Another Trump hopes Israel can make ammonia great again

Another Trump hopes Israel can make ammonia great again

Jules Trump says Haifa Chemicals will shut down production, lay off workers if alternative arrangements for soon-to-be-closed storage facility aren't found

Jules Trump controls Israel's Haifa Chemicals (Courtesy)
Jules Trump controls Israel's Haifa Chemicals (Courtesy)

Trump is mad at the Israeli government. Not Donald Trump, the president of the United States. The other Trump — Jules Trump, a 73-year-old South African-born US citizen and real estate tycoon who holds a controlling stake in the Israeli fertilizer maker Haifa Chemicals. He is no relation to Donald, but the real estate tycoon who is now US commander-in-chief did sue the “other” Trump to stop him from using the name.

“Trump never won,” Jules Trump said with a chuckle, sitting on the couch in a Tel Aviv hotel suite last week. “I still operate under the name Trump. Our relationship with him now is fine.”

But, to get back to Israel, Jules Trump, who with his brother Eddie owns a controlling stake in Haifa Chemicals, has a huge problem.

An Israeli court has ordered that a huge ammonia tank on the bay be emptied by April 1 following concerns that damage to the storage facility could endanger the lives of tens of thousands of people in Haifa, Israel’s third-largest city. The tank stores the compound that Haifa Chemicals and others use in their production lines. Haifa Chemicals is the main consumer of the imported ammonia, which it uses to make potassium nitrate, a fertilizer used by farmers in Israel and globally to grow flowers, fruit and vegetables.

The ammonia storage tank in the northern city of Haifa. (Courtesy of Environmental Protection Ministry)
The ammonia storage tank in the northern city of Haifa. (Courtesy of Environmental Protection Ministry)

“Our business cannot function without ammonia. There is no business,” Trump said in an interview with The Times of Israel. At the current rate of consumption, Israel will run out of ammonia by the last week of March, he said. And then the company’s plants in the north and the south of Israel will start shutting down production lines, which will lead to worker layoffs, he warned.

Haifa Chemicals directly employs some 800 workers, and indirectly some additional 3,600 people are expected to be affected by the closure of operations, according to the Economy and Industry Ministry. These include truck drivers, producers of the plastic bags in which the fertilizer is stored, and shippers — the company is the second-biggest user of shipping containers in Israel.

The operations of Haifa Chemicals account for 2 percent of Israel’s industrial exports and 1% of total exports from Israel, the Manufacturers Association of Israel said in a February report. Its sales total some $600-$700 million, 97% of which are exported, according to data provided by the company.

“The government has to open up the doors to allow ammonia on some basis,” Trump said. “You don’t close off the road to the town until there is another road, until you develop a plan.”

An unfolding saga of billionaires and citizens

The court order to empty the ammonia came in response to a Haifa municipality’s petition following the publication of a report the city commissioned that found the ammonia operations pose a serious risk to the population.

The report warned that if ruptured, the vast ammonia storage tank would suffocate 16,000 victims under a toxic cloud. The tank could “fall apart tomorrow morning,” the report’s author, chemistry professor Ehud Keinan, said at a press conference to release the report on January 31, held at the municipality.

“If the tank breaks apart we are talking about 16,000 fatalities,” Keinan warned.

But an even worse danger, the report warned, is posed by a delivery ship carrying tons of ammonia that arrives at the Haifa container once a month. If its cargo were released to the air, it could kill as many as 600,000 in the bay area, according to Keinan.

Last year, Hezbollah leader Hassan Nasrallah threatened to target Haifa’s ammonia facilities with rockets in the next conflict with Israel.

Haifa Mayor Yona Yahav and Professor Ehud Keinan speak at a press conference at the Haifa Municipality regarding a report on the dangers of the ammonia tank in the Haifa bay. January 31, 2017. (Flash90)
Haifa Mayor Yona Yahav and Professor Ehud Keinan speak at a press conference at the Haifa Municipality regarding a report on the dangers of the ammonia tank in the Haifa bay. January 31, 2017. (Flash90)

“The potential damage that could be caused is unacceptable by any standard,” Judge Tamar Sharon Netanel wrote in the court’s final decision on the matter, saying it was an issue that “threatens the loss of human life, and the health of hundreds of thousands of people.”

The ruling noted the economic importance of the facility, but Netanel said the potential public health crisis outweighed the company’s interests.

