Santiago-Sociedad Quimica y Minera de Chile S.A. (SQM) reported a 33.9 percent drop in second-quarter net income, to $83.1 million ($.32 per ADR) on sales of $344.8 million, compared to the year-ago $125.7 million ($.48 per ADR) and $460.8 million, respectively. Special Plant Nutrients, SQM’s largest business, saw a sales drop to $165.6 million from the year-ago $275.9 million. SQM six-month net income was $169.5 million ($.64 per ADR) on sales of $665.7 million, versus the year-ago $190.5 million ($.72 per ADR) and $787.1 million. Six-month SPN sales were $311.3 million, down from $446.4 million. SQM said the first half was challenging, with important reductions in sales volumes consistent with the prevailing global economic conditions and uncertainty over potash prices. However, it said sales volumes in different industries in which it participates have started to recover, and SQM believes volumes for the second half will be greater than those of the first. “We are already seeing signs of recovery in our Specialty Plant Nutrition business line, and we believe that demand in general has reached a turning point,” said Patricio Contesse, SQM CEO. In the meantime, he said SQM continues to move forward with its expansion plans, which will allow it to double sales volumes of potash in 2010.
All posts by traceybg@gmail.com
Bunge to raise $665 M
White Plains, N.Y.-Bunge Ltd. announced Aug. 12 the pricing of its offering of 10.5 million common shares at a price to the public of $65.50 per share. The net proceeds of the offering to Bunge will be approximately $665 million. In addition, Bunge has granted the underwriters a 30-day option to purchase up to an additional 1,500,000 common shares to cover over-allotments, if any. The offering is being made under Bunge’s existing shelf registration statement and is expected to close Aug. 18, 2009. Bunge intends to use the net proceeds from this offering to repay outstanding indebtedness and for other general corporate purposes.
Yara Belle Plaine down for upgrade
Regina, Sask.-The Yara Belle Plaine Inc. nitrogen complex has gone down for 45 days to enable the C84 upgrade for the facility that was announced in 2007 (GM Oct. 1, 2007). When Yara International ASA bought the plant last year (GM July 21, 2008, p. 1), it had capacity for 650,000 mt of ammonia, 980,000 mt of urea, and 230,000 mt of UAN. In addition to this, capacity expansion projects will increase ammonia and urea production to 725,000 and 1,115,000 mt annually in 2009.
Market Watch
AMMONIA
U.S. Gulf/Tampa: Sources report that a new piece of business for September arrival may give good guidance for what is ahead. Nitrochem has reportedly sold 19-20,000 mt to Transammonia at $330/mt DEL for September arrival from Yuzhnyy. Even before the news, sources said higher global price ideas would eventually impact Tampa, though not all sources thought it would be up that much. Still, there is the possibility that the large phosphate companies will be able to pull a better number.
As of Aug. 13, the Direct Hedge (DH) paper market was showing September at $270-$290/mt and October-November at $250-$270/mt.
In the meantime, the higher Tampa numbers have only been able to translate to NOLA in theory, as finding actual trades in that market is troublesome. However, this week sources said seller quotes for new barge cargoes were between $250-$260/st FOB, with one report of a piece of business that would net back within that range.
U.S. June ammonia imports were off 38 percent according to the U.S. Department of Commerce, to 489,363 st from the year-ago 793,281 st. For the July-June fertilizer year imports were off 25 percent, to 6.6 million st from 8.75 million st.
Eastern Cornbelt: Sources reported few changes to spot fertilizer prices, and minimal activity to test the markets. Anhydrous ammonia pricing remained at $325-$345/st FOB for spot tons, with forward contract ammonia for September through December referenced at $365/st FOB in Illinois and Indiana. Effective Aug. 12, Agrium’s anhydrous ammonia postings moved to $385/st FOB E. Dubuque and Niota, Ill., $390/st FOB Meredosia and Marseilles, Ill., and $400/st FOB NorthBend/Finney, Ohio.
Western Cornbelt: Despite generally favorable crop reports for the region, fertilizer sources said the phones “have not been ringing for anything” as both dealers and growers approach their fall fertilizer needs with caution. “It’s definitely quiet out there,” said one source. “I think the biggest problem is a lack of money at the dealer level.”
Anhydrous ammonia was pegged at $315-$325/st FOB regional terminals for cash market tons, with the low in Nebraska and the upper end in Iowa. Effective Aug. 12, Agrium’s anhydrous ammonia postings moved to $360/st FOB Hoag, Neb., $365/st FOB Greenwood, Neb., and $370/st FOB Mankato, Minn., and Iowa terminals at Early, Garner, and Whiting. Koch’s ammonia postings were slated to move on Aug. 13 to $315/st FOB Beatrice, Neb., and $325/st FOB Sgt. Bluff, Iowa, and Aurora, Neb.
Southern Plains: Sources described fertilizer movement on preplant wheat as “a little here and there,” but activity should pick up quickly. One source said he expects tight supplies for most products as demand continues, citing a two-week turnaround planned for Koch’s Enid, Okla., plant starting on Aug. 15, and the closure of Locks 17 and 18 on the Arkansas River below Catoosa/Inola, Okla., from Aug. 24 through Sept. 6 for maintenance. “Dealers have not positioned a lot of product,” he noted.
With ammonia supplies allocated at several locations, sources said the spot market had firmed to $260-$270/st FOB regional production points, with the upper end reflecting the posted level. Dodge City, Kan., was reportedly loading by appointment only, with a limited number of loads available each day. Woodward, Okla., was on allocation, and Borger, Texas, had reportedly restarted and was moving tons as fast as production allowed.
