The Mosaic Co. said Oct. 25 that repairs at its Faustina, Louisiana, ammonia plant (GM Oct. 16, p. 9) are expected to be completed in six to twelve weeks, depending on a further damage assessment. Mosaic’s Faustina ammonia plant suffered damage in a minor explosion earlier this month due to an apparent failure of a welded joint in a heat exchanger vessel. The explosion resulted in no injuries and minor damage to adjacent plants. Mosaic continues to review the incident and indicated that insurance coverage is available for losses that exceed a deductible of $10 million.
To manage its inventory and working capital levels and to mitigate the cost of purchased ammonia, Mosaic plans to temporarily reduce phosphate fertilizer production at Faustina while repairs are being completed.
Softer than expected market conditions for phosphates and the current production plans at Faustina have resulted in the lowering of Mosaic’s fiscal 2007 Phosphates sales volume guidance to 8.5 to 9.3 million metric mt, including feed and GTSP sales, from its earlier estimate of 9.5 to 9.9 million mt. Export sales have been negatively impacted by a number of factors, including a severe drought in Australia, subsidy uncertainties in Pakistan, and continued poor farm economics in Brazil. In addition, the North American fall fertilizer season is also off to a slower than anticipated start. As a result, Mosaic does not expect to meet its fiscal 2007 Phosphates operating earnings improvement target of $100 million.
“While domestic sales have increased modestly in October, it appears unlikely that second quarter sales volumes for our Phosphates business will exceed first quarter levels, as we had previously expected,” stated Jim Prokopanko, Mosaic chief operating officer. “The damage to our ammonia plant at Faustina was more extensive than we initially estimated and we will promptly begin repair work so that it can be fully operational as soon as possible. We remain optimistic about the long-term outlook for the global fertilizer industry. North American farm economics have improved over the last year, industry fundamentals remain solid, and we believe that phosphates shipments will rebound, especially for the North American spring fertilizer season. Momentum in the potash market remains strong and our fiscal 2007 Potash sales volume guidance remains unchanged at 7.7 to 8.1 million mt.”
Even before the Faustina explosion, Mosaic was skeptical that the fall fertilizer season was going to be good enough for it to meet its phosphate goals (GM Oct. 9, p. 1).