, I'll refer you to our disclaimer about forward-looking statements. Now let me hand over to Ahmed.
Thank you, Hans. Let me start by covering our top priority, safety. We're pleased that our safety performance continued to be best in class, despite the prevalence and challenges of COVID-19. The pandemic has to date not had a direct impact on our operations, largely thanks to the vigilance of our employees across our platform. We're also fortunate that both of our main industries have been more resilient than others, and that our products were all classified as essential during COVID-19, meaning that there was minimal disruption to our supply chain and sales order books. Our recordable 12-month rolling incident rate was 0.23 incidents per 200,000 man-hours as of September, a significant improvement from 2019.
This continues to be one of the lowest in our global industry, but of course, our goal remains to prioritize process safety and to reduce occupational safety incidents ultimately to zero for all our assets across the globe. This is even more important now that COVID-19 continues to dominate our lives, with many countries going back into lockdown. On to results. Despite these ongoing challenges during the quarter and significantly lower selling prices of both nitrogen and methanol compared to the previous year, our production, commercial, and supply chain teams did an excellent job under such circumstances and established healthy volume growth. Consequently, we delivered resilient results during the quarter. Our volumes increased 30% during the third quarter and increased 27% in the first nine months of 2020 year-on-year.
On a like for like basis, excluding Fertiglobe, our Q3 2020 volumes increased by 9% in comparison to the previous year and 8% on a year-to-date nine-month basis. On the nitrogen side, we benefited from the contribution from Fertiglobe, which has been consolidated since Q4 2019, we also increased our volumes elsewhere. This growth was driven by improvement in operational performance compared to 2019, such as our state-of-the-art Iowa facility pushing its maximum proven capacity to higher levels as a result of stabilization and debottlenecking of production last year. DEF sales were particularly strong and recovered to record levels during the quarter as well. We saw our nitrate volumes in Europe increase during the third quarter year-over-year, which followed a record second quarter and overall an increase of 23% year-to-date.
Our industrial end markets were weaker, which was partly the cause of a 15% year-over-year drop in ammonia volumes, but we have seen these end markets recover since then. In the first half of this year, our nitrogen business was the main driver of this growth, but I'm pleased to say that this quarter we've also had strong performance in methanol, as we record an increase of 39% in own produced methanol sales volume in Q3 2020 compared to the same period last year. We achieved record production volumes across all our facilities despite a preemptive shutdown at our Texas facilities in late August and early September for Hurricane Laura. At OCI Beaumont, that represented over two weeks and Natgas was approximately one week.
In the Netherlands, we were running both methanol production lines fully for the first time at BioMCN and at rates well above 90% for the quarter. As a result, we expect the methanol business to be a primary driver of volume growth next year. With that, I'd like to turn it over to Hassan to discuss the financial results.
Thank you, Ahmed. I will dive straight into some highlights of our financial results, starting with our P&L. As Ahmed described, during the third quarter, we achieved resilient results. Our consolidated revenues increased by 19% to $752 million, and our adjusted EBITDA was up by 79%, reaching $192 million in the third quarter as compared to the third quarter of last year. Both the nitrogen and methanol segments contributed to this growth in adjusted EBITDA, which reflects the year-on-year growth in sales volumes, which Ahmed mentioned earlier, as well as some benefits from natural gas of just over $20 million, but was partially offset by significantly lower selling prices. We estimate this negative impact on our EBITDA from lower selling prices that have been circa $100 million between Q3 2019 and Q3 2020.
Methanol prices were significantly down year-over-year, and ammonia prices also remained at very low levels during the quarter. I would also like to point out that prices were lower not just compared to the third quarter last year, some were also lower as compared to the second quarter of the current year. For instance, contract methanol prices reached their lows in Q3 due to the lagging effect of contract versus spot movements that have been recovering very well since then, which should bode well for Q4 pricing. Overall, we believe that pricing represents upside in the future. Turning to the balance sheet and cash flow. Free cash flow growth CapEx during the quarter was around breakeven, which reflects our operational performance for the quarter, offset by typical seasonal net operating working capital outflows as we built up inventory in ahead of Q4 applications, notably, Fertiglobe.
