Welcome to today's OCI and the third quarter 2020 results conference call. At this time, all participants are in a listen only mode. After the speaker presentation, there will be a question and answer session to ask a question, you will need to press star 1 on your telephone. Also, I'm gonna advise you this conference is being recorded today, 6th November 2020. 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 joining the OCI And B Third Quarter 2020 Conference Call. With me today are Aetna Del Hoshi, our Chief Executive Officer and Hassan Draghi, our Chief Financial Officer.
As you have seen, we published our results this morning. And, on this call, we will review OCIC operational events financial highlights for the quarter followed by a discussion of OCI's articles. And 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 and I'll now turn it over to our disclaimers about forward looking statements.
Now let me hand over to Rafnett.
Thank you, Hans. Let me start by covering our top priorities, Stacy. We're pleased that our safety performance continues to be best in class despite the prevalence and challenges of COVID-nineteen. The pandemic is 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-nineteen, meaning there is minimal disruption to our supply chain and sales order books. Our recordable 12 months rolling in in rate was 0.23 incidents for 200,000 man hours as of September, a significant improvement from 2019. This continues to be one of the lowest in our global industry, of course, our goal remains to prioritize process safety and to reduce occupational safety incidents ultimately to 0 for all our assets across the globe. This is even more important now that COVID-nineteen continues to dominate our lives with many countries going back into lockdown. Also 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 team did an excellent job under such circumstances and established healthy volume growth.
Consequently, We delivered resilient results during the quarter. Our volumes decreased 30% during the third quarter and increased 27% in the 1st 9 months of 2020 year on year. On a like for like basis, so excluding Fortiva and Abu Dhabi, our Q3 2020 volumes increased by 9% in comparison to the previous year and 8% on a year to date 9 month basis. On the nitrogen side, we benefited from the from Fortiva and Abu, which has been consolidated since Q4 2019, but we also increased our volumes elsewhere. This growth was driven by improvement in operational performance compared to 2019 touches our state of the art I O facility pushing its last improving capacity to higher levels as a result of stabilization and de bottlenecking in production last year.
The DEF sales were particularly strong and recovered record levels during the quarter as well. And we saw our nitrate volumes in Europe increased during the third quarter year over year, which follows a record 2nd quarter and overall 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 volume. 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 the existing growth but I'm pleased to say that this quarter, we've also had strong performance in methanol as we reported an increase of 39% in owned produced methanol sales volume in Q3, twenty twenty for the same period last year.
We achieved record production volumes across all our facilities despite a preempted shutdown at our Texas facilities in August for, in Austin, early on, late August early September for Hurricane Moore. At OCI, I don't want that representative over 2 weeks, and that gas sale was approximately 1. In the Netherlands, we're running both, both methanol production lines fully for the first time at Vianca and at rates low above 90% for the quarter. As a result, we expect the SNL business to be the primary driver of volume growth next year. With that, I'd like to turn it over to Hassan to discuss the financials
Thank you, Ahmad. I would like to read through some highlights of our financial results starting with our P and L. As that was described during the third quarter, we achieved resilient results. Our consolidated revenues increased by 19% to $752,000,000 and our adjusted EBITDA was up by 79%, reaching $192,000,000 in the 3rd quarter. As compared to the third quarter of last year.
Both the nitrogen and metal segments contributed to this growth in adjusted EBITDA. Which reflects the year on year growth in sales volumes, such as I mentioned earlier, as well as some benefits from natural gas of just over $20,000,000. But was partially offset by significantly lower selling prices. We estimate this negative impact on our EBITDA from lower selling prices and a circa $100,000,000 between Q3 twenty nineteen and Q3 twenty twenty. National prices were significantly down year over year and ammonia prices also remain at very low levels during the quarter.
