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Management Briefs

Management Briefs

ArrMaz Custom Chemicals has named Hank Waters as CEO. He joined ArrMaz in early 2009 as president and will replace Glen Varnadoe, who is retiring after more than 25 years of service at ArrMaz and its predecessor companies.

Waters joined ArrMaz from Ashland Inc., where he worked for 17 years and held several positions, including corporate vice president, president of the Ashland Distribution division, president of the Ashland Performance Materials division, and president of the Ashland Water Technologies division. He has also worked for GE Plastics and Air Products. Waters graduated from The General Manager Program at the Harvard Business School, and has a B.S. in Chemical Engineering from Ohio University.

“We are very pleased with Hank’s contribution to the success at ArrMaz,” said Paul Chellgren, Chairman of ArrMaz and an operating partner of Snow Phipps, New York, the private equity firm that purchased the company in 2008.

ArrMaz, Mulberry, Fla., produces a wide variety of process chemicals that are generally custom-formulated to meet customer specifications. It is a leading producer of functional additives and process aids to the fertilizer and asphalt industries, and is a significant provider of chemical products to related minerals mining industries.

Market Watch

Ammonia, Ammonium Nitrate, Ammonium Sulfate, Black Sea, Central Florida, Eastern Cornbelt, Great Lakes, India, Indonesia, Market Watch, Middle East, Nitrogen Solutions, Northeast, Northern Plains, Phosphate, Potash, Sulfur, Tampa, U.S. Exports, U.S. Gulf, U.S. Imports, Urea, Vancouver, Western, Western Cornbelt

AMMONIA

U.S. Gulf/Tampa: Price ideas for March continue to be robust, though there is some speculation that continued delays in getting the new UAN plant to full production in Trinidad might mean another ammonia cargo available for Tampa. If that is the case, sources say this would add downward pressure to the coming round of price negotiations.

U.S. Imports: Anhydrous ammonia imports were off 14 percent in December, according to the U.S. Department of Commerce (DOC), to 423,840 st from the year-ago 492,573 st. July-December imports were also off 14 percent, to 3.14 million st from 3.65 million st.

Eastern Cornbelt: The ammonia market was quoted at $420-$450/st FOB, depending on location and time of delivery. Those numbers were up from last report, with the low end quoted for prompt tons on a spot basis, while the upper number reflected some spring prepay offers still on the table.

Western Cornbelt: Anhydrous ammonia was quoted at $390-$420/st FOB regional terminals, with the low for spot tons and the upper end for spring prepay. That range reflected an increase from last report. Sources pegged the market for prompt tons out of production points in Kansas and Oklahoma at $325-$340/st FOB last week.

Northern Plains: Anhydrous ammonia was pegged at $400-$410/st FOB regional terminals, with the upper end reflecting the Feb. 5 reference price from Agrium FOB Mankato, Minn. Delivered ammonia in North Dakota was quoted in a broad range at $455-$485/st, depending on supplier and time of delivery. Dakota Gasification was offering spot tons at $470/st DEL in the state, and said production at its Beulah, N.D., plant will restart “as soon as the snow melts.”

Great Lakes: Sources quoted the anhydrous ammonia market at $400-$440/st FOB in the region, with the low confirmed by Michigan sources FOB Courtright, Ont., for prompt tons. The upper end was reported for spring prepay offers.

Black Sea: Regular global demand is keeping pressure on the market, but not enough to move the price past the break-even production cost for Ukrainian producers.

Price ideas for material range from $300/mt FOB to $340/mt FOB. The problem is getting buyers and sellers to agree on what the price really is. Producers, naturally, cling to the $340/mt FOB number. Buyers in other parts of the world, however, say the price is much lower.

Working from the prices talked about in the Middle East, observers say the market should be $330-$345/mt FOB. Finding an actual bit of business at that level, however, is another thing.

The last bit of business that people talked about was in late January. The price at that time was pegged in the low $300s/mt FOB.

Ukrainian producers remain shut down, because the price has not been stable at levels that fully cover the cost of Russian natural gas and other costs to production. Sources have pegged the break-even point at $320/mt FOB.

For now, the best bet on pricing is $310-$340/mt FOB.

Middle East: Supplies remain tight in the area. Sources from Asia report that as soon as the producers assemble a cargo’s worth of material, it is loaded and shipped out. Demand comes from Southeast Asia, as well as Europe.

Reports circulated of a couple of deals to Yara for a cargo from Iran at $355/mt FOB and $367/mt FOB.

Transammonia – not the American office – did another deal for Iranian tons at $370/mt FOB.

And Mitsubishi bought Iranian tons from Mitsui for South Korea. The delivered price was $435/mt CFR. The estimated netback on that deal is $370-$375/mt FOB.

Sources have reported that Iranian material is often priced lower than the going regional market price. One reason for the discount is that most ammonia is priced on a delivered basis. The extra steaming time to Iran at the top of the Arab Gulf requires the FOB price to be just a bit lower than material from one of the Arab producers.

Another reason for an Iranian discount is logistics. Complaints of material not being at the port on time to ship or problems with the loading equipment are frequently heard.

In recent months, however, Iran has been a steady supplier for companies able to do business with them.

The flurry of activity this week seems to show, said one source, that Iran can be a large-scale supplier of ammonia. This source added, however, that he is still waiting to see if it can be a steady, large-scale supplier.

The Iranian business, without the convention discount included, pushes up the regional price to $355-$370/mt FOB. If the discount is applied, the price moves up to $345-$360/mt FOB.

Lastly, Fertil has extra tons available because of reduced granular urea output. Sources say the reduction in urea output is most likely a result of start-up problems for the new facility rather than a deliberate act to reduce urea production.

India: Gujarat Narmada Valley Fertilizers Co. (GNFC) halted operations at its ammonia plant following an explosion and fire in the waste heat boiler in the ammonia synthesis unit Feb. 11. The impact on downstream products was unclear.