Total capital expenditures were around $47 million in the third quarter of 2020, most of which can be attributable to maintenance CapEx. During the nine months, CapEx amounted to $211 million. Our consolidated net debt stood at $3.9 billion as of 30th September 2020, a $77 million increase from the 30th of June 2020, which reflects both a $54 million FX impact on euro-denominated bonds and the build-up of inventory, which I just mentioned. On a quarterly basis, we typically see such fluctuations, which should smooth out over the full year with the completion of the Q4 application season. For the year to date as it stands, we reduced net debt by $145 million and we expect to see cash flow benefits from the reversal of this inventory build-up that we witnessed in Q3.
We continue to optimize our capital structure with a two and a half times oversubscribed dual tranche bond offering, EUR 400 million, $400 million as part of the refinancing of $1.155 billion outstanding bonds. The delta for which was financed through the existing RCFs, which allowed us to create some more pre-payable debt going forward. We have also successfully completed and closed the $385 million refinancing at Fertiglobe, and both transactions were completed in October. There are several benefits to these refinancings. First, we lowered our weighted average cost of gross debt by a further 60 basis points to below 4.5%, which is a 25% improvement from just over 6% at the end of 2017, when we started our capital structure optimization program. This will result in additional cash interest savings of more than $32 million per year annualized from next Q onwards.
The bond offering also extends maturities of the refinanced debt by about two years with the next scheduled bond maturity for OCI N.V. not until 2024, further derisking our business and capital structure. It also gives us more flexibility to reduce gross debt and then capture incremental interest savings from free cash flow generation going forward while maintaining a conservative approach to liquidity access, which remains in the neighborhood of $1 billion between cash on hand and undrawn committed facilities. We will, of course, continue to evaluate opportunities to achieve similar optimization initiatives and further simplify our capital structure. With that, I'd like to hand over back to Ahmed for our outlook and some concluding remarks.
Thanks, Hassan. Concluding the outlook of our business, which despite all the challenges around us is looking much more positive than only a few months ago. I also believe that OCI's asset base, commercial capabilities, and financial standing are well-positioned to manage any near-term volatility if that were to happen. If I start with the outlook for nitrogen markets, our global order book is currently robust based on recent tender awards to Fertiglobe to supply a combined total of almost 700,000 tons of urea to India and to the fast-growing Ethiopian market. We continue to see healthy demand from several major importers across the globe, including India and Brazil in particular, but also other countries. Chinese urea exports were 10% lower than the first nine months of the year, but the pace is rising modestly in the fourth quarter on higher Indian import demand.
Anthracite coal prices in China have started to rapidly recover, which combined with increased demand domestically for stocking ahead of their spring season, has raised prices from the marginal producer, providing support for the global urea market for the balance of the year. Going forward, Chinese export availability is expected to be relatively limited in H1 2021 on the back of the increase in marginal cost and expected recovery in domestic industrial urea consumption. The outlook for corn prices has strengthened recently with approximately 30% increase in corn futures for December 2020 to $4.14 a bushel from around $3.20 in April, as global corn demand has increased, driven by purchases from China, as well as a recovery in demand outlook. The global corn stock to use ratio has declined by 5% in the 2019-2020 fertilizer year, with similar declines anticipated next year, which is also positive for nitrogen markets.
Importantly as well, U.S. farm income is up more than $20 billion from last year, which also supports on-farm operation spending and generates additional income available to pay for crop inputs such as fertilizer. The U.S. fall ammonia season has started, and the weather is conducive for a good fall ammonia run in our core markets, particularly when compared to the unfavorable weather in the conditions we experienced back in 2018 and 2019 in the fall. We're already seeing strong volume movement this week at N7 out of our Wever facility. However, U.S. nitrogen prices overall are trading at severely discounted prices relative to global benchmarks, contrary to where fundamentals should have them trade. Despite being a deficit market, U.S. urea imports continue to be priced below the port of origin in the Arab Gulf by a meaningful discount.
