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Market Watch

Ammonia, Ammonium Nitrate, Ammonium Sulfate, Asia, Bangladesh, Black Sea, California, Central Florida, China, Eastern Cornbelt, India, Market Watch, Middle East, Nitrogen Solutions, Pacific N.W., Phosphate, Potash, Southern Plains, Sulfur, Tampa, U.S. Exports, U.S. Gulf, Urea, Vancouver, Vietnam, Western Canada, Western Cornbelt

AMMONIA

U.S. Gulf/Tampa: The markets were quiet over the holidays, having achieved a $25/mt drop beforehand to $300/mt DEL at Tampa. There have been discussions of new business at NOLA, but nothing confirmed.

Eastern Cornbelt: Sources reported a fair amount of interest in spring prepay ammonia at year’s end, but spot demand for prompt tons had dried up in the region. Spring prepay offers for ammonia were reported in the $425-$440/st FOB range, with the low in Illinois and the upper end reported FOB Henderson, Ky.

Western Cornbelt: No spot demand for ammonia was reported in the region last week. Prepay ammonia was quoted at $400-$420/st FOB in the region for spring, depending on location, with the low reported in Nebraska.

Southern Plains: Koch’s Dec. 30 ammonia postings included $315/st FOB Dodge City, Kan., and $325/st FOB Conway and Clay Center, Kan., with first-quarter spring prepay offered at $335/st FOB Dodge City, $345/st FOB Conway, and $350/st FOB Clay Center, and second quarter spring prepay offered at $345/st FOB Dodge City, $350/st FOB Conway, and $355/st FOB Clay Center.

California: Anhydrous ammonia was pegged at $480-$485/st truck-DEL and $515/st rail-DEL in the California market, with aqua ammonia listed at $132/st FOB.

Pacific Northwest: Anhydrous ammonia was tagged at $445/st truck-DEL in the region last week, although postings were considerably higher. Agrium anhydrous ammonia postings firmed on Dec. 10 to $480/st rail-DEL in Oregon, Washington, and northern Idaho; $500/st truck-DEL in Oregon and Washington east of the Cascades, and in northern Idaho; $505/st rail-DEL in southern Idaho and Utah; and $530/st truck-DEL in Montana and northern Wyoming.

Western Canada: The anhydrous ammonia market was quoted at $665-$692/mt DEL in the region, reflecting an increase of $30-$45/mt from early December. The low end was confirmed in Manitoba, with the higher numbers in Alberta.

Black Sea: The price in the area is stable as market observers wait to see what kind of demand will come from the U.S. in the first quarter.

Ukrainian producers remain shut down until the price gets back into the $300s/mt FOB. Sources say the exact break-even point for the producers keeps shifting. The main issue facing the producers as the new year starts is the final price of Russian natural gas. Talks are continuing between the Russians and Ukrainians regarding the final price. The Russians continue to raise the issue of alleged diversion by the Ukrainians of natural gas destined for Western Europe. The Russians are once again threatening to withhold the gas if they perceive gas is being diverted.

In previous years, disputes between Russia and Ukraine have led to a complete stoppage of the flow of natural gas to points west. The European Community has been working with both parties to ensure a steady flow this winter.

Middle East: Supplies remain tight. The only producer that seems to be able to supply some spot tons is Iran.

Area sources say the main problem with buying from Iran is that its supply is not as reliable as that from other Gulf producers.

Even though Indian buying is beginning to wane, sources say most of the Arab Gulf producers still do not have any spot tons available. Sources say the producers are spending as much time paying back swapped tons as they are handling ongoing contracts.

In the past few months, most of the producers had one or more ammonia lines down for repair. To ensure no customer was left short of material, producers and traders swapped cargoes. Now that just about everyone is back to full production, the swaps are being paid back.

The market price remains stable.

UREA

U.S. Gulf: The majority of recent granular barge trades were in the $314-$318/st FOB range, according to most sources. Trades started at the lower end of the range and worked their way up.

Buyers argue that prices should not go up because of a healthy list of imports due into the U.S. in January. Sellers counter that imports to date are way off, and that those tons will not come close to filling the demand for the spring season.

Eastern Cornbelt: The granular urea market was unchanged at $355-$360/st FOB in the region.

Western Cornbelt: Granular urea pricing to the dealer remained at $350-$360/st FOB in the region.

California: Granular urea was $390-$410/st rail-DEL and $375-$390/st FOB to the dealer.

Pacific Northwest: Granular urea was tagged at $380-$400/st DEL in the region. Agrium’s granular urea postings firmed again on Dec. 10, moving up $20/st from Nov. 27 list prices. Dec. 10 postings include $380-$395/st DEL in Montana and Wyoming, depending on location; $400/st FOB warehouses at Acequia and Pella, Idaho, and at Washington locations at Glade, Warden, and Wilson; $405/st DEL in Washington, Idaho, Oregon, and northern Nevada; $415/st DEL in northern and central Utah; and $420/st DEL in southern Utah.

Western Canada: Granular urea pricing to the dealer was pegged at $471-$486/mt DEL, up $15-$25/mt from last report, with the high end of the range reported in Alberta. The common dealer price in Saskatchewan was quoted at the $476/mt DEL level last week.

China: Prices keep edging up. Earlier in December, the Chinese domestic urea price put the product out of the global market. Sources now say, however, that the international market has moved up enough that some January business with China could be possible.

Sources now peg granular at $320/mt FOB, and prills about $10/mt less.

At these levels, the Middle East and Yuzhnyy tons become non-competitive into the Asia market. One source noted that China can be a less-expensive supplier than the other major sources, but it is no longer the cheap alternative.

Buyers have a short window of opportunity to buy and ship the Chinese urea. The export duty on urea will be only 7 percent for the month of January. Beginning Feb. 1, the duty will jump to 100 percent.

Sources say a little leeway may be granted in some ports regarding the rules of shipping. A few local customs officers may be willing to allow cargo to go out at the lower rate in February if it is placed in a bonded warehouse and a vessel is nominated by Jan. 31. Other port officials will demand the cargo be fully loaded on a vessel by the end of the month.

One trader said he would be reluctant to attempt any shipments in February, even at the lower duty.