I would also like to point out that prices will lower compared to the third quarter last year, somewhat also lower as compared to the second quarter of the currency. For instance, contract method requires weaker load in Q3 due to the lagging effect of contracts versus stockholders, but after recovering, very well from 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 for core CapEx during the quarter was a long breakeven, which reflects our operational performance for the quarter offset by typical seasonal net operating working capital outflows. We build up inventory in the head of Q4 applications, notably, transportable.
Total cash The capital expenditures were around $47,000,000 in the third quarter of 2020, most of which can be attributable to the maintenance CapEx. During the first during the 9 months, CapEx amounted to $211,000,000. Our net debt consolidated net debt stood at $3,900,000,000 as I said, September 2020, a $77,000,000 increase from 30th June 2017. This reflects both, a $54,000,000 FX impact on euros of amended loans. And the build up of inventory which I just mentioned.
On a quarterly basis, we typically see such fluctuations efficiencies would shift me down over the full year with the completion of the Q4 application season. For the year to date, as end, we reduced net debt by $145,000,000 and we expect to see
cash flow
benefits from the reversal of this inventory buildup to be within 63. We continue to optimize our capital structure with a two and a half times oversubscribed rule of tranche, bond offering 400,000,000 dollars, $400,000,000 as part of the refinancing of $1,750,000,000 outstanding ones. The delta for which was financed through the existing RCF which allows us to create some more prepayments that went forward. We have also successfully completed and closed the newly $5,000,000 refinancing at public law and those transactions were completed in October. There are several benefits with refinancing.
First, we lowered our weighted average cost of goods debt by a further 60 bps to below 4.5%. Which in the, which is a 25% improvement from, just over 6% at the end of 20 17, when we start with our capital structure optimization program. This will result in additional interest savings of more than $32,000,000 per year annualized from next few hours. The bond offering also extends maturities of the refinance debt by about 2 years with the next scheduled bond maturity for OCI and V, not until 2024, further de listing 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 $1,000,000,000 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.
And with that, I'd like to
hand over to Doctor. For our outlook and thoughts on who the remarks.
Thanks, Hassan. Concluding the outlook of our business, which despite all the challenges around us and 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 would happen. If I start with the outlook for nitrogen markets, Our global order book is currently robust based on recent tender awards to to supply a common a combined total almost 700,000 tons of urea to India and to the fast growing Ethiopian market. We continue to see healthy demand from several major imports across the globe, including India and Brazil in particular, but also other countries.
Chinese exports as Chinese exports were 10% lower in the 1st 9 months of the year, but the pace is rising modestly in the 4th quarter on higher Indian import demand. Antif site coal prices in China has started to rapidly recover, which combined with increased demand domestically for stocking ahead of their spring season has rated prices for from the Marginal Producer, providing support for the global urea market for the balance of the year. Going forward, Chinese export availability expected to to be relatively limited in page 1, 2021 on the back end of the increase, increase in marginal costs and expected recovery in domestic industrial urea consumption. The outlook for corn prices has strengthened recently with a 30%, roughly 30% increase in corn future December 2020 to $4.14 a bushel from around $3.20 in April as global corn demands have increased driven by by purchases from China as well as the recovery in demand outlook. The the global core 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, US farm income is up more than $20,000,000,000 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 four markets per when compared to the unfavorable weather, in the in the conditions we experienced back in 2018, 2019, in the fall. We're already seeing strong volume movement this week at M7, out of our Weaver Weaver facility.
However, US nitrogen prices overall are trading at severely discounted prices relative to global vegetable, contrary to where fundamentals should have them trade. Despite being a deficit market, US imports, US3 imports continue to be priced below the point of origin in the Arab Gulf by a meaningful discount. Since July, UAN prices in the U. S. Gulf has made it more favorable actually for Russian and even Trinidad exports of UAN to go to Europe and still pay the duties rather than roll to the US 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 and attractive affordability level support increased ammonia demand in the ongoing fall season and the UN and ammonia demand in the spring season. Obviously coupled with what I said earlier around foreign incomes improving, versus the prior year. On the industrial side, demand was impacted by COVID-nineteen.