Since July, UAN prices in the U.S. Gulf have made it more favorable actually for Russian and even Trinidadian exports of UAN to go to Europe and still pay the duties rather than going to the U.S. Gulf. As we get close to the season, we expect that fundamentals will start to address these disconnects to supply the spring season. The ratio of ammonia and UAN prices relative to corn pricing on a nitrogen ton basis today are at a decade low. Attractive affordability levels support increased ammonia demand in the ongoing fall season and the UAN and ammonia demand in the spring season. Obviously, coupled with what I said earlier around farm incomes improving, versus the prior year. On the industrial side, demand was impacted by COVID-19, and while there still remains uncertainty, we have seen signs of recovery, primarily driven by China.
Ammonia prices lagged urea, but have started to benefit as a result of the recovery in industrial markets, curtailment of high-cost capacity in Trinidad, and higher feedstock prices as we're seeing globally right now. Melamine demand in our core European markets is also improving, with a markedly tighter supply-demand balance as we go into the end of this year compared to earlier in the year. Moving to methanol markets. The outlook for our methanol end markets has also strengthened. There can be some volatility going forward depending on how this pandemic develops, but U.S. Gulf spot methanol prices have roughly doubled since reaching a bottom below $150 per ton on a spot basis in June to approximately $300 this month, slightly above that actually. Demand for methanol to olefin plants in China has been consistently high on the back of healthy MTO economics.
Global downstream demand has also continued to recuperate steadily as fuel consumption is returning and a pickup in construction and other industrial activity is driving increased demand for derivatives such as formaldehyde. Our step-up in production, as mentioned earlier in Q3, coincided with this recovery in global economic activity as well as methanol demand. Following this record methanol production for OCI in Q3 2020, normalization of production and improved upstream efficiency is expected to drive volume growth in the methanol segments going forward. Turning to natural gas. We are well positioned to benefit from the recent increase in feedstock prices, both in terms of the competitiveness of our cost base, given our U.S. and European assets' energy efficiency, as well as Fertiglobe's significant cost advantages as a result of its fixed price gas supply agreement. In terms of support for our product selling prices, particularly ammonia.
In summary, we believe improving market fundamentals, allied with our continued volume growth into 2021, will deliver improving free cash flow as well as positioning us well in a volatile economic environment. Before we go into Q&A, I'd like to finish with some exciting new projects we have announced today that fit well within our strategy to focus on and develop sustainable products and production. We continuously strive to be a leading environmental steward, especially as our core products, ammonia and methanol, are some of the best-positioned energy carriers in a future hydrogen economy. We are therefore excited that we are working with RWE in the Netherlands on a green hydrogen project to produce renewable methanol, as announced this morning, and we are in advanced talks to develop other projects at our nitrogen facilities in the Netherlands as well in the green hydrogen space.
This morning, we also announced that we are supplying ExxonMobil through subsidiary Esso with biomethanol, which is blended in all of ExxonMobil's fuel sold in the United Kingdom. Through our cooperation with ExxonMobil, we aim to promote the use of biomethanol as a complementary biofuel alongside ethanol to reduce the carbon intensity of road transportation fuels. We also see many opportunities in new applications where this versatile product can be used as an environmentally friendly building block for products such as cosmetics, building materials, as well as paints and resins. Going forward, we will continue to identify, evaluate, and develop more initiatives that reduce our environmental impact and grow our green portfolio. Our focus, of course, on de-leveraging is still very much in place.
We'll look at one or a combination of things, including asset-light opportunities, subsidies, government programs, tax incentives, as well as structuring and using off-takes of green feedstocks to still meet our low CapEx, high free cash flow conversion targets. Of course, our evaluation of ESG initiatives takes both sustainability into account as well as economics. Finally, while we believe our environmental performance is already amongst the best-in-class due to our state-of-the-art asset base being one of the youngest fleets in our industries, we aim to improve by setting long-term ESG targets. We aim to challenge ourselves to further improve by using 2019 as our baseline so that we can achieve a meaningful reduction over our existing environmental footprint.
We intend to announce these targets next year with key decisions and timings based on the scale and focus of government environmental policies in the U.S. and Europe, as well as the Carbon Border Adjustment Mechanism and other government support for green initiatives. With that, we will open the line for questions.