Out of Kansas pipeline terminals, the dealer market for ammonia was quoted at roughly $300-$305/st FOB. One source referred to some logistical issues, with the Magellan pipeline not operating due to required testing procedures. He said the pipe was scheduled to restart later in the week.
Effective Aug. 12, Agrium’s ammonia postings moved to $345/st FOB Mocane, Okla., $350/st FOB Conway, Kan., and $355/st FOB Clay Center, Kan. Koch’s ammonia postings were slated to move on Aug. 13 to $290/st FOB Enid, $310/st FOB Dodge City, $320/st FOB Farnsworth, Texas, and $325/st FOB Conway and Clay Center.
South Central: The anhydrous ammonia market was tagged at $290-$320/st FOB regional terminals to the dealer, with the low end reported at Memphis, Tenn.
Middle East: Suppliers continue to hold off for higher prices. Reportedly at least one bid was made last week at $240/mt FOB and was roundly rejected. Suppliers point to bids at $260/mt FOB as the new level for talks. The only problem is that buyers are not as willing as producers hoped.
Sources report no new deals have been done at the higher levels they want. At the same time, however, there were no new deals at all to indicate where the market should be.
Asian sources tend to agree the $240/mt FOB material is long gone, but without a new spot sale there is nothing on the record to move up the price.
Black Sea: Demand is picking up, say sources. Bids are now hovering around $260/mt FOB. Sources say the rise is faster than expected, but not surprising. Reported sales to the U.S. at $320-$330/mt CFR are said to be right in the $260/mt FOB range.
The price started to make its move up about three weeks ago, when deals finally broke the $200/mt FOB barrier. Since July 27 the price has moved steadily upward, with even buyers saying they are surprised the price is not moving up more quickly.
Buyers in Turkey and the U.S. seem to be leading the upward pressure.
Even with this bullish attitude, Asian sources continue to point to the fact that many plants in the area are shut down because they cannot produce ammonia at a profit at the current level. The conventional wisdom still says that the Ukrainian facilities have a break-even point at $320/mt FOB.
In the meantime, the Aug. 13 Direct Hedge paper market has Yuzhnyy at $240-$250/mt FOB for August and September, with slightly higher numbers for the fourth quarter – $245-$260/mt.
Asia: Producers in Indonesia and Malaysia have no immediate plans to take maintenance shut downs. Sources say demand in the area remains so strong that the temporary closure of one plant could push prices dramatically higher and force buyers to look even more to Yuzhnyy and even the Caribbean for material to fulfill contracts.
UREA
U.S.Gulf: Granular barge business remained firmly within the $290-$292/st FOB range last week, with new trades reported within that range. Sources said prills supplies remain tight and higher priced, though a rumor of new imports could scuttle that.
Current prompt barge prices reflect short supplies and limited demand, said sources, as some anxiously bought product to get it up the Arkansas River before lock repairs. Sources said the jury is still out on fall demand and noted that there is a big drop between the current barge market and the fall paper market. As of Aug. 13, Direct Hedge was showing September at $260-$270/st, October at $252-$257/st, and November at $254-$257/st. Sources said these numbers didn’t give physical buyers much reason to buy forward.
U.S. urea imports were up 20 percent, to 253,477 st from the year-ago 211,209 st. For the July-June fertilizer year they were off 12 percent, to 5.75 million st from 6.56 million st.
Eastern Cornbelt: Granular urea was steady at $315-$325/st FOB regional terminals, with the low in Illinois and the upper end reported in Ohio to the dealer.
Western Cornbelt: Granular urea remained at $310-$320/st FOB regional terminals. One Iowa source put the market in his trade area at an untested $315/st FOB. Agrium’s Aug. 7 postings for granular urea included $335/st FOB Marion, S.D., and North Dakota locations at Alton, Carrington, Colfax, Scranton, and Grand Forks, and $340/st rail-DEL in Minnesota, Wisconsin, and the Dakotas.
Southern Plains: The granular urea market was tagged at $320-$325/st FOB in the region, with most citing the upper end of that range as the new dealer market for tons out of Enid and Inola last week.
South Central: Urea movement on rice was finished by last week, although sources said applications were still going down in the first days of August. One source said volumes were normal overall, even though the application period was much longer than normal due to a wide variety of crop development.
The granular urea market had reportedly firmed to $315-$320/st FOB terminals to the dealer, although one source said the last sales were done in the $300-$305/st FOB range.
Southeast: There was “precious little” urea available in the region last week, and those terminals that did have product were reportedly listed firmly at the $315/st FOB level. One source said the last tons he purchased were at the $300/st FOB level, but that was no longer being offered. Current pricing in western Pennsylvania was reported at the $325/st FOB level on a spot basis.
Pacific Northwest: Agrium’s Aug. 7 postings for granular urea included $335-$350/st DEL in Montana and Wyoming, depending on location; $355/st FOB Acequia and Pella, Idaho, and Washington terminals at Glade, Warden, and Wilson; $360/st DEL in Washington, Oregon, Idaho, and northern Nevada; $370/st DEL in northern and central Utah; and $375/st DEL in southern Utah.
India: As last week opened, MMTC showed it was not finished buying. Sources report that Helm got another award for 50,000 mt. Transammonia also reportedly got a deal for 120,000 mt. In addition to the additional 170,000 mt just awarded, MMTC increased Gavilon’s award from 30,000 mt to 35,000 mt.
The price paid for the awards of 310,000 mt came in at $281-$282/mt CFR. The Helm and Trammo awards were at $286/mt CFR.
Area observers are not sure if the Trammo business is all firm tons or a combination of firm offers and options to be exercised.
If all the tons awarded do come through, MMTC will have settled its July 29 tender by taking nearly half a million mt. Sources say this amount should be more than enough to keep the country stocked with urea until the October-November delivery season begins anew.