UREA

U.S. Gulf: New granular business last week was put in the $315-$318/st FOB range. Sources said the range reflected wet weather and a lack of movement to the field. Sellers remain optimistic that once actual field movement and stocking begins, demand for barges will pick up – as well as prices.

One source observed that barge pricing has remained within a steady range – $315-$325/st FOB – for several weeks now. At this point, few are predicting any big changes in price volatility. However, others do note that if 90 million acres of corn are planted, the country could fall short of urea. Even though January-February has seen fresh imports, July-December 2009 imports are off. In addition, the U.S. market remains below global pricing. Sources say that even if that situation changes, it is getting too late to import additional product.

Prills are now said to be in line with granular, if not higher.

U.S. Imports: December urea imports were up 39 percent in December, to 429,699 st from the year-ago 309,694 st, according to the DOC. However, July-December urea imports are still down 20 percent, to 2.17 million st from 2.71 million st.

Eastern Cornbelt: Granular urea pricing was down slightly from last report, to $350-$365/st FOB in the region. The low reflected new postings for prompt tons out of Illinois terminals from CF.

Western Cornbelt: Granular urea was tagged at $350-$360/st FOB in the region.

Northern Plains: The granular urea market was tagged at $360-$365/st FOB the Twin Cities for prompt or prepay tons. Delivered urea in North Dakota was quoted at $400-$407/st, with posted levels at the $400/st mark FOB North Dakota terminals.

Great Lakes: Granular urea was pegged at $360-$380/st FOB for prompt tons, with the low in Wisconsin and the upper end in Michigan to the dealer. One Wisconsin source quoted delivered urea in the $370-$390/st range, depending on location.

Northeast: Granular urea was quoted at $365-$375/st FOB in the region.

Black Sea: The talk of the area is all about how low the market will go.

Earlier this month, sources reported the price had moved comfortably above $310/mt FOB. As last week started, however, the price slipped below $300/mt FOB and then below $290/mt FOB.

At first, sources said there is no market that can sustain a price out of Yuzhnyy above $300/mt FOB. By the end of the week, sources were saying there is no market for anything in the upper $280s/mt FOB.

Producers are now offering at $290-$295/mt FOB, while bids are coming in below $285/mt FOB.

Sensing a softening market, sources report Turkish buyers are pushing harder for lower prices. Recent deals reportedly have earned netbacks under $300/mt FOB.

One Asian trader added that the belief that India will not be coming in until March is adding more grease to the skips in the Yuzhnyy price.

Even the Latin American buyers are only dangling their toes in the market. No large-scale purchases are reported. The buyers seem to be taking only what they need, when they need it.

As the week closed, sources pegged the market at $285-$295/mt FOB, with odds favoring a further drop.

Middle East: Producers in the area were confident and unwilling to offer discounts as last week started.

By the end of the week, however, the idea of an ever-stronger market seemed dashed.

MOPCO/Egypt settled a granular selling tender at $333/mt FOB. The producer had been hoping for bids at $340/mt FOB and up.

The deal now lowers the upper range of the granular market. The range now sits at $300-330/mt FOB.

Prills remain stable.

At the same time, there are reports that Fertil is having some hiccups with its granular production. One trader dismissed the idea that the company is deliberately cutting back on production to regulate supply. He said it is unlikely a company would not try to run its newest plant at full capacity. Any limited output, he added, is most likely teething pains.

Overall, the producers report they are in good shape because of long-term contracts to the United States and Australia. Smaller contracted tons to Asian locations fill out the order books.

Sources have been concerned, however, that come March the buying from these locations will end.

Latin American buyers have been taking only the tons they need in a hand-to-mouth style.

An immediate concern, say sources, is a growing consensus that India could hold out until mid- or late-March to begin buying. Some argue the tender can be pushed back as late as early April.

Indonesia: Just as traders were figuring the export market would go quiet, PIM calls a tender to sell 20,000 mt of prilled urea.

The company issued the tender late Friday afternoon. Bids are due later this week.

Area traders are expecting to see prices softer than the current $316/mt FOB price.

NITROGEN SOLUTIONS

U.S. Gulf: Many players were bullish on UAN, saying a weak Fall ammonia application season would lead to increased use of UAN in the spring, especially if it is a wet spring. Nearby barges were reported to be trading within the $208-$215/st FOB ($6.50-$6.72/unit) range, with forward into late March/April called $218-$225/st ($6.81-$7.03/unit) FOB.

U.S. Imports: December UAN imports were up 208 percent, to 308,330 st from the year-ago 99,983 st. However, for July-December, UAN imports are still off 33 percent, to 653,761 st from the year-ago 973,701 st.

Eastern Cornbelt: UAN-32 was pegged in the $245-$260/st ($7.66-$8.13/unit) range FOB regional terminals, with the low reported out of spot river locations in Illinois and the upper end reflecting prepay offers. One Ohio source tagged the common dealer market in the $7.75-$7.85/unit FOB range last week, with the low out of river terminals. Postings from one regional supplier ranged from $7.85-$8.15/unit FOB for prompt tons in the region last week.

Western Cornbelt: The UAN-32 market was quoted at $240-$255/st ($7.50-$7.97/unit) FOB regional terminals, with the upper end reported in Iowa and the low in Missouri on a spot basis.

Northern Plains: The UAN market was tagged at $7.95-$8.20/unit FOB terminals in the region. Delivered UAN-28 was quoted at $230-$245/st ($8.21-$8.75/unit) in North Dakota, with the low for prompt tons and the upper end for spring prepay. UAN postings from CF for the Feb. 12-19 order and shipping period included $8.20/unit FOB Pine Bend, Minn.