Thank you, ladies and gentlemen. Your first question comes from the line of Christian Faitz from Kepler Cheuvreux. Please go ahead, your line is now open.
Yes, thank you very much. Good afternoon, everybody. Couple of questions from my side, please. I ask them one by one, if that's okay.
From your remarks, I take it there will be no major outages during Q4 or in early Q1. Would that be the right assumption for my modeling? Thank you.
Sure. Thanks, Christian. As you know, from policy perspectives, we don't announce outages so that people don't trade around it on the commercial side. We'll be announcing at the close of Q4 what outages, planned or unplanned, may have taken place.
Okay. Fair enough. Thank you. Second question. How does the free cash flow evolving in 2021, assuming there are no major CapEx projects?
Yeah. On the free cash flow question, obviously, the big determinant is going to be pricing in terms of the level of free cash flow that we generate. As we announced this quarter, over the last couple of months, we've looked at ways to improve our free cash flow profile, and one of them is obviously achieving the higher pricing where we're seeing the industrial demand recover from a very low level in late Q2 and into Q3. The outlook looks a lot better for products such as methanol, ammonia, melamine, which is supportive and brings the nitrogen and methanol markets into a tighter supply and demand balance versus what we've experienced over the last six months. We're looking forward to that.
We've seen new capacity also be delayed for a number of reasons, but one of the main ones obviously being COVID-19 and more impaired economics, which is also supportive of our outlook, which I talked about in the prepared remarks. Q3, you saw almost 39% growth in methanol volumes. That continues to be a focus of ours. I think I've mentioned on prior calls our focus on oversight and doing things that are in our control with regards to regional oversight on our operations in each of our three regions, Europe, the United States, and the Middle East, as well as basically an overall focus on preventative maintenance to improve utilization rates and onstream times overall at our assets.
That'll have a significant effect in terms of our ability to generate additional EBITDA by generating that volume and cover obviously more of our fixed costs. Hassan also mentioned the financing savings that we get the full year benefit of next year versus these savings, which actually only closed I think in early Q4, exactly October. We haven't seen the effect of those yet on our free cash flow or EBITDA to free cash flow waterfall. That's a $32 million annualized benefit. Overall, to pin it down, we haven't given guidance for next year on CapEx, but over the next few years, we anticipate seeing CapEx get to a more stable and lower maintenance CapEx level as you review our entire portfolio on now a more centralized rather than decentralized basis with more of a central team overseeing our product portfolio.
Which should bode well obviously for utilization rates, process safety, occupational safety, but also just how much capital we need to deploy and deploying the right capital in the right places that makes the most economic sense for our assets.
Okay, great. Thank you. I guess I'll leave the methanol disposal question to somebody else. Thank you. That's it from my side.
Thank you. Your next question comes from the line of Thomas Wrigglesworth from Citi. Please go ahead.
Thanks very much for the chance to ask questions. Just on the hydrogen projects. I hear you on the, obviously, the constraints around the balance sheet to date, but could you just share with us, over the medium term, where it's most attractive for you to play? Obviously, we've heard of now your peers as well as competitors talk about being into the ammonia game, but methanol, in my experience, green methanol is a relatively new one. Can you maybe highlight where the attractive end markets are for that? A little bit more color on where you see the potential for green hydrogen. I'll come onto my second question. Thank you.
Sure. Green hydrogen we see a lot of potential on. I think we've had some discussions around it for the last year. It's both kind of public and private sector related. I'll start with the public sector. In Europe, there's basically the ETS program for carbon. That incentivizes those with the European asset base, like ourselves, to look at opportunities over the last several years leading up to this year, around ways to reduce our carbon footprint because it actually pays you to improve efficiencies and look at feedstocks like green hydrogen. Definitely green ammonia is a big focus, and I'll start with that, then get into green methanol.
