AMMONIA
U.S. Gulf/Tampa: New Tampa business for December was reported to have traded last week at $359/mt DEL, up $37/mt DEL from November business. Sources also noted a sizeable increase in the Black Sea.
Eastern Cornbelt: The fall ammonia application pace slowed somewhat after Thanksgiving, but not due to weather. One source said growers had simply applied all they wanted to thanks to the cooperative weather conditions in October and November. An Indiana source reported particularly heavy fall ammonia movement north of Interstate 70 at mid-month.
The spot market for ammonia was pegged at $590-$595/st FOB river terminals in Illinois on the low end last week, with the upper end quoted at $605-$615/st FOB spot inland locations. One supplier was referencing spring prepay at the $650/st FOB mark, and other sources reported fill ammonia tons being offered at the $620/st FOB level for January and February.
Western Cornbelt: Field applications of ammonia continued at a brisk pace in the region last week as growers and dealers attempted to beat an incoming storm. Ammonia supply continued to have a difficult time keeping up with demand, as reports came in at midweek of five-hour truck lines at some ammonia shipping points in the region.
As a result, few cash loads were available on the spot market, and those that could be had were generally reported in the $575-$590/st FOB range in the region. Sources said ammonia pricing out of production points in Kansas had firmed to the $540/st FOB mark, with Oklahoma terminals reportedly at the $515-$520/st FOB range.
California: Anhydrous ammonia remained at $445/st truck-DEL and $460/st rail-DEL in the state, but sources said an increase is likely in mid-to-late December or possibly early January.
Pacific Northwest: Anhydrous ammonia was up significantly, at $520/st FOB Washington terminals and $540-$550/st DEL in the region. Sources reported tight inventories, with some suppliers not offering spot or prepay tons at the moment.
Western Canada: The anhydrous ammonia market had reportedly firmed to $809-$853/mt DEL in the region as of Nov. 23, up from the $746-$791/mt range reported on Nov. 19. Ammonia pricing in the region has firmed roughly $100/mt since the first of November, sources said.
Black Sea: With strong market demand and higher natural gas prices on the way, sources say the Yuzhnyy price will keep rising for a while longer. Asian sources report all last week the price edged upward. By Monday the price broke the $300/mt barrier. By Thursday a cargo was reportedly sold at $310/mt FOB. Sources report European and U.S. prices are also on the way up. Some expect to see the price continue to climb through December. Other observers, however, seem to think the apex has been reached.
For now, sources peg the market at $300-$310/mt FOB.
Western Europe: Plagued by higher natural gas prices and a strong pushback on higher ammonia prices, a number of producers are closing down. Ammonia users are being forced to turn to Baltic and Black Sea sources. Even with the record high prices from those areas, sources say the price is still more favorable than what some of the continental factories can offer. European sources peg the delivered market at $360-$370/mt C&F.
Middle East: Producers continue to focus their attention on India.
A recent purchase by Mitsui from Sabic for an Indian buyer was reported in the low $340s/mt CFR. Observers put the netback at $300-$305/mt FOB.
One trading house said buyers cannot begin a conversation with a supplier unless they bring at least $300/mt FOB to the table. With an ever-tightening market, sources say the entry level price is expected to move up.
Buyers from around the globe are looking at the Middle East for supplies. Turnarounds in Asia and a growing vessel line-up in Yuzhnyy are beginning to make Middle East producers look more attractive. The problem buyers face, however, is that the producers know they are popular and are pricing their product accordingly.
Even with stories that the new Iranian facility will begin operation by the end of the year, sources say a full cargo will not be ready until late February at the earliest. And even then, they say demand will absorb the tonnage so fast it will cause barely a blip on the screen.
Asia: The only good news Asian buyers had last week was a report the Mitsui joint venture KPA was back up and running. The plant was down for routine maintenance. Sources say the company was pleased that no major repair issues were discovered during the shutdown.
Balancing that good news, however, was the expected shutdown of KPI.
The closing of the Mitsubishi joint venture plant came as no surprise. The company expects the facility to be down three or four weeks for routine maintenance.
UREA
U.S. Gulf: Granular prices were back on the move again last week, with players calling new prompt trades within the $420-$435/st FOB range. Sellers could point to both higher international and forward prices as justification for the new numbers.
Eastern Cornbelt: Granular urea remained firm at $465-$475/st FOB to the dealer, with the low in Illinois and the upper end reported in Ohio.