The Chinese Lunar New Year is Feb. 14 this year. Just as Christmas and New Year slow down most business in the West, the Lunar New Year brings most operations in China to a halt.

In the past, the Chinese government has authorized a full week off for the New Year celebrations. Many companies allow their employees additional time off leading up to the New Year date and beyond the government-granted period.

The absence of many workers at the factories and docks would not allow for timely vessel loadings, said one trader.

Sources say the main buyer for Chinese tons this month will be Vietnam. Vietnam will need to have about 150,000 mt arrive this month and next. The favorable freight rates between China and Vietnam make China the most likely source for the shipments.

India: Sources say the Agora deal with IPL put a solid floor in the market. Without that deal, sources say prices from Yuzhnyy and the Middle East could have softened as excess tons looked for a home.

Now Agora has to find material to deliver at $300/mt CFR. Industry watchers say Fedcominvest is the most likely backer of the deal with Black Sea material.

If all 250,000 mt are delivered on time, sources say India will not need to make any purchases until the second quarter.

Vietnam: Despite statements the country will be self-sufficient in urea production this year, sources say it will need to import about 150,000 mt this quarter.

One trader noted that even when new plants come online later this year, urea production in the country will not meet demand. Most of the production is in the south. Because of infrastructure issues, it is often cheaper to buy Chinese material in small vessels than to ship domestic tons to the north.

Middle East: Sources report steady shipments of contract tons are keeping the producers happy.

Prills are reportedly being offered at $280-$300/mt FOB, while granular is pegged at $300-$315/mt FOB.

At least one trader, however, said that some deals for granular have gone at $315-$320/mt FOB.

Sources report that enough steady contract business is on the books for this quarter that producers are not concerned about any price softening. What does concern producers, however, are reports that the contract buyers are taking only the minimum required. The buyers are not exercising their options for additional tons as they have in the past, said one trader. This could change as the spring application in Europe and the U.S. approaches and farmers have a better sense of what they might be able to do at that time.

Black Sea: Thanks to the Agora deal with IPL, sources say the Yuzhnyy market will not take its usual January price dip. Sources say Agora will most likely be supplying IPL with tons from Yuzhnyy. The sale of 200-300,000 mt to India – along with all the other deals involving Black Sea tons – has provided a solid floor on area prices.

Sources say the market has moved up. Prices in mid-December were pegged in the upper $250s/mt FOB. Sources now say bids are in the low $260s/mt FOB, with offers at $270/mt FOB.

One trader noted that if Agora had not made its deal with India, the price could have slipped into the low $250s/mt FOB due to lack of sales. Now that Agora has to deliver its cargos this month and next, sources say there is no reason for the Black Sea price to soften.

Sources report that the first two weeks of January are fully booked. The second half of the month looks less tight, but only at the right price.

Besides Agora filling its commitment to IPL, sources report that Fedcominvest also has a few tender awards to satisfy.

Bangladesh: BCIC closed two tenders as the year ended. Sources say few expect any awards to come from the tenders.

NITROGEN SOLUTIONS

U.S. Gulf: The last done business continues to be called $179-$186/st FOB ($5.59-$5.81/unit FOB). While there was much talk of $190/st, confirmation was harder to find. Sources generally said there was much more interest in the inland markets and for prepay.

Eastern Cornbelt: The UAN-32 market was quoted at $230-$250/st ($7.19-$7.81/unit) FOB regional terminals, depending on location and time of delivery, with the low reported for prompt tons on a spot basis. Koch’s Dec. 29 UAN-32 postings FOB Henry, Ill., included $240/st ($7.50/unit) FOB for prompt tons, and $250/st ($7.81/unit) FOB for first-quarter and second-quarter spring prepay. One source talked of spring prepay offers as high as $8.00-$9.00/unit FOB in the Ohio and Michigan markets.

Western Cornbelt: The UAN-32 market was quoted in a broad range at $215-$245/st ($6.72-$7.66/unit) FOB regional terminals to the dealer, with the upper end reported in Missouri for prompt or prepay tons.

Koch’s Dec. 29 UAN-32 postings for prompt tons included $215/st ($6.72/unit) FOB Fort Dodge, Iowa, Beatrice, Neb., and Dodge City, Kan., and $225/st ($7.03/unit) FOB Sergeant Bluff, Iowa. Koch’s first-quarter spring prepay UAN was referenced at $225/st ($7.03/unit) FOB Dodge City, $245/st ($7.66/unit) FOB Fort Dodge and Beatrice, and $250/st ($7.81/unit) FOB Sergeant Bluff, with second-quarter spring prepay posted at $240/st ($7.50/unit) FOB Dodge City, $245/st ($7.66/unit) FOB Fort Dodge and Beatrice, and $250/st ($7.81/unit) FOB Sergeant Bluff.

California: The UAN-32 market was quoted at $235-$245/st ($7.34-$7.66/unit) DEL in California, with the warehouse range pegged at $233-$245/st ($7.28-$7.66/unit) FOB to the dealer.

Pacific Northwest: Delivered UAN-32 remained at $230-$240/st ($7.19-$7.50/unit) in the region. Koch’s Dec. 29 UAN-32 postings FOB Cheyenne, Wyo., included $215/st ($6.72/unit) FOB for prompt, with first-quarter spring prepay offered at $220/st ($6.88/unit) FOB and second-quarter spring prepay offered at $245/st ($7.66/unit) FOB.

Western Canada: The UAN-28 market was up some $15/mt from last report, with pricing to the dealer reported at $282-$298/mt ($10.07-$10.64/unit) DEL in the region.

AMMONIUM NITRATE

U.S. Gulf: Barge prices continue to move up, with sources calling recent trades within the $210-$215/st FOB range.

Western Cornbelt: Ammonium nitrate was pegged at $270-$275/st FOB in the region, reflecting a slight increase from last report.

California: No market was reported for ammonium nitrate in California. CAN-17 pricing was up some $20-$30/st from last report, however. The dealer market for CAN-17 was quoted at $255-$275/st FOB in the state, with the low at Helm and the upper end FOB El Centro.

Pacific Northwest: No current prices were reported for ammonium nitrate in the region. CAN-17 was unchanged at $245-$250/st FOB and $260/st DEL in the Pacific Northwest.

