U.S. Gulf/Tampa: Tampa numbers for the first half of November rolled over from October at the $310/mt DEL mark last week, according to sources. In the meantime, Mosaic reported that the Faustina ammonia plant would continue to be down for six to 12 weeks for repairs and that the company had opted to cut back on phosphate production rather than source ammonia (see page 1).
Natural gas prices were of concern at midweek as Henry Hub prices ran up, but settled down $.19/mmBtu to close at $7.497/mmBtu on Thursday.
There was some good news and bad news regarding one gas forecast for the coming winter season. The good news, according to a forecast by WSI Corp., was that November should be warmer than normal in the pivotal Northeast, as well as in the North Central states of Iowa, Wisconsin, and Illinois. Energy Security Analysis Inc. (ESAI) noted that this warmer weather may extend the injection season and put additional pressure on physical gas prices as there is little room for excess gas due to the extremely full storage, expected at 3.5-3.6 Tcf by early November.
While temperatures are expected to be cooler-than-normal in the Northeast in December and January, they are expected to be warmer-than-normal in all other regions. ESAI is bearish on gas prices, saying cooler weather in the Northeast will not be enough to offset moderate demand in all other regions.
Eastern Cornbelt: Sources reported some fall movement of ammonia to the field in southern Illinois, but wet conditions stalled activity in most other locations. The regional ammonia market was tagged at $345-$355/st FOB last week, up just slightly from last report, with one supplier offering forward pricing for November at $360-$370/st FOB regional terminals, depending on location.
Western Cornbelt: Some areas of the region were starting to move ammonia in late October, but activity was still slow and spotty due to wet field conditions, continued harvest activity, or warm soil temperatures. Ammonia pricing remained at $330-$345/st FOB most regional terminals.
Northern Plains: Ammonia pricing covered a wide range in the region as the fall application season got underway. In North Dakota, sources quoted delivered ammonia at $355-$400/st, with the low out of Leal, N.D., and the upper end reflecting new postings from Dakota Gasification. Fueled by stronger natural gas pricing, ammonia postings from Dakota Gasification moved from $360/st to $385/st DEL on Oct. 19, followed by a jump to $400/st DEL on Oct. 23.
Great Lakes: The anhydrous ammonia market was down from last report at $345-$355/st FOB in the region, with the low at Huntington, Ind., and the high reflecting reference pricing FOB Courtright, Ont. Field conditions were a little soggy in many sections of the region last week, and the moisture continued to delay harvest progress and fall fieldwork.
Black Sea: Prices have edged up a couple more dollars. Sources in Asia now say the latest fixtures put the market at $242-$245/mt FOB. Observers say the main push on prices comes from the plants that are currently in turnaround. Once these plants come back online by the middle of November, they say, availability should pick up ?Çô and with it, prices should ease off.
With U.S. prices remaining relatively stable and production about to come back online, overseas sources see little reason for a major jump in prices.
Sources point to the unusual situation of Black Sea and Middle East prices almost at parity. Eventually, say observers, one of the two will have to move in order to account for vessel size and freight disparities. Unfortunately for Asian buyers, say sources from that region, the Black Sea is expected to blink first. If that happens, the price from Yuzhnyy could drop back to the traditional $10-$20/mt difference while the Middle East price remains firm. For Asian buyers, that would mean no relief in prices.
Still, said one observer, having the Black Sea price drop $10/mt or so is better than having the Middle East price going up the same amount.
Middle East: Sabic continues to have problems with its SAFCO-IV plant. The facility is down, and when it will resume operations is still anyone’s guess. The absence of the plant is one reason industry observers say the ammonia market is so tight in the region. The other is on the demand side.
India continues to pull as many tons as it can. Sources figure the demand will continue into late January or early February.
For now, sources report that the old lower end of the market is pretty well gone.
A multi-tier market had developed as freight rates help industry watchers estimate netbacks. With producers calling the market dead center at $245/mt FOB, others point to deals in the Far East that have prices at $260-$285/mt CFR. Once $40/mt is taken off for freight – most likely a low number, say observers, but one that can be used – market prices show a range of $220-$245/mt FOB.
Whereas sources had once pegged the low end of the multi-tiered market closer to $215/mt FOB, the $220/mt FOB as a bottom price matches with the general discussion of price increases in the region. Few expect the price to stay at that level as demand continues and production remains constrained.
At the upper end, the $245/mt FOB is also seen as changeable. Estimated netbacks from the States indicate prices should be closer to $250/mt FOB.
No matter how the math works out, producers are apparently pleased with the current trend and are doing little more at this time than just filling orders and passing on their expectations for higher prices.
South Korea: Namhae closed a tender last week for 120,000 mt of ammonia for all of next year. These tons are to be divided evenly between December and July, and are in addition to the usual 30-35,000 mt Namhae takes roughly every month from its long-term contracts. Offers in the tender reportedly came from the usual lineup of suppliers to the area: Agrium, Mitsubishi, Sabic, Mitco/Malaysia, and possibly Transammonia and Yara.
Alaska: The Agrium plant in Kenai will shut down for the winter. According to local media reports, the shutdown will take place when consumer demand for natural gas is at its highest in the area. Local government officials told the Anchorage Daily News the move would assure adequate gas supplies for heating and electricity production.
The plant is slated to go down Oct. 29 and stay down until February or March. The Daily News also reported that the plant’s 150 employees will not be laid off during the shutdown. Some will work maintenance shifts and others will be encouraged to take vacation time, the company said.
Sources in Asia say the plant has one cargo of ammonia ready for shipment to Korea this week. After that, Asian buyers will be looking for substitute tons from nearby sources.
It was well known in the industry that the plant would come down to ease the natural gas situation in the area. As a result, said one Asian source, while the absence of the Alaskan material will be noticed, it will not cause a spike in prices. There was plenty of time, he said, for buyers to arrange for alternative sources.
To get around the problem of not having enough natural gas for winter operations in deference to local consumer needs, the company is engaged in a feasibility study of converting Alaskan coal to gas. If the gasification plant gets a green light, media reports say it will be the largest private construction project in that state since the Trans-Alaska oil pipeline.