Toronto-PhosCan Chemical Corp. said March 26 that it has signed an agreement with IAMGOLD Corp. for the evaluation of the potential to recover and sell niobium contained on the Martison phosphate property near Hearst, Ont. IAMGOLD, which owns and operates the niobec underground mine located near Chicoutimi, Québec, will pay for niobium testing and a possible feasibility study, which could lead to a joint venture with PhosCan to extract, process, and market niobium from the Martison deposit. PhosCan says the project contains low grade niobium mineralization and is also overlaid by a higher-grade niobium-enriched lateritic oxide cap in the northern portion. Niobium is used in alloys to strengthen steel.
All posts by traceybg@gmail.com
Proposed NOLA cold storage raises NH3 concerns
New Orleans-A proposed cold storage facility to be constructed by the Port of New Orleans is getting opposition from downtown New Orleans residents concerned over both the anhydrous ammonia to be used at the facility as well as heavy truck traffic to and from the facility. The Port told Green Markets that the refrigeration facility, which would hold 40,000 pounds of anhydrous ammonia, will be built with a monitoring system that will alert the operators if it detects a leak of half of an EPA reportable release. The Port said it and the terminal operator that will be running the facility both have excellent safety records handling ammonia refrigerant. The Port said this is the only site that meets its construction and operational criteria, and that the funding is coming together. It will take 18 months to construct. The local Faubourg Marigny Improvement Association says the facility is being built too close to its neighborhood as well as the French Quarter. It is just across the railroad tracks from the French Market. It also says that some 100 18 wheelers per day will have to come through the tourist area and local neighborhood as a result. A local blogger drew attention to the proposed facility by terming it “Bhopal in the making,” though he later recanted this term, saying it was part of his “drama queen tendencies.” He reiterated that it is not the project that is offensive, but the location. The new facility is reportedly necessary to aid the growing chicken export market.
Market Watch
AMMONIA
U.S. Gulf/Tampa: Tampa business for April has been concluded at $318/mt DEL, up $43/mt from March.
Anhydrous ammonia imports were off 50 percent in January, to 361,648 st from the year-ago 717,984 st, according to the U.S. Department of Commerce. July-January imports were off 20 percent, to 4 million st from the year-ago 5 million st.
Correction: The U.S. Department of Commerce cargo mentioned in this section last week was for June 2008, not February 2009. The rest of the information was correct. DOC determined that the Russian cargo to Savannah, which was originally reported as 23 metric tons valued at $506,855/mt, was really 23,107 mt at $504.51/mt.
Eastern Cornbelt: Sources reported fairly brisk preplant ammonia movement in southern Illinois, at least prior to the midweek moisture. The regional cash market for ammonia was pegged in the $440-$480/st range FOB terminals to the dealer, with the lower end out of spot Illinois River locations.
Planters were rolling already in some southern locations of the region, but it was spotty at best. One source said soil temperatures still aren’t there yet in his trade area, but early April should see a rush of field activity if weather conditions are cooperative.
Western Cornbelt: Snow, hail, and rain, depending on location, slowed fieldwork in the region last week, but Iowa sources said some ammonia was being applied before rains stalled any movement. The anhydrous ammonia market remained at $400-$440/st FOB most regional terminals for spot tons to the dealer. “There is a lot of prepay on the books to ship, and we’re wet and nothing is moving,” said one regional supplier last week, who added that some preplant applications might be skipped if planting delays persist.
California: Anhydrous ammonia pricing was unchanged from last report at $495-$540/st DEL in the state, with the low for trucked tons and the high for rail. Aqua ammonia was referenced at $135/st FOB.
Pacific Northwest: Fieldwork was underway in some areas of the region last week despite the cooler weather. Central and eastern Washington sources said potatoes were being planted, and spreading was underway “when the wind isn’t taking them out of the field.”
The anhydrous ammonia market was down considerably from last report. Sources said spot pricing in the region had dropped to $425-$465/st DEL, with the low for railed tons and the upper end for the truck market. Out of terminals in eastern Washington, the dealer market was pegged at $425/st FOB.
Western Canada: Sources reported minimal spot pricing changes for fertilizer products. Fertilizer movement and field activities remained on the backburner.
Anhydrous ammonia was quoted at $844-$889/mt DEL in Western Canada following a slight pricing increase at mid-month.
Black Sea: Sources in Asia say that an earlier 15,000 mt deal by Transammonia with OPZ came in at $285/mt FOB. One trader said Trammo ended up paying a bit more than it should have because it was short and desperately needed to service a contract. Others said the price is about right for the way the market was heading.
Industry observers disagreed on how fast the price was heading up, but all were in agreement that the price is moving up. For producers, the price is not moving fast enough. Asian sources continue to argue the break-even price for the producers is about $320/mt.
There was more good news as Asian sources report Asian demand into May looks to be as strong as March and April. Eventually, they say, some of the new buying will reach directly to the Black Sea.