Green ammonia is a big focus, and I won't rehash a lot of what our peers have said and what we've said around just the advantages of ammonia from a storage transport perspective, and also the fact that it burns very cleanly because it doesn't have any carbon in it. It's an excellent fuel once you have that infrastructure in place. On the green ammonia side, OCI Nitrogen is a very good candidate for that, which is our plant in the Southern Netherlands. We're in discussions now on opportunities around OCI Nitrogen specifically, and they've been going on for quite some while. The other area, which is a little bit behind and more recent than OCI Nitrogen is the Middle East. One of the big costs for these types of projects is getting access to reliable, high load factor, renewable power.
Our assets, for example, those in Egypt, those in Abu Dhabi, even some of those in Texas, have the benefit of being in good areas for both wind and solar generation. Particularly in a country like Egypt, where there's been significant capacity build-out for power over the last half a decade. It's been a political move by the Egyptian government. We're seeing a lot of opportunities close to our plants in Egypt to have access to cheap, reliable power, which could ultimately be converted with our existing ammonia capacity into green ammonia and transported to areas where there may not be as much abundant renewable feedstocks like Western Europe or other locations, or even East Asia. The other advantage of that area is obviously we have significant experience there in terms of building the assets.
We know the landscape and construction costs, if there would be an electrolysis plant, for example, built, whether it's on our balance sheet or on someone else's balance sheet, would be cheaper to build in a country like Egypt than in some more industrialized countries. There are places where construction costs are more expensive. With regards to green methanol, similar to green ammonia, those markets need to continue to develop, and we anticipate them developing over the course of the decade. In terms of the government's other big focus is about where is the carbon charged. Right now it's being charged to those closest to the hydrocarbon, like ourselves and everybody in our industry.
Ultimately, we think as you go further downstream and you have carbon passed on to the final end user, end users will ultimately potentially pay a very slightly higher price because of the small amounts of ammonia or methanol in that product to have a green product ultimately. Those types of pulls from a demand perspective as well as subsidies should afford us the ability to continue to make our asset portfolio more green. With regards to green methanol, one big advantage OCI has is that we're the number 1 producer of biomethanol globally. This is a market that we've been growing over the last five years.
We purchased BioMCN, which helped us establish that footprint in Europe in the middle of 2015 and used what we learned about that market to actually be a large biomethanol producer in Texas, where we produce biomethanol using waste gas as a feedstock, and then we sell that into markets that can pay a premium for that product. We saw the announcement today with ExxonMobil. That's one of a few initiatives we've had, which is in the biofuel space, where you get an additional premium selling a renewable product like biomethanol, a second-generation renewable product because it's made from waste, not made from, for example, on-purpose corn like ethanol, which gets additional credits in the biofuel space. We anticipate those markets to continue to develop. We think it's still in infancy right now with countries focusing on it.
They have renewable energy directives, they have renewable fuel directives, and they're still looking at the different possible products that can be used there. Both biomethanol, green methanol, as well as green ammonia, are all very suitable candidates and stand towards the top of the list for marine fuels, transportation fuels generally, and even general industrial chemical feedstocks that have a renewable base.
Thank you very much. Changing tack onto UAN. You cite in your release that there's been an intense price-based competition in the U.S. Gulf. Can you just clarify for me, is that a function of discounted imports coming into the market? Is that correct? Do you think that's something that the participants, a bit like in phosphates, will bring to the attention of the authorities? Is this something that you're alluding to in your comments that demand will pick up and should normalize out this kind of temporary competition? Thank you.
Sure. I think it's a combination of those factors. On the demand side, UAN, you still need a few million tons to be imported before the spring season. We're seeing an outlook for corn acres improving for the next season, next spring, versus initial estimates a few months ago for UAN. I think as you heard me in prepared remarks say, UAN is at the absolute cheapest level it's been relative to corn in modern history. It's a very attractive product to be used. We think from a demand perspective, the demand will be there. There's been a bit of this basically trepidation from buying early. What we anticipate is over the coming few months to help get the UAN and freight economics and get them into the Midwest, we anticipate that prices should improve on that demand pull from that.
We'll watch how the fall ammonia season progresses as we're well into the midst of that right now. In terms of the reasons behind where the pricing's at, basically what we're pointing out is there's just a disconnect. The economics don't make sense right now that the price in the U.S. Gulf is less attractive for Trinidadian producers that are close by, as well as Russian producers that are further away, than actually going and selling into a country like France, which is a major UAN consumer, that actually would require an anti-dumping duty of anywhere from low EUR 20-EUR 40 a ton being paid for any product sold there.