Western Cornbelt: Granular urea pricing was quoted at $455-$465/st FOB, up roughly $10/st from the prior week, with the upper end of the range reflecting new dealer reference pricing from some regional suppliers.
California: Granular urea was quoted in a broad range at $455-$490/st FOB, with delivered urea pegged at $475-$500/st, depending on location. Agrium’s granular urea postings moved on Nov. 19 to $455/st FOB West Sacramento, Calif., $475/st DEL in central California, and $480/st DEL in northern California. Those levels represent a $30/st increase from the company’s Nov. 2 urea postings.
Pacific Northwest: Granular urea pricing had firmed to $490-$510/st FOB in the region. Delivered urea was pegged in a broad range at $490-$520/st, with the lower numbers in Montana. Effective Nov. 23, Agrium’s urea postings moved up to $490-$505/st DEL in Montana and Wyoming, depending on location; $515/st FOB Washington warehouses at Glade, Kennewick, Warden, and Wilson; $520/st DEL in Washington, Oregon, Idaho, and northern Nevada; $530/st DEL in northern and central Utah; and $535/st DEL in southern Utah. Those levels reflect a $35/st increase from the company’s Nov. 19 postings at those locations, and a $65/st increase from the Nov. 2 reference levels.
Western Canada: Granular urea pricing was on the march in the region, with sources quoting the Western Canada market last week at $555-$580/mt DEL. That range was up $35/mt from Nov. 19 pricing levels, and $55/mt higher than regional urea prices in early November.
China: China BlueChemical Ltd. expects its Phase II urea plant and CNOOC Jiantao methanol plant in Hainan Province will resume production around Jan. 1, 2008. The two plants suspended production Nov. 6 due to a stoppage of natural gas supply from the Dongfang 1-1 Offshore Gas Field of its sister company CNOOC Ltd. Third-party contractors reportedly damaged an underwater pipeline transmitting natural gas owned by CNOOC when they were constructing projects for other companies. China BlueChemical estimates the suspension could result in the loss of production of 135,000 mt of urea and 56,000 mt of methanol, and will have an adverse financial impact on the company.
India: Industry observers studied the MMTC tender numbers closely. They tossed out the offers at $407/mt CFR as a pre-tender negotiated price. After that, prices moved up sharply. The offers between $419 and $445/mt CFR are expected to be taken. With a little luck, said one trader, MMTC negotiators might be able to shave a couple dollars off the December tons.
By January, however, industry watchers are convinced $445/mt CFR will represent the bottom of the market, especially if more purchases are needed.
Pre-tender arrangements booked 150,000 mt of the 400,000 mt India is said to still need by the end of January. The tonnage offered in the $419-$445/mt CFR range adds an additional 185,000 mt. Only by getting sellers to move their optional tons will MMTC reach and exceed the 400,000 mt number.
One observer noted that if that amount isn’t enough, Indian buyers will have to face the prospect of urea at $465/mt CFR as offered by Transammonia.
Result of the tender follow:
| Supplier | Origin | Quantity ‘000 mt | Price US$/mt | Shipment Notes | |
| FOB | CFR | ||||
| Ameropa | Open | 25 | 407.00 | Dec – Jan. 10 | |
| Transammonia | China | 100 | 407.00 | In 2-3 lots at seller’s option | |
| China | 50-100 | 465.00 | Nov. – Dec. | ||
| Keytrade | Open | 25 | 407.50 | Dec – Jan. | |
| Swiss-Singapore | China | 25 | 392.70 | 419.70 | By Jan. 10 |
| 422.30 | |||||
| Toepfer | Open | 20-25 | 435.00 | Dec. | |
| 436.50 | |||||
| 50 | 435.00 | Seller’s option | |||
| IMR | China | 25 | 438.00 | By Jan 10 | |
| Fertil | UAE | 20-25 | 410.00 | Dec. | |
| 20-25 | 410.00 | Jan. at seller’s option | |||
| QAFCO | Qatar | 25 | 410.00 | Dec. | |
| 25 | 410.00 | Jan. at seller’s option | |||
| Helm | Open | 50-60 | 445.00 | By Jan. 15 | |
| 50-60 | Seller’s option | ||||
Not participating in the tender were PIC/Kuwait and Sabic/Saudi Arabia. Sources say both producers have enough business booked, with not only India but also the U.S. and other granular hungry countries.
This tender could signal the end of the seasonal buying for India. Observers expect to see the MMTC negotiators working hard to shave a few dollars from the offers to get past the magic 400,000 mt number.
The Indian financial ministries have been leaning hard on MMTC and IPL to get the price of imported urea down. The issue is the increased subsidies the government has to pay as the imported price goes up.