Great Lakes: UAN was quoted in a broad range at $7.75-$8.21/unit FOB regional terminals, depending on location, with the low confirmed by sources in southern Wisconsin. Out of Michigan terminals, UAN-28 was pegged at $220-$230/st ($7.86-$8.21/unit) FOB to the dealer.

Northeast: The UAN-30 market was pegged at $210-$215/st ($7.00-$7.17/unit) FOB port terminals, while UAN-32 remained at $7.50-$7.75/unit FOB terminals in upstate New York. The vessel market was tagged in the $240-$250/mt CFR range, with replacement tons indicated in the $250-$260/mt CFR range at mid-month.

Western U.S.: Effective Feb. 17, Agrium’s UAN-32 postings moved up $10/st to $260/st ($8.13/unit) rail-DEL in Washington, northern Idaho, and Oregon excluding Malheur County; $265/st ($8.28/unit) rail-DEL and $270/st ($8.44/unit) truck-DEL in southern Idaho, Nevada, Utah, and Oregon’s Malheur County; and $280/st ($8.75/unit) DEL in Montana and northern Wyoming. In California, Agrium’s postings firmed to $248/st ($7.75/unit) FOB Sacramento, $270/st ($8.44/unit) truck-DEL in central California, and $275/st ($8.59/unit) truck-DEL in northern California.

AMMONIUM NITRATE

U.S. Gulf: The market appears to be firm at the $250/st FOB mark.

U.S. Imports: Imports were off 52 percent in December, to 22,075 st from the year-ago 45,732 st, according to the DOC. During July-December they were off 40 percent, to 195,895 st from 328,956 st.

Western Cornbelt: The ammonium nitrate market had reportedly firmed to $285-$290/st FOB, with the upper end again quoted in Iowa. Sources pegged the Catoosa, Okla., market at $275/st FOB at mid-month, also up from last report.

AMMONIUM SULFATE

Eastern Cornbelt: Granular ammonium sulfate pricing
continued to climb, with sources quoting the dealer market
last week at $230-$235/st FOB or DEL in the region. Sources
continued to describe supplies as tight.

Western Cornbelt: Granular ammonium sulfate was tagged at $225-$235/st FOB in the region, depending on location. An Iowa supplier quoted the market at a firm $230/st FOB to the dealer.

Northern Plains: Granular ammonium sulfate remained at $235-$245/st DEL in the region, and tons were described as tight.

Great Lakes: Granular ammonium sulfate pricing was up significantly from last report. Sources pegged the dealer market at $230-$236/st FOB, with the upper end reported in Michigan. The low end of the range was also quoted for rail-delivered tons in Wisconsin. Honeywell’s Feb. 1 postings included granular ammonium sulfate at $230/st rail-DEL and FOB warehouses in Wisconsin.

Northeast: Granular ammonium sulfate had reportedly firmed to $195-$200/st FOB and $225-$230/st DEL in the region.

U.S. Imports: Imports were up 80 percent in December, to 45,284 st from the year-ago 25,216 st, according to the DOC. July-December imports were up only 3 percent, to 167,562 st from 162,100 st.

PHOSPHATES

Central Florida: The Central Florida DAP market was losing ground to the export market, which was rising rapidly last week. Horrible weather in the East and Midwest was a major contributor to the slowdown in business.

Although producers saw little increase in business last week, traders were active – at least more so than they have been for the past couple of months. Most of the prompt railcars of DAP sold were done by traders.

Several sources said none of the material sold last week was going directly onto the ground, but into storage systems in preparation for the spring season. “Dealers are waiting for the farmers to start coming in before they order more,” said one.

The drawback to waiting to buy is the strong probability that prices will go higher. Despite the domestic slowdown, the export market was taking a huge chunk out of available inventories. Production levels may be difficult to maintain, considering the shortage of sulfur. Phosphate producers have been struggling to find sulfur, and considering the depressed economy, that situation was likely to continue well into and probably throughout the quarter.

The Central Florida DAP price range last week increased slightly, from $390-$400/st FOB the previous week to $395-$400/st FOB. Small buyers will likely pay a higher price this week. Mosaic increased its posted price from $395/st FOB to $400/st FOB, while CF’s price remained at $395/st FOB. PCS Sales was charging market-based prices. Prices from Agrifos were $430/st FOB for DAP and $440/st FOB for MAP, but railcars were about $5/st FOB less, if available.

U.S. Gulf: Last week Transammonia purchased 15,000 mt from CF, which it plans to use for the export market. Shortly after, CF began buying NOLA DAP barges to replace the material it sold to Trammo. The result was a run-up in the market.

The deal worked well for CF, which will avoid having to pay to ship DAP across the Gulf to the river markets, even though it had to pay a premium to get the replacement product. CF was believed to have been seeking as many as a dozen NOLA DAP barges, and had purchased at least 10 as of late last week, according to sources.

Sales picked up as a result of the CF/Trammo deal. Early in the week, transactions were done as low as $412/st FOB, but they began rising shortly after and continued that trend late into the week, when asking prices were close to $425/st FOB – although no business was done at that level.

The bitter weather that swept across much of the country during the past month has slowed business from terminals and warehouses throughout the Midwest.

In addition to the CF deal with Trammo, sources said many of the barges traded recently have been for export, which was bringing a premium of around $50/st FOB over the NOLA DAP barge market.

Corn prices were holding up well last week, and farmers will be using more fertilizer this season than during the past two years because soil tests have been consistently showing low levels of nutrients. Coupled with a strong corn market, farmers cannot afford not to buy. However, some fear that if the price of phosphate goes up too high, farmers will attempt to use less than they otherwise would have.

TFI’s January report showed inventories increased and more phosphate was sold in the domestic market. However, production was beginning to show signs of strain as a result of a shortage of sulfur. Producers were said to be scavenging every possible source for additional supplies in order to keep processing plants running.