And while there still remains uncertainty, we have seen signs of recovery, primarily driven by China. If only prices like 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. Melalignment demand in our core European markets is also improving with a market lead tighter supplydemand 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 is also strengthened.
There can be some volatility going forward depending on how this pandemic develops, but U. S. Gulf spot ethanol prices have roughly doubled since reaching a bottom below $150 per, per ton on a spot basis. In June to approximately $300 this month, slightly above production. Demand from methanol also passed in China has been consistently hot on the back of healthy MTO economic, global demand, downstream demand has also continued to recuperate steadily as fuel consumption returning and a pickup in construction, other industrial activity is increasing and driving increased demand for derivatives such as Ronaldohead.
Our step up in production, as I mentioned earlier, in Q3, Poseidon's recovery in global economic activity as well as Methanol. Following this record methanol production for OCIang in Q3 2020, normalization of production and improved, on stream efficiency is expected to drive volume growth the methanol segments going forward. Turning to natural gas. We are well positioned to benefit from the increased recent increase in feedstock prices, both in terms competitiveness of our cost base, given our U. S.
And European assets, energy efficiency, as well as vertical significant cost advantages as a result of its 6 price, gas, supply agreement. And in terms of support for other for our pro product selling prices, particularly among In summary, we believe improving market fundamentals, allied with our continued volume growth in 2021, we will deliver improving free cash flow, and free cash flow as well as positioning, positioning as well in a volatile economic environment. Before I before we go into Q And 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 continue to strive to be a leading environmental steward, especially as among our core product ammonia and Methanol are some of the best positioned energy carriers in the 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 fog to develop other projects at our nitrogen facilities in another one as well in green hydrogen space.
This morning, we also senior is supplying ExxonMobil through a subsidiary Esso with bioethanol, which is landed in all of ExxonMobil's fuel cells in the United Kingdom. Through our cooperation with ExxonMobil, we aim to launch you to bioethanol as a complimentary 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 with an environmentally friendly building blocks 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 deleveraging is still very much in place.
So we'll look at, like, 1 or a combination of things, including asset light opportunities, subsidies, government programs, tax incentives, as well as, structuring and using optics of green feedstocks to still meet our low CapEx, high free cash flow conversion targets. So, of course, our evaluation of ESG initiatives takes both sustainability into account as well as economics. Finally, Well, I believe our environmental performance is already amongst the best in class due to our state of the art assets base being one of the youngest seats in our industries. We aim to improve by setting long term ESG targets. We aim to challenge ourselves further improve by using 2019 as our baseline so that we can achieve a meaningful reduction over our existing environmental system.
We intend to announce these targets next year with key decisions and timing based on the scale and focus of government environmental policies, in the US and Europe, as well as the EU carbon task board carbon border task mechanism and other government support for green initiatives. With that, we will open the line for questions.
Thank you, ladies and gentlemen. We'll now begin the question and answer session. As a reminder, if you wish to ask a question, please press star 1 in your telephone and wait for your name to be announced. Please stand by while we compile the queue in a queue. This will only take a few moments.
If you wish to cancel your request, you can press the hash key. Your first question comes from the line of Christian Pates from, Kepler Cheuvreux. Please go ahead. Your line is now open.
Yes. Thank you very much. Good afternoon, everybody. A couple of questions from my side, please. I ask them 1 by 1, if that's okay.
First, 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?
Sure. Thanks, Christian. As you know, from a policy perspective, we we don't announce outages, you know, so that people don't trade around it on the commercial side. So, you know, we'll we'll be announcing, at the close of q 4, what, outages, ponder on time may have taken place.
Okay, fair enough. Thank you. Then, the second question, how does the free cash flow evolving in 2021, assuming there are no major CapEx projects.