Last year the government was in arrears to local urea producers on the subsidies because of the run-up in the imported price. This time, in the final set of tenders, the price has moved up to new heights.
In an effort to reduce the country’s dependence on imported urea, the government has been looking at financial plans that could increase domestic urea production. According to local media reports, a government panel is preparing a plan to encourage additional international investment in urea production.
Middle East: Producers are said to be in good shape. Reports of a spot cargo of granular sold at $410/mt FOB circulated last week. At the same time, Fertil and Qafco offered aggressively high prices in the MMTC tender.
Sources say the Indian buyer will most likely take the Middle East tons, along with a handful of other offers at $445/mt CFR and below.
Area producers are well booked into January, say sources. Besides the Indian business that is dominated by prilled sales, the granular producers have strong business with the U.S. and Asian buyers.
Asian and European sources say prills and granular remain at close parity.
Based on the MMTC tender, sources say offers under $400/mt FOB will be rejected. That does not mean, however, that a few older, cheaper deals may still be in the process of loading last week and this week.
The producers appear to want to hold onto the $410/mt FOB offered for December and January shipments. At least one observer noted the price might be lowered a little in post-tender talks with the Indians. No one is betting on sub-$400/mt FOB this week, but that does not mean it won’t happen.
That said, industry observers peg the prilled and granular markets at $390-$410/mt FOB.
Black Sea: While so many in the industry watched what happened in India, Yuzhnyy suppliers kept moving their price up. Demand from Turkey and Latin America continues to provide a solid floor on pricing.
Producers now say $400/mt FOB has been done – and they want more.
Observers are not sure the price has moved as far and as fast as the Middle East price, but no one can offer evidence that the Black Sea and the Middle East are at full parity.
Sources peg the market at $400-$405/mt FOB.
Bangladesh: International traders continue to complain about the difficulties of doing business with BCIC. Despite the international grumblings, the government has approved the importation of close to 400,000 mt as soon as possible.
Because of delays in securing tons throughout the year on a steady basis, local media report a shortage of urea in the country. The recent approval for imports, said one former government official, indicated the government was willing to buy product at any price.
Past tenders by BCIC often resulted in failed deals because of delays in first issuing the awards and then the letters of credit. For some offering companies, by the time BCIC got back to them, the validity of the offers expired and the market moved up several dollars. After one such go-around with BCIC, one trader said even if he wanted to consummate the deal, he could no longer find product at the original offering price.
Pakistan: The country has to import about 100,000 mt of urea to meet requirements during the month of January 2008, according to government officials. This import would be in addition to 150,000 mt of urea that is being imported on discounted cost from Saudi Arabia.
NITROGEN SOLUTIONS
Eastern Cornbelt: UAN was quoted at $10.70-$10.90/unit FOB regional terminals. An Indiana dealer reported pulling some spot UAN-28 last week at the $302/st ($10.79/unit) FOB level.
Western Cornbelt: UAN-32 was pegged at $340-$350/st ($10.63-$10.95/unit) FOB regional terminals to the dealer, up $10/st from last report, with spot sales confirmed at the upper end of that range in Iowa last week.
California: UAN-32 was pegged at $365-$378/st ($11.41-$11.81/unit) FOB, and $390-$400/st ($12.19-$12.50/unit) DEL. Agrium’s UAN-32 postings firmed on Nov. 19 to $378/st ($11.81/unit) FOB Sacramento, Calif., $395/st ($12.34/unit) DEL in central California, and $400/st ($12.50/unit) DEL in northern California. Those levels reflect a $25/st increase from Agrium’s Nov. 2 reference prices.
Pacific Northwest: UAN-32 was quoted at $355-$370/st ($11.09-$11.56/unit) DEL in the region, depending on location. Agrium’s UAN-32 postings firmed on Nov. 19 to $370/st ($11.56/unit) DEL in Oregon excluding Malheur County, Washington, and northern Idaho; $375/st ($11.72/unit) rail-DEL and $380/st ($11.88/unit) truck-DEL in southern Idaho, Nevada, Utah, and Oregon’s Malheur County; and $400/st ($12.50/unit) DEL in Montana and northern Wyoming. Agrium’s UAN-28 postings in Montana and northern Wyoming firmed on that date to $350/st ($12.50/unit) truckDEL. Those postings reflect a roughly $25/st increase from the Nov. 2 reference levels in the region.