The talks between MMTC and PIC and QAFCO fell through as the Arab Gulf producers closed ranks and refused to sell at the bid price of $270/mt FOB.
There were some rumors circulating as the week ended that an Indian buyer might come in quickly to soak up the last of the Chinese tons not awarded in the last tender.
The thinking is that sellers of Chinese urea might be more willing to drop their prices to ensure product does not sit in the warehouses after the export duty jumps back to 110 percent.
This strategy was dismissed by others, who said the Chinese sellers could easily wait until November, when the duty drops back to 10 percent for the rest of the year. One trader noted that in previous years Indian buyers were able to take advantage of unsold Chinese tons because the window to sell material competitively on the international market was limited. This time, he said, producers only have to hold onto their material 45 days instead of six months before the next low-duty period begins.
Traders say the Indian buyers would be better served by waiting until the November selling season opens in China before calling a tender.
No other major buyers are in the market at this time, say sources. Without India and Pakistan buying, the only cargoes that move are long-term arrangements, such as the ones between the Middle East suppliers and the United States. Yuzhnyy and Chinese suppliers – in general – lack these steady buyers.
If stockpiles can build up in Yuzhnyy and China, say sources, Indian buyers should be able to secure better prices in an October tender than if they called one this week or next.
Middle East: The results of the MMTC tender clearly indicated that the producers are in no rush to sell product, said Asian sources. PIC and QAFCO each rejected bids at $270/mt FOB from MMTC. This rejection by itself would show an unwillingness to do business at any level. At the same time, however, traders point to the limited tons – 25-35,000 mt – offered by these companies into a market that the Arab Gulf producers usually dominate as evidence that the producers have enough business to keep themselves happy for a few more weeks.
The limited tonnage also indicated to industry watchers that the Middle East suppliers have enough long-term deals to supply urea that they do not need to be aggressive in current tenders.
Sources report the order books are in good shape for this month and the first half of September. No one is yet willing to look at the second half of next month or at October.
Even though tonnage will flow under contracts, sources say in many cases the shipments are at the minimum required tonnage.
In addition to the contracts, sources say upcoming BCIC tenders might offer one outlet for an additional cargo or two to ease any growing surplus situation.
Sources say the producers have cut back on production. Some surpluses are forming, but not at an alarming rate. Occasional spot deals and the winning of an award or two in smaller tenders – such as Sri Lanka – should keep the producers happy for a while, say sources.
Without any awards to a Middle East producer, sources say the market remains in the low $270s/mt FOB for both prills and granular.
China: The price remains in the low $260s/mt FOB for prills and the mid $270s/mt FOB for granular. At this point, sources say vessels are lining up and waiting for their turn to load cargoes. For some of the ships, the crew does not yet know where their final destination will be.
Depending on talks among traders, buyers, vessel operators, and urea producers, material could be shipped to India or the U.S.
One trader noted that some traders with vessels in the lineup are just waiting to see whose letter of credit gets opened first. At that point, the ship will get its shipping orders. Reportedly, the Chinese government is not pleased with this process, but does not have rules in place to demand a final destination to get into the lineup.
Black Sea: Sources say the market remains in the high $250s/mt FOB, despite efforts to push the price higher.
With the Indian buying now done, sources say bidders are now looking at the low $250s/mt FOB. One trader, however, added that no one has yet concluded below $255/mt FOB.
Yuzhnyy is facing pressure from buyers not willing or able to pay higher rates, and a ready supply of Chinese material. The freight advantage the Chinese product has with buyers in India and the Americas means that Black Sea producers are forced to focus on Europe and other nearby buyers.
So far, demand for Yuzhnyy material is not strong enough to warrant a price increase. In fact, sources say the supply demand equation almost dictates a price reduction.
The DH paper market was showing Yuzhnyy at $250-$260/mt on Aug. 13 for August, with September at $245-$250/mt and the fourth quarter at $240-$245/mt.
Indonesia: After settling its last tender, PIM will reportedly call another selling tender in a couple of weeks.
Sources say 10,000 mt were left unsold in the last tender. By mid-September, another 10,000 mt might be ready for export as well.
The authority to sell the cargoes continues to flow from export permits issued during the last fiscal year. No new export permits have been issued. The government said it would suspend new exports until it has a better handle on the domestic urea supply situation.
Bangladesh: The country will continue to face a short supply of domestic urea in view of the closure of Chittagong Urea Fertilizer Ltd. (CUFL) due to its shutting down for a long time on April 26 of this year because of a shortage of gas. According to the media, CUFL’s production capacity is 561,000 mt, which had not been attained since its inception in 1987. According to company officials, CUFL had produced 323,000 mt of urea against name plate capacity during the last fiscal year. Eight fertilizer factories in the country have the capacity to produce 1.8 million mt of urea against the total demand of 2.8 million mt, while the rest – 1 million mt – are imported.
NITROGEN SOLUTIONS
U.S. Gulf: Most players continued to report the last done business within the $135-$137/st ($4.22-$4.28/unit) FOB range. In the meantime, some sellers continue to quote $140/st, and CF reportedly is now posting $150/st FOB.
The DH Aug. 13 paper market gives UAN a little stamina, with August and September at $137-$140/st FOB and October-December at $138-$145/st FOB.
UAN imports were off 73 percent in June, to 59,939 st from the year-ago 222,706. July-June fertilizer year imports were off 54 percent, to 1.6 million from 3.49 million st.
Eastern Cornbelt: UAN was quoted at $5.50-$5.78/unit FOB regional terminals to the dealer, depending on location. Forward contract tons for September were referenced by one supplier at $180.80-$190.40/st ($5.65-$5.95/unit) FOB in the region.
