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PotashCorp extends curtailment program; buyers/sellers in standoff before IFA

News

PotashCorp on May 20 indicated its intention to curtail 2009 potash production by an additional 400,000 mt, bringing the total reductions in production to 3.9 million mt year-to-date and 4.8 million mt for the 2008/09 fertilizer year.

“Our commitment to our long-held potash strategy remains rock solid,” said PotashCorp President and CEO Bill Doyle. “While short-term demand deferrals are uncomfortable, we always manage with a long-term view. Demand will inevitably return, and – regardless of when that happens – we will be patient and preserve our assets until they are needed.”

PotashCorp makes this announcement as major global potash buyers and sellers are expected to meet at the IFA meeting in Shanghai. Doyle expects major agreements with China and India to come before the end of the second quarter. He told analysts last week that the Chinese are expected to buy product once their inventory levels drop to 2 million mt. Assessments are they may be around 3 million mt now.

Doyle also expects China to rebound next year, saying they may double their take or go as high as 13.7 million mt. He expects China to take about 5 million mt this year, or about the same as last year, which would be another year below their trend line.

Harry Wang, Sinofert Holdings senior vice president and executive director, speaking at the BMO Capital Markets Agriculture, Protein and Fertilizer Conference on May 14, said that China’s normal usage is about 10 million mt, and that it took 9.5 million mt in imports in 2007 and 5.5 million mt in 2008. He said that about 3.5 to 3.8 million comes from domestic Chinese production, with the remainder coming from imports. He said China realizes that it will need to import some 70 percent of its potash for years to come. While it hopes to become self sufficient in the product, as it is in nitrogen and phosphate, he said the goal is about a 10 percent increase in domestic production per year. While current use is 10 million mt, he said that Chinese farmers need to use more potash and use 22-23 million mt per year.

Like U.S. farmer psychology, Wang said the Chinese also expect potash prices to drop as they have with nitrogen and phosphate. He noted that a Chinese potash producer recently dropped its prices about $100/mt, to $485/mt. He said such a drop has a definite impact on negotiations as it makes it difficult to increase prices.

Doyle said India is in a more dire situation regarding potash than China, which might prompt it to conclude its contracts first. Still, he predicts Indian imports may be down in 2009, to 5 million from 2008’s 6.3 million mt. He expects India to rebound again to 6.3 million mt in 2010.

Doyle, like other producers, is adamant that prices must remain firm or higher so that the industry can build brownfield and greenfield projects that are going to be needed for future demand.

The U.S. retail potash pipeline should be about 95 percent empty by June 30, according to Doyle, speaking to an analysts meeting May 20. He said refill should begin in July-August, and that there will be no price cuts to encourage it. Doyle said with about a 35 percent drop in consumption this fertilizer year, corn acreage and potash use should be up in the next fertilizer year. He added that corn acreage could hit 90 million acres, up from an expected 82-84 million this year.

PHI reports $11.6 M 1Q loss, spring season did not develop, says CEO

News

Phosphate Holdings Inc. (PHI), the owner of Mississippi Phosphates Inc., reported a loss of $11.6 million ($1.51 per diluted share) on sales of $54.2 million for the first quarter ending March 31, 2009, compared to year-ago net income of $10.9 million ($.86 per share) and $67 million, respectively. Of sales, actual DAP sales were $52.9 million, versus the year-ago $61.6 million.

PHI said the first quarter was materially impacted by inventory write-downs of $9.3 million and recording unrealized losses on firm raw material purchase commitments of $6 million.

PHI had an operating loss of $18.3 million, down from the year-ago operating income of $10.9 million.

“The first quarter of 2009 was another difficult period for the company,” said PHI CEO Robert Jones. “Uncertainties regarding the overall economy, the availability of credit, the direction of grain prices, spring weather conditions and the high-cost fertilizer inventory in the supply chain all impacted both the movement and price of DAP. While we saw some product demand reappear mid-quarter, it was substantially limited to the export market, particularly, India.

“During the first quarter of 2009, approximately 83 percent of our DAP sales were into the international market,” continued Jones. “During the quarter, we operated our facilities at approximately 50 percent of capacity, with our principal goal of converting existing phosphate rock inventories into DAP in order to meet liquidity needs. We utilized borrowings under our credit facilities, income tax refunds and proceeds from a major sales transaction to sustain our operations. As of the date of this release (May 19, 2009), we have approximately $1.0 million in cash and no borrowings under our credit facility.

“During the first quarter of 2009, the company benefited from lower sulfur costs. However, these reduced costs were offset by rising ammonia cost. Sulfur costs settled (C&F Tampa) at zero in the first quarter of 2009, while ammonia prices increased from $125 per metric ton to $318 per metric ton. Since the end of the first quarter, DAP prices continue to decline from a level of approximately $375 per metric ton to $312 per metric ton (FOB U.S. Gulf).

“DAP prices and demand remain depressed and the U.S. spring season simply did not develop, and it appears that phosphate fertilizer applications will be down approximately 25 percent in the 2008/2009 fertilizer year, compared to prior-year applications,” said Jones. “Such a cutback in application rates will likely deplete soil nutrient levels requiring above-normal application rates in the 2009/2010 fertilizer year. We are continually evaluating opportunities to improve our liquidity position to ensure that we position ourselves for the inevitable rebound in phosphate demand and pricing. While near-term challenges persist, the long-term fundamentals for global phosphate demand remain positive.”

ICL Fertilizer sees big income, sales drop; income remains in plus column

News

Israel Chemicals Ltd.’s ICL Fertilizers saw a huge drop in operating income and sales during the first quarter ending March 31, 2009. Operating income was $138.8 million on sales of $371.1 million, compared to the year-ago $407.4 million and $952.9 million.

ICL cited a sharp decline in quantities sold as well as lower phosphate prices, which were somewhat offset by higher potash prices, decreases in shipping and energy costs, and the depreciation of the shekel in terms of the dollar. Efficiency measures also helped reduce the impact of lower sales.