Western Canada: UAN-28 was quoted at $350-$365/mt ($12.50-$13.04/unit) DEL in the region, up from the prior $329-$344/mt ($11.75-$12.29/unit) DEL range. Those numbers are up considerably from early November, when the regional range was reported at $317-$332/mt ($11.32-$11.86/unit) DEL.
AMMONIUM NITRATE
Western Cornbelt: Ammonium nitrate was firming on the heels of the urea upsurge. Sources quoted the nitrate market at $365-$375/st FOB for actual sales, with some suppliers now referencing a $385/st FOB level to the dealer. The dealer market for ammonium nitrate FOB Catoosa/Inola, Okla., had reportedly firmed to the $340/st level.
California: No market was reported for ammonium nitrate in the region. CAN-17 pricing, however, remained in a broad range at $275-$310/st FOB, with the upper end reflecting postings. One Central California source quoted the common dealer price in the $275-$290/st FOB range last week.
Pacific Northwest: Ammonium nitrate pricing was “through the roof,” according to one Washington source. The market had reportedly firmed to $425-$438/st DEL, with the low in Montana and the upper end in Washington. Agrium’s ammonium nitrate solution (20-0-0) postings for the Washington, Oregon, Idaho, Nevada, Utah, Wyoming, and Montana sales area firmed on Nov. 19 to $225/st FOB Kennewick, Wash.
CAN-17 was also up from last report at $260-$265/st FOB and $270/st DEL in the Pacific Northwest. Agrium’s CAN-17 postings FOB Kennewick firmed on Nov. 19 to $265/st.
AMMONIUM SULFATE
Eastern Cornbelt: Granular ammonium sulfate was pegged at $240-$250/st FOB to the dealer, and remained in very tight supply in the region.
Western Cornbelt: Granular ammonium sulfate was tagged at a firm $240-$250/st FOB regional terminals to the dealer. Agrium’s ammonium sulfate postings firmed on Nov. 23 to $260/st DEL in Nebraska, Wisconsin, Minnesota, and the Dakotas.
American Plant Food Corp. said its ammonium sulfate postings in Texas would be moving up on Dec. 10. New reference prices for granular sulfate will include $220/st FOB Freeport, $230/st FOB Galena Park, $240/st FOB Fort Worth, and $250/st FOB Littlefield. Coarse ammonium sulfate postings will move on Dec. 10 to $205/st FOB Freeport, $215/st FOB Galena Park, $225/st FOB Fort Worth, and $235/st FOB Littlefield. APF’s standard ammonium sulfate postings will move on that date to $195/st FOB Freeport and $225/st FOB Littlefield, and N-Pac Compacted sulfate will firm to $235/st FOB Galena Park.
California: Ammonium sulfate was reported at $230-$250/st FOB in California last week.
Pacific Northwest: Ammonium sulfate pricing was up from last report at $255-$270/st DEL in the region. Agrium’s 20-5-0 ammonium sulfate postings firmed on Nov. 23 to $265/st FOB in Washington, Idaho, Oregon, Utah, and Nevada, and $270/st DEL in those same locations plus Montana and Wyoming.
Western Canada: Granular ammonium sulfate was pegged at $340-$345/mt DEL in the region, up from $315-$320/mt DEL at last report.
PHOSPHATE
Central Florida: Even with a heavy loading schedule for orders they received earlier, one phosphate producer was able to scrape up enough extra DAP in Central Florida to sell railcars on a prompt basis last week – but at a premium price. Immediately after, Mosaic announced it was raising its prices for phosphates another $20/st FOB.
Without question, the world market was the driving force behind the skyrocketing price of all of the major markets, including Central Florida. One of the factors driving export sales from the U.S. has been the deteriorating value of the U.S. dollar in comparison to other major world currencies.
As one producer said, prices will continue to rise until farmers say “enough, we can’t afford it anymore.” However, considering the price of grains such as corn and wheat, that doesn’t appear likely to happen anytime soon.
Last week, the price range for Central Florida increased from an unrealistic $415-$425/st FOB to a new, but flat, $450/st FOB. Mosaic has basically abandoned posting an asking price for DAP because of a lack of supply, but bumped its price to $460/st FOB and $456/st FOB for MAP, which was still well below the export price. Previously, Mosaic’s asking price was pegged at $440/st FOB, and its MAP price was $436/st FOB. PotashCorp’s Central Florida reference price leap-frogged other producers to jump from $440/st FOB to $490/st FOB, while CF’s asking price increased from $440/st FOB and $437/st FOB for MAP to $455/st FOB for DAP and $452/st FOB for MAP. MAP supplies were said to be essentially unavailable. In Texas, Agrifos’ truck price last week jumped from $480/st FOB with its rail price at $475/st FOB, to $500/st FOB for DAP and $515/st FOB for MAP, with a $5/st FOB discount for rail. However, its inventory was sold out until January.