Based on transactions last week, the NOLA DAP barge price range was lower on the bottom and higher at the top when compared to the previous week. The previous week’s range was $415-$416/st FOB, but changed to $412/$421/st FOB. Considering most of the activity last week was the result of the CF/Trammo deal, prices will likely stabilize somewhat this week.

Eastern Cornbelt: The DAP market was pegged at $440-$450/st FOB regional warehouses, also up slightly from last report. MAP was $10-$15/st higher than DAP. The 10-34-0 market was tagged at $355-$365/st FOB in the region.

Western Cornbelt: DAP was $440-$450/st FOB regional warehouses, up slightly from last report. MAP was $10-$15/st higher than DAP, and 10-34-0 was unchanged at $345-$355/st FOB in the region.

Northern Plains: Minnesota sources quoted the DAP market at $450-$460/st FOB last week, with MAP $10-$15/st higher. A North Dakota dealer pegged rail-delivered MAP at $490-$510/st, with no new business reported to test those levels.

10-34-0 was reported in a broad range at $315-$345/st FOB for prompt tons, with the low also reported in North Dakota for delivered tons on a spot basis. Agrium’s phosphoric acid postings firmed on Feb. 1 to $725/st rail-DEL for both super phosphoric acid (SPA) and merchant grade acid (MGA) in Minnesota and the Dakotas.

Great Lakes: The DAP market was quoted at $450-$465/st FOB, with the upper end FOB Webberville, Mich., to the dealer. A Wisconsin source quoted delivered DAP at $460/st to his location last week. MAP was $10-$15/st higher than DAP. The 10-34-0 market was tagged at $360-$365/st FOB, with the low in Wisconsin and the upper end in Michigan.

Northeast: MAP remained at $465-$490/st FOB in the region, with the low at Philadelphia and the higher numbers out of warehouse locations in New York. DAP was $10-$15/st less than MAP, where available, and 10-34-0 was tagged at $345-$355/st FOB in the region.

U.S.Export: The talk last week was about the deal Transammonia did with CF, which had as much or more of an effect on domestic sales as it did in the export market.

The 15,000 mt Trammo bought from CF was the only export-related sale of U.S. phosphate found last week, and it was unclear exactly where the product was destined to be delivered. PhosChem made no new sales last week.

However, India was believed to be negotiating with the Russians for the purchase of a large quantity of DAP – possibly as much as 1 million mt – but no details or confirmations could be found.

Other promising markets included Pakistan, Central America, and Argentina, which was the leading buyer of MAP in January.

TFI’s January export report showed DAP exports declined in January by 35.3 percent, compared to a year earlier. TFI said exports last month totaled 136,878 mt. Mexico was the biggest customer at 38,512 mt, followed by Japan at 21,425 mt and China with 20,981 mt, which was most likely an overrun from the previous year.

TFI said MAP exports from the U.S. were up 119.2 percent from 2009, at 100,560 mt. Argentina led the way with imports of 34,943 mt, while Canada was second at 27,019 mt and Brazil third with 13,227 mt.

The export DAP price range last week increased from $490-$495/mt FOB to $505-$510/mt FOB. Considering the market has shown no signs of weakness, the price should continue to rise in the short term, say sources.

POTASH

Eastern Cornbelt: Sources quoted the potash market at $395-$405/st FOB from secondary suppliers. Producer postings were higher, at $420/st FOB and $430/st DEL in the region.

Western Cornbelt: Potash continued to be quoted in the $395-$417/st FOB range, depending on grade and location, with the upper end reflecting white granular potash from some secondary suppliers. An Iowa source pegged the red granular potash market firmly at the $405/st FOB level last week, below producer postings of $420/st FOB and $430/st DEL.

Northern Plains: Potash was quoted at $367-$380/st FOB Saskatchewan mines, depending on grade and supplier. Agrium’s Feb. 2 potash postings FOB Vade, Saskatchewan, included $367/st for standard and $372/st for premium grade. Agrium’s 60 percent red premium potash postings firmed on Feb. 2 to $420/st FOB Shakopee, Minn., and Grand Forks and Colfax, N.D., and $430/st rail-DEL in Minnesota, Wisconsin, and the Dakotas.

Great Lakes: Potash pricing had reportedly firmed to $420-$427/st FOB, depending on grade and location, with the upper end quoted by Michigan sources for white granular potash on a spot basis. Delivered potash was pegged at the $430/st level in Wisconsin.

Agrium’s 60 percent red premium potash postings firmed on Feb. 2 to $420/st FOB Saginaw, Mich., and $430/st railDEL in Michigan and Wisconsin.

Northeast: The potash market was quoted at $400-$420/st FOB, with the low reported by Pennsylvania sources from secondary suppliers on a spot basis. Delivered potash was pegged at $420-$440/st, depending on grade and location, with the upper end reflecting reference levels from producers.

U.S.Imports: December imports were off only 3 percent, to 692,616 st from the year-ago 711,286 st. However, for the July-December period they were off 40 percent, to 2.91 million st from 4.83 million st.

India: Canpotex has concluded a new second-quarter supply contract to India covering shipments through June 2010 at a contract price of US$370.00/mt CFR. This new contract, totaling approximately 600,000 mt, is with a consortium of buyers that includes Coromandel International Ltd. and Tata Chemicals Ltd.

SULFUR

Tampa: A number of factors have been responsible for sulfur shortages in the Gulf Coast region, as well as the rest of the country and the world – the economy, which was keeping driving down, refinery turnarounds, and the weather.

The weather has been especially brutal this year. The frequent cold fronts that have frozen most of the country have also been a problem in the Gulf of Mexico. A Martin sulfur vessel, the Margaret Sue, last week hit waves of 16 feet in the Gulf and sustained enough damage to force it to head for port and a shipyard for repairs. The vessel was expected to return to service in about a week, but the interruption in delivery of molten sulfur to Tampa just added to the existing shortage problem.