AMMONIUM SULFATE

Eastern Cornbelt: Granular ammonium sulfate was steady at $185-$210/st FOB in the region.

Western Cornbelt: The granular ammonium sulfate market remained in a broad range at $185-$210/st FOB, with the low in Missouri and the upper end in Iowa.

Southern Plains: Effective Jan. 4, American Plant Food Corp.’s ammonium sulfate postings in Texas will firm $20/st, bringing granular ammonium sulfate list prices to $195/st FOB Freeport, $205/st FOB Galena Park, $220/st FOB Fort Worth, and $235/st FOB Littlefield. APF’s postings for coarse grade ammonium sulfate will firm on that date to $185/st Freeport, $195/st FOB Galena Park, $210/st FOB Fort Worth, and $225/st FOB Littlefield, while standard grade ammonium sulfate postings will move to $180/st FOB Freeport and $220/st FOB Littlefield. The company’s N-Pac Compacted price will firm on Jan. 4 to $210/st FOB Galena Park.

APF’s granular ammonium sulfate postings in Mermentau, La., will move on Jan. 4 to $225/st FOB.

California: Ammonium sulfate pricing was steady at $210-$247/st FOB, depending on grade and location, with the lower numbers quoted for standard grade product. One supplier had fluid grade ammonium sulfate listed at $220-$225/st FOB in California, effective Dec. 7.

Pacific Northwest: Granular ammonium sulfate had reportedly firmed to the $200-$220/st DEL range in the region. One supplier was referenced at $195/st FOB and $200/st DEL for granular and regular grade ammonium sulfate in Washington, Oregon, and northern Idaho, and $225/st FOB and $230/st DEL in southern Idaho and Montana. Fluid grade ammonium sulfate postings as of Dec. 7 included $165/st FOB and $170/st DEL in Oregon, Washington, Idaho, and Montana.

Western Canada: Granular ammonium sulfate remained at $290-$295/mt DEL to the dealer in Western Canada.

PHOSPHATES

Central Florida: Although the market in Central Florida was not exactly going gangbusters last week, sales of DAP railcars were moving at a healthy pace. With supplies on the river system beginning to evaporate in a late season rush, availability was greater in Florida.

Mosaic was making sales at $350/st FOB last week, but CF, which has little or nothing to sell, was said to have posted its price up to $370/st FOB.

Meanwhile, sources said PotashCorp was preparing to increase its production at White Springs in North Florida. This would make sense, because the market has surged and the company will soon take a portion of its Aurora facility in North Carolina down for a turnaround.

With the typical end-of-the-year slowdown, many traders who deal in the Central Florida market were out last week, but business as usual should begin right after the beginning of the New Year.

Phosphate producers will almost certainly pay more for sulfur during the next quarter, as prices on the world market have shot up during the past several weeks, according to sources. They say the new price could roughly double, but considering the rapidly rising price of phosphate, that should not pose a problem.

Last week, the Central Florida DAP price range was a flat $350/st FOB based on prompt sales, up from the previous flat $320/st FOB.

Agrifos posted prices for railcars last week at $385/st FOB for DAP railcars and $395/st FOB for MAP by rail. Trucks were $5/st FOB higher for both products offered by Agrifos.

U.S. Gulf: The jingle from phosphate barge sales just before Christmas became “Silent Night” last week, as time off became the rule of the week.

Sales were made on the river, and all were up about $30/st FOB over the previous week, a sign of the supply shortage. Few barges were available for prompt delivery, after most were scooped up the week before.

Sales out of warehouses were hampered after many facilities simply ran out of product. Farmers were prepaying for phosphate to their dealers, who were attempting to lock up product.

The biggest factor affecting sales of all sorts last week was the brutally cold and wet – rain, ice, and snow – weather that swept across most of the Midwest. Availability of trucks to make deliveries was a problem in some areas, and that situation may not improve much this week.

Sales for barges to be delivered in the spring were on the upswing last week as well. Although those deals could not be included in the price range, some ran as high as $390/st FOB, which could be a bargain by March.

Terminal prices were also racing to keep pace with the higher cost of phosphate barges, with the lowest found at around $400/st FOB, but other locations running as high as $420-$430/st FOB.

The NOLA DAP barge price last week was $380/st FOB, which was up from the previous range of $334-$355/st FOB, and prices for MAP were running $10-$15/st FOB higher. But sellers were increasingly moving toward the $15/st FOB differential, as MAP was said to be extremely scarce.

Eastern Cornbelt: Sources reported rapidly firming markets for phosphates in late 2009. The DAP market was pegged at $425-$430/st FOB regional warehouses last week, with MAP $15/st higher. CF’s postings for the Dec. 29 to Jan. 1 period include DAP at $425/st FOB Peoria, Ill., and $430/st FOB Cincinnati, Ohio.

The 10-34-0 market was quoted at $345-$365/st FOB in the region.

Western Cornbelt: The final days of 2009 saw continued pricing hikes for phosphates. DAP was quoted at $420-$430/st FOB regional warehouses to the dealer, with MAP $15/st higher. CF’s list prices for the Dec. 29 to Jan. 1 order and shipping period included DAP at $420/st FOB Inola, Okla., and St Louis, Mo., and $430 Pine Bend, Minn. MAP postings for that period included $435/st FOB Inola and $445/st FOB Pine Bend.

One wholesale supplier said he was hearing complaints from dealers about the rapid run-up in phosphate prices, with some reportedly threatening to cut back on purchases for spring. He speculated that lower potash prices in early January may prompt a shift to potash instead.

10-34-0 was quoted at $335-$355/st FOB, also up slightly from last report. Agrium announced new postings for phosphoric acid. Effective Jan. 1, the list price for super phosphoric acid (SPA) and merchant grade acid (MGA) will move to $690/st rail-DEL in Iowa, Nebraska, Colorado, Kansas, New Mexico, Oklahoma, Texas, Wyoming, Minnesota, and the Dakotas.