Haifa Mayor Yona Yahav in March hailed the “brave and historic ruling” and thanked Netanel on behalf of Haifa residents for displaying courage in protecting the city.

Trump said that the report on the dangers of ammonia were greatly inflated. “It was written like a horror novel and greatly exaggerating any possibility of a tragedy,” he said. But the report “caught the people’s attention, and I understand why people in Haifa are sensitive.”

In 2013, the government made a decision to shut down the tank in 2017 and set up an ammonia production plant in the Negev instead. In its decision, it also committed to ensuring a continuous supply of the compound for the nation in the interim period, until the new production plant was up and running.

Trump said the company is now “totally supportive of a facility in the south. We believe it is the right thing to do because of the mood of the people in Haifa and therefore we are fully backing it.”

The failed tender for a new plant

But after the Environmental Protection Ministry published a tender for the new ammonia manufacturing plant, it had to cancel it in November 2016 due to a lack of bidders. Potential contenders for the bid said the terms of the tender made the construction not economically feasible, the ministry said in a statement at the time. The potential bidders were concerned about the high price of the natural gas supply to the plant as well as uncertainty regarding future demand for ammonia, which didn’t provide the bidders with a safety net they required, they said. Haifa Chemicals and other ammonia consumers were also asked to participate in the tender, the ministry said in an explanatory note on the matter, but they declined to do so.

Now, however, Haifa Chemicals has proposed to take upon itself the construction of the plant by investing $175 million. And it is asking the government to match the investment, said Trump, which would amount to just a little more than the value of the incentives the government would have offered the winners of the tender. But the Finance Ministry is being unresponsive, even as the Prime Minister’s Office supports the proposal, Trump said.

“We put forward an offer to the government that we will build a plant,” Trump said. “So far the government has been non-responsive. We have tried to negotiate it but without success.”

Not only would the plant provide businesses with the much-needed ammonia, it would also “create a tremendous amount of jobs,” Trump said. The company didn’t take part in the tender because “I am not in the ammonia business,” he said. But now, “I have to be.”

Haifa's industrial zone. The ammonia tank is visible on the jetty jutting into the sea at the right. (Shay Levy/Flash90)
Haifa’s industrial zone. The ammonia tank is visible on the jetty jutting into the sea at the right. (Shay Levy/Flash90)

The director of the Prime Minister’s Office, Eli Groner, wrote in a letter dated February 28 to Amir Levi, the budget director at the Finance Ministry, that the closing of the ammonia plant in Haifa has “complex economic implications,” and that without an alternative supply “there is a real possibility that Israel’s fertilizer industry, which contributes to the livelihood of thousands of families and exports goods at a value of 2.5 billion shekels a year, will come to a grinding halt.”

The total value of the benefits the government was willing to provide the new ammonia plant amounts to about 40% of the cost of the project, Groner wrote. “This aid is not far from the support Haifa Chemicals is asking to set up the ammonia manufacturing plant in the south.”

“If serious and continuous negotiations with the company are held, as opposed to what has taken place in the past two months, a resolution can be reached within a short time,” he wrote.

Even if a decision to set up a plant in the south is made and negotiations between the sides are successful, there still needs to be a solution for the supply of ammonia in the interim period until the new manufacturing plant is up and running in two to three years, Trump said. The company submitted some interim solutions to a government panel that is dealing with the issue, but it has not heard back, Trump said, declining to disclose what the solutions were. Meanwhile, the clock is ticking.

“We need the government to act quickly. We need the government to come up with solutions. It is their responsibility and we need them to deliver,” Trump said. “With the government, the talks are at a very unsatisfactory stage, bearing in mind the urgency of the issue.”

The lack of responsiveness is even more surprising, given the government’s commitment to the steady supply of ammonia, Trump said. “Reversing on a commitment is incredible.”

An email sent to the Finance Ministry seeking comment was not replied.

This is not the first time the Israeli government has come under fire for burdensome regulatory policies. Companies like Delek Group and Israel Chemicals have had to contend with long and tortuous regulatory proceedings. Prime Minister Benjamin Netanyahu’s government has subjected Israel Chemicals to increased taxes, prompting its former CEO to seek investments abroad. Drilling at the Leviathan well was delayed by about a year as the government set out its new natural gas policy.