Toward the end of the first quarter, ICL said global demand for fertilizers increased somewhat, reflecting a renewal of activity in Brazil and some other markets. It said fertilizer inventories were reduced in the country and demand was picking up due to higher soy prices and the devaluation of the local currency. ICL added that said potash demand in Southeast Asia, particularly in Indonesia and Malaysia, was up due to higher palm oil prices.

Going forward, despite the current global economic crisis and continued relative weakness of the short-term market demand, the company said long-term fertilizer fundamentals remain positive. ICL says it has intensified its cost savings and efficiency programs, and that it is taking advantage of its virtually-unlimited outdoor storage capacity at the Dead Sea to stockpile potash for future sales. It also continues to manufacture at normal levels.

Company-wide, Israel Chemicals had first-quarter net income available to shareholders of $158.8 million on sales of $898.5 million, versus the year-ago $346.7 million and $1.53 billion, respectively. Operating income was $205.6 million, down from the year-ago $465 million. EBITDA was $259.3 million, down from $507.9 million. As with ICL Fertilizer, volumes were off at the company’s other segments ?Çô ICL Industrial Products and ICL Performance Products.

On May 4, the company paid a dividend totaling $175 million in respect of its 2008 results. The company on May 20 declared that a dividend of $100 million will be paid on June 17, 2009, with respect to the first quarter results.

Agrium to build new ESN plant

Alberta, News Briefs, Nitrogen

Calgary-Agrium Inc. said May 21 that it will proceed with construction of a new facility for production of its branded polymer-coated nitrogen product, ESN®, which has been specifically designed for the agricultural markets. New Madrid, Missouri, has been selected as the home of the new ESN® facility. “We are excited about the opportunity to increase our production capacity of ESN® so that we can continue to meet the growing demand for this unique product. We selected New Madrid due to its great access to markets, its skilled workforce and its location on the Mississippi River, making it ideally suited for our business,” said Andrew Mittag, President, Agrium Advanced Technologies. The coating facility will have an annual production capacity of 120,000 tons, and has been designed such that capacity could be doubled in the future. The incremental capacity will bring total Agrium ESN® production capacity to 360,000 tons at three separate locations. Agrium also produces ESN at Calgary, Alberta, and Sylacauga, Ala. All plans will be finalized shortly, and groundbreaking on the new facility is expected to begin in early June 2009. The plant is expected to cost approximately $36 million, be operational in 2010, and have 18 full-time employees.

Commission increases Sasol penalty

Africa, News Briefs

Johannesburg-The South Africa Competition Commission meeting last week increased penalties to be paid by Sasol Chemical Industries Ltd., from the previously reported R188 million (US$22.4 million) (GM May 11, p. 12) to R250.7 million (US$30 million). The Commission said the amount is approximately 6-8 percent of the turnover of the Sasol Nitro division. “The Competition Commission hopes to encourage early and substantive cooperation,” said Commissioner Shan Ramburuth. “While it is commendable that Sasol’s ongoing internal review has uncovered conduct substantiating our findings, this conduct should have been uncovered when the Commission initiated its investigation five years ago and certainly prior to the settlement agreement signed earlier this month.” In addition, the Commission said it has identified additional related conduct that goes to the heart of the Commission’s collusion case. This includes meetings of Sasol Nitro, Omnia Holdings Ltd., and Yara (Kynoch). Omnia responded last week by saying that the investigation has raised extremely complex issues and that the allegations against Sasol were more numerous and wide-ranging than those against Omnia. The company said it would continue to defend itself while cooperating with authorities. Yara International ASA pointed out that Yara South Africa Ltd. completed the takeover of the former Kynoch Fertilizer Ltd. operation in 2001 and did a complete turnaround in management in 2005-2006, including rebranding to Yara. “Yara maintains its position of no wrongdoing,” a spokesman told Green Markets. It said it will continue its own internal investigation and is actively cooperating with the Commission.

Viterra and ABB Grain to merge

News Briefs, Saskatchewan

Regina-Canada’s Viterra Inc. and Australia’s ABB Grain Ltd. announced May 19 that they have signed an implementation agreement under which Viterra proposes to acquire all the issued and outstanding shares in ABB for a mixture of cash and scrip via a scheme of arrangement, which will be subject to shareholder and court approval. Both companies are in the grain and fertilizer business. The transaction, valued at approximately A$1.6 billion (C$1.4 billion based on the closing share price of CAD$8.84 per Viterra share on May 15, 2009, the last trading day in Viterra shares prior to this announcement, and an Australian dollar:Canadian dollar exchange rate of 0.8901), is comprised of a combination of cash and shares, including a special dividend to be paid by ABB. The ABB directors unanimously recommend that ABB shareholders vote in favor of the proposed scheme of arrangement, in the absence of a superior proposal and subject to an independent expert concluding that the proposal is in the best interests of ABB shareholders. The transaction has also been unanimously approved by the Viterra board.

Gavilon expands with South African subsidiary

Africa, News Briefs

Savannah-Gavilon Fertilizer LLC said May 19 that it has established a South African subsidiary, Gavilon South Africa (Pty) Ltd. The company, to be based in Johannesburg, will commence business operations on July 1, 2009. “The establishment of Gavilon South Africa (Pty) Ltd will enable Gavilon to further expand our commodity merchandising and distribution businesses around the globe in major commodity markets,” said Brian Harlander, Gavilon president. The Johannesburg office will be responsible for the group’s merchandising and distribution businesses in southern and eastern Africa, enabling Gavilon to better serve its agricultural clients and to expand its business in the region. The company currently has operations in Kenya, Mozambique, Malawi, Zambia, and South Africa. Kobus Bosch, presently of PJC Commodities, with whom Gavilon has cooperated in the region for many years, will serve as managing director of the new company. Bosch brings 24 years of agricultural commodity experience to Gavilon. Gavilon Fertilizer is a subsidiary of The Gavilon Group LLC, which is involved in the physical distribution, trading, merchandising, and risk management of raw materials and value-added products moving through the global supply chain of grain, feed ingredients, fertilizers, and energy products. For more information, see www.gavilon.com.