Yeah. So on a free cash flow question, obviously, the 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, you know, we've looked ways to improve our free cash flow profile. And one of them is obviously issuing the higher pricing where we're seeing, you know, the industrial demand, recover from very low level in late Q2 and into Q3. And the outlook looks a lot better for products such as methanol, ammonia, melamine, which is supportive and brings the, you know, the nitrogen, and methanol markets into a tighter supply and demand balance versus who's experienced over the last 6 months.
We're looking forward to that. We've seen new capacity also be delayed, you know, for a number of reasons that one of the main ones obviously being quoted by team and more prepared economics, which is also supportive of our outlook, which I talked about in the prepared remarks. With regards to you know, other, other items outside of pricing, volumes and other and other big ones. So Q3, you saw almost, you know, 39% growth in methanol 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 3 regions, Europe, the United States, and, the Middle East, as well as basically an overall focus on preventative maintenance, to improve utilization rates and, and altering times overall.
At our assets. And that'll have a significant effect in terms of our ability to generate, additional EBITDA by generating that, that volume. And, you know, cover obviously more of our fixed costs. Hassan also mentioned the financing, the financing savings that, you know, we get the full year benefit of next year versus, you know, the these savings contracts, we only closed, I think in early Q4, exactly October. So, you know, we haven't seen affected those yet, on our on our free cash flow or EBITDA and free cash flow, waterfall.
So, you know, that's that's a $32,000,000 annualized benefit. And overall, you know, it's hard to to pin it down and we haven't given guidance for next year on CapEx. But over the next few years, we anticipate seeing CapEx, get some more stable, lower, maintenance CapEx level as we review our entire portfolio on our more centralized rather than decentralized basis with more of a central team overseeing our, our product portfolio. We should go, though, obviously, pre 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 athletes.
Okay. Great. Thank you. And I guess I'll I'll leave a message on all these calls or questions with somebody else. Thank you.
That's it for myself.
Thank you. Your next question comes from the line of Tom Wigglesworth from Citi. Please go ahead. Your line is now open.
Alright. Thanks very much for the the chance to ask questions. So just on the on the hydrogen projects. I hear you on the on the, obviously, the constraints around the balance sheet sheet today, but could you just share with us you know, 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 ignorance, green methanol is a relatively new one.
Can you can you maybe highlight, you know, where the, where the attractive end markets are for that. So a little bit more color on, on where you see the potential for green hydrogen, I'll now come on to my second question. Thank you.
Sure. I mean, green hydrogen, we see a lot of potential on, and I think we've had some discussions over the, around it for the last year. But, it it's basically both kind of public and private sector related. So let's start with kind of the public sector. You know, in the U.
S. And in Europe, there's, there's basically the ETS program for carbon. So that intensifies, you know, those with the European asset base like ourselves look at opportunities over the last several years, leading up to this year. Around ways to reduce our carbon footprint because it actually saves you, to, to, improve efficiencies and look at feedstocks like green hydrogen. So definitely, Green Ammonia is a big focus, and I'll start with that and get into Green Methanol.
So 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 is advantages of ammonia from a storage transport perspective and also the fact that, you know, it burns very cleanly because it doesn't have any carbon in it. So it's an excellent fuel. Once you have that infrastructure in place. So on the green ammonia side, OCN packaging is a very good candidate for that, which is our class in the Southern Netherlands.
We're in discussions now on opportunities around the OCM nitrogen specifically, and they've been going on for for quite some while. And the other, the other area, which is, a little bit behind the more recent than also an accident in the Middle East you know, one of the big costs for these types of projects is, getting access to reliable, high load factor, renewable, renewable power. You know, our assets, for example, is in Egypt, goes in Abu Dhabi, even for those in Texas, have the benefit of, being in good areas for both wind and solar generation. And, typically, in a country like Egypt where there's been significant capacity build up for power over the last half a decade, been a political, move by the Egyptian government. You know, we're seeing a lot of opportunities close to our plants in Egypt have access to a 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, renewable feedstocks like, 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, you know, building the assets. We know that the landscape and, and construction costs, if there would be an electoral supply, for example, built, whether it's on our balance sheet or someone else's balance sheet, would be cheaper to build in, a country like Egypt than in some more industrialized countries, the air places where construction costs and more expenses. With regard to green methanol, similar to green ammonia, those markets need to continue to develop. And then 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? So right now it's being charged to those closest to the hydrocarbon.