Roby Ginel, the director general of Israel’s manufacturers association, said at a conference in Tel Aviv that the regulatory environment in Israel is “perceived as almost irrational” and there is still “heavy regulation” in the economy even if the government is trying to ease terms for businesses, TheMarker business daily reported on Wednesday.

According to data provided by the manufacturers association, Israel uses some 120,000 tons a year of ammonia, and the import and storage of the compound has been done until now at the terminal in Haifa. The terminal has a tank that stores 12,000 tons of ammonia, about a month’s worth.

Haifa Chemicals consumes some 68 percent of the imported ammonia to produce specialty fertilizers, and 25% is consumed by a subsidiary of Israel Chemicals. The rest is consumed by other industries.

Some 35% of the ammonia imported is transformed into fertilizer for the local market. The rest of the ammonia is used to produce fertilizer that is exported, mainly to Europe and the US, the association said.

“The closure of the plant means the halting of operations of a significant part of the plants in the short term,” the association said in a February 14 report, or the production of lower quality fertilizer because of the use of “inferior alternatives.”

The closure of the plant without an alternative will also lead to the halting of activities in the production lines of other industries, the association said, including those that provide vital services to the defense industry, cement production, the chemicals industry, power plants and the food industry – affecting some 100 ammonia consumers, the report said.

Ninety-seven percent of the fertilizer that Haifa Chemicals produces is for exports, with the remaining 3% going to local farmers, for whom it is the sole supplier. The company is one of the two top global leaders in the production of the specialty fertilizer, with sales totaling some $600 million to $700 million a year, with most of it deriving from the exports.

Workers want government to intervene

“From next week, at the start of the week or in the middle, Haifa Chemicals will shut down its production plants in the north and the south,” said 62-year old Emil Lugaci, who has worked for 35 years at Haifa Chemicals and is in charge of the ammonia tank’s maintenance. “If the decision is final, then worker layoffs will follow. There will be no choice.”

“The government has cut our supply without finding an alternative until a new plant can be built,” he said in a phone interview. And this “means an almost immediate closing of all the sites.”

The workers have been in touch with authorities, met with ministers and staged demonstrations and protests, calling on the government to intervene.

Activists protest outside a court hearing regarding the closure of an ammonia storage tank outside the Haifa District Court on February 26, 2017. (Meir Vaaknin/Flash90)
Activists protest outside a court hearing regarding the closure of an ammonia storage tank outside the Haifa District Court on February 26, 2017. (Meir Vaaknin/Flash90)

“I call on the government to take responsibility and also set up an investigative committee to establish how the events developed,” he said. There are millions of tons of ammonia stored in US cities, he said. “Is there no danger there?”

Haifa Chemicals was founded in 1966 by the Israeli government and has been under private ownership since 1989. The Trump brothers bought the business in 2008 and have controlled it since.

The management of Haifa Chemicals is “cynically using the workers as hostages” in their battle with the government, said Lihi Shachar Berman, a leader of the Green Course environmental activist group in Haifa, by phone. “If the ammonia ends and there won’t be other alternatives, it is the fault of the company and not of the government,” she said, because only once the court forced the issue did the company actually start looking for alternatives, she said.

The management was presented a number of possibilities, she said, like allowing factories to store small quantities of ammonia locally at their plants, she said, but “the current solution is what suits the company best,” she said.

“On one hand you have billionaires who made a fortune with this business and on the other hand you have the citizens of Haifa that could be hurt by this threat, and the workers must definitely not be the ones to suffer from the laxity of management,” she said. “We are against the layoffs. The state must protect the workplaces by forcing the owners to find an immediate solution that will enforce their continued employment.”

Brothers Jules and Eddie Trump grew up in South Africa and spent their free time stocking the shelves in the department store owned by their parents, Willie and Celia. Their Lithuanian Jewish grandparents had come from Russia in the late 19th century. The family left South Africa in the sixties and made its way to the US, with a stop in the Netherlands. Over the years, the brothers have built an empire of real estate developments in the US, mainly in Miami.

The Haifa operations are an important business for the Trump Group, said Trump. The 4,500 workers for which the company is responsible, directly and indirectly, are “a big responsibility,” he said.

“I can’t say closing is not an option because without ammonia I can’t continue,” he said. “There is no but. The government has to open up the doors to allow ammonia on some basis.”

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