Western Cornbelt: The UAN-32 cash market remained at $170-$185/st ($5.31-$5.78/unit) FOB regional terminals, depending on location. An Iowa source pegged the dealer market at the $5.75/unit FOB level in his area.
Southern Plains: Sources pegged the UAN-32 market at $150-$175/st ($4.69-$5.47/unit) FOB regional terminals, with the low from production points and the upper end reflecting the market from truck resellers. The common reference price out of regional production points was reported at the $160/st ($5.00/unit) FOB level last week.
South Central: With spot demand all but over on cotton, sources reported little activity to test the UAN market. Most sources pegged the dealer range for UAN-32 at $165-$185/st ($5.16-$5.78/unit) FOB regional terminals, with the higher numbers out of more northerly locations.
Southeast: The UAN market was tagged at $5.00-$5.38/unit FOB port terminals, with little movement to test the market. List pricing for UAN-30 out of the Baltimore, Md. market was reported at the $170/st ($5.67/unit) FOB level last week.
AMMONIUM NITRATE
U.S. Gulf: Actual business continues to be slow. Recent trades and quotes are $200-$210/st FOB. Sources report that imports are scarce, leaving more opportunity for domestic producers.
As of Aug. 13, Direct Hedge has the August and September paper market at $200-$210/st FOB.
Imports were off 10 percent in June, to 30,203 st from the year-ago 33,728. July-June fertilizer year imports were off 37 percent, to 629,833 st from 1 million st.
Western Cornbelt: Ammonium nitrate was unchanged at $265-$270/st FOB in the region.
Granular ammonium sulfate remained at $160-$180/st FOB for limited inventories.
Southern Plains: Ammonium nitrate remained at $255/st FOB Catoosa, Okla., with minimal inventory at the port.
South Central: Ammonium nitrate was pegged at $240-$270/st FOB in the region. One source confirmed that he was out of ammonium nitrate and CAN-27, and was in no hurry to hunt for replacement tons.
Southeast: Ammonium nitrate remained at $290-$315/st FOB in the region, depending on location.
AMMONIUM SULFATE
Eastern Cornbelt: Granular ammonium sulfate was unchanged at $160-$180/st FOB to the dealer.
Western Cornbelt: Granular ammonium sulfate remained at $160-$180/st FOB for limited inventories.
Southern Plains: Out of Plainview, Texas, ammonium sulfate was referenced at $215/st FOB for granular, $205/st for coarse, and $200/st for standard.
Ammonium sulfate postings from American Plant Food Corp., effective July 27, included granular at $175/st FOB Freeport, $185/st FOB Galena Park, $200/st FOB Fort Worth, and $215/st FOB Littlefield; coarse at $165/st FOB Freeport, $175/st FOB Galena Park, $190/st FOB Fort Worth, and $205/st FOB Littlefield; and standard at $160/st FOB Freeport, and $200/st FOB Littlefield. The company’s N-Pac Compacted posting moved on July 27 to $190/st FOB Galena Park.
South Central: Although dealer postings from granular ammonium sulfate remained as high as $220/st FOB in the region, sources reported no new business at those levels. Some speculated that deals could be found in the $175-$180/st FOB range if buyers pushed.
Southeast: Granular ammonium sulfate remained at $190-$195/st FOB, with the upper end reflecting the Augusta, Ga., reference price. Several sources said they anticipated a downward pricing adjustment in the near term, but nothing was announced by press time.
U.S.Imports: Imports were off 40 percent in June, to 12,822 st from the year-ago 21,489 st. July-June fertilizer year imports were off 23 percent, to 351,797 st from 458,143 st.
PHOSPHATES
Central Florida: Phosphate companies were increasing production because inventories remained low and sales of railcars have been on the upswing, at least for a little. The export market was still the biggest factor for low inventories. To some degree the fall season has finally begun, and the next few weeks will tell whether it will be significant or not.
In order for the product to reach its destination for the fall season, phosphate will have to be ordered soon. The biggest problem would be logistics – there may not be enough railcars available, if too many orders are placed late in the season.
The USDA updated its estimate on corn and other crops last week and said corn yields would be greater this season than previously anticipated. The biggest question will be the weather. If it turns cold early, frost will hurt yields – and the corn crop harvest was said to be running a couple of weeks late.
Due to earning a much higher rate for export sales, Mosaic and possibly other producers will be looking at a price hike for domestic markets, and new prices could be charged by the beginning of this week.
The Central Florida DAP price range flattened out last week from $265-$270/st FOB the previous week to $270/st FOB, based on actual sales. However, small buyers may have to pay a premium. Both Mosaic and PCS Sales had a $10/st FOB additional charge for MAP. Agrifos was no longer posting rail prices, but increased its price for truckloads from $280/st FOB for DAP and $285/st FOB for MAP to $300/st FOB for DAP and $305/st FOB for MAP.
As of Aug. 13, the DH paper market was showing Central Florida as $265-$275/st for August and $265-$280/st for September-December.
U.S. Gulf: Demand for phosphate on the NOLA river system was on the increase last week – along with prices. The biggest problem was a lack of available barges for prompt delivery. Mosaic had none available, and others were having trouble getting vessels for prompt sales.
CF sold a bunch of the barges it had available for September at $280/st FOB and last week increased the price it was asking for that month another $10/st FOB, to $290/st FOB. Although one source said the company had none left for September, others disagreed. Mosaic also made forward sales for September at $282/st FOB and October at $285/st FOB. Because none of the September and October deals were considered prompt – within the next two weeks – they were not included in this week’s NOLA DAP barge range.