California: DAP and MAP were quoted at $440-$445/st FOB or DEL in California, with the low after discounts. Agrium’s MAP postings firmed again on Dec. 23, representing the third price hike in a month. Postings moved on that date to $445/st FOB the warehouse or rail-DEL in California and Arizona. Those levels reflect a $35/st increase from Agrium’s Dec. 9 MAP postings, and a $50/st increase from Nov. 30 list prices.

16-20-0 had firmed as well, to $307/st rail-DEL and $307-$337/st FOB warehouses, depending on location. Simplot was referencing 0-45-0 TSP at $425/st rail-DEL or FOB French Camp.

Super phosphoric acid (SPA) and merchant grade acid (MGA) remained at $7.40/unit DEL in California, with Simplot referenced at $7.60/unit FOB the warehouse for MGA. Agrium’s phos acid postings for Jan. 1 include $750/st rail-DEL for both SPA and MGA in California and Arizona. Simplot had no pricing change planned for January.

The 10-34-0 market in California was steady at $333-$354/st FOB, with the low in the Central Valley and the upper end at desert locations.

Pacific Northwest: MAP and DAP were quoted at $430-$440/st DEL in the region last week, with the low in Montana and the higher numbers reported in the Washington market.

Agrium’s Dec. 23 MAP postings included $430/st DEL in Montana and Wyoming; $435/st DEL in southern Idaho, Utah, Nevada, and Oregon’s Malheur County; and $440/st DEL and $435/st FOB the warehouse in Washington, northern Idaho, and Oregon excluding Malheur County.

Simplot was reportedly referenced at the $440/st level for truck or rail-DEL tons from Pocatello, Idaho, with 16-20-0 now posted at the $299/st DEL mark. Simplot’s dealer reference price for 0-45-0 TSP was $420/st FOB Pocatello. 10-34-0 was steady at $350-$360/st FOB in the region.

SPA and MGA were steady as well at $7.40/unit DEL in the region. Agrium’s phos acid postings for Jan. 1 include $750/st rail-DEL for both SPA and MGA in Washington, Oregon, Idaho, Montana, Utah, and Nevada.

Western Canada: The MAP market was tagged at $522-$542/mt DEL in the region, up $40/mt from mid-December pricing levels and a full $60/mt higher than month-ago postings. The lower numbers were reported in Manitoba, with the higher end of the range reflecting dealer prices in parts of Alberta.

10-34-0 pricing was also up in the region, to $450-$453/mt DEL, up some $30/mt from last report.

U.S. Export: During the Christmas holiday period, PhosChem made a sale of 6,000 mt into South America at $380/mt FOB.

Sources said a couple of phosphate processing plants in North Africa were down, and that was helping PhosChem to make sales into Latin America.

Based on PhosChem’s most recent sale, the export DAP price range last week moved to a flat $380/mt from the previous range of $368/mt FOB, and PhosChem increased its asking price for the next deal to $390/mt FOB.

Asia: The price of DAP continues to strengthen in the region. Sources report Thai buyers are now looking at $430-$450/mt CFR for January tons. Offers are now topping $470/mt CFR. Just a month ago, the price was closer to $370/mt CFR.

The increase in price comes as Australia and New Zealand continue to look for DAP and China sits on its DAP reserves.

The Chinese purchase of 600,000 mt of DAP for northern farmers drained the international market of any softness buyers were hoping for. Despite large reserves in the south, the purchase came about because the logistics of shipping the expensive DAP from southern China to northern China made the material more expensive than shipping tons from Tampa to northern China.

Sources report tightness in the market not normally seen in this area at this time of year.

One trader said that he has not been able to find spot tons for January or February at any price. In the past, he said, adding a few dollars to the bid could free up at least one cargo. Only bids beyond what buyers are willing to pay could secure a cargo, he said.

POTASH

Eastern Cornbelt: PCS Sales’s potash postings FOB Saskatchewan mines are scheduled to drop on Jan. 4 to $345/st for standard, $350/st for granular, and $357/st for soluble and white granular. This compares to the PCS range of $467-$480/st FOB for these products July 24, 2009 (GM July 27, 2009), soon after the price to India dropped to $460/mt CFR.

The company’s granular potash postings out of warehouse locations for the Jan. 4 to Feb. 28 period are slated to drop to $390/st FOB in Illinois, Indiana, Ohio, and Wisconsin, with rail-delivered postings falling to $400/st in Illinois, Indiana, Ohio, Wisconsin, and Michigan. By comparison, on July 24, 2009, PCS posted granular at $515/st FOB and $530/st rail-DEL.

In the Eastern U.S., PCS granular potash postings will drop to $397/st FOB Chesapeake, Va., $400/st FOB Baltimore, Md., and $410/st rail-DEL. A $30/st increase is scheduled for all locations on March 1.

Western Cornbelt: While potash out of the warehouse remained as high as $440/st FOB last week, lower postings were slated to take effect Jan. 4. On that date, PCS Sales was scheduled to drop its list prices for granular potash to $390/st FOB St. Louis, Ft. Dodge, and Waterloo, Iowa, with rail-delivered postings moving to $400/st in Iowa and Minnesota. A $30/st increase is scheduled for March 1.

California: Potash remained at $475-$495/st DEL in California, depending on grade and location. Potassium nitrate was steady at $1,080/st FOB for bulk tons and $1,150/st FOB for bags. The sulfate of potash (SOP) market was unchanged at $675-$730/st FOB for bulk tons, depending on grade and supplier.

Pacific Northwest: Potash was quoted at $432-$445/st FOB and $470-$477/st DEL, depending on grade, supplier, and location. Those levels reflected a decrease from last report, and sources said another downward pricing adjustment is scheduled for early January.

SULFUR

Tampa: Prices on the world sulfur market rose steadily during the past couple of weeks, and sources said that situation was likely to continue as supplies were becoming increasingly difficult to find.

Several sources said it was highly probable the price of molten sulfur to Tampa will increase to about twice the current level, and could be somewhere in the range of $70/lt. That would still be a bargain in comparison to what the rest of the world was paying. A trader in China was said to have paid $115/mt delivered, and another in Asia coughed up $125/mt FOB. Sales of Russian sulfur into North Africa were running about $80/mt.

All of the same supply problems continued along the Gulf Coast last week – refineries were producing less than normal, some were shutting down for economic reasons and turnarounds, and more sweet crude was being refined. Farther north, the weather was taking a toll on some plants.