U.S. Gulf: Normally, after Thanksgiving, phosphate trading on the river system grinds to a halt as people relax and get ready for the next round of holidays. That may not be the case this year. NOLA DAP barge sales on the river were brisk last week, and prices continued to rise. It appeared the NOLA DAP barge market will probably continue to be active until around Christmas, and the slowdown will last perhaps only seven-to-10 days.
Early last week a sale was made at the low end of the previous week’s range, which was $465/st FOB, but the prices went straight up from there. Many in the industry said last week they expect the price of a NOLA DAP barge to be $500/st FOB or more in January. That probably explains why business has continued to be brisk at this time of year – attempting to beat the expected higher prices.
The driving factors for the river system continued to be the high price of grains and the export market, which continued to boom last week. U. S. producers were working at getting the domestic market more in line with their export sales. Based on sales on the river last week, the export price was still about $13/st FOB higher than the highest NOLA DAP barge price.
Prices at terminals were also moving up to reflect the higher price of NOLA DAP barges, and will be in the $490-$500/st FOB range this week. Higher prices at warehouses will continue.
Last week traders made multiple sales, ranging from a low of $465/st FOB to a high of $475/st FOB, and some were asking $480/st FOB late last week. However, Mosaic made prompt NOLA DAP barge sales at $480/st FOB, which set the NOLA DAP barge price range of $465-$480/st FOB, so buyers should expect to pay more this week. In addition, Mosaic increased its asking price for NOLA DAP barges to $490/st FOB from its previous rate of $480/st FOB.
Eastern Cornbelt: Phosphate prices were up another $10/st last week, and sources continued to report brisk movement in plowdown applications. DAP and MAP were quoted at $495-$505/st FOB regional warehouses, with new spot sales confirmed at the upper end of that range. Sources reported no current prices for TSP or 10-34-0 in the region.
Western Cornbelt: Phosphate prices at regional terminals continued to firm to reflect the higher price of Gulf barges. Sources tagged DAP and MAP at $495-$505/st FOB in the region last week, reflecting another $10/st increase from the previous week, and spot sales were confirmed at the top end of that range.
10-34-0 was pegged at $415-$430/st FOB, with the upper end reflecting new dealer list pricing in Iowa. Phosphoric acid postings from Agrium for December include superphosphoric acid (SPA) at $735/st rail-DEL and merchant grade acid (MGA) at $725/st rail-DEL in Colorado, Iowa, Kansas, Minnesota, the Dakotas, Missouri, Nebraska, New Mexico, Oklahoma, and Texas. A whopping $70/st increase is scheduled in January for both products, followed by $10/st per month increases in February, March, April, and May.
California: Phosphate products were in very tight supply in the state, and pricing was up significantly from last report. DAP was quoted at $540-$550/st FOB warehouses and $540/st rail-DEL, with MAP pegged at $525-$535/st FOB and $525-$530/st rail-DEL. Agrium’s MAP postings firmed on Nov. 23 to $530/st rail-DEL and FOB warehouse in California and Arizona, up $10/st from the company’s Nov. 12 reference price and $45/st higher than the company’s Nov. 2 MAP postings.
Phosphoric acid prices were quoted at $7.25-$7.35/unit DEL for merchant grade acid (MGA) and a solid $7.35/unit DEL for super phosphoric acid (SPA). Another dime/unit increase for both products is slated for Dec. 1, followed by a $70/st increase Jan. 1.
Phosphoric acid postings from Agrium for December include SPA at $745/st rail-DEL and MGA at $735/st rail-DEL in Arizona and California. A $70/st increase is scheduled in January for both products, followed by $10/st per month increases in February, March, April, and May.
16-20-0 pricing was up from last report at $343-$350/st FOB warehouses and $343/st rail-DEL. 10-34-0 remained at $324-$331/st FOB, but a $5/st increase was slated for Dec. 1 to coincide with the higher phosphoric acid prices. Sources said substantially higher 10-34-0 prices will take effect in January.
Pacific Northwest: Phosphate pricing was up dramatically from last report. DAP was quoted at $525-$545/st DEL in the region, depending on location, with the low reported in western Montana. The dealer market in Idaho, Washington, and Oregon was generally tagged in the $530-$540/st DEL range in late November. MAP was in very tight supply, with the market pegged at $510-$530/st DEL in the region. The low end of that range was again reported in western Montana.