That's a significant disconnect for the UAN markets overall, and we anticipate that those prices have to come back up and that differential and economics prevail ultimately, where people will think from an economic perspective around how they move product. That coupled with the fact that we've seen gas prices in Europe really increase markedly, triple since the middle of this year, despite UAN remaining flat since the middle of this year in the U.S., there's a disconnect. Also the euro strengthening. There's significant, I think, push from a supply side perspective as well as a demand pull perspective to suggest that UAN should start trading at more reasonable levels relative to where fundamentals and prevailing economics should take it.
Okay, great. Thank you very much. Very helpful.
Thank you. Your next question comes from the line of Lisa De Neve from Morgan Stanley. Please go ahead, your line is now open.
Good afternoon, all. Yeah, first congratulations on your operational performance this quarter. I have three questions. One short one on the first one on tax, maybe I just start with that one first, you can answer and I can ask you the second question. Very topical with the elections, if there were to be a change in U.S. tax policy, how would this affect your tax rate going forward?
Well, as per our previous guidance, as you know, our guidance is to continue to have a very low cash effective tax in the future, in line with historical years. I think for the U.S. context, it's a good question because between our operations in Texas, in Beaumont and IFCo, we have more of a $1 billion of NOLs that can be indefinitely carried forward. Really nothing in the medium term that would impact us in terms of U.S. tax policy. We continue to see that. Also worth highlighting, that in Egypt, a few days ago, I think almost a week ago, the Egyptian parliament passed a new law to reintroduce free zone status for certain sectors, fertilizers as mentioned. Wait and see how that will manifest or which exact companies will be included.
There's a good possibility there that our Egyptian operations again get a sort of a perpetual cover from income tax going forward. That's something we have to confirm. Overall, I think we continue to have a good handle on our keeping low taxes in the future.
Great. Another sustainability question for you related to the European Green Deal. European Commission has some very ambitious, let's say ambitious agricultural targets to reduce fertilizer consumption by 20% by 2030, but has yet to set out any sort of targets on how this is to be achieved. Now, how do you see a 20% reduction in fertilizer consumption possible in Europe? How are you planning to respond to this European request?
It's a good question, Lisa. It's something obviously we've been focused on. We have a couple of case studies in even one or two member states we focus on. Ultimately, the nitrogen is going to need to get in the ground. The use of products like urea inhibitors, as well as maybe potentially more nitrates demand could help achieve that. I will say that obviously in the fall that we ratified a policy at the board, following recent events, in the last few months to take a strict policy to not produce ammonium nitrate. Whether it's insurance and just overall having that tail risk, it's something that we didn't want to be involved in. We haven't done anything with ammonium nitrate as a product.
It does have some advantage from emissions perspective, but we think that as a product, it has significant disadvantages on that tail risk about ensuring that the downstream users appropriately take all the safety mechanisms. I think there's a little bit of a push that could be helpful for products like UAN, like CAN as good beneficiaries of potentially reducing emissions over time, local emissions of ammonia, as well as having a safer fertilizer base that provides the same nutrients that basically the farmers are going to need to achieve food security globally.
Okay. Obviously we all noticed this very nice rebound in methanol prices and sort of recovery in sort of the demand side as well the last couple of months, I can say now. Thinking about things a little bit more structurally, where do you see sort of the largest revenue opportunities or revenue growth opportunities for methanol over the next three to five years, both on the gray side, gray methanol and green methanol? Thank you.
Yeah, methanol took a hit like ammonia took a hit and melamine took a hit and industrial urea took a hit all this year. What we've been seeing starting east and now moving westward, on a short-term basis, the Chinese industrial machine has kind of turned back on in early Q3, European hitting more of a tread also in Q3 as well as the U.S. What we've seen is that methanol on the gray side has continued to find a home and seen good demand growth, on a kind of quarterly basis, not overall year, but on a quarterly basis, kind of quarter-over-quarter, I think we're almost 10% higher in Q3 versus Q2. Next year, we anticipate mid-single-digit methanol demand growth driven by more run rate MTO consumption of methanol as a clean industrial precursor for plastics and other downstream uses of olefins.