Truck deliveries last week were hampered in the Midwest by ice and snow, and by flooding in the southern areas.

Negotiations for new prices for the first quarter should begin after the beginning of the year, and phosphate producers, who have seen their own business and prices rise sharply in the past few weeks, would be wise to settle quickly, according to some sources. Sulfur producers were also increasing the amount they planned to ship to prilling units along the Gulf to take advantage of the stronger export market.

Vancouver: Prices for spot deals out of Vancouver were rising at the rate of about $10/mt FOB a week. Cold weather was slowing supplies last week.

The Week in Fertilizer Stocks

Fertilizer Stocks
Producer Symbol Price Week Ago Year Ago
Agrium AGU 63.34 59.79 31.77
CF Industries CF 93.31 88.30 46.70
Intrepid Potash IPI 29.43 28.10 20.00
Mosaic MOS 59.68 56.03 33.87
PotashCorp POT 109.50 111.84 73.22
Terra Industries TRA 33.18 32.70 12.43
Terra Nitrogen TNH 104.75 106.25 85.63
Distribution/Retail
Andersons Inc. ANDE 26.44 26.19 16.12
Deere & Co. DE 54.93 54.14 37.87
Scotts SMG 39.35 39.28 28.68

Terra says no to latest CF offer; CF to let financing expire, sheds Terra shares; Agrium still in hunt

Featured, News

Terra Industries Inc. said Dec. 14 that its board of directors, after careful consideration, including receipt of advice of its independent financial and legal advisors, has unanimously rejected CF Industries Holdings Inc.’s latest proposal to acquire Terra for $29.25 per share in cash plus 0.1034 of a share of CF common stock per Terra share, because it continues to substantially undervalue Terra.

Terra said the board considered, among other factors, that the fertilizer sector has strengthened significantly in recent months. In addition, moderate gas costs and the broader recovery among Terra’s agricultural and industrial customer base is expected to drive rising demand and improving margins for Terra’s upgraded nitrogen products. The board believes the market consensus is shifting to reflect the brighter near- and long-term prospects for the entire sector, and that the latest improvement to CF’s bid does not fully reflect these brighter prospects. As an example of this recent re-rating of the fertilizer sector, the board noted that the market-weighted average increase in stock prices of global fertilizer companies (excluding CF, Agrium Inc., and Terra) over the period from CF’s Nov. 1 proposal to Dec. 11 is 26 percent, and the market-weighted average increase for the unaffected pure-play nitrogen companies is 34 percent. These figures compare to an increase in the S&P 500 of 7 percent over the same period.

Terra said its board will continue to consider any bona fide opportunity that creates meaningful value for all Terra shareholders.

CF said Dec. 15 that it will not seek to extend the financing commitments for its proposed acquisition of Terra, which expire on Dec. 31, 2009. CF said that its ability to obtain financing for any transaction with Terra after that date will depend on the credit markets and other factors at that time.

CF also stated that it has sold a sufficient number of Terra shares in market transactions to bring its interest in Terra to just below 5 percent of Terra’s outstanding shares. CF had earlier bought up to 7 percent. As a result, CF will no longer be required to file a Schedule 13D with respect to Terra with the U.S. Securities and Exchange Commission, and future discussions or negotiations with Terra will not be publicly disclosed on Schedule 13D.

CF sold just enough shares to get below 5 percent ?Çô to 4,976,048, or 4.98 percent. CF sold just over 2 million shares within the last 60 days in the price range of $33-$34 per share, thereby pulling in just over $68 million, according to the SEC filing.

Back in September, CF said that it acquired approximately 7 percent of Terra in the open market over a two-week period (GM Oct. 5, p. 1). CF purchased 6,985,048 shares out of 99,786,406 outstanding at a cost of $247 million and an approximate average price of $35.36 per share. Shares were purchased between Sept. 10-25 and ranged from $31.42 to $37.17.

“We continue to believe that an acquisition of Terra is in the best interests of the stockholders of both companies and intend to consider alternatives available to us to advance this transaction,” said Stephen Wilson, CF chairman, president, and CEO.

CF said there can be no assurance that it will take further action to acquire Terra or that the financing necessary to fund such a transaction will be available after Dec. 31, 2009.

In the meantime, Agrium Inc., which announced major Egyptian nitrogen and Saskatchewan potash initiatives last week (see page 1) reiterated that it remains interested in CF. In fact, on Dec. 14, Agrium sent the CF board a slide presentation that it said demonstrates Agrium’s compelling offer. It said CF’s board needs to justify not engaging with Agrium.

Agrium also warned that CF’s offer for Terra is likely to result in value impairment of $880 million, or $14.75 per CF share. “CF stockholders want to receive a premium, not pay one,” said Agrium.

Agrium noted that its own offer for CF is now valued at $107.88 per share. Early in the merger game CF had indicated that a bid of over $100 per share might get its attention, but CF partisans now say that was then, that the markets have gone up in the meantime. Agrium says the $107.88 represents 20 percent to CF’s current trading price of $89.99, 37 percent to CF’s unaffected price of $78.50, and 43 percent to CF’s expected share price of $75.25 pro forma a combination with Terra.

Agrium said an upward sector move of 35 percent from the current Agrium offer would achieve a future CF stock price of $146, assuming a 100 percent stock election. By comparison, Agrium said CF shareholders would have to realize an 86 percent sector upward move on CF’s unaffected price and a 94 percent sector upward move on CF’s share price pro forma a combination with Terra to achieve equivalent future value.

Agrium moving forward on Egyptian nitrogen, Saskatchewan potash expansions

Featured, News, Potash, Saskatchewan

Agrium Inc. announced positive developments on two major initiatives last week ?Çô the tripling of the Egyptian nitrogen facility in which it has invested, as well as significant progress with its planned brownfield expansion at its Vanscoy, Sask., potash mine.

Agrium said Egyptian Nitrogen Products Co. S.A.E. (ENPC), a wholly-owned subsidiary of MISR Fertilizer Production Co. S.A.E. (MOPCO) of Egypt, has secured local financing of $1.05 billion. This will allow ENPC to proceed with the next steps of the construction of the second and third production trains at the existing MOPCO nitrogen facility in Damietta, Egypt. This is the largest single financing completed by Egyptian-led banks and is fully underwritten.