Agrium’s MAP postings firmed on Nov. 23 to $515/st DEL in Montana and Wyoming; $520/st DEL in southern Idaho, Utah, Nevada, and Oregon’s Malheur County; and $520/st FOB and $525/st DEL in Washington, northern Idaho, and Oregon excluding Malheur County. Those prices were up $10/st from the company’s Nov. 12 reference levels, and $45/st from the company’s Nov. 9 postings in the region.
10-34-0 pricing had reportedly firmed to $375-$385/st FOB, with reference levels from one regional supplier moving to the $390/st FOB level Dec. 1. 16-20-0 was up as well at $340-$345/st DEL in the region.
Super phosphoric acid (SPA) was quoted at a firm $7.35/unit DEL in the region, with merchant grade acid (MGA) at $7.25-$7.35/unit DEL. A dime/unit increase for both MGA and SPA is slated for December, followed by a 70 cents/unit increase in January. Sources reported very tight acid inventories.
Phosphoric acid postings from Agrium for December include SPA at $745/st rail-DEL and MGA at $735/st rail-DEL in Idaho, Montana, Nevada, Oregon, Utah, Washington, and Wyoming. A $70/st increase is scheduled in January for both products, followed by $10/st per month increases in February, March, April, and May.
Western Canada: MAP was quoted at $560-$595/mt DEL in the region, up $10/mt from early November levels.
U.S. Export: Export prices continue to rise faster than the U. S. dollar has been falling. Last week, PhosChem made sales into Brazil at startlingly new highs – $545-$550/mt FOB for 36,000 mt. Immediately after, PhosChem raised its export asking price to $560/mt FOB. The export price of $550/mt FOB was about $43/st less than the same product out of Central Florida for domestic customers.
In other good news for phosphate exporters, ocean freight rates dipped about 10 percent during the past two weeks, which also helped boost the export FOB price.
One of the biggest drivers for U. S. phosphate export sales and prices has been the declining value of the U. S. dollar. The more the dollar slips, the better the price appears to overseas customers.
Worldwide demand for phosphates has also helped kick up prices. With countries like India and China improving their lot in life, their people are demanding higher quality food, especially protein.
PhosChem’s sales into Brazil pushed up the export DAP price range last week from $511-$520/mt FOB the previous week to $545-$550/mt FOB. The next sale will be at a higher price.
Pakistan: The Yang Hai, a Chinese vessel that brought about 25,000 mt of DAP for Engro Chemical of Pakistan, recently sustained structural damages at Karachi Port when it was hit by another vessel, the Jaipur, registered in Jordan. The hit caused severe damage and resulted in a large hole in the vessel. No human casualties were reported.
POTASH
Eastern Cornbelt: Potash pricing continued its upward march, and spot inventories were very, very tight. Some sources quoted the last warehouses sales in the $375-$385/st FOB range for brokered tons, but there were also reports of reference prices now at the $400/st FOB mark or higher for any available tonnage. An Indiana source said he was actively looking for a load or two last week and couldn’t find any.
Western Cornbelt: Potash was quoted at $375-$400/st FOB regional terminals for available spot tons, which were few and far between. There were reports of sales made at both ends of that range last week. “I’ve never seen potash this tight,” said one source. “It’s unbelievable.”
California: Potash, if you can get it, was quoted at $358-$365/st FOB warehouses to the dealer, with the upper end for granular muriate. One Central California source said rail-DEL spot tons could be had at those same numbers, but availability was limited. Warehouse potash postings from Intrepid Potash will firm on Dec. 1 to $372/st FOB Bakersfield, Calif., for 62 percent white standard; $360/st FOB Chico, Calif., for 60 percent white standard; and $366/st FOB Chico for 60 percent white granular.
Potassium nitrate remained at $570/st FOB for bulk and $630/st FOB for bags. Sulfate of potash (SOP) was quoted at $417-$427/st rail-DEL and $423-$433/st FOB, with the upper end for granular product.
Pacific Northwest: Potash was in very tight supply in the region. The market was quoted at $350-$372 DEL, provided tons could be had. Effective Dec. 1, potash postings from Intrepid Potash FOB Moab, Utah, will firm to $311/st for 60 percent standard and $317/st for 60 percent granular, while pricing FOB Wendover, Utah, will move to $325/st for 60 percent standard and $331/st for 60 percent granular. Those levels represent a $50/st increase from the company’s Nov. 5 reference levels, and an $80/st increase from the Oct. 1 price levels at those locations.