Management Briefs

Management Briefs

Yara International ASA on May 19 announced changes to its executive management team through both an internal reshuffle and the hiring of new employees.

Head of Downstream Edward Cavazuti will move back to the U.S. for family reasons, where he will head up Yara’s business development in the Americas. Current Chief Financial Officer Egil Hogna will take over as the new head of downstream, while Hallgeir Storvik, Head of Strategy, Supply & Trade, will become the new CFO and head of strategy. Head of Industrial Terje Bakken will take over responsibility for the company’s activity within the fields of supply and trade. An external recruitment process will take place to hire a new head of industrial. Trond Stangeby will act as the head of industrial until this position is filled. Changes to responsibilities will become effective Aug. 1.

Håkan Hallèn has been hired as the new chief human resources officer, as Anne Grethe Dalane will take over on Aug. 1 as the business unit manager for Latin America and country manager for Argentina. Hallén is coming from Aibel and has experience in the area of human resource administration and management within international organizations, including UBS, Volvo, The World Bank, OECD, and Accenture.

“The changes to the executive management team do not imply a change to company strategy, but they relate to the efforts to further improve the company’s global processes and also an opportunity to concentrate on development within important areas for the future. Håkan Hallén will bring with him crucial experience to Yara, which will contribute to the further development of the company,” said President and CEO Jørgen Ole Haslestad.

H.J. Baker & Bro. Inc. has named DeLeon Thomas plant manager for its wholly-owned subsidiary Tiger-Sul Product’s Atmore, Ala., facility. The Atmore facility manufactures Tiger 90 CR® sulfur and Tiger Micronutrients ® fertilizers.

The company says Thomas has a proven track record as a production manager within the specialty chemical and pharmaceutical industries. Previously, he worked for Imerys-World Minerals in California, as well as Minerals Technologies in Alabama. Thomas, who graduated from the University of Southern Mississippi with a Bachelor of Science degree in Chemistry and a minor in Mathematics, holds several professional certifications.

Market Watch

Ammonia, Ammonium Nitrate, Ammonium Sulfate, Bangladesh, Black Sea, Central Florida, China, Eastern Canada, Eastern Cornbelt, India, Market Watch, Middle East, Nitrogen Solutions, Pakistan, Phosphate, Potash, Russia, South Central, Southeast, Southern Plains, Sulfur, Tampa, U.S. Exports, U.S. Gulf, U.S. Imports, Urea, Vancouver, Vietnam, Western Cornbelt

AMMONIA

U.S. Gulf/Tampa: Nothing new was reported this past week, with sources expecting that any change at Tampa will likely await the IFA conference in Shanghai.

March ammonia imports were off 11 percent, to 584,980 st from the year-ago 654,832 st, according to the U.S. Department of Commerce. July-March imports were off 22 percent, to 4.97 million st from 6.35 million st.

Eastern Cornbelt: Although loads of ammonia were moving at a steady pace out of some terminals last week, the spot market had reportedly dropped to $350-$375/st FOB in the region, with the low confirmed in Illinois to the dealer. Slightly better weather conditions allowed growers to get back in the field in many parts of the region last week, but planting was still well behind normal, and some areas continued to experience weather-related delays.

Western Cornbelt: Anhydrous ammonia pricing had reportedly dropped to $325-$360/st FOB to dealers for spot tons last week, with the low in Nebraska.

Southern Plains: Anhydrous ammonia was reported at $285-$320/st FOB in the region, down roughly $15/st from last report. The low was reported FOB Dodge City, Kan., while the upper end reflected dealer pricing FOB Kansas pipeline terminals. Several sources put the market FOB regional production points more commonly at the $290-$300/st FOB level last week.

South Central: Cash market pricing for anhydrous ammonia was tagged at $350-$375/st FOB regional terminals to the dealer.

Trinidad: PotashCorp announced May 18 that it will be taking down two of its Trinidad ammonia plants for scheduled turnarounds. Trinidad #1 and #2 will go down June 7 – June 24. Their outage is expected to take some 60,000 mt out of the market.

Black Sea: The best that can be said about the area is that everything is quiet.

Sources report many ammonia plants are shut down because the cost to produce ammonia is higher than the current market price. Observers add that there appears to be little on the horizon to help get the price up soon.

Stagnation in Middle East pricing – and even reports of a major price drop – coupled with limited demand from Europe and the U.S., is doing nothing to excite the producers.

While prices have hovered around $210/mt FOB for the past few weeks, sources now say a further softening has occurred. While many in Asia said the price did not drop below $210/mt FOB last month, this month, they say, the price seems ready to go sub-$200/mt FOB. Some observers say reports of $190/mt FOB material are circulating, but could not point to a specific deal to back up the claim.

With markets soft everywhere, sources now say a consensus price idea is forming around $200-$210/mt FOB.

Middle East: Depending on who one talks to, the market either has taken a nosedive or people cannot tell the difference between FOB and CFR prices.

Reports of a deal from Iran by Transammonia had many in the Asian market trying to figure out where prices have moved.

The deal with IPCC is pegged at $200/mt FOB, with a price of $250/mt CFR to an Indian buyer. At the same time, sources say Middle East producers are saying the price was $250/mt FOB for a delivered price closer to $300/mt.

As last week progressed, more evidence came forward that the price was indeed $200/mt FOB.

Producers claimed the deal was a one-off purchase done on a spot basis for a desperate Indian buyer. They say Trammo was especially agile in snapping up the tons when they did. Producers say the deal should not be seen as a trend in the local market.

Others agree Transammonia was fortunate and skillful in getting the deal it did, but are less likely to believe the purchase might not actually reflect a downward trend.