Warehouse prices and sales were also on the increase last week, with the lowest prices around $295/st FOB in the St. Louis area and the highs about $310/st FOB on the Arkansas and some upriver locations.
All of the prices were likely to increase relatively soon, because producers will probably hike what they charge to bring domestic markets more in line with export rates, which have been on the increase. Mosaic will no longer be offering at $285/st FOB this week. Then, very late in the week, Mosaic did sell a NOLA DAP barge at $282/st FOB, which was included in the range.
On the Arkansas River, the U.S. Army Corps of Engineers will close Locks 17 and 18 from Aug. 24 until Sept. 6 for maintenance. That could pose a problem for terminals in Oklahoma, because the winter wheat season begins during the third week of August and product could run short – or out entirely.
The USDA issued its revised crop estimate last week and kept the number of acres of corn planted the same, but hiked expected yields. Because of cold weather, many farmers planted later than normal and the harvest was said to be about two weeks behind schedule. If the colder weather returns early and crops are hit by a frost, the yield will be down. After the slow start the weather has been warmer than anticipated, and the crops were generally doing well. The yields will depend on the weather.
The NOLA DAP barge price range moved up last week, from $270-$274/st FOB last week to $272-$282/st FOB. The lowest prices were paid on Monday and the highest toward the end of the week, which was an indication prices will continue to rise. Both Mosaic and CF were charging a $10/st FOB premium for MAP.
As of Aug. 13, the DH paper market had August at $275-$285/st, with September-December at $280-$290/st.
Eastern Cornbelt: DAP was steady at $300-$310/st FOB regional warehouses, with MAP $10/st higher than DAP. 10-34-0 was pegged at $320-$350/st FOB in the region.
Western Cornbelt: DAP was steady at $295-$305/st FOB warehouses to the dealer, with the low reported in the St. Louis, Mo., area. MAP was $10/st higher than DAP. Forward contract DAP tons for September through October were referenced by one regional supplier at $320/st FOB St. Louis.
10-34-0 was steady at $310-$340/st FOB in the region.
Southern Plains: The DAP market was pegged at $300-$310/st FOB the Tulsa market, up from last report, with MAP $10/st higher. 10-34-0 was quoted at $310-$320/st FOB, reflecting another drop from last report. Effective Aug. 1, Agrium’s phosphoric acid postings moved to $660/st rail-DEL for both SPA and MGA in Colorado, Kansas, New Mexico, Oklahoma, and Texas.
South Central: DAP pricing had reportedly firmed to $315-$320/st FOB regional terminals to the dealer, with MAP $10/st higher. One source said the only movement taking place was on pastures, but interest was starting to kick in for the preplant winter wheat run. TSP was pegged at $300-$305 FOB warehouses to the dealer.
U.S. Export: The export market continued its bullish charge, with new sales at higher prices last week.
PhosChem sold 16,000 mt to a customer doing business in New Zealand and Australia at $325/mt FOB, and another 3,000 mt into Central America at the same price. Transammonia made a sale into Africa of 8,500 mt at $313/mt FOB using product from Miss Phos. In addition, Transammonia sold a handymax-sized vessel of about 30,000 mt into Pakistan using Mexican phosphate at $372/mt CFR, which amounted to a netback of between $310/mt FOB and $312/mt FOB. However, Mexican DAP cannot be considered in the U.S. range for obvious reasons.
Pakistan also made buys from Lithuania and Australia at $373-$380/mt CFR, but FOB prices were not available and were dependent upon ocean freight rates, which have been on the increase.
Due to the bustling export market, U.S. producers were looking at adjusting domestic prices late last week.
The export DAP price range last week increased from $306-$315/mt FOB to $313-$325/mt FOB, based on actual sales.
As of Aug. 13, DH had Tampa DAP at $305-$310/mt for August with a boost for September-November, all at $315-$325/mt.
Pakistan: The country continues to line up imports of DAP. Dawood has reportedly finalized two cargoes: 1) AFT/Fertinal 30,000 mt ex-Mexico at around US$373.00/mt for September shipment; and 2) Dreymoor 30,000 mt ex-Lithuania at around US$370.00/mt for September shipment.
Meanwhile, according to the latest report of the National Fertilizer Development Centre (NFDC), total DAP availability during Kharif season 2009 would be 619,000 mt, comprising 204,000 mt inventory, 94,000 mt expected imports, and 321,000 mt domestic production. Against this availability, DAP offtake estimates are around 612,000 mt. While the supply situation appears satisfactory during Kharif, further imports are required to carry over reasonable qualities for next season.
POTASH
Eastern Cornbelt: The regional potash market remained at $510-$520/st FOB warehouses and $520-$530/st rail-DEL, based on reference levels from producers.
Western Cornbelt: Potash pricing was steady at $510-$520/st FOB and $520-$530/st rail-delivered to the dealer, depending on location and supplier.
Southern Plains: Sources put the potash market at $510-$520/st FOB regional warehouses to the dealer. Intrepid Potash released new potash postings, effective July 27. Granular 60 percent is now posted at $482/st Carlsbad, N.M., and Moab, Utah, and $490/st Wendover, Utah. Standard 60 percent is posted at $477/st FOB Carlsbad and Moab, and $485/st FOB Wendover. Other postings for Carlsbad include standard 62 percent at $493/st, fine standard 62 percent at $496/st, and granular 62 percent at $498/st FOB.
South Central: Potash was pegged at $510-$515/st FOB regional terminals. Several sources said there was little incentive to buy, noting that there are “lots of full warehouses” and “we won’t need it until next February.”