Western Canada: No current prices were reported for potash in the region due to limited availability.
SULFUR
Tampa: Phosphate producers are not going to like it, but sulfur prices for Tampa may take a record jump during the first quarter. Late last week, Abu Dahbi increased its sulfur price for December by $120/mt over the November price of $240/mt. That will put the new price at $360m/t for December. What that will do for January, when U. S. sulfur and phosphate producers will begin their quarterly price negotiations, was a little frightening. At the beginning of the year, the price at Abu Dahbi was about $50/mt, so the new price is about 700 percent higher. One source said the price of sulfur for Tampa could double, but could rise as little as $50/lt. However, considering the price phosphates was commanding on all of the major markets, the phosphate industry could afford it, but won’t like it.
Earlier projections that the price of sulfur should stabilize in early 2008 appeared to have been optimistic. Projects that were expected to come online earlier in the year will probably not actually begin producing until much later in the year. It now appears a turnaround will not happen until late in the third or the fourth quarter of 2008.
However, when it does drop, the fall will be fast and furious, and prices are not likely to ever reach the levels of today – and they will be into next year, say sources. BP’s refinery at Texas City will eventually come online and produce about 900/lt day, and another in Canada will pump an additional 100,000 tons into the system. Only then will prices begin to fall. Some of that new production could be offset by Venezuela and Mexico, which plan to do turnarounds at some of their refineries next year, and could eliminate about 100,000 tons from the market.
“As an industry, we are a bunch of idiots,” said one source. “We should have all seen this coming, but none of us did.” Experts in the field of sulfur never predicted the current situation.
A vessel destined for Morocco was loaded with 26,000 mt of sulfur prill at Beaumont in November, and another 40,000 mt of prill will be headed to Brazil in December.
Sulfur traders said they were receiving an overwhelming number of calls seeking spot sulfur supplies at just about any price. Unfortunately, none could be found.
On the positive side, no transportation problems were reported for either sulfur vessels or railcars last week.
West Coast: Valero was still in the process of a turnaround at its refinery near Long Beach, Calif., late last week. That job should be finished around the middle of December.
Vancouver: Negotiations for new first-quarter sulfur contracts for China were underway last week, and prices were anticipated to increase – probably substantially. The Chinese were known to be low on sulfur inventories, which does not help their bargaining position.
MARKET NOTES
India: To defer the payment of fertilizer subsidy arrears in the current year, the Indian finance ministry proposes to issue Rs75bn in bonds, with a 14-16 year tenure and an interest rate of 8.20 percent, said a senior government official, on condition of anonymity.
Modeled after India’s oil bonds, it will be the first time the government is employing this instrument to defer the fiscal pressure from the growing fertilizer subsidy dues. But industry representatives said they were skeptical about the government initiative. “The tenure is too long and the interest rate much below our expectations. Moreover, it is still not very clear whether they will be tradable or not. The government must understand that it is giving us these bonds in place of hard cash. If they are not saleable, then manufacturers will be compelled to borrow the working capital at 12-14 percent from banks,” said a senior Fertilizer Association of India (FAI) official, who wants to remain anonymous as the matter is sensitive. A 15-year Government of India bond issued by the Reserve Bank of India (RBI) carries a yield of 8.13 percent.
The bonds, worth Rs75bn, are part of Rs150bn disbursed during the first supplementary budget in August in order to meet the government’s fertilizer subsidy dues to the manufacturers. The supplementary budget – a second one was presented to Parliament last week – allows the government to allocate fresh funds when the initial budgeted amount proves inadequate. The actual fertilizer subsidy for the current year is expected to be around Rs480bn, while the initial budget allocation was Rs224.51bn. The sharp rise in subsidy payments this year has primarily been due to the rise in the price of imported fertilizers and raw materials, even as the domestic administered prices remained unchanged.
According to FAI estimates, even if the bonds are tradable and the industry is able to sell them at a 5 percent discount, it will still suffer a loss of Rs3.50bn over the total sum of Rs75bn for which the bonds are being floated. The FAI official said the industry requested that the government restrict the tenure of the bonds to a maximum of five to seven years. He also said the industry wanted the interest rate on these bonds to be at par with the commercial bank prime lending rate – presently 12.75-13.25 percent – in order to keep the bonds cash neutral for the companies.