In the past month and a half, the price of ammonia from Arab Gulf producers has been inching upward on record demand from India and a stronger Asian market.

The Indian DAP producers have been ready to pay a dollar more under each contract ton it bought to ensure a steady supply for their plants.

Asian buyers have largely had their demand covered from Indonesia and Malaysia, but occasionally an extra cargo or two from the Arab Gulf was needed to maintain a steady supply.

Producers in the area slowly and deliberately moved the price up. Some did not hide their desire to see $300/mt FOB ammonia by the second semester.

Now, say sources, demand from India might be easing off as that country buys more DAP instead of making it.

And the Transammonia deal adds more fuel to the fire of discontent against higher prices.

Even those saying the Trammo deal should not be considered as a market bell-weather say the range in pricing has changed.

The bears say the range is all in the low $200s/mt FOB, while the bulls say the spread is in the mid-$200s/mt FOB.

One Asian trader noted that without any other deal to help provide guidance, he is calling the market $200-$250/mt FOB. At least one other observer called that a fair assessment of the current unstable situation.

Asia: Buying remains firm for June, but July is now a question mark. Sources say industrial buyers placed orders for tons before their tanks were half-empty through May and June. Now, said one source, buyers are becoming more hesitant.

The general economic slowdown appears to be hitting more manufacturers. Demand reportedly is slacking off. Some buyers are said to now be waiting to see what kind of demand they might have for their finished products in the second semester before they place input orders.

UREA

U.S. Gulf: Demand finally returned to the urea market last week, according to several sources. In the Corn Belt there was enough sunshine to put farmers in the field, and they wanted fertilizer. Likewise, buyers in rice country were starting to pull more fertilizer as well. Add to this reports of recent exports from the U.S. Gulf to Latin America that helped deplete the number of available barges, and you get a healthy dose of demand. As a result, most sources said urea barges began the week as low as $222-$223/st FOB and quickly worked their way up to $230-$235/st FOB. By Friday, product was being offered between $235-$238/st FOB.

Buyers in the Corn Belt were looking for barges upriver, in place for quick action. This product was garnering a premium. One source added that some buyers may have decided it would be a good idea to not end the season empty; that it might be best to a good idea to have a little extra product in inventory.

Urea imports were up 18 percent in March, to 661,226 st from the year-ago 561,466 st. The higher numbers drew attention because they include 176,278 st of product from China, which sources say is very unlikely. Even including the Chinese product, July-March imports were off 16 percent, to 4.68 million st from the year-ago 5.57 million st.

Eastern Cornbelt: The granular urea market was tagged at $270-$290/st FOB in the region.

Western Cornbelt: Granular urea was pegged at $265-$275/st FOB regional terminals based on spot quotes, with most sources reporting the $270/st FOB level as the common dealer price at midweek. One source said that market might see some spot increases as inventories are tested at some locations, due to a combination of high river levels and an overlap of side-dress applications on corn and topdress movement on rice.

Southern Plains: The granular urea market was pegged at $270-$275/st FOB Enid and Inola, Okla., with tight supplies on the river resulting in long truck lines at Enid. The low end of the range reflected midweek postings FOB Enid.

Drier weather improved conditions on the swollen Arkansas River as the week advanced, where swift currents and heavy flows earlier caused barge traffic delays. By Thursday, sources said barges were once again moving on the river system.

South Central: Urea was moving “at a pretty good pace” on rice in the region last week, thanks to improving weather conditions after a surplus of rainfall for much of the spring. One source said a 10 percent increase in rice acreage should bode well for urea volumes.

Urea pricing out of regional terminals was down from last report but covered a wide range at $255-$295/st FOB to the dealer, with the low reported in Louisiana and the upper level reflecting list pricing in Arkansas. One source pegged the Memphis market in the $260-$280/st FOB range last week.

Heavy rains and an influx of water from the Arkansas River were causing flooding concerns along portions of the Mississippi River last week. The National Weather Service said it expected a crest 8 feet above flood stage by Saturday morning on the Mississippi River at Cape Girardeau, Mo. Water levels were expected to climb to more than five feet above flood stage by Memorial Day, reaching 53.5 feet at the gauge at Natchez, Miss., and Vidalia, La. Louisiana’s Red River was also approaching flood stage as the week advanced, and sources said very swift currents were affecting barge movement.

Southeast: Granular urea pricing was down from last report at $290-$295/st FOB port terminals to the dealer, with good movement reported. Sources reported favorable conditions for spring fieldwork in parts of the region last week, although some areas were wet, including southern Georgia and northern Florida.

India: A few things became clear in the IPL tender: The Middle East producers are resigned to no major price rise; there is a lot of CIS material held by traders; and this is only the beginning of what could be an interesting three months.

Offers in the tender, which closed May 20, totaled more than 637,000 mt for just the firm tonnage, and another 312,000 in optional tons. One observer noted it is significant anytime 1 million tons are offered in one tender, even if not all the traders have firm commitments for backing.

The letters of intent to buy that came out May 22 were also revealing.

IPL issued LOIs to buy 450,000 mt from six companies, with new prices that flatten market expectations.

Sources looked at the prices offered and opined about who was long and who was waiting for an award before securing the tons.