Southeast: Sources quoted delivered potash at $520-$550/st in the region, depending on grade and supplier. PCS’s granular potash postings dropped on July 24 to $535/st FOB Columbia, Ala., Chesapeake, Va., and Baltimore, Md., $540/st rail-DEL in Alabama, Georgia, Virginia, and the Carolinas, and $550/st rail-DEL in the Northeast region.
U.S. Imports: Potash imports were off 60 percent in June, to 326,358 st from the year-ago 820,973 st. July-June fertilizer year imports were off 43 percent, to 6.93 million st from 12.25 million st.
India: A dry monsoon season in India is leading to increased speculation that major potash buyers will not take many of the “optional” tons that were recently negotiated as part of the $460/mt CFR struck with international suppliers. As a result of the situation in India, sources speculate that this extra product may benefit China in its potash negotiations. Last week, K+S AG Chairman Norbert Steiner told analysts that he was not very optimistic that the Chinese would come back into the market any time soon.
SULFUR
Tampa: Refineries were still running below normal last week, and sulfur supplies were doing the same. However, supply and demand were essentially in balance, and no change was expected in the near future.
As a result of higher freight rates, sources said China and India were both offering to pay about $5/mt more for sulfur than they had been, which was a good sign. However, netbacks to suppliers did not change, so they did not go down.
After both Mosaic and PotashCorp settled with all of their major suppliers, the industry settled into a more normal routine.
Shipments of prill from the Gulf were expected to set new records this year and were already above the total for all shipments last year.
Vancouver: At least one oil company has decided to block sulfur that would have ultimately gone south into the U.S., because the loss would be less.
U.S.Imports: June imports were off 60 percent, to 70,671 st from 177,667 st a year ago. July-June fertilizer imports were off 32 percent, to 1.495 million st from the prior year’s 2.21 million st.
Pakistan: Oil & Gas Development Co. (OGDC) on Aug. 12 issued a tender to sell 3,000 mt of sulfur at a minimum price of about US$76.50/mt in ten lots ranging from 10 mt to 1,000 mt ex-Dakni, Punjab. The last day for bids is Aug. 20.
MARKET NOTE
Argentina: Repsol, the Spanish oil group, is widely reported to be looking to shed its 84 percent stake in Argentina-based YPF, which owns 50 percent of nitrogen producer Profertil. Agrium Inc. owns the other 50 percent. Major international players interested are reportedly India’s Oil and Natural Gas Corp. and two Chinese companies, CNPC and CNOOC. Repsol is reportedly looking for at least $17 billion for its YPF stake.
The Week in Fertilizer Stocks
| Producer | Symbol | Price | Week Ago | Year Ago |
| Agrium | AGU | 48.86 | 48.96 | 82.66 |
| CF Industries | CF | 83.15 | 83.14 | 138.85 |
| Intrepid Potash | IPI | 26.68 | 26.20 | 46.73 |
| Mosaic | MOS | 54.65 | 54.39 | 107.08 |
| PotashCorp | POT | 97.55 | 99.00 | 179.48 |
| Terra Industries | TRA | 31.24 | 30.38 | 47.08 |
| Terra Nitrogen | TNH | 106.33 | 110.02 | 92.43 |
| Distribution/Retail | ||||
| Andersons Inc. | ANDE | 28.39 | 27.96 | 45.18 |
| Deere & Co. | DE | 45.63 | 45.36 | 65.33 |
| Scotts | SMG | 39.83 | 39.47 | 24.47 |
SPOT BARGE PRICES
Agrium delivers second best quarter despite 42 percent drop in earnings
Agrium Inc. reported a 42 percent drop in net earnings for the second quarter ending June 30, 2009, to $370 million ($2.35 per diluted share) on sales of $4.14 billion, versus the year-ago $636 million ($4.00 per share) and $3.94 billion, respectively. EBITDA was $602 million, down from the year-ago $1.03 billion.
“Solid results from Retail, Advanced Technologies and our Wholesale nitrogen businesses resulted in Agrium achieving our second strongest quarterly net earnings in our history,” said Agrium President and CEO Mike Wilson. “We were able to do this despite the challenge of a short-term reduction in potash and phosphate application rates and Retail crop nutrient margins. The outlook for our businesses and products remains strong and we are starting to see signs of improving demand fundamentals as we approach the fall season. Our Retail crop protection and seed businesses in particular delivered excellent results and we ended the season with normal crop nutrient inventories in our retail business. We continue to anticipate a recovery in potash demand later in the second half of 2009.”
Agrium per share results of $2.35 easily beat average analyst projections of $1.83 collected in a Bloomberg survey.
An 89 percent drop in potash volumes in Agrium’s Wholesale business was a major factor for the quarterly drop, sinking to 61,000 mt from the year-ago 574,000 mt. Average potash selling prices were up, however, to $770/mt from the year-ago $425/mt.
Wholesale phosphate volumes were off 12 percent.
Nitrogen volumes remained about even with year-ago numbers, as a decline in North American numbers was offset by increased exports from Profertil. Urea and ammonia products saw a strong quarter and nitrogen contributed $182 million in gross profit, 86 percent of Wholesale’s total gross profit.
Agrium took a $32 million write-down associated with Wholesale’s resale business.
Second-quarter Wholesale gross profit was $212 million on sales of $950 million, versus the year-ago $582 million and $1.4 billion, respectively.
Retail second-quarter gross profit was $597 million on sales of $3.15 billion, compared to the year-ago $667 million and $2.5 billion. Improved Retail sales reflected last year’s acquisition of UAP Holding Corp. While crop protection and seed profits were up in this sector, crop nutrients saw a decline to $117 million, down from $335 million, though sales figures were actually up, at $1.3 billion from $1.25 billion.
Second-quarter Advanced Technology gross profit was $17 million on sales of $82 million, versus the year-ago $20 and $107 million.