Sources said that although a large number of refineries along the Gulf Coast were still undergoing turnarounds, most should be returning to service relatively soon. However, most were still planning to use sweet crude, which will provide less sulfur than the sour. Even when those facilities are back in service, sulfur will remain tight.

Phosphate producers were not the only ones being affected by the shortage. Sources said some industrial customers were not getting the supplies they need and were planning to shut down in some instances. Phosphate companies were seeking other sources of supply, and Mosaic was said to be re-melting blocked sulfur in Canada that it purchased earlier. In addition, the sulfur it had blocked at Galveston was believed to have been exhausted. Also, Mosaic was said to have recently purchased about 10,000 mt of sulfur from the Caribbean to help bolster its supplies.

Although negotiations for new second quarter prices were still about two months away, it appeared likely prices would rise – and probably by quite a bit.

CF told analysts last week that its production rates have not been impacted by sulfur availability. However, it did say that it had a transportation hiccup over the weekend (Feb. 13-14) that it believes has been resolved. The company said its sulfur supply has been first rate.

U.S.Imports: Imports were up 16 percent in December, to 90,362 st from the year-ago 77,999 st. July-December imports were off 47 percent, to 614,640 st from 1.15 million st.

Vancouver: Spot prices for sulfur from Vancouver were heading up last week. A source said a price of $170/mt FOB was being sought for a spot deal, although it had not been concluded.

The Week in Fertilizer Stocks

Fertilizer Stocks
Producer Symbol Price Week Ago Year Ago
Agrium AGU 65.98 64.52 38.48
CF Industries CF 102.01 100.12 52.68
Intrepid Potash IPI 28.03 27.06 22.33
Mosaic MOS 60.56 58.42 40.88
PotashCorp POT 115.20 111.12 81.73
Terra Industries TRA 41.30 34.04 18.94
Terra Nitrogen TNH 105.70 104.05 115.51
Distribution/Retail
Andersons Inc. ANDE 31.35 30.96 13.72
Deere & Co. DE 57.26 52.32 32.23
Scotts SMG 38.75 37.84 31.07

Vale continues to buy up Fosfertil; Mosaic to receive over $1 B

Featured, News

Brazilian mining giant Vale S.A., Rio de Janeiro, said Feb. 10 that through its subsidiary, Mineração Naque S.A., it has entered into an option contract with The Mosaic Co. The agreement gives Vale the right to buy shares of Fertifos Administração e Participações S.A. (Fertifos) and Fertilizantes Fosfatados S.A. – Fosfertil (Fosfertil), a company listed on the BM&F Bovespa. This contract is part of the recently announced process of acquiring 100 percent of the equity capital of Bunge Participações e Investimentos S.A. (BPI) (GM Feb. 1, p. 1).

The exercise of the option is subject to certain conditions, among them the effective acquisition of the fertilizer assets of Bunge Group in Brazil. The option gives Vale the right to acquire a direct and indirect stake of 20.27 percent in the equity capital of Fosfertil, comprised of 27.27 percent of common shares and 16.65 percent of preferred shares.

The strike price of the option contract is US$1,029,811,129.77, which was based on the same price per share – US$12.0185 – agreed to with BPI, Fertilizantes Heringer S.A. (Heringer), Fertilizantes do Paraná Ltda. (Fertipar), and Yara Brasil Fertilizantes S.A. (Yara) for the acquisition of their direct and indirect stakes in Fosfertil.

After the acquisition of the direct and indirect stakes of BPI, Heringer, Fertipar, Yara, and Mosaic is concluded, Vale will hold 78.90 percent of the equity capital of Fosfertil, corresponding to 99.81 percent of common shares and 68.24 percent of preferred shares. The total price to be paid for the acquisition of 78.90 percent of the equity capital of Fosfertil is US$4,006,876,600.55.

Pursuant to Brazilian corporate law and capital markets regulations, and once the acquisition of the above mentioned stakes is concluded, Vale will launch a mandatory offer to buy the remaining 0.19 percent of the common shares held by the minority shareholders of Fosfertil at the same price per share agreed upon among BPI, Heringer, Fertipar, Yara, and Mosaic.

In addition to the acquisition of Fosfertil shares, Vale has also agreed to acquire from Mosaic a processing plant located in Cubatão, state of São Paulo, Brazil, for US$50 million. Vale said it has a nominal capacity to produce 300,000 mt/y of single superphosphate (SSP), which is the phosphate nutrient used most often in Brazil.

Mosaic confirmed the transactions and said they will have no impact on Mosaic’s significant fertilizer blending and distribution business in the country and its SSP production and port activities in the Paranagua complex.

Ohio co-op merger approved by members; Trupointe to begin operations in September

Featured, News

Members of the Ohio cooperatives Southwest Landmark Inc. and Advanced Agri-Solutions Inc. have voted to merge the two organizations. The new cooperative, Trupointe Inc., will begin operations on Sept. 1, 2010, and will serve more than 4,400 farmer members through approximately 45 locations in 26 Ohio counties and three Indiana counties. The new organization will employ a full- and part-time workforce of 510.

“The two cooperatives are extremely complementary,” said Larry Hammond, CEO of Advanced Agri-Solutions and upcoming CEO of Trupointe. “We are looking forward to a smooth transition and are pleased our members agreed that together our cooperatives’ combined assets will result in a stronger co-op for our members.”

Ballots were mailed to members on Jan. 14 (GM Jan. 25, p. 1) after the boards of directors of both co-ops voted unanimously to approve the merger. The results of the member vote were announced on Feb. 8. The consolidation passed with 77.1 percent of the 1,294 ballots cast by Advanced Agri-Solutions members and 82 percent of the 632 ballots cast by Southwest Landmark members. Sixty percent was needed for the merger to proceed.