As the formaldehyde and acetic acid market continue to grow as well, those are good GDP-linked growth drivers in that space. T he other overall one, which crossovers between green grades, is methanol as a fuel. It's a clean-burning fuel. It's easy to transport, easy to store, like a refined product, and it can be on road transport, like what we're doing with biomethanol, which ExxonMobil has announced today, and other consumers in Western Europe, as well as the green methanol and gray methanol as steps towards getting into that space. For example, there's a pilot project in India that's been ongoing, a little bit delayed with COVID-19, but potentially, having methanol blended with gasoline as a good way to diversify, even just economically, putting the clean attributes of methanol aside, economically diversify and have a cheaper fuel into the Indian markets.
A bit more medium to long term as well, over the next, maybe on the latter part of your date range there, is the marine fuel. At the very least, methanol vessels that carry methanol should be, over time, converted fully into methanol supply. Overall, when we think and people step back and the IMO is taking a look at its carbon targets overall, not just sulfur, which has been the focus through 2020. Looking at carbon targets, both methanol and ammonia are very much up there as top contenders with significant attributes on energy density that make them advantage versus something like a hydrogen base, which I think would just be very difficult. Then with regards to LNG, that also needs to be refrigerated. It's a very big process to refrigerate it, expensive, and it has to be also -200 degrees to get LNG liquified.
Methanol, obviously, is quite easy. It's just not much in terms of adjustment relative to a diesel carrier or a fuel oil carrier. A lot of potential green shoots on that side. Even if you're a drop in the ocean and just how big of a consumer these vessels are for energy, that could be quite significant on a methanol market that's just touching 100,000 tons a year.
Great. Thanks for that.
Yeah.
Thanks for that.
Thank you. Your next question comes from the line of Henk Veerman from Kempen. Please go ahead. Your line is now open.
Hi, good afternoon, gentlemen. I have three questions, if I may. The first one is about the dividend to non-controlling interests, which was $26 million in Q3. How much do you expect to pay to non-controlling interests in Q4? How large is the current dividend accrual to non-controlling interests? That's my first question.
Yeah. With regards to the dividend, obviously, with the consolidation of Persil, there is an impact of incremental leakage that is offset by the access to Persil's cash flow and, of course, the synergies number. We've been talking about how we've been on track with the synergy realization of Fertiglobe that is estimated at north of $60 million, which we're very happy about. There's a little bit of balance there. I think we've disclosed in the past that we all estimate around $140 million of run rate minority leakage reflecting basically our structure. It tends to be lumpy at times. I would say we expect probably to see additional leakage in the next six months. I can't really give you a quarterly estimate.
Part of the reason also for sometimes the delay in the dividends within the JVs, is we're also looking at some prepayment of debt in Algeria, which, after the recent bond, we were evaluating our capital structure and our existing debt, and we realized that this is the most expensive debt in the system, close to 6%. We're evaluating some prepayment opportunities there, balanced against the fact that there's a 30% delta or discrepancy between the stock official DZD rate in Algeria and the black market rate with ever-dwindling country reserves. As you typically have seen in many of the emerging markets, inevitably, there tends to be some form of a devaluation, and that could actually have a meaningful de-leveraging impact on our consolidated balance sheet.
We're balancing out prepayment of debt to reduce our interest cost on run rate basis against the potential impact of a devaluation in the future. I hope that answers your question.
Right. Yeah. Second question would be on the net debt in Natgasoline. I think it's currently about $800 million-$850 million. We yet have to see the Q3 report. What is the target net debt in that JV? At which point in the future will you start upstreaming cash again from Natgasoline to OPCO?