Supplier/Origin Origin Quantity mt Ship Date US$/mt FOB US$/mt CFR
PIC Kuwait 25,000
25,000 (S/O)		 June
June		 262.00
Sabic
Prilled/Granular (S/O)		 Saudi Arabia 100,000 June 262.50
Qafco
Prilled/Granular (S/O)		 Qatar 30,000
25,000 (S/O)		 June
July		 263.00
CIFC
Prilled/Granular (S/O)
Lots of 25-30,000		 Open – Malaysia – CIA 50,000
25-30,000
25-30,000 (S/O)		 June 277.00 Vizag
278.00 Kandla
280.00 Vizag
Amma UAE 25,000 June 279.00 Kandla
281.00 Vizag
Fedcominvest
Prilled
Lots of 30-50,000		 Open 120,000
50,000 (S/O)		 June 279.00 Mundra
283.00 Vizag
Transammonia
Prilled/Granular (S/O)		 Open 25-40,000
2 Lots		 June (1 lot)
July (2 lot)		 279.75 Kandla
285.00 Vizag
286.00 Tuticorin
Helm Open 50,000
50,000 (S/O)		 June 281.50 Mundra/Kandla
281.50 Mundra/Kandla
Swiss Singapore
Granular		 Open 15-20,000 June 286.50 Kandla/Mundra
Gavilon
Prilled/Granular (S/O)		 Open 25-55,000
25-55,000 (S/O)		 30 June
15 July		 289.00 Mundra
287.00 Mundra
Toepfer
Prilled/Granular (S/O)		 Open 25-40,000
25-40,000 (S/O)
20-25,000 (S/O)		 302.70 Kandla
302.70 Kandla
302.70 Vizag/Krishnapatam
Liven
Prilled		 Open 12,500
12,500 (S/O)		 June 309.00 Vizag

Even though Sabic was not the lowest offer, the fact that the Saudi company offered 100,000 mt and settled with 125,000 mt on the heels of securing a deal with TCP/Pakistan for 90,000 mt indicated to a number of sources that the Sabic warehouses must have been pretty full.

With Sabic ready to hold the price in the area even, PIC and Qafco had no choice but to stay in the same price range.

Negotiations between IPL and the lowest offering companies started as soon as the tender papers were opened. Sources expected to see a couple of bucks shaved off the Middle East origin material. In the end, only $1-1.50/mt was cut.

IPL was hoping for a delivered price of $273/mt. With a little squeezing on the freight rates, sources say the Middle East offers will allow the buyer to declare victory.

Sources had expected to see pressure on the traders to accept $273/mt CFR. The final results show traders were not willing to go that far, but were willing to reduce the final delivered price.

Observers figured if IPL takes more than 300,000 mt, the buyer may not come back into the market until the fall. Just what taking 450,000 mt means is still up in the air.

Sources in Asia say the sub-$280/mt CFR offers reflected traders with cargoes in hand, but with no homes for the material.

Offers are displayed at the top of this page.

Awards as of Friday morning follow.

Company Source Quantity (mt) US$/mt FOB US$/mt CFR
PIC Kuwait 25,000 260.50
Sabic Saudi Arabia 100,000
25,000 (S/O)

261.00
Qafco Qatar 60,000 261.50
FedCominvest CIS – Ukraine 120,000 273.00 panamax
277.00 handysize
CIFC Open 50,000 275.00
Transammonia Open 70,000 277.00

Sources noted the Sabic offer includes shipments in July.

Reportedly, part of the CIFC award included Malaysian and Egyptian material. Transammonia is also expected to supply tons from the new Oman plant.

Representatives from MMTC are expected to work the delegates at the IFA conference this week in Shanghai in the hopes of bettering the IPL deal. One trader said that the best MMTC might be able to do this week is secure some pre-tender deals with no tonnage specified.

Before IPL announced its awards, sources said the chances were good that MMTC or STC would call a tender by June 15. Now that nearly a half-million tons were awarded, the industry is rethinking what will happen and when. Some sources in Asia maintain MMTC will still come into the market mid-June for July shipments. They say India needs the tons. The big issue will be how the market reacts next week after the full impact of the IPL business sinks in.

Just how many tons India will need to buy this season is still up in the air. The most commonly heard number for current reserves is about 1 million mt. Some claim the number is as high as 1.5 million mt, and others as low as 300,000 mt.

Even though Indian voters returned the ruling Congress Party to power, sources say rumors are circulating that some changes in the bureaucracies that handle fertilizer are coming.

Middle East: Producers apparently gave up trying to move up the price and decided to settle for clearing out their inventories.

Offers in the IPL/India tender at $262-$263/mt FOB for prills or granular kept prices just about where they were following the TCP/Pakistan tender.

The final awards came in at $260-$261/mt FOB, with more tons being awarded than were offered.

Sources had speculated that the producers might have been willing to go below $260/mt FOB, but that seemed to be more wishful thinking by people hoping to see a softer Middle East market.

The Sabic offer of 100,000 mt and award of 125,000 mt – on the heels of its contract with TCP for 90,000 mt – indicates the producer is looking to keep its warehouse inventory down.

The other producers knew they had no chance of getting an award if they were too far out of line with Sabic, so even though PIC and Qafco only offered one firm cargo each, their offers were inline with the Sabic offer – as was their final awarded price.

Sources say Transammonia will most likely cover its award with material from the new Oman plant. With freight pegged at $12-$15/mt from the Arab Gulf to India’s west coast, sources put the netback at $262-$265/mt FOB.

For traders in Asia, the Middle East offers appeared to have confirmed reports that the differential between prilled and granular is gone.

The Sabic and Qafco offers indicated only one price, with the supplier deciding if it would send prilled or granular material.

The granular premium might turn into a discount soon, say some in the industry. With more plants ready to produce granular coming online, soon prills will be the rarity in the region.

Based on the IPL tender results, sources now peg the market at $260-$265/mt FOB for both flavors of urea.

PIC will be shutting down next month for routine maintenance.

Black Sea: Results from the IPL/India tender indicate prices have dropped significantly.

The Fedcominvest offer of $273/mt CFR and freight rates of $42-$48/mt for a panamax from Yuzhnyy to India shows a netback of $225-$231/mt FOB.

The CIFC offer of $275/mt CFR equates to a netback of $227-$233/mt FOB.

The average of the trader offers has a netback similar to the CIFC numbers. Sources say, however, that anyone walking up to a producer today should expect to see prices in the mid- to upper- $230s/mt FOB.