“The service territories are adjacent, so it is unlikely any branch locations would need to be closed due to the consolidation,” said Gordon Wallace, CEO of Southwest Landmark and upcoming Chief Operating Officer of Trupointe. “It was important as we began this process that we preserve jobs for our more than 500 full- and part-time employees, who on average have been with us for 20 to 25 years, as long as they want to be part of our future.”

Southwest Landmark brings its expertise in agronomy and energy to the merger, while Advanced Agri-Solutions contributes an emphasis on grain marketing and feed. The new co-op will also sell petroleum and turf products.

Members also approved a new board of directors that will be made up of five board members from each existing co-op board, and will be selected by the boards themselves. “The consolidation means more resources and expertise for our members, more grain delivery destinations, more buying power and more market share,” said Southwest Landmark Board President John Waymire. “This is a win for our farmers’ future.”

Before the merger is completed, the co-ops said they would establish internal working groups to study operational efficiencies and blend corporate cultures. Another task will be the development of a consistent Trupointe brand identity.

“We have a lot of work to do in the next few months, but I’m confident the employees and management of both organizations will make this process as seamless as possible,” said Chris Shroer, Advanced Agri-Solutions board president. “We are excited about the possibilities ahead of us.”

Southwest Landmark saw total sales of more than $217 million for the fiscal year ending July 31, 2009, while Advanced Agri-Solutions posted total sales of $279 million for the fiscal year ending Aug. 31, 2009. Southwest sold nearly 57,000 tons of dry fertilizer in 2008, along with more than 48,000 tons of liquid fertilizer and 8,774 tons of anhydrous ammonia. Ag Chemical sales for 2008 totaled $13.35 million, with turf chemical sales totaling $1.26 million.

Compass 4Q SOP earnings off 66 percent; company says 2010 should be a good year

News

Compass Minerals reported that specialty fertilizer (sulfate of potash) operating earnings were off 66 percent for the fourth quarter ending Dec. 31, 2009, to $12.6 million on sales of $26.3 million from the year-ago $36.6 million and $57.8 million, respectively. Sales volumes were off 30 percent, to 41,000 st from 59,000 st. Compass said fourth-quarter volumes were the highest for the year. The average selling price for the quarter was $640/st, compared to the year-ago $975/st.

“We believe that specialty fertilizer customers are cautiously returning to the market, and we expect a meaningful improvement in sulfate of potash demand in 2010,” said Compass President and CEO Dr. Angelo Brisimitzakis. He told analysts he expects the company to achieve significant quarter-over-quarter sales volume improvements in the first quarter 2010 and for the year. He called 2010 a transitional year for SOP. “We think 2010 will be a good year, but not back to normal. And we think pricing has bottomed out, and we are hopeful that it will improve from there, and thus we announced a $30 increase.

“While the average selling price of SOP is almost certain to settle lower than our 2009 average, we still expect 2010 SOP prices to provide attractive margins,” continued Brisimitzakis. He said the company saw a bottoming of SOP prices in the low $500s/st FOB, and the $30/st increase is effective April 1.

For the full year, fertilizer earnings were off 35 percent, to $76 million on sales of $126.8 million, from 2008’s $117.7 million and $232.9 million, respectively. Sales volumes were off 61 percent, to 153,000 st from 391,000 st. The 2009 average selling price was $828/st versus 2008’s $596/st.

Company-wide, Compass net earnings for the fourth quarter were down, at $62.5 million ($1.88 per diluted share) on sales of $312.2 million, compared to the year-ago $80.1 million ($2.44 per share) and $388.3 million. For the year ended Dec. 31, 2009, before the snowfalls in recent weeks in the Eastern U.S., Compass reported that its salt business saw less demand for salt in the fourth quarter and year 2009 than in 2008. However, the salt segment did benefit from higher prices, lower shipping and handling costs, and stable production costs.

For the year, Compass reported increased net income, to $163.9 million ($5.01 per share) on sales of $963.1 million, compared to 2008’s $159.5 million ($4.93 per share) and $1.17 billion.

Compass has raised its quarterly dividend by 10 percent, to $.39 per share, effective with its dividend payable March 15, 2010, to shareholders of record at the close of business March 1, 2010.

The Andersons sees positive 4Q and 2009 results

News

The Andersons, Inc. reported earnings of $16.2 million, or $0.88 per diluted share, on total revenues of $916 million for the fourth quarter ending Dec. 31, 2009. That was up significantly from the comparable year-ago period, when the company ?Çô saddled with inventory write-downs within the Plant Nutrient Group – posted a loss of $33.4 million, or $1.84 per diluted share, on revenues of $770 million.

The company had full-year 2009 net income of $38.4 million, or $2.08 per diluted share, on $3 billion in revenues, compared to 2008 earnings of $32.9 million, or $1.79 per diluted share, on total revenues of $3.5 billion.

The Plant Nutrient Group saw fourth-quarter operating income of $1.7 million on $111 million in revenues, compared with the year-ago operating loss of $74.5 million on revenues of $112 million. Full-year results for the group included $11.3 million in operating income on revenues of $491 million, compared with a 2008 operating loss of $12.3 million on revenues of $653 million. The 2008 operating loss was fueled by $84.1 million in market adjustments made during last year’s fourth quarter due to sharp declines in nutrient prices.

The Andersons noted that the integration of the Hartung Brothers Inc.’s Fertilizer Division into the Plant Nutrient Group was completed by year end. The Hartung acquisition was first announced in May 2009 (GM May 11, 2009), and completed on Aug. 1, 2009.

In a conference call with analysts, CEO Mike Anderson said the Plant Nutrient Group had “depressed volumes” on fertilizer throughout 2009, but that it saw a 75 percent increase in fourth-quarter volumes from the year-ago quarter. “Seventy-five percent up on hardly anything is not a lot, but it’s definitely an uptick,” he said.