Similar to Ahmed's reply earlier, really, commodity prices have a significant impact on the leverage metrics. In Natgasoline, the important factor in Natgasoline for us would be also the extraction of dividends. I think that is something we have to monitor going forward. In terms, typical of the financing in place, we have some reserve requirements that have to be satisfied, after which we're able to extract dividends from the company. Of course, with the improvement of methanol prices, as we've covered quite extensively in this announcement, and with the positive trajectory there, we hope that later next year we can start looking at potential extraction of dividends from Natgasoline.
Okay. The last time you paid out a dividend, the net debt was about $800 something million. If you have, let's say, a couple of good quarters in Natgasoline, should we already expect a dividend, let's say, end of 2021, for example? Will you prefer de-levering in that
Based on the existing trajectory, it's possible to see maybe a little bit later than that, but just about around there.
Okay. My last question would be on the press release you state explicitly that you are looking for further optimization of the capital structure and simplifying the capital structure. The maturity of your debt is now a couple of years out. Are there any obvious changes or obvious actions into, let's say, the next 12-18 months to further optimize your capital structure? Can you maybe illustrate that sentence that you made in the press release today?
We just completed the upsizing bond issue that went super well and helped us reduce our cost of debt at N.V. combined with the defeasance of IFCo , which was a little bit further simplification because of those. We got rid of some legacy structures that were highly restrictive, more restrictive, and now has given us better access to cash flow and free cash flow on a quarterly basis. I think going forward, there are some things we can do to further simplify. The direction of travel is to take the debt upstairs to N.V. level, and hopefully, in doing so, not just simplify, but also achieve further interest savings. We haven't identified specific projects yet, but I think it's pretty evident what's still out there that we could possibly look at. The direction of travel is definitely to further consolidation of the cost of debt.
Okay. That was very helpful. Thanks .
Thank you. Your last question comes from the line of Frank Claassen from Degroof Petercam. Please go ahead. Your line is now open.
Good afternoon. Frank Claassen, Degroof Petercam. Got one question left, and that is on DEF. How are you seeing the current price and competitive environment in the U.S., and when do you see room to ramp up to your maximum capacity of 1 million tons in Iowa?
Hi, Frank Claassen. That's a good question. Obviously, we've been pleasantly now happy to see the recovery here in Q3 with some of the record-setting volumes we've seen in the market. What's been a big driver of our ability to do more volumes, even out of Wever, is the N-7 platform, because now we have four plants between our North Dakota Wever facility, two facilities that we now manage for Dyno Nobel in the Northwest, as well as our existing Wever facility. We've quickly grown market share in DEF, and we're happy to see the volume ramp up there. Just by definition, we've seen market share go up because it does not make sense for imports to come in because DEF continues to be priced off of NOLA.
Like I was saying previously on where our UAN imports supposed to come and also some of these lower priced Arab Gulf urea cargos going into the U.S. on contract, you're getting a place where economics prevails. DEF continues to grow. This year had a bit of a slowdown with what happened in Q2, but we're seeing that next year we should see the annualized recovery of truck volumes, more trucks moving over, higher dosing rates in SCR, driving the demand growth for DEF next year. From a supply perspective, imports, which played a big part of that, just aren't incentivized to come anymore because you're linking it to NOLA, which is the lowest urea price globally. DEF is priced off of NOLA urea, and it gets a premium to NOLA urea, and that premium varies based on customers and location.
Ultimately, linking what is something that is not in the fertilizer space to NOLA urea has the detrimental effect from a supply perspective of crowding out a lot of imports from coming in. We think over time the market supply-demand balance looks tighter on DEF going into next year. Our volume, how much we take of that, and we asked about our capacity of 1 million tons, will depend on ultimately what opportunities are there versus the fact that our big production facility at Wever in the United States has flexibility to produce four products, three of which outside of DEF are in the Midwest, so benefits from the Midwest premium. We have to evaluate, in terms of our product mix, how much goes into DEF relative to that and just the net backs when we decide how much to contract for next year.
That is very helpful. Thank you.
Thank you.
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We have no further questions still. Please continue.
Okay. Well, thank you. Thanks everybody for joining this call. We appreciate your time. Stay safe, and we look forward to the next discussion.
Thank you, everyone.
Thanks.
Ladies and gentlemen, that does conclude our conference call for today. Thank you for participating. You may now disconnect.