Like ourselves and everybody in our industry. But ultimately, we think that if you go further downstream and you have carbon, passed on to the final end user, end users will ultimately potentially pay a slightly, very slightly higher price, because of the, you know, small amounts of pneumonia, methanol, and that, in that product, they have a green product that ultimately. Those types of, you know, pulls from a demand perspective as well as subsidies should afford its ability to continue to make our asset portfolio more green. With regards to green, methanol, one big advantage that OTI has we're the number one producer of bioethanol globally. This is the market that we've been doing over the last 5 years.
We purchased by MCM, which will which helped us establish that footprint in Europe in the middle of 2015. And use what we learned about that market to actually be a large biomethyl producer in Texas where we produce biomethyl using a waste, waste gas as a feedstock, and then we sell that into, markets that can pay a premium for that product. And we saw the announcement today with, ExxonMobil. You know, that's one of the few initiatives we've had, which is in the biofuel space where you get an additional premium selling our renewable products 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 biosphere space. So we anticipate those markets to continue to develop.
We think, it's still in infancy right now about, with countries focusing on it. They have renewable energy directors. They have, renewable fuel directors, and they're still looking at the different possible products that can be used there, both bio methanol, green methanol, as well as green ammonia are all very suitable candidates and status towards the top of the list for marine fuels, transportation fuels generally, and Houston, general industrial, chemical feedstocks that have, our renewable base.
Thank you very much. Changing TAC, on to UAN. You cite in, your, release that there's been, an intense price based competition in the US gulf. Can you just clarify from your element? Is that a function of you're saying that's a function of discounted imports coming into the market?
Is that correct? And do you think that's something that, you know, the the participants of it, like, in phosphates will bring to the attention of the authorities? Or or is this something that you're alluding to in your comments that demand will pick up and should normalize out these, this kind of temporary competition?
Sure. I think it's a combination
of those factors. So on
the demand side, you know, UAN, you still need a few million tons at the end point the spring season. We're seeing, you know, corn acres, an outlook for corn acres improving for the next season, next spring versus initial estimates a few months ago for UAN. And I think as you as you heard me in in prepared remarks, say UAN is it the the cheapest level has been relative to corn in modern history. So it's a very attractive product to be used. So we think from a demand perspective, the demand will be there, but there's been a bit of this, basically, trepidation from go from from buying early.
And so what we anticipate is over the coming few months to to help get the UAN and pay afraid economics. I guess in the Midwest, we anticipate that prices should improve on that demand pull from that and we'll watch out the fall only season progresses as we're, as we're well, in the midst of that right now. In terms of the reasons behind, you know, where the pricing is at, we want to, you know, basically what we're pointing out is digits to disconnect. The economic still makes sense right now, but the price in the US bill is less attractive for Trinidadian producers that are closed by as well as Russian producers that are further away than actually going and selling into, country like France major UAN produced consumer that actually would require an anti dumping duty of anywhere from, you know, low 20s to €40 of the fund being paid. For any product pool, but that's a significant disconnect for, for you for for the UAN mark overall.
And we anticipate that, you know, that those prices have to come back up and that that differential and economics prevail ultimately where people will think from an economic perspective around how they move costs. So that coupled with the fact that we've seen gas prices in Europe really, increased market. We tripled since the middle of this year despite UAN remaining flat. Since the middle of this year in the US, there's there's a different handle to the euro's strengthening. I mean, there's there's significant I think push from supply side perspective as well as the demand flow perspective to suggest that Luanne should, should start trading at more reasonable levels relative to look where fundamentals are prevailing and technology is.