Sources peg the market in the full range of the $230s/mt FOB, with some smaller prompt deals that might peak above $240/mt FOB.

Earlier last week sources were talking about how the market had stabilized in the upper $230s/mt FOB to the lower $240s/mt FOB. Now, the market appears to have slid again.

A common view is that many of the Black Sea tons offered in the IPL tender were already positions held by traders and do not reflect any new deals taking place.

That said, however, sources say the IPL tender has set a new benchmark on prices below $240/mt FOB.

Pakistan: Sources report that TCP is getting ready to call another tender to close June 20. As Green Markets went to press, no official announcement was posted on the TCP web site.

No one is acting surprised about the rumors of more TCP buying.

TCP took 255,000 mt in the last tender. Sources estimate that Pakistan was 500-600,000 mt short of its immediate needs when the tender was called.

Manzoor Ahmed Wattoo, minister for industry and production, told local media that TCP was planning to purchase 654,000 mt by July for the upcoming Kharif season. With a total urea requirement of 3 million mt during the season, local production is expected to be 2.55 million mt, leaving a gap of about 400,000 mt.

The minister made the comment in response to media inquiries that a growing black market in urea is developing in Pakistan because of a shortage of the product. He called on farmers not to panic, because the domestic producers and TCP will provide enough material for the application season.

China: Sources said preparations for the IFA gathering in Shanghai prevented many of the urea operators from focusing on what is happening to prices – and what will happen after the export duty drops to 10 percent July 1.

For now, the estimated ex-plant price in China is $235-$245/mt FOB. With transportation to the port and the 10 percent duty, the price hits $280-$290/mt FOB ex-port.

At that level, the urea is too expensive to be competitive against the Middle East and Yuzhnyy suppliers.

The issue then becomes what to do once China enters its slack period of urea use.

Sources say there is still some give in the Chinese price. With domestic demand down, the local price is coming off. However, say sources, at a certain point the producers will not keep operating if the price gets too low.

At the same time the domestic price comes down, sources say if the global market moves up, Chinese producers and international buyers might be able to reach an accord.

Sources say the policy planners in Beijing are worried that if Chinese urea is priced too low, there could be a mass exodus of product, leading to a domestic shortage.

On the other hand, if Chinese prices remain higher than the global market, producers could start building reserves that will be difficult to place later in the year.

Shutting down plants has the benefit of reducing product availability and maintaining prices. The down side, however, is the increase in unemployment such a move would require.

The central government reportedly is concerned that more lay-offs at a time when so many other industrial sectors are shedding workers could lead to additional domestic unrest.

Rumors persist that Beijing will lift the export duty on urea come July 1, instead of just lowering it to 10 percent.

Sources in Asia, however, say much of that talk is wishful thinking on the part of people who want to snare cheap Chinese urea for the Indian and Pakistan tenders. The general consensus is that Beijing will stay with the current schedule of export duties.

Bangladesh: BCIC closes a tender June 8 for 175,000 mt. The buyer wants 75,000 mt of prills and 100,000 mt of granular.

This tender is a follow-up to the tender that closed earlier this month. At that time BCIC wanted 100,000 mt each of prills and granular. The company issued an award for only 25,000 mt at that time. This tender is designed to make up the difference.

Vietnam: Sources say recent purchases of urea and other fertilizers are now clogging the Ho Chi Minh City port. Some ships have reportedly been sitting at anchor for a month waiting to discharge their product.

NITROGEN SOLUTIONS

U.S. Gulf: While recent prompt trades have been reported as low as $150/st FOB, sources are now talking about summer fill, which they say could go as low as $120/st FOB.

UAN imports were off 46 percent in March, to 198,846 st from the year-ago 365,035 st. July-March imports were off 51 percent, to 1.35 million st from 2.76 million st.

Eastern Cornbelt: UAN-32 was pegged at $215-$232/st ($6.72-$7.25/unit) FOB regional terminals to the dealer.

Western Cornbelt: UAN-32 spot pricing also continued to slide, with sources quoting the regional market in a broad range at $205-$230/st ($6.41-$7.19/unit) FOB last week. The low was reported out of spot Mississippi River locations late in the week.

Southern Plains: The UAN-32 market was quoted at $190-$200/st ($5.94-$6.25/unit) FOB regional terminals, with the lower numbers FOB production points. An Oklahoma source put the UAN-28 dealer market last week at $170/st ($6.07/unit) FOB a local shipping point. Sources described the nitrogen solutions market as long.

South Central: The UAN-32 market was described as a “dog” by one source, who noted that dealer groups are bartering excess tons at “give-away” levels that wholesalers are struggling to compete with. The dealer market was quoted in a broad range at $190-$210/st ($5.94-$6.56/unit) FOB regional terminals; one wholesale source said his bid of $200/st ($6.25/unit) FOB to a small dealer was “scoffed at” at midweek.

Southeast: The UAN-30 market was tagged at $180/st ($6.00/unit) FOB Norfolk, Va., and Wilmington, N.C., while UAN-32 out of spot terminals in Georgia was quoted as low as $180-$185/st ($5.63-$5.78/unit) FOB last week. The Baltimore UAN-30 market remained in the $192-$200/st ($6.40-$6.67/unit) FOB range last week.

AMMONIUM NITRATE

U.S. Gulf: March imports were off 19 percent, to 59,807 st from the year-ago 73,676 st. July-March imports were off 41 percent, to 522,017 st from the year-ago 878,707 st.

Western Cornbelt: Ammonium nitrate was steady at $265-$270/st FOB in the region.

Southern Plains: Ammonium nitrate remained at $250/st FOB the port of Catoosa, Okla.

South Central: The ammonium nitrate market was pegged at $250-$260/st FOB regional terminals to the dealer. CAN-27 pricing remained at $205/st FOB in Arkansas.

Southeast: The Tampa market for ammonium nitrate was steady at $305-$315/st FOB last week. A Carolina source pegged the Wilmington market at the $290/st FOB level, but reported little demand with urea pricing at current levels.