Agrium reported six-month net earnings of $310 million ($1.97 per share) on sales of $5.93 billion, versus the year-ago $831 million ($5.24 per share) and $5.1 billion, respectively. EBITDA was $601 million versus the year-ago $1.38 billion. Wholesale gross profit was $329 million on sales of $1.64 billion, versus the year-ago $855 million and $2.1 billion. Retail gross profit was $739 million on sales of $4.2 billion, versus the year-ago $782 million and $2.9 billion. Advanced Technology gross profit was $27 million on sales of $149 million, versus the year-ago $37 million and $186 million, respectively.
Going into fall, Agrium told analysts that it is close to selling about half of the nitrogen and phosphate it expects to sell for fall, and noted that it recently came out with new potash postings. “I’d say that the response in general from our customer base has been if they want to get ahead of the curve, they understand that the supply chain is relatively low and needs to be re-stocked,” said Kevin Helash, Agrium vice president, marketing and distribution. As of early August, he said people are optimistic, “but they’re not ready to blow their brains out and totally load up for fall and maybe spring yet.”
Tom Warner, Agrium Retail vice president, east, said the price of NPK has come down 40-50 percent for this fall versus last spring. He likened it to buying fuel a year ago at $4 a gallon to this year at $2.25. “Historically, that’s high; by the same token it’s cheaper compared to before. So I think you’ll see them begin to put the product back on like they have in the past, because it is down significantly from this past spring and last fall, both.”
“They’re still looking for bargains,” said Ron Wilkinson, Agrium senior vice president and Wholesale president. However, he said some customers have gone ahead and pre-paid for fall. “They’re really looking towards getting back to profit this fall and they’re looking at a decent harvest. Again, it is about timing, but they’re putting the product back on.”
Agrium Retail inventories were at about 30-35 percent of fall needs for phosphate and potash as of June 30, according to Richard Gearheard, Agrium senior vice president and Retail president. He put phosphate at 65,000 tons, down from the year-ago 170,000 tons, and potash at 160,000 tons, down from 345,000 tons.
On the international market, Agrium said demand for potash is starting to come around from India, Malaysia, Indonesia, and Brazil.
CF prepared to increase offer for Terra; Terra board to consider by end of month
CF Industries Holdings Inc. said Aug. 5. that its board of directors is prepared to increase CF’s offer for Terra Industries Inc. to a fixed exchange ratio of 0.465 shares of CF for each Terra common share. CF says the proposal represents a premium of 35 percent over the exchange ratio on Jan. 15, 2009, just prior to when the initial offer was made, and a 38 percent premium to the average exchange ratio over the one-year period prior to that offer.
The deal is now valued at $3.71 billion, up from the initial bid value of $2.1 billion (GM Jan. 19, 2009, p. 1).
Under this plan, Terra’s shareholders would own 49 percent of the combined company, CF’s 51 percent.
CF Chairman, President, and CEO Stephen Wilson, in discussing the proposal with analysts, reiterated that CF would want Terra President and CEO Mike Bennett on the board of the new company, as well as in a senior executive position. He also welcomed having a number of Terra board members on the combined board, and suggested that CF would consider locating some functions in Sioux City.
CF also said it is prepared to return at least $1 billion of cash to stockholders of the combined company following the closing of the transaction, which likely would be accomplished through open market purchases or a self-tender offer.
As for the $1 billion, CF told analysts that the combined CF/Terra had $2.1 billion in total cash as of June 30, 2009. “The $1 billion was arrived at because we’ve been in conversations with Terra shareholders and have a very clear idea of what they’re looking for in terms of stock and cash,” said Tony Nocchiero, CF senior vice president and CFO. “And we’ve tried to target an amount that’s consistent with both those desires and with the needs of the companies to maintain a safe and adequate liquidity position.” CF said it would still have the funding to proceed with other projects, such as the new nitrogen complex in Peru.
In addition, immediately prior to the consummation of the combination, the company would distribute an aggregate of five million contingent future shares to CF stockholders. These contingent shares would be converted into CF common stock should the stock trade at more than $115 per share over a specified period following the close. This gives pre-merger CF shareholders the opportunity to increase their stake in the company from 51 percent to 54 percent.
“We continue to believe firmly that a business combination with Terra is the best way to create stockholder value and is in the best interests of both CF Industries and Terra stockholders,” said Wilson. “We believe that the return of cash will be extremely attractive to both sets of stockholders. The issuance of contingent shares provides an opportunity for existing CF Industries stockholders to benefit from upside performance in our stock.” He said the logic of the combination was recognized by both companies as they discussed a merger in 2004 and 2007.
Wilson touted CF’s “blow out” second-quarter earnings (GM Aug. 3, p. 1) and noted that CF generated $9 of cash per share during the quarter and eclipsed $500 million of EBITDA for the first half of 2009, exceeding the median Wall Street expectation for the entire year.
CF noted on Aug. 6 that the Hart-Scott-Rodino premerger waiting period applicable to proposed combination expired Aug. 5, and that CF has now satisfied the regulatory conditions. “With the expiration of the premerger waiting period, we now can promptly close a business combination with Terra,” said Wilson.
Terra said on Aug. 5 that its board of directors will consider CF’s latest proposal at a meeting to be held prior to the end of the month.
CF also announced that it has extended the expiration date of its exchange offer for all of the outstanding shares of Terra common stock until 5:00 p.m., Eastern time, Friday, Aug. 21, 2009. The offer had been scheduled to expire at 5:00 p.m., Eastern time, on Friday, Aug. 7, 2009. As of the close of business on Aug. 4, a total of 9,144,017 shares of Terra common stock had been tendered into the exchange offer.