Okay. Great. Thank you very much. Very helpful. Thank
you. Your next question comes from the line of Lita Deny from Morgan Stanley. Please go ahead. Your line is now open.
Good afternoon all. So, yeah, first congratulations on your operational performance, this quarter. I have a three questions. One short one on the first one on tax. And maybe I just thought with that one first.
And you can get on to our 19 off your second question. So 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, we've as you know, our guidance is to continue to have a very low cash effective tax, in the future. In line with the fiscal year. I think for the U. S. Context, it's a good question because we are between our operations in Texas, Vermont and IPSCO, we have more than $1,000,000,000 of NOLs can be definitely carried forward.
So we really nothing in the in the medium term that was impacted in terms of US tax policy. So we continue to see that. Also, we're highlighting that in Egypt a few days ago, I think, I'm just telling you that the Egyptian department passed a new law to reintroduce freedom status for certain sectors. 1st slide, as I mentioned, So as a latency, I'll see how that will manifest. So which exact companies will be included, but there's a bit of possibility there that, that our Egyptian operations again get, a, sort of a perpetual cover from, from tax or income tax, very solid, but that's something to be the easiest to confirm.
So overall, think we continue to have a a a good good handle on our, keeping low patches in the future.
Great. And then another sustainability question for you, related to the European Greendale. So European Commission has some very ambitious, that's ambitious. Agricultural targets to reduce fertilizing 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% production, in fertilizer consumption possible in Europe?
And and how are you planning to respond to this, European request?
Yeah. I mean, it's a good question. It's something obviously we can focus on. We have, you know, a couple of case studies with 1 or 2 member states to focus on. But ultimately, you know, the nitrogen is going to be connected to to get on the ground.
So the use of you know, products like urea inhibitors, as well as, maybe potentially more, nitrates demand could help achieve that. I will say that obviously, and and you saw that we've ratified a policy at the board, following recent events, you know, you know, in in the last few months, to, to take up a strict policy to not produce ammonium nitrate. I know, obviously, whether it's in sure and and just overall having that tailor to something that we didn't want to be involved in. We haven't done anything with the ammonium nitrate as a product. It does have some advantage from a mission perspective, but we think that as a product, it has, you know, significant disadvantages on that tail risk without being able to about ensuring that the downstream users, appropriately take all the safety mechanisms.
So I think there's a little bit of, you know, a push that could be helpful for products like UAN, like, CNN as, as good beneficiaries of you know, potentially reducing emissions over time, local emissions of ammonia, as well as, you know, having a safer fertilizer base. It's provides the same returns that basically the farmers are gonna need to, to achieve, you know, food security globally.
Okay. And, obviously, we all noticed this very nice rebound in in national prices and sort of recovery in, sort of, the demand side as well. Last couple months I can say now. But I'm thinking about things a little bit more structurally. I mean, where do you see sort of the largest revenue opportunities of revenue growth opportunities for methanol of the next 3 to 5 years, both on the gray side way, methanol and green methanol?
Thank you.
I mean, you know, methanol took a
hit, like, ammonia took a hit, and Melanie took a hit, and industrial urea took a hit all this year. And so we've been seeing turning east and now moving westwards you know, the the on a short term basis, the Chinese industrial machine has kind of turned back on in q early Q3 European hitting more of a stratos in Q3 as well as the U. S. So what we've seen is that methanol on the gray side you know, it's continued to find a home and seen good demand growth on a on a kind of quarterly basis, not overall year, but on a quarterly basis, kind of quarter over quarter think we're almost 10% higher in Q3 versus Q2. Next year, we anticipate mid single digit methanol, the man growth, driven by, you know, more more run rate, MTO consumption of methanol, as a senior industrial precursor for plastics and other downstream uses of olefins.
And the the formaldehyde and septic asset market continue to grow as well. Those are good, you know, GDP linked, growth drivers in that space, but the other, you know, the other overall one, which kind of costs them between green and grapes with methanol as a tool. It's a clean burning fuel. Easy transport, easy to store, like a refined product. And it can be on for road transport, like what we're doing with with biomethanol, with ExxonMobil as announced.