AMMONIUM SULFATE

Eastern Cornbelt: Granular ammonium sulfate remained at $225-$245/st FOB in the region last week.

Western Cornbelt: Granular ammonium sulfate was unchanged at $225-$245/st FOB, with inventories described as tight at some locations.

Southern Plains: Ammonium sulfate pricing was down $35/st from last report following new postings that took effect earlier in May. Effective May 8, postings FOB Plainview, Texas, moved to $230/st for granular, $220/st for coarse, and $210/st for standard. American Plant Food Corp.’s May 8 ammonium sulfate postings in Texas included granular at $190/st FOB Freeport, $200/st FOB Galena Park, $215/st FOB Fort Worth, and $230/st FOB Littlefield; coarse at $180/st FOB Freeport, $190/st FOB Galena Park, $205/st FOB Fort Worth, and $220/st FOB Littlefield; standard at $170/st FOB Freeport, and $210/st FOB Littlefield; and N-Pac Compacted at $205/st FOB Galena Park.

South Central: Granular ammonium sulfate pricing was reported at $220-$230/st FOB, reflecting a drop from last report. APF’s granular ammonium sulfate posting FOB Mermentau, La., dropped on May 8 to $220/st. Product remained in fairly tight supply in the region.

Southeast: Granular ammonium sulfate pricing was steady at $200-$210/st FOB, with the low FOB Hopewell, Va., and the upper end FOB Augusta, Ga. Delivered granular ammonium sulfate was pegged in the $220-$249/st range in the region, with the upper end reflecting postings for railed tons into Florida. Standard grade ammonium sulfate was pegged in the $165-$178/st range DEL range in Florida.

U.S. Imports: Imports were off 28 percent in March, to 45,479 st from the year-ago 63,361 st. July-March imports were off 20 percent, to 265,664 st from 331,390 st.

PHOSPHATES

Central Florida: The weather finally began to cooperate in the East last week, as the rain eased and farmers were finally able to begin planting. While it was far too late to get railcars of phosphate into the Northeast, trucks were busy filling holes in the area.

While most of the country had been getting far too much rain of late, Florida was getting none. Then, last week, it changed and Florida was the one getting rain – and a lot of it. However, the season there was over or nearly so, and fertilizer will wait until preparation for fall planting begin.

As expected, TFI reported a lackluster April for phosphate sales, but exports were higher than many anticipated. Overall, disappearance was slightly higher than production. The pickup in sales in mid-May could slow plans for curtailments, although PotashCorp does not plan a quick restarting of its White Springs plant in North Florida.

The Central Florida DAP price range changed from $295-$315/st FOB the previous week to $295-$305/st FOB last week. PCS Sales had no published price. Mosaic’s price was $315/st FOB for DAP and $325/st FOB for MAP, but it has sold DAP at $295/st FOB. CF was $295/st FOB for DAP $10/st FOB higher for MAP. The price from Agrifos remained at $350/st FOB for trucks and $340/st FOB for rail shipments.

U.S. Gulf: Last week, more NOLA DAP barge transactions were completed than were done in the previous four weeks combined. Weather, of course, was the reason. What seemed to be an endless season of rain, after heavy snow in the winter, cleared, and Ohio, Indiana, and Illinois were in the process of planting corn. Western Corn Belt states had been able to start a couple of weeks earlier. The break in the weather could put the corn crop closer to the USDA projection of 85 million acres, but that was not certain last week. Naturally, the price of corn fell slightly, but remained above the important $4/bushel mark. Several sources pointed out that the current corn price was as good or better for farmers than when it was $7/bushel last year, due to significantly lower input costs.

The Army Corps of Engineers closed a couple of dams feeding the Arkansas River last week and a few barges were able to make the trip, but supplies of urea and phosphate were extremely low. However, the season was essentially over in Oklahoma, so the impact on farmers will be minimal.

Early last week, NOLA DAP barge prices were at the bottom and confirmed sales were made as low as $244/st FOB. There were rumors of deals down to $240/st FOB, but the lowest prices could not be substantiated. As the weather improved, prices began to rise, along with sales. Barges at New Orleans were becoming scarce and were said to be less available than at upriver locations.

Although sales were confirmed as low as $244/st FOB, the price rose into the $250-$255/st FOB range by midweek, and a sale was done at $258/st FOB last week. As a result, the NOLA DAP barge range changed at both ends last week from $250-$255/st FOB the previous week to $244-$258/st FOB. Both Mosaic and CF had a $10/st FOB additional charge for MAP. Prices appeared likely to firm or rise this week.

Eastern Cornbelt: DAP was reported at $325-$340/st FOB regional warehouses to the dealer, with MAP $10/st higher. 10-34-0 pricing remained at $625-$700/st FOB, with the low in Illinois and the upper end in Ohio.

Western Cornbelt: The DAP market was pegged at $320-$340/st FOB regional warehouses to the dealer, with the low out of spot river warehouses in southern Missouri. MAP was $10/st higher than DAP. 10-34-0 remained at $550-$650/st FOB in the region with the upper end in Missouri, but some sources speculated that sub-$500/st sales might be doable in Nebraska. No business was confirmed at those lower numbers, however.

Southern Plains: DAP was pegged at $320-$325/st FOB the port of Catoosa, with MAP $10/st higher. One source said the market is being buoyed by tight supplies caused by barge delays on the Arkansas River, but pricing is likely to drop going forward to more closely reflect barge pricing at the Gulf.

10-34-0 pricing continued to fall. Sources quoted the regional market at $450-$490/st FOB, with the low in Texas and the upper end in Kansas out of truck terminals.

South Central: The DAP market was tagged at $320-$330/st FOB regional warehouses to the dealer, with MAP $10/st higher. TSP was quoted in a broader range at $295-$315/st FOB, with the low in Louisiana.