At least a couple of analysts last week told CF they were concerned over whether shareholders would get a say in acquiring Terra or being acquired by Agrium Inc. CF responded that the shareholder vote on Terra was initially taken off the table due to Terra’s saying CF’s offer was illusory because it could not obtain shareholder approval. CF said that the current offer is for common stock and there would be a vote by shareholders on both sides.
Another analyst complained that if 75 percent of the shareholders tender into a deal, that should be the decision, not the board’s.
Wilson told analysts that CF has been focused on shareholders from the day the company went public on Aug. 11, 2005. Before taking questions, he said “I’d like to remind everyone that CF has generated significant value for shareholders since our IPO in August of 2005; that it has the highest share price appreciation and total shareholder return among public global fertilizer companies from our IPO date to Jan. 15, 2009.”
“The simple fact is that they (Agrium) haven’t put a number on the table that’s at all compelling,” said Wilson. “And we’re moving ahead with Terra.”
One CF backer last week told Green Markets that Agrium is going to have to come forward with a deal over $100 per share or no one will take them seriously. Minus this, he said it would be full speed ahead for CF to go for Terra. He said the CF-Terra deal should make sense to Terra for several reasons, one being it is almost a 50-50 percent merger, with the number of board members still up for negotiation. In addition, he added that Terra’s Bennett is being offered a senior job, leaving the door open that once Wilson, who is five years Bennett’s senior, retires, he could be in line for leadership of the combined company.
Agrium last week told analysts that there remains a high level of support for their offer for CF. Agrium President and CEO Mike Wilson termed CF’s new price for Terra a “minor modification.” “This strengthens our conviction that our offer for CF is superior to any alternative CF has including paying a premium for Terra.”
LSB Chem income off 70 percent
LSB Industries Inc. reported that operating income from its Chemical business was off 70 percent, to $6.2 million on sales of $69.9 million for the second quarter ending June 30, compared to the year-ago $20.5 million and $113.4 million, respectively.
LSB pointed out several factors impacting the results. Second-quarter 2008 included a one-time $7.6 million gain from litigation. The current quarter included $3.2 million in start-up costs for the Pryor, Okla., nitrogen plant; $3.1 million in lower profit margins on UAN as a result of lower tons sold and lower margins, offset by $1.1 million of gross profit margins in excess of current market prices due to firm sales commitments made in 2008; and $300,000 on natural gas hedging contracts, compared to gains of $1.2 million in the 2008 quarter.
LSB said the decrease in sales was primarily attributable to declines in selling prices resulting from steep declines in raw material feedstock, and fewer tons of products sold into the industrial and mining markets due to the economic downturn.
LSB Chairman and CEO Jack Golsen said that while both company businesses, Chemical and Climate Control, had respectable numbers in the first half, he did not believe the results were sustainable in the second half due to the current business slowdown. “With respect of our Chemical business, we believe sales and margins in all three of its primary markets will be down due to the decline in business activity in these markets,” said Golsen. “However, it does appear from published reports that nitrogen fertilizer prices and demand are beginning to firm up. Koch Nitrogen Co. has started to pre-sell the UAN production at our Pryor, Okla., plant, and production at that facility is expected to start later in the third quarter, barring delays.”
Six-month Chemical income was $18.8 million on sales of $144.4 million, down from the year-ago $32.6 million and $204.8 million, respectively.
Company-wide, LSB reported second-quarter net income of $8.7 million ($.38 per diluted share) on sales of $138.6 million, versus the year-ago $17.9 million ($.75 per share) and $198 million. Six-month net income was $20.5 million ($.89 per share) on sales of $288.8 million, compared to the year-ago $28.8 million ($1.21 per share) and $358.5 million.
The Andersons 2Q fert income off 78 percent
The Andersons Inc. reported a 78 percent drop in second-quarter operating income in their Plant Nutrient Group, to $10.3 million on revenues of $198 million, compared to the year-ago record operating income of $47.4 million on revenues of $274 million.
The company said margins were significantly lower as basic nutrient prices deflated in 2009, whereas in 2008 margins greatly increased as nutrient prices inflated. Retailers reducing their nutrient inventory holdings, and lower application rates of basic nutrients (potash, potassium, and to a lesser degree, nitrogen), led to reduced sales volume this quarter.
The Plant Nutrient Group’s first-half operating income was $12.4 million on revenues of $309 million, versus the year-ago record $54.9 million and $379 million.
“Although we would have liked better results this quarter, it is important to remember that last year’s second quarter results included unprecedented margins in our Plant Nutrient Group,” said Chairman and CEO Mike Anderson. “We are pleased with the results of our grain and ethanol businesses. The grain business performance was strong, and our ethanol business returned to profitability, which is an accomplishment in the current ethanol environment. Conversely, we continue to be disappointed with the Lansing Trade Group results this year. The Plant Nutrient Group has returned to solid financial performance, and we believe the lower of cost or market issues are behind us. The Turf & Specialty Group set an earnings record as the value added and proprietary product strategy being pursued continues to be successful. Our Rail Group, and to a lesser extent our Retail Group, however, continue to be impacted by the overall economic decline. These results continue to demonstrate that our purposeful diversification allows us to remain a strong and profitable company, even when some businesses are underperforming.”
Company-wide net income for the second quarter ending June 30 was off 65 percent, to $15.9 million ($.87 per diluted share) on sales of $810.9 million, versus the year-ago $45.6 million ($2.48 per share) and $1.1 billion, respectively. Six-month net income was $20.9 million ($1.14 per share) on sales of $1.51 billion, compared to the year-ago $53.4 million ($2.90 per share) and $1.8 billion.