Day and other consumers in Western Europe, as well as, as well as green methanol and gray methanol, as kind of steps towards getting into that space, in, for example, you know, South with a pilot project in in India that's been ongoing a little bit delayed with COVID-nineteen, but potentially you know, having methanol blended with gasoline, as a good way to, to diversify even just economically putting the the the clean attributes in the outside economically diversify and, and have a cheaper fuel into the Indian markets. And a bit more medium to long term as well over the next, you know, maybe on the on the on the latter part of your date range there is is a marine field. You know, at the very least methanol vessels that carry methanol should be overtime converted fully into methanol, methanol supply. And, you know, overall when we think and people step back in the IMO is taking a look at the 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 an advantage versus, something like a, like hydrogen base, which I think we be very difficult.
And then with regards to LNG, and then that also needs to be, you know, refrigerated. It's a very big process to refrigerate it. Expense is gonna have to be also minus 200 degrees, to, to get LNG, liquefied. And let them obviously, but it's just not not much in terms of adjustment relative to a diesel carrier or a fuel oil carrier. So a lot of, potential kind of green shoots on that side and, and, you know, even if you're dropping the ocean, just how big of a consumer these, these vessels are for, for energy, that could be quite significant on our national market.
It's, you know, just touching a 100,000 tons a year.
Great. Thanks for that.
Thank you. Your next question comes from the line of Tank Buren 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 as
interests, which is $26,000,000 in Q3.
How much do you expect to pay to non controlling interest in, in Q4. And then how how large is the current dividend accrual to a non controlling
interest? That's
my first question.
Yes, right. Now with regards to the dividend on is, with the consolidation of the Persil, there is an impact of incremental leakage offset by the access to the free cash flow and of course the synergy number. And we've been talking about, how we've been on track with the synergy utilization of basic load that is estimated at most of $60,000,000, which we're very happy about. And so there's a little bit of value there. I think we've disclosed in the past that's our we owe estimate around the $140,000,000 of run rate, minorities, recession, basically, our structure.
It tends to be lumpier times. So I would say we expect probably to see additional linkage in the next 6 months. I can't really give you a quarterly estimate. We're also looking at it's one of the reasons also called, for the, sometimes the delay and the dividends within the JV, and we also look to have some prepayments of debt in Algeria. Which, after the recent bond, we're evaluating our, sort of, our capital structure and our existing debt.
And we realize that this is the most extensive debt in the system. Close to 6%. So evaluating some prepayment opportunities there balanced against the fact that there 30% delta of discrepancy between the soft official, DVD rest in Algeria, and that black market rate is ever building the country reserves. Typically, and as you typically have seen in many emerging markets inevitably, this tends to be some form of evaluation. And that could actually have a meaningful deleveraging impact on our consolidated balance sheet.
So we're balancing up the payment of debt to reduce our interest costs and run rate business against some, against the potential impacted as evaluation in the future. But I hope that answers your question.
Right. Second question would be the on the net debt in, net gasoline. I think it's currently about, 800 to 850,000,000 US dollars. We have had to see the fee report. But, what is the, what is the target net debt in that, in that JV?
So at which point in the future will you start up streaming cash again in, from a gasoline to the Tahoe.
I mean, I mean, similar to others, to realize that, earlier, really, commodity prices have a significant impact. On, on our leverage, on the leverage metrics. And that gasoline, I mean, the importance factor in everything for us, so this is also the extraction of dividends. And, I think that is something we have to monitor going forward. And in terms and in terms typical of the financing in place, we have some reserves requirements that have to be satisfied after which you're able to extract dividends in the company.