Anderson also noted that the group has started to build nitrogen and phosphate inventories, and is “taking a serious look” at potash now that lower prices are in play. “If you look at the relationship of nutrient prices to corn right now … we would expect producers to be using nutrients,” he said. “Right now the pipeline is starting to fill up again … We’re expecting a good season.”

The Grain & Ethanol Group saw 2009 operating income of $51.4 million on revenues of $2.2 billion, compared with 2008 operating income of $43.6 million on revenues of $2.4 billion. The group’s grain business had a record year, the company said, while the ethanol business had its second highest year, resulting from significantly increased margins during the second half of the year.

For the fourth quarter, the Grain & Ethanol Group’s operating income was $27.8 million on revenues of $722 million, compared with $11.9 million and $565 million, respectively, in the year-ago fourth quarter. The increase in the operating income was attributed to improved results in the ethanol business, which had its highest quarter since entering the business four years ago. These improvements were partially offset by lower quarterly results in the grain business, due primarily to the late harvest in 2009.

Driven by an almost 20 percent increase in lawn business volumes, the Turf & Specialty Group’s 2009 full year operating income was a record $4.7 million on $125 million of revenues, compared with $2.3 million in income and $119 million in revenues in 2008. For the fourth quarter, the group incurred an operating loss of $1.1 million on $19 million in revenues, compared with $1.1 million and $20 million, respectively, in the 2008 fourth quarter.

Reduced consumer spending led to a 2009 sales drop within the Retail Group, which posted a full-year operating loss of $2.8 million and a fourth-quarter loss of $0.7 million. In 2008, the group saw operating income of $0.8 million for the full year and $1 million for the fourth quarter.

The Rail Group also posted a loss in 2009 resulting from double digit declines in national rail traffic. The group saw an operating loss of $1 million for the year and $1.5 million for the fourth quarter, compared with operating income of $19.8 million for the year and $3.3 million for the fourth quarter in 2008. The company said the average utilization rate (the percentage of the fleet’s railcars in service) for 2009 was 78.1 percent, which was down significantly from the prior year rate of 92.5 percent.

“Clearly, our full year earnings were heavily influenced by the results within our agricultural business units,” said Anderson. Noting the record results in the grain and turf businesses, along with the impact of the weak economy on the rail and retail groups, Anderson said the company’s “strategy of purposeful diversification allows us to remain a strong company, even when external factors are significantly impacting one or more of our groups.”

Looking ahead, Anderson said he anticipates continued improvements in the Grain & Ethanol and Plant Nutrient groups. “I believe that our Plant Nutrient Group will have an improved level of profitability due to farmers returning to more normal application rates and an expectation that corn acres will increase modestly, and the fact that we will begin to reap the benefits of our recent acquisitions,” he said.

Agrium 4Q earnings off 76 percent; Wholesale EBIT, volumes up

News

While Agrium Inc. reported declining net income in the fourth quarter and year ending Dec. 31, 2009, its Wholesale unit showed a 32 percent increase in improved earnings before interest and taxes (EBIT) compared to year-ago levels. Wholesale EBIT was $140 million on net sales of $716 million, compared to the year-ago $106 million and $982 million, respectively. For the year, however, Wholesale EBIT dived to $495 million from the year-ago $1.48 billion, while Wholesale sales dropped to $3 billion from the year-ago $4.7 billion.

Fourth-quarter Wholesale gross profit was $180 million, down from the year-ago $283 million. Agrium said this was due primarily to lower average selling prices for all three major nutrients. The reduction in prices year-over-year more than offset a 44 percent increase in sales volumes in the fourth quarter. They were up 35 percent, 69 percent, and 25 percent, for N, P, and K, respectively.

“The fourth quarter of 2009 saw the initial stages of recovery in the crop input sector,” said Mike Wilson, Agrium president and CEO. “We have seen increasing demand for domestic potash and a tight supply situation for nitrogen and phosphate products. Wholesale sales volumes were substantially higher this quarter across all products than the fourth quarter of last year, despite the shortened fall application season.

“We are seeing increasing signs that demand for crop nutrients and other crop inputs will be strong in the coming spring, despite some recent weakening in crop prices following the revised yield estimates from the USDA. Agrium is looking forward to a significant recovery in the crop input markets in 2010.”

Fourth-quarter net income was $30 million ($.19 per diluted share), a 76 percent drop from the year-ago $124 million ($.79 per share). Fourth-quarter results include losses of $35 million on gas and other hedging positions, and a $34 million expense in stock-based compensation. Sales were off by about $500 million, to $1.44 billion from the year-ago $1.94 billion.

For the year, Agrium net income was off 72 percent, to $366 million ($2.33 per share) on sales of $9.13 billion, versus 2008’s $1.32 billion ($8.34 per share) and $10.0 billion, respectively.

Despite the good news from the fourth-quarter Wholesale business, Agrium Retail and Advanced Technology segments were in the negative EBIT column. Retail negative EBIT was $57 million on sales of $738 million, compared to the year-ago negative $54 million and $1.02 billion. Within the Retail division, crop nutrient sales gross profit during the fourth quarter was $46 million on sales of $431 million, down from the year-ago $60 million and $631 million, respectively. Crop protection profits were off, at $98 million on sales of $234 million from the year-ago $133 million and $288 million. The seed and other services sector reported improved margins of $45 million on sales of $73 million, up from the year-ago $35 million and $103 million, respectively.

Fourth-quarter Advanced Technology EBIT was a negative $6 million on sales of $95 million, down from the year-ago positive EBIT of $6 million and sales of $76 million.