FAI also demanded that the bonds be made eligible for Statutory Liquidity Ratio so that they are easily tradable and provide cash to the manufacturers. A senior fertilizer ministry official confirmed that they were in talks with the finance ministry in order to make the terms of the bonds more favorable to the manufacturers. According to the FAI official, RBI was not in favor of providing differential treatment to the fertilizer industry, as opposed to the oil companies. The FAI official said the unattractive proposal for fertilizer bonds would further compound the fertilizer industry’s woes. Last week, the finance ministry had deferred the disbursement of an additional Rs 90bn towards the payment for fertilizer subsidy dues.
India: The government has chalked out a multi-pronged strategy, including a nutrient-based subsidy system, revival of closed units, and tax incentives, to prop up fresh investment in the fertilizer sector, which has otherwise been unattractive for new investors for quite some time. “The initiative is aimed at overcoming deficiency of secondary and micronutrients in our soil and facilitate the provision of these nutrients to farmers at affordable prices and bring down subsidy level substantially incentivising increased production in the existing units as well in the country” said sources in the Department of Fertilizers (DOF). For new units, the DOF has also proposed import duty waivers on project imports and an income-tax holiday that would last the first ten years of commercial production. Similarly, an import-parity pricing formula in place of a cost-based one will be introduced for the gas-based units. The proposal has been forwarded to the Empowered Group of Ministers set up to review the status of the fertilizer industry. “The measures designed by the department would make industry efficient and competitive during 11th Five Year Plan,” said J.S. Sarma, secretary of fertilizers.
For this, the sector needs 95 mmscmd gas by 2011-12 to increase the production of fertilizers from the existing 21 million mt to 40 million mt. The petroleum ministry has agreed to provide 41 mmscmd gas by 2009, which is expected to save Rs 60bn in subsidy, Sarma said. The new policy would ensure that the efficient units get a return of at least 12 percent on investment, make the sector lucrative, and develop infrastructure to ensure healthy competition and efficient input consumption, as well as encourage conservation, he said.
Pakistan: Increasing DAP prices and drought conditions impacted October consumption, according to the National Fertilizer Development Authority. It says DAP consumption declined 46.8 percent in October, to 202,000 mt from the year-ago 381,000 mt. However, urea use was up, at 225,000 mt from 173,000 mt.
During the month of October, Pakistan imported 171,695 mt of DAP and other fertilizers at a cost of $87.773 million, compared to 197,747 mt at $99.179 million in September 2007, according to data released by the Federal Bureau of Statistics. This showed that the quantity of imported fertilizer fell by 13.17 percent and 11.50 percent in terms of value in dollar and quantity, respectively, over the previous month, but if compared with October 2006 (47,662 mt at $14.187 million), the import of DAP and other fertilizers was up by 260.23 percent and 518.69 percent in terms of quantity and value in dollar, respectively, over same month last year.
The total fertilizer imports during the first four months of the current financial year July-October 2007 period stood at 601,142 mt DAP, and other fertilizer at $289.291 million compared to 440,350 mt at $130.413 million – showing a growth of 36.51 percent and 121.83 percent in term of quantity and value in dollar, respectively, for the same period last year.
Pakistan: Engro Chemicals Pakistan Ltd. (EPCL) plans to secure Rs. 4 billion (US$ 65.57 million) from public and local financial institutions to partly finance a new urea plant in Sindh. Engro said it has already signed license agreements for ammonia with Haldor Topsoe (HTAS) and for urea with Snamprogetti (SNAM). The engineering contract was awarded to Snamprogetti. A purchasing and supply contract was also executed between Salpem Comercio Maritime LDA of Portugal (SAIPEM) and ECPL. The purchasing and supply contract covers the purchasing and supply of equipment supervision contract executed between SAIOPEM and ECPL. The contract provides for supervision services during construction, commissioning, and test run, in addition to the provision of training services to ECPL’s personnel.
The plant is estimated to cost US$1 billion, and will have a production capacity of 1.3 million mt by 2011.
South Africa: Mozambique authorities have reportedly reacted positively to a proposal by International Development Corp., a government of South Africa entity, for setting up a phos acid/DAP plant as well as a urea-ammonia complex through a joint venture with RCF of India. The plants would be built in South Africa, with gas to be supplied from Mozambique. The attempt will be made to set up a urea plant before going ahead with a phos acid/DAP complex. According to IDC, officials from Mozambique are keen to have another set of meetings to take the proposal further. In all likelihood, if the plans proceed, RCF and IDC would form a 50-50 joint venture to set up the project. The entire output of the plant will be brought to India under a buyback arrangement.