Raviv Zoller: Sorry. And to go back to your first question on MOUs, the difference between an offtake agreement and an MOU agreement is basically reaching the qualification of product for the customer. And as we work on technological innovation, we’re working with customers in order to meet future qualification. So it means that some of these are going to get deferred until we can actually create living samples that come out of the qualification center. On one case, we’ve already signed an offtake agreement. We can’t afford to sign more than maybe one offtake agreement, because basically most of the product from the first plant is already accounted for. So we need to leave flexibility and not commit too much, because once we have a qualified product, it will be for more than just one — more than just one plant.
I hope that explains things. It also means that we’re not very concerned about the schedule of the first ton that we sell. We’re more concerned about having a client list and technological capabilities that allow us to qualify various specifications of different customers and also use the most advanced technology that’s out there.
Alexander Jones: Thank you.
Raviv Zoller: Thank you.
Operator: Thank you. Our next question today comes from the line of Dan Rizzo from Jefferies. Please go ahead.
Dan Rizzo: Sorry. You can hear me?
Raviv Zoller: Yes, I can, clearly.
Dan Rizzo: Hi. Sorry. Thanks. And thanks for taking my question. You mentioned the ruling in EU for anti-dumping, and I was wondering in the past how effective rulings like these have been and when you might see a benefit from that within the region.
Raviv Zoller: These kinds of things are very effective. They, basically, immediately cause the market price to go up. And so it makes us much more competitive. It also allows to pass a hurdle of introducing new solutions that, for example, are more environmental-friendly or more sustainable for the long run that if they are priced at a certain level, it may not be sufficiently economic to introduce into the market. But once you know that the average price in the market goes up, then suddenly you can actually replace the old product, and then the effectiveness of such a move can be very, very long-term.
Dan Rizzo: Okay. And then you mentioned like — sorry.
Raviv Zoller: A similar petition was also initiated in the U.S. So we expected within a year or so the same thing could happen in the U.S.
Dan Rizzo: That’s really helpful. I do appreciate that. And then with potash demand, I mean — or demand in general, things are generally improving. But I was wondering if customers are still kind of keeping inventories very tight, or if there are signs of a restock cycle or an early signs of restock cycle, I should say.
Raviv Zoller: I think it differs in different parts of the world. If you take China, then China has a lot of current inventory. It’s managed centrally. India is also managed relatively central, but there the inventory is not high enough at the moment. And then in other regions, we’re not seeing the same heavy stock loads that we saw in the U.S. and in Brazil in recent couple of years. So the demand is robust. There’s nutrient deficiency, deficiency of potassium for sure. So we see very healthy demand this year.
Aviram Lahav: Maybe to add that with the current interest rates, the way they are, especially high in Brazil and also higher than expected in most regions in the world, the carrying cost is obviously a bigger issue than before. And therefore, what potentially we can witness is that people, especially the chain, will be buying closer to the event of usage. So a pile-up has a cost today. So what we can see, obviously, the demand projected for 2024 is significantly higher than ’23, which in itself was higher than ’22, but it can be more close to the event than general restocking at a very high level. By the way, apart from China, it’s the other way around because in China, the interest rates in the last — because of the issues with the stimulus, they are the lowest they have been in many, many years. In fact, used to be that the Western world was low — very low interest rate for years and China was high. Now it’s completely the flip side.
Dan Rizzo: Alright. Thank you very much.
Aviram Lahav: Welcome.
Raviv Zoller: Thank you.
Operator: Thank you. Our next question today comes from the line of Anthony Taglieri of BMO. Please go ahead.
Joel Jackson: This is Joel Jackson, BMO. You hear me?
Raviv Zoller: Yes, Anthony, go ahead.
Joel Jackson: No, I’m Joel.
Raviv Zoller: Hi, Joel, how are you?
Joel Jackson: Okay, a few questions. Can you talk about — like do you see in IP earnings greater in the second quarter than the first quarter? Maybe talk about some of the puts and takes – in Q1?
Raviv Zoller: Yes, on IP, typically the first quarter is seasonally higher, so we don’t see a big difference between Q1 and Q2 this year, but we will see continued sequential growth. So we do expect higher prices and better results in the second quarter for IP — second half. Sorry. Yes,
Joel Jackson: Right. Okay. And then — that’s helpful. Thank you. And then in Potash, it’s pretty stable for you there. A couple of things. So do you think pricing will be similar in the second quarter versus first quarter? And I know we talked about China, India before a little bit on this call, but if we’re not getting seaborne contracts in either country because there’s a lot of rail shipments going to China and there seems to be some cargo — like cargo by cargo, more spot deals in India. As a company that sells a lot to both, do you think that the markets are changing in how potash will be sold to those countries, no longer seaborne contracts, maybe more spot cargoes or what do you think?
Raviv Zoller: We don’t really see a significant shift. We don’t see that. I mean, rail — railway deliveries sort of peaked last year. I don’t think they’re that economical anymore. So I don’t really see them growing. Always there’s regions that carry higher prices and that’s how deliveries move. As you know, we’re a price taker in the market, so we capitalize on maximum price opportunities that we have, and there’s ample demand this year. So from our perspective, we don’t see any significant change still. Europe is a smaller market, but less of the suppliers are active in Europe. And, obviously, the long-term trend is that China is becoming more dependent on Laos, so there’ll be less Western product going to China. But other than that, we don’t see any short-term shifts.
Joel Jackson: And just on the Q2 price — in Q2 for potash being similar to Q1 or not?
Raviv Zoller: So, yes, Q2 is, in our case, at this moment, where we’re almost sold out for Q2, we’re a few dollars less than — I think we’re about $6 to $7 less than first quarter. It’s not final, but it shouldn’t change more than 1% or 2%.
Aviram Lahav: But it’s – dependent on the mix of things, Joel. The mix of sales can have a significant impact.