“We are extremely pleased that ENPC has been able to reach a financing agreement for the tripling of the existing nitrogen facility in Egypt. This is an outstanding opportunity for Agrium to participate in the significant expansion to this world class facility and in an area with long-term, competitively priced gas and prime access to world markets. We appreciate the support and efforts of the Government of the Arab Republic of Egypt, and especially the Ministry of Petroleum, in achieving this financial close. Our project co-owners bring local business knowledge, energy supply and distribution expertise, which combined with our expertise in operations and global marketing, positions MOPCO as a leading global facility. This investment also grows Agrium’s international presence and is an important step in continuing to diversify our asset base,” said Mike Wilson, Agrium president and CEO.

Agrium owns a 26 percent equity interest in the existing MOPCO facility, which has been in operation since October 2008. This translates into 169,000 mt of the 650,000 mt of urea capacity from a highly cost competitive, export-oriented facility. The equipment fabrication for the two train expansion is approximately 95 percent complete. Field construction of the two trains will now accelerate, with both trains expected to be completed in the first half of 2012. Total annual production at the site will be 1,950,000 mt of urea and 150,000 net mt of ammonia. Agrium’s 26 percent share of the production upon completion of the two new trains will be 507,000 mt of urea and 39,000 mt of net trade ammonia. Agrium will market all 1,300,000 mt of urea and 100,000 mt of ammonia in the export market from the two new trains. Under the financing plan, Agrium will not be required to put any further equity into the project.

In the meantime, the Vanscoy potash expansion is expected to add 750,000 mt of annual potash capacity to the mine, contingent upon final project approval, which is expected to occur in late 2010. An Engineering, Procurement, and Construction (EPC) contract was recently executed by Agrium with a joint venture comprised of SNC Lavalin Inc. and PCL Industrial Management Inc. to further develop the engineering and ultimately complete the expansion.

Agrium says most of the construction work on the capacity addition is expected to be completed in 2013 and 2014. Some incremental capacity and related additional production is expected in late 2013. The majority of the capacity expansion is expected to be available in 2014, with full rates expected to be achieved in late 2014. The full 2.8 million mt of annual production capacity is expected to be achieved in 2015.

“The brownfield expansion is an important part of our strategy to continue to grow all three of our strategic business units,” said Wilson. “The EPC contract with two leading engineering and construction firms is an important step in this process. We believe that global potash demand will start to rebound in 2010 and that brownfield expansions make economic sense given the world ultimately will need this additional production. As I have stated previously, Agrium is committed to growing across all three business units through a variety of value added opportunities. The announcement today in no way diminishes our resolve to proceed with our proposed acquisition of CF Industries Holdings Inc.”

Copenhagen delegates mull GHG emission cuts for ocean freight; industry warns of soaring freight costs

News

Fertilizer industry representatives were on hand in Copenhagen last week, as delegates to the U.N. climate change summit tried to hammer out international agreements on carbon emissions cuts. One of numerous topics of concern for the industry is measures currently under consideration by the International Maritime Organization (IMO) to reduce greenhouse gas (GHG) emissions from ocean freight vessels.

Going into the conference, many were expecting some form of tax on the high-carbon Bunker C fuel that is used in 80 percent of ocean shipping. According to a recent story in the Wall Street Journal, leaders at the Copenhagen talks hope the fuel tax, which is estimated at $10 billion a year, will prod shipping companies to use cleaner fuels, alternative energy sources, and/or shorter routes.

Options on the table include a straight tax, as well as a cap-and-trade agreement that has some support within the shipping industry. In that system, ship owners could buy or sell carbon offsets, depending on the amount of GHG emissions from the bunker C fuel used in their fleets. Some countries have also reportedly proposed that the $10 billion raised by a bunker-fuel tax should be used to help developing countries pay for adapting to new emissions rules.

In addition to the tax itself, discussions at the summit also reportedly centered on the role the IMO would have in administering any GHG emission rules for the shipping industry. A fertilizer industry source told Green Markets the shipping industry’s strategy is to keep the issue under the care and control of the IMO, which is a U.N. body headquartered in London that the industry believes is the only entity capable of enforcing the tax even-handedly. On Dec. 17, however, international news agencies reported that there was high-level support for moving the administration of the potential GHG tax on shipping outside of the IMO’s control.

GHG emissions from shipping and aviation were excluded from the Kyoto Protocol in 1997, but the IMO was charged with developing a framework for developing GHG shipping regulations. Environmental groups charge that the IMO has failed to deliver a commitment to cut emissions from ocean vessels, and that these emissions could double or triple by 2050.

Those industries that depend on ocean freight are worried that proposed GHG reduction measures could increase ocean freight costs by 5 percent or more for bulk cargoes such as fertilizer. If governments can’t agree on a tax at the Copenhagen summit, the European Union has stated that it will levy a fee on all ships that dock in EU ports.

The Fertilizer Institute told Green Markets that the issue is of “great concern” to the industry, and that preliminary calculations done by TFI have indicated the increase in freight cost could be more along the lines of 10-15 percent. TFI Vice President of Scientific programs Bill Herz was on hand in Copenhagen the week before the summit, and Katherine English, TFI’s vice president of government relations, was there during the event.

Transport & Environment, a European environmental group promoting sustainable transportation initiatives, reported that aviation and shipping are responsible for around 10 percent of man-made climate change emissions. According to the Wall Street Journal, scientists put the GHG contribution from shipping at about 3-5 percent. The IMO, in a recently published update to a 2000 study on GHG emissions from ships, reported that international shipping was responsible for the emission of 870 million tons, or some 2.7 percent, of the global emissions of CO2 in 2007.

By contrast, rain forest destruction, which releases the carbon dioxide stored in trees, is estimated to account for 20 percent of GHG emissions globally.

The first intersessional meeting of the IMO’s Working Group on Greenhouse Gas Emissions from Ships took place in Norway in 2008. The group is tasked with developing the technical basis for – and an actual draft of – the GHG reduction mechanisms that could become part of a future IMO regime to control emissions from international shipping. The IMO’s full package of measures on carbon emission reduction is expected to be finalized by 2011.