Ontario: Agrium’s Kapukasing mine had a brief outage due to a landslide that caused a power outage and temporarily blocked a road during the week of May 11. There were no injuries, and the mine is back in operation.

U.S. Export: No new export deals from North America were found last week, but India was still in the market and buying from China. In general, export prices have deteriorated, along with domestic prices, and were hovering around $295/mt FOB last week.

TFI said phosphate exports were up by 70.1 percent in April, and India accounted for the bulk of business. India received 366,476 mt, far more than second-place Brazil at 57,846 mt, and the Ivory Coast at 27,700 mt. Total exports for April were 498,042 mt. For the calendar-year-to-date, India led by a wide margin at 806,241 mt, with Australia the next biggest consumer at 131,499 mt, followed by Vietnam at 96,946 mt. The total thus far this year was 1,427,380 mt, an increase of 12.9 percent.

TFI said Brazil was the tops for MAP exports for April at 77,494 mt, with Canada next at 36,489 mt, and Australia third at 36,154 mt. Total MAP exports for April amounted to 167,192 mt, an increase of 15.9 percent. For the calendar-year-to-date, MAP exports were about the same as a year earlier, up just 0.01 percent to 550,002 mt. Australia was the leading buyer during the period at 189,679 mt, followed by Canada at 158,585 mt, and Brazil at 146,953 mt.

The export DAP price range last week was adjusted to $295-$296/mt FOB to reflect current market conditions.

India: RCF had retendered for 36,000 mt (to be supplied in two lots of 18,000 mt each) of 29 percent P2O5 phos rock on May 14. The following offers were received: Getax 35/40,000mt ex Togo for 35.2 percent P2O5 or ex Algeria for 30 percent P2O5; CIFC 2 X 18,000mt ex Algeria for 29.5-30 percent P2O5 or Egypt for 29 percent P2O5; and Sun International 2 X 18,000mt ex Egypt for 30 percent P2O5.

RCF will open the prices of those bidders found technically qualified in their tenders.

Present phosphate rock price indications are US$120-$125/mt CFR India for 64-65 percent BPL, and $125-$130/mt CFR India for 70-72 percent BPL.

Expect Indian companies to meet with their phos acid suppliers during IFA to negotiate the third quarter pricing.

POTASH

Eastern Cornbelt: Sources quoted the potash market at $630-$650/st FOB warehouses from brokers and resellers, reflecting another slight drop from last report.

Western Cornbelt: The potash market was tagged at $600-$630/st FOB regional warehouses. The low end of the range was reported out of river warehouse locations in southeastern Missouri. One source reported a “fair amount” of new potash business last week as weather conditions improved and field activities heated up. He said earlier he was anticipating at least a 40 percent decrease in potash volumes this spring, but now thinks the usage cutbacks will be less than that in his trade area.

Southern Plains: Potash FOB Carlsbad, N.M., was reported in the $720s/st FOB, depending on grade, but sources said any spot sales that were taking place were for brokered tons out of regional warehouses or truck-delivered product from Mississippi River locations. That market was pegged in the low- to mid-$600s/st last week. One source described it as a “potash disposal sale” at the reseller level, saying any offer is likely to be considered.

South Central: Potash out of regional warehouses was pegged at $595-$600/st FOB, reflecting another drop from last report. Potash barges were reported in the mid-$500s/st DEL in the mid-South region.

Southeast: While reference prices for potash from producers remained in the mid-$880s/st rail-DEL, sources said dealer sales were taking place for as low as $600/st FOB blend plants and inland terminals, with dealer pricing at Wilmington reported at the $640/st FOB level. Delivered Russian potash from the Gulf was reportedly moving in the low-$600s/st last week in the region as well. “It’s a weird market this year,” said one source.

U.S. Imports: Potassium muriate imports were off 72 percent in March to 371,637 st from the year-ago 1.32 million st. July-March imports were off 31 percent to 6.1 million st, down from 8.84 million st.

SULFUR

Tampa: As the summer driving season rapidly approaches, some refineries were experiencing production problems and the amount of sulfur they were making was somewhat down. That’s not a serious problem, because phosphate production has been slightly curtailed and may be more so in the future. Priller operations were humming last week, but were not running at capacity. Still, inventories were growing, but a number of vessels were scheduled to arrive in the next six weeks to lighten their load. Interestingly, only one vessel from Beaumont was headed to China, and another, possibly, to Brazil. Several were believed to be destined for North Africa, which normally obtains its sulfur from other sources. Spot prices on the Gulf were around $15/lt, largely due to higher ocean freight rates.

On the world market, China continued to be the major buyer, but traditionally little of that is supplied from the Gulf Coast.

Vancouver: Prices were said to be firm in Vancouver, but supplies were down as a result of production problems at some refiners.

U.S. Imports: March imports were down 83 percent, to 49,495 st from the year-ago 284,639 st. July-March imports were off 23 percent, to 1.29 million st from 1.68 million st.

MARKET NOTES

Russia: The Acron Group reports that it will cap the price of mineral fertilizers to farmers. For the second half of 2009, prices will remain at first half levels, which is RUB 5,000 per 1 mt of ammonium nitrate, RUB 7,700 per 1 mt of urea, and RUB 10,200 per 1 mt of NPK (16:16:16).

The Week in Fertilizer Stocks

Fertilizer Stocks
Producer Symbol Price Week Ago Year Ago
Agrium AGU 48.85 46.92 84.96
CF Industries CF 79.92 77.68 129.37
Intrepid Potash IPI 30.86 28.42 47.12
Mosaic MOS 53.35 50.33 120.67
PotashCorp POT 109.55 107.93 195.60
Terra Industries TRA 29.62 28.07 40.06
Terra Nitrogen TNH 123.29 122.98 136.90
Distribution/Retail
Andersons Inc. ANDE 22.20 20.88 40.62
Deere & Co. DE 41.57 41.78 79.91
Scotts SMG 34.41 34.47 28.41