So of course, with the improvement of methanol prices that we've covered quite, extensively in this announcement, And with the sort of positive trajectory there, we hope that we can, later next, we can start looking at potential
the last time you paid out
a difference was the net debt was about 800 something 1,000,000. So I mean, if you have, let's say, a good, a couple of good quarters in the gasoline, should you already expect a dividend? Let's say end of 2021, for example, or will you prefer delevering in that
based on the existing trajectory as it's possible to see maybe a little bit later than that, but, we are just about around there.
Okay. Yeah. Yeah, my last question would be on the, I mean, in the press release, you state explicitly that you are looking to, for further sort of, optimization of the capital structure and simplifying the the capital structure I mean, your maturity of your debt is now, it's now a couple of years out. Are there any, like, obvious, changes or obvious actions, let's say, the next 12 to 18 months to further optimize your capital structure. Can you maybe illustrate that that sentence that you made in the
press release today? I mean, we just we just completed as we really we just, as I mentioned, we just completed the, precisely bond issue that went super well and the health issues are cost of debt, and these combined with the 30 year refi, which was a little bit further simplification because of those We got rid of some negative structures that were highly restricted, more restricted, and now, now giving us better access to cash flow in terms of low, on a quarterly basis. And I think going forward, there are there are some things we can do to further simplify the direction of travel is to, sort of, take the dust up sales to NPE level and those to be, in doing so, not just in the fiber, also achieve further interest savings. We haven't identified specific projects yet. But,
I mean, it's I think it's
pretty evident what's been out there, that we can that is supposed to be looked at but the collection of travel is definitely to further consolidation of the Coca Cola.
Thank you. Your last question comes from the line of Frank Claassen from the group, Peter Petercam. Please go ahead. Your line is now open. Good afternoon, Frank Claassen and Ralph Petercam.
I've 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 1,000,000,000 tons in, in Iowa?
That's a good question. I mean, 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. And what's been a big driver of our ability to do more volume even out of weaver is the N7 platform because now we have 4 class between our North Dakota dealer facility, two facilities that we now manage for Donna Nobel in the northwest as well as our existing Weaver facility. So we've quickly grown market share in, in DES and we're happy to see you know, the the volume ramp up there. And just by definition, we see market share go up, because the imports does not make sense for imports to come in because, you know, def continues to be priced off of NOLA.
So like I was saying previously on, you know, where are UAN imports supposed to come and also some of these lower, you know, lower price, the, you know, Arab Gulf, Urea card was going into the, US contract, you know, you're getting a place where it kind of economics prevailed. So def continues to grow, this year had a bit of a slowdown with what happened in Q2. But, we're seeing that, that, next year, we should, you know, see, you know, the the the annualized recovery of truck volumes, more trucks moving over higher dosing rates in SCR, driving the demand growth for DES next year. And from a supply perspective, you know, imports, which paid 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. So the app is priced off of, in all the arrears.
And, it gets a premium in all the arrears. And in that very varies based on customers and location, but ultimately link linking, you know, what is something that is, what is something that is not in the fertilizer space to normally re ahead the the detrimental effect from a supply perspective of crowding out a lot of imports from coming in So, you know, we, we think, over time, you know, the market supplydemand balance looks tighter on DES going into next year. And, you know, our volume, how much how much we take of that? And we ask about our capacity a 1,000,000 tons will depend on ultimately what opportunities are there versus the fact that, you know, you know, our big production facility as we were in the United States has flexibility to produce four products. 3 of which outside of def are in the Midwest.
So, you know, benefits in the Midwest premium. So we have to evaluate, you know, in terms of our product how much goes into DDS, relative to that and just the netbacks, when we when we decide how much the contract, for next year.
That is very helpful. Thank you.
Thank you.
We have no further questions from the phone lines, but everyone, if you wish to add a question, you can press star 1. Please continue.
So there is no more questions? We
have no further questions still. Please continue.
Okay. Well, thank you. Thanks, everybody, for joining this call. You know, we appreciate your time. Stay safe.
I know we look forward to the next discussion.
Thank you, everyone.
Thanks, gentlemen. This does conclude our conference call for today. Thank you for participating. You may now disconnect.