Yara says DEF will be multi-billion dollar business

News

Yara International ASA sees the diesel exhaust fluid (DEF) market, which is beginning to take hold in the U.S., becoming a new multi-billion dollar business. Rolf Isberg, Yara vice president and the man in charge of this development as head of the North America industrial segment, says that Yara expects this segment of its global nitrogen chemicals business to grow on a global basis from today’s 10 percent to 30 percent of total sales over the next decade, with the U.S. market as a major contributor to achieve that growth.

In an interview with Green Markets, Isberg said he expects the two main suppliers in the U.S. to be Yara and Terra Industries Inc., with their respective distribution partners. “Yara has chosen to team up with Mansfield Oil, the largest independent fuel distributor in U.S., with sales and distribution in 49 states and more than $5 billion in revenue. In addition, we also expect competition from a number of smaller distributors like Airgas and Old World Industries. All suppliers have to be certified by the American Petroleum Institute (API). In Europe you have two Pan-European suppliers – Yara with the Air1 concept, and Greenchem. In addition, you have a few more regional suppliers tied up to a single source. Yara is the largest and leading supplier in Europe, with sales in more than 30 European countries.”

In the U.S., he said Yara is currently establishing a nationwide supply concept where it can rely on multiple sources. “LSB out of Cherokee, Ala., is one of our sources. In addition to LSB, we produce and make DEF available at Yara’s own facilities in [the] U.S. and Canada. When the DEF market matures, our experience from other markets clearly shows that a multi-sourcing concept with strong back up solutions will provide customer value and guarantee of supply.

“We are currently negotiating with a number of large fleets and truck stop chains to make our Air1 DEF available to customers and retailers from January 2010,” Isberg continued. “We cannot at this time disclose any names since contracts are not finally signed. As to the rest – the market is about to begin, there are truck inventories to sell, so the first SCR trucks will be on the road in a few months once current inventories are depleted. Fleet owners are starting to look into who will be their supplier. In the beginning, this will only concern a few trucks in their fleet. But obviously, it will become more and more part of their daily routine as time goes by. Most fleets will make the choice of SCR technology as this is the only technology that allows them to meet the requirements of the Clean Air Act, but also brings them fuel efficiency and has a positive impact on their operational costs.

“From Jan 1, 2010, DEF will be available at thousands of locations around the nation,” said Isberg. “Most of the truck OEM’s dealerships, the major truck stop chains like Pilot, Love’s, Flying J, and TA, will have product available from the shelf. In addition, a large number of oil distributors will have product available for delivery to consumers. In the beginning, you will see mostly small packaging, but bulk distribution and bulk dispensers will slowly take over the market in the years to come. According to Integer Research’s quarterly AdBlue and DEF Monitor, U.S. highway consumption of the fluid may grow to 91.1 million gallons (345 million liters) in 2011 and to 160.1 million gallons in 2012 from about 21.6 million gallons next year. In Europe, where it’s called AdBlue, consumption is expected at about 320 million gallons in 2010, according to the London-based researcher. The European market started in 2006.”

As for the pricing of DEF, Isberg said he expects it to be less expensive than diesel fuel. “The final price for customers will also to a large extent depend on where he is located and how large of volumes he will source. Customers should expect that DEF will be more and more cost competitive as infrastructure for distribution and sales are increasing going forward.”

Isberg would not disclose expected sales volumes. “But as I have said before, this market will all start on Jan. 1 and the new DEF industry will be a multibillion-dollar business. Our ambition is to build a few hundred million dollars revenue per year.”

Yara expects to serve the U.S. market both from domestic production and imports. “We are building a flexible supply model so we are able to supply the market at all times,” said Isberg. “This will include imports. All the more, the location of the domestic urea production plants does not match the consumption areas of DEF. We strongly believe our large-scale terminal concept on the East and West Coast will be a very competitive add-on to domestic production. The U.S. market is short on urea and imports are needed to balance the market. Yara is very well positioned and located to capture this growth. Yara has three plants in Europe – Italy, Germany, and Netherlands. Our Sluiskil plant is the largest DEF producing site in the world. Part of this production will be used to supply the U.S. market via the terminals we also use for our fertilizer activities.”

Asked about Yara’s presence in the U.S. SCR market for utilities, Isberg said the company currently supplies American Electric Power (AEP), the largest customer in the U.S. with urea for NOx abatement. “We have the expertise from our European and Asian operations for DeNOx applications towards the stationary market,” he said. “At the moment, we are concentrating on the DEF market for on- and off- road vehicles. We are also positioning ourselves on the maritime segment, which will be needing DeNOx as the U.S. and Canada have applied to the International Maritime Organization

Rentech meets EBITDA goals in 2009, restates earnings, adjusts accounting

News

Rentech Inc. reports that its wholly-owned nitrogen producer, Rentech Energy Midwest Corp. (REMC), reported EBITDA of $65.5 million for the fiscal year ending Sept. 30, 2009, compared to the year-ago $53.8 million. This was in line with expectations; however, EBITDA would have been higher, at $71.5 million, had Rentech not had to make a $6 million restatement regarding natural gas purchases. The restatement had the effect of adding $6 million to fiscal 2008 EBITDA and operating earnings and deducting it from 2009 totals. The restatements impact results going back to 2007. REMC operating income for fiscal 2009 was $57 million, versus 2008’s $52.7 million.

Rentech told analysts that as of Dec. 15 REMC has shipped and/or pre-sold slightly more than half of its ammonia shipments and slightly more than a quarter of its UAN shipments for fiscal 2010. Rentech expects 2010 volumes from its East Dubuque, Ill., plant to be at normal levels. Capacity utilization is expected to be good, and gas prices low. Beyond that, Rentech had no 2010 predictions for REMC EBITDA; however, according to the company, EBITDA must be around $25 million to meet recently adjusted credit covenants. The company said when it adjusted the covenants it gave itself plenty of room to be sure it could hit them in a downside case.

