Some 158 fertilizer and transportation industry representatives gathered in Scottsdale, Ariz., Oct. 24-26 for the North American Fertilizer Transportation Conference. Attendees heard from railroad officials and federal regulators on issues ranging from new commercial highway safety guidelines to railroad capacity, and also received a detailed fertilizer overview from Harry Vroomen of The Fertilizer Institute (TFI).
Vroomen offered a comparison between the 2008 spike in fertilizer prices and current market conditions, and documented the dramatic growth in global nutrient demand in the last 10 years. He said 2008 saw huge spikes in shipping costs, high natural gas and petroleum prices, stronger crop prices fueled by the demands of global food production and biofuels, and a falling U.S. dollar. Those factors combined to drive a 356 percent increase in nutrient prices from 2005 to 2008; DAP prices alone went from $144/st in 2005 to $1,077/st in 2008, Vroomen said.
After crop prices tumbled and fueled a dramatic price-induced drop in fertilizer usage during 2009, Vroomen said the industry is once again experiencing strong crop prices, rising fertilizer prices at the wholesale level, and very tight fertilizer inventories. Vroomen noted that potash inventories dropped to record lows in August 2010, and that nitrogen demand could rebound to 2005-2006 levels.
Commenting on whether we are likely to repeat the 2007-2008 scenario, Vroomen said there are certainly similar demand variables at play. The big differences from 2008, however, are that natural gas prices are down, along with energy prices, ocean freight rates, and phosphate rock and sulfur prices. Export tariffs are also lower than in 2008, but rail rates remain high.
John Gray of the Association of American Railroads reported on the “big dollar issues” facing the railroad industry, including Positive Train Control (PTC) measures and the push for high-speed rail. Gray said PTC, which is intended to prevent train-to-train collisions, over-speed derailments, and other safety issues by providing very precise train location information, is required by Dec. 31, 2015, for all Class 1 railroads with 5 million annual gross ton/miles transporting toxic inhalation hazard (TIH) materials such as anhydrous ammonia and chlorine.
Gray said roughly 17,000 Class 1 locomotives – as well as some 73,467 Class 1 route miles ?Çô will need to be equipped with PTC at a cost of roughly $8.2 billion, $2.4 billion higher than 2009 Federal Railroad Administration projections. While describing PTC as “an important safety system that will deal with a lot of the headline accidents,” Gray said the technology can’t be fully implemented by the 2015 deadline and represents a “long-term threat to capacity.” He said some of the other key issues facing PTC include cost escalation and the system’s complexity and reliability.
Bruce Burrows of the Railway Association of Canada said deregulation has helped revive Canada’s rail industry, but cautioned that the industry going forward needs a stable regulatory environment that provides balance between all participants. He also detailed the activities of Canada’s Rail Freight Service Review Panel, noting that RAC generally supports it while stressing that “commercial solutions are preferable to prescriptive regulatory recommendations.”
Burrows challenged the Panel’s recommendation for a federal mediator to help resolve commercial disputes between carriers and customers, however, saying “the majority of shippers are unaware of the commercial dispute resolution options currently open to them.”
The conference also featured presentations by Harry Thomas of the U.S. Department of Transportation, Michael Dean of U.S. Customs and Border Protection, and Daniel Elliott, chairman of the Surface Transportation Board.