For the year, both Retail and Advanced Technology were off, but they remained in positive numbers. Retail EBIT was $163 million on sales of $6.2 billion, versus the year-ago $480 million and $5.5 billion. Retail crop nutrient gross margins were $212 million on sales of $2.52 billion, down from the year-ago $627 million and $2.72 billion. Retail crop protection margins were up for the year, at $648 million on sales of $2.64 billion, from 2008’s $576 million and $2.1 billion, respectively. The seed and other services segment of retail also saw improved results, with margins of $322 million on sales of $1 billion, up from the year-ago $223 million and $683 million. Improved crop protection and seed performance reflected Agrium’s acquisition of United Agri Products Inc.

Full-year Advanced Technology was $3 million on sales of $304 million, versus the year-ago $33 million and $352 million.

Agrium said it paid $100 million, including working capital, for 57 farm centers in the U.S. and Canada that it bought over the last several months. It said the combined annual sales for these acquisitions, which included a few independent outlets as well as approximately 33 in Canada and some from Agriliance LLC, is projected to be $350 million.

Agrium said it continues to be fully committed in its pursuit of CF Industries Holdings Inc.

4Q-09 Wholesale Sales Profit Tons Price
Nitrogen 294 95 930 316
Potash 135 74 353 382
Phosphate 91 1 232 392
Purchased Product 161 2 598 269
4Q-08 Wholesale Sales Profit Tons Price
Nitrogen 355 136 691 514
Potash 192 159 283 678
Phosphate 153 86 137 1,117
Purchased Product 251 (108) 388 647
YR-09 Wholesale Sales Profit Tons Price
Nitrogen 1,247 412 3,766 331
Potash 333 174 763 436
Phosphate 436 38 1,004 434
Purchased Product 816 (37) 2,672 305
YR-08 Wholesale Sales Profit Tons Price
Nitrogen 1,815 712 3,551 511
Potash 816 632 1,686 484
Phosphate 847 421 906 935
Purchased Product 971 (42) 1,781 545

* Net sales and gross profits in $ millions, volumes in 000 mt, price is average selling price per mt. Purchased product is for resale.

Canpotex inks deal with Sinofert

News

Canpotex said Feb. 8 that it has reached an agreement with Sinofert on a spot sale of approximately 350,000 mt of Canadian potash at competitive prices. The product is to be shipped to China before the end of March 2010. This allows a very short window of time to ship such a large amount potash out of Vancouver.

As a result of this sale, Canpotex says it is now fully committed on sales through the first quarter of 2010, and it will announce plans with respect to second-quarter pricing early in March, after thoroughly reviewing changing and much-improved overseas potash market conditions.

The news missing from the Canpotex announcement was the price it agreed to with Sinofert. Traditionally, Belarusian Potash Co. (BPC) has negotiated pricing with China and Canpotex has followed. In December, BPC negotiated a price of $350/mt CFR with Chinese buyers (GM Jan, 4, p. 1). Canpotex later said it would not sign a year-long contract at that number, and that it would seek a spot contract with Chinese buyers instead.

Canpotex and its three principals – PotashCorp, The Mosaic Co., and Agrium Inc. – were mum last week as to the actual price, since Canpotex and Sinofert have agreed to keep it quiet. However, this left it open for the industry to speculate. One question was whether Canpotex was willing to commit to $350/mt CFR, but only for a spot contract that would end in March. This alternative would get Sinofert the $350/mt price, and give Canpotex the room to maneuver for the rest of the year. At the same time, however, Canpotex has been touting higher prices to other – albeit smaller – buyers in the region. These buyers traditionally pay higher prices than China.

Although Agrium Inc. was available for questions from analysts last week in its earnings conference call, it remained silent on responding to the China question. However, PotashCorp and Mosaic representatives appeared at the Goldman Sachs Agricultural Biotech Forum Feb. 10, and while not coming out and revealing the price, they were candid about the negotiations.

PotashCorp Executive Vice President and Chief Financial Officer Wayne Brownlee stressed that Canpotex was not willing to enter into a long-term contract at the $350/mt CFR price. He noted the stalemate between the two sides, and said the question was whether there was a way to save face for both sides or “should you just walk away completely and say ‘you know what, tough luck, Charlie,’ so to speak. We have a long-term relationship with the customer base there.

“So basically, what you’ve gotten there is a compromised arrangement, where we agreed to supply tons for two months – 350,000 mt. Part of the agreement was not to talk about the price so much, the price is nothing to jump up and down about.”

Brownlee said it was more about getting a compromise that was helpful to them and a little helpful to Canpotex. “It tightens up the market a little bit more and it’s part of turning around the market momentum into a seller’s market rather than a buyer’s market, and it was part of the contracts that we had signed in Taiwan and Japan and Australia. Part of the aspect of the business that we saw in the United States, it’s part of the $30 increase going through, which we think has taken effect in the United States, and we are already seeing that the $30 ton Brazil price increase that was announced by our competitor is also seeming to just take effect. So, this whole process has been trying to change momentum from a buyer sentiment to a seller sentiment.”

Brownlee said it was a compromise that helped turn the ship around.

“I can tell you that both China and Canpotex were very pleased with this contract,” said Mosaic Executive Vice President and Chief Financial Officer Lawrence Stranghoener. “It solved an immediate need for product in China. And it’s served producers’ desire to ship product immediately, standard-grade product that was in stock.”

Stranghoener said whether this represents a new way of business in China remains to be seen, “but at least for now it is better serving our purposes as a producer and evidently our customers’ needs as well.”

As for a $30 price increase for potash due in March in the U.S., Stranghoener said it was not fair to say it has already taken effect in light of good demand. “I don’t think it’s fair to say it’s already taken effect. I think the tone is positive; the trend is positive. I think right now all eyes are on the grain markets and the upcoming spring planting season. February is typically a bit of a slow month in this industry, and that’s proving to be the case again this year, especially with grain prices weakening a bit.” He said the company still expects very strong demand and recovery, even with the relatively high producer inventory levels. Stranghoener added that distributor pipelines are quite low, suggesting a very attractive supply-demand picture shaping up for the next several months.