As for the fourth quarter ending Sept. 30, 2009, the drop in REMC revenues was due to economic weakness and weak demand for fertilizer products. It also reflects a significantly lower price for fertilizer products than in the year-ago quarter. In the year-ago period, REMC was still delivering very high priced tons that had been pre-sold when the market was strong.

Rentech uses REMC’s cash flow to fund the development of its alternative energy technology. Company-wide, fiscal 2009 net income was $3 million ($.02 per diluted share) on sales of $183 million, versus fiscal 2008’s loss of $56.9 million ($.34 per share) and $211 million. Operating income was $13.9 million, versus the year-ago loss of $50.5 million.

For the fourth quarter ending Sept. 30, Rentech had a net loss of $6.35 million ($.03 per share) on sales of $24.7 million, versus the year-ago loss of $2.9 million ($.01 per share) and $74.6 million.

REMC’s average ammonia price actually increased 37 percent in fiscal 2009, while UAN was off 13 percent. This was because most of the spring 2009 ammonia shipments were on product prepayment contracts, most of which were entered into when fertilizer prices were at their peak. However, REMC entered into only about half of its spring 2009 UAN prepayment contracts after prices started to decline.

Rentech has changed its balance sheet treatment of pre-sale contracts, which will have no impact on the statement of operations. The company previously recorded the entire amount of firm take-or-pay pre-sale contracts as deferred revenue, and recorded accounts receivable for the difference between the total contract amount and the cash deposits received. It will now record deferred revenue only to the extent of cash deposits received, and will record no accounts receivable until products have been shipped.

Rentech has recently announced news on its energy technology business, including the fact that some 13 airlines have signed a Memorandum of Understanding for a future definitive supply agreement for certified jet fuel from Rentech’s Natchez Project, a proposed synthetic fuels and power facility in Adams County, Miss.

In other technology news, Rentech and ClearFuels Technology Inc. report that they have been selected to receive up to $23 million as a grant from the U.S. Department of Energy to construct a biomass gasifier at Rentech’s Energy Technology Center in Denver. The gasifier will be integrated with Rentech’s Product Development Unit for the production of renewable synthetic fuels from biomass. Rentech has a 25 percent strategic ownership interest in ClearFuels.

C. Dioxide952,5711092,860

Fiscal Year 2009 Fiscal Year 2008
Shipments Tons Revenue ($) Tons Revenue ($)
Ammonia 126 90,419 173 90,743
UAN 267 68,893 313 93,179
Urea 36 15,555 34 15,778
Nitric Acid 9 2,946 14 4,055
Total 533 180,384 643 206,615
* Tons are short; revenues are in thousands.

Agrium to shut down phosphate mine

News, Phosphate

Agrium Inc. announced Dec. 15 that its Dry Valley phosphate mine in Southeast Idaho’s Caribou County will be shut down during the first quarter of 2010, eliminating the jobs of about 120 employees who work for URS, Agrium’s mining contractor.

Agrium Mine Manager Lin Kramer said the Dry Valley Mine has a surplus of phosphate ore for its Conda fertilizer plant about 15 miles away, and would be idled starting Jan. 1 until tentatively late March.

“We hope this will only last two months, and then we will resume normal mining operations,” said Paul Poister, Agrium’s government relations manager in Denver.

Agrium’s Dry Valley open pit mine supplies more than 20,000 carloads of phosphate ore to the plant from April to November. If temperatures drop to 25 degrees below zero or colder for more than two hours, the mine has to shut down, said Kramer, who has managed it for about 2½ years.

“Last year, we did not shut down for temperature. The year before we did,” Kramer said, estimating up to 2.2 million tons of ore are shipped to the plant in a year. He noted reclamation efforts have returned the landscape almost to its original state when mining in a section is completed. “We’ve all learned a tremendous amount over the years.”

Agrium is winding down the Dry Valley Mine, which was acquired from FMC/Astaris in the 1990s before FMC’s Pocatello elemental phosphorus plant near Pocatello closed in December 2001. It is also transitioning into its North Rasmussen Ridge Mine a few miles from Dry Valley, which the BLM approved in 2003. FMC mined the A and B panels there. Agrium finished the C panel and continues to work the D panel.

At Dry Valley, the phosphate-rich area’s geologic faulting and folding present challenges. Blast hole drills are used to dynamite sections so the ore can be accessed. Six 150-ton trucks crisscross the mine site to haul the rock away.

Agrium plans a new Rasmussen Valley Mine, which would mostly be on the Caribou-Targhee National Forest, but the Blackfoot River Wildlife Management Area managed by Idaho Fish & Game also would be affected. It would be far south of a deposit that lies on Rasmussen Ridge, but it would be near the headwaters of the Blackfoot River near where Lanes Creek and Diamond Creek converge.

Brandt acquires Monterey AgResouces

News Briefs

Springfield, Ill.-Brandt Consolidated Inc. said Dec. 17 that it has acquired Monterey AgResources, Fresno, Calif. Brandt said the deal increases its product base geographic coverage and enhances its ability to provide excellent customer service as well as Brandt’s aggressive corporate strategy – providing superior representation, production, and warehousing for customers throughout North America and around the world. “The acquisition of Monterey AgResources exemplifies the Brandt vision of growth, success, and control,” said Rick Brandt, the company’s president and CEO. “Monterey’s superior personnel, product portfolio, and trade areas are a great compliment to Brandt. We are a family company in that all employees and their families are part of the equation and we welcome the families of Monterey to our team. The energy of this acquisition is resounding and we are excited to move forward.” Brandt and Monterey both formulate, package, and market specialty products and chemicals for all agriculture systems. Additionally, they offer a broad range of products for the greenhouse, ornamental, turf, home and garden, aquaculture, and feed markets. John Salmonson, Monterey president, and Tom Thomson, vice president, will continue to operate the company under the new agreement with Brandt and will retain a minority share in the company. Brandt, founded in 1953, consists of three operating divisions: Specialty Formulations, Retail Agronomy, and Dealer Support. Monterey, in business since 1963, is a wholesale distributor of nutrients and crop production products to the agricultural, horticultural, lawn and garden, and feed industries. Monterey has also been instrumental in the development of micronutrients for use in agriculture and continues to be an innovator in the agrichemical industry, bringing new technologies and products to the ever-developing agriculture market.