Middle East: Sources report no new tons heading to India under long-term contract arrangements. The lack of new loadings, however, has not deterred producers from holding firm to the idea of $300/mt FOB as a new price.
Strong Indian and Southeast Asian demand, combined with the shutdown of several plants in the Arab Gulf for maintenance, means prices could continue to rise in the next few weeks.
Producers say they will only entertain bids at $300/mt FOB. But Asian sources say that price is closer to what might get bid for immediate spot tons. The contract and long-term deals are still at least $25 below that level.
With no new business confirmed last week, sources say the price remains in the $260s/mt FOB.
Asia: Industry observers are optimistic about the second quarter. Reportedly, more buyers are making inquiries about buying tons for May. One trader noted that some of the buyers are even willing to make vessel nominations now for May deliveries.
In the past few months buyers would only look at nominations two weeks before they absolutely needed the material.
For traders and producers, the strengthening demand into May is a hopeful sign that industrial and fertilizer users are moving into a stronger period of sales. With stronger sales, sources say, more ammonia can be sold on a steady basis.
To back up claims of a stronger Asian market, Mitsubishi sold a cargo of 8,000 mt to Mitsui for $300/mt FOB out of Indonesia.
The deal is unusual, because while the two Japanese powerhouses often swap cargoes, purchases between the two companies are a rarity. One trader said he was not familiar with any actual purchases between the two in recent history.
UREA
U.S. Gulf: New granular barge business was reported at $288-$290/st FOB. Some argued prices may have been lower if netted back from a delivered basis. Sources generally attributed the wet weather across much of the nation’s heartland as putting a damper on urea’s psychology.
Prills were reported to be in very short supply, though sources wondered if there was also short demand as well. While in the recent past most have put prills in the same range with granular, some are now arguing that it should receive a premium.
U.S. urea imports in January were off 29 percent, to 720,621 st from the year-ago 1.02 million st, according to DOC. July-January imports were off 19 percent, to 3.43 million st from 4.24 million st.
Eastern Cornbelt: Granular urea was quoted at $330-$350/st FOB, with the upper end out of shipping points in northwestern Ohio. The Cincinnati market was pegged at $330-$340/st FOB last week.
Western Cornbelt: Granular urea continued to show some weakness. Sources pegged the dealer market at $325-$340/st FOB most regional terminals to the dealer, reflecting a $5/st drop from the previous week. The low end was reported in St Louis. Iowa sources quoted the common dealer price in the $330-$335/st FOB range last week.
California: Granular urea was quoted at $425-$450/st FOB. Delivered urea was pegged at the $450/st level as well. There were reports of railed tons from the Midwest at lower numbers, but no actual levels were confirmed. Agrium’s granular urea posting moved on March 15 to $465/st FOB West Sacramento, $485/st truck-DEL in Central California, and $490/st truck-DEL in Northern California.
Pacific Northwest: Granular urea was pegged in a broad range at $395-$440/st DEL. Effective March 15, Agrium’s urea postings firmed to $410-$425/st DEL in Montana and Wyoming, depending on location; $435/st FOB Washington warehouse locations at Glade, Kennewick, Warden, and Wilson; $440/st DEL in Washington, Idaho, Oregon, and northern Nevada; $450/st DEL in northern and central Utah; and $455/st DEL in southern Utah.
Western Canada: Granular urea was pegged at $575-$600/mt DEL, up some $15/mt from last report.
Black Sea: March has not been a good month for area urea producers. The month started with anticipation of higher prices thanks to anticipated strong demand from Europe, a tender from Pakistan, and an expected tender in India. The European demand has been steady but not strong. Pakistan bought what it needed and then stopped. And India has not returned to the market.
Producers entered March at $290/mt FOB, with every expectation that $300/mt FOB was possible. The longer India stayed out, the softer the market became. Then Pakistan stopped buying.
Sources report that $247/mt FOB was done late last week. Sources could not confirm who bought the tons and how many tons the buyer took. Despite the vagueness of the deal, sources were convinced the deal was done and that it represents a serious downward trend in pricing. By the end of the week, one Asian source pegged the market at $245-$250/mt FOB. Other observers agreed on the low end, but said the spread was wider.
Middle East: Long-term contracts are the only thing helping the producers. Asian sources point to an end of buying from smaller purchasers such as Sri Lanka and Thailand, and a complete absence from the market from big buyers such as Pakistan and India.
With no new spot business to guide players in pricing, sources say prills remain in the low $300s/mt FOB. Granular is just a few bucks more expensive.
India: Industry sources are now pretty well convinced there will be no new tender from India until the end of April, at best.
Indian sources report the country has reserves of 1 million mt. While some dispute that number, there is no doubt the country has more than enough urea on hand to start the next application season without fear of quickly running out.
Industry sources add that the Indian fiscal year ended March 31. A full understanding of how much money will be available for urea imports and subsidies is still up in the air.
Even if the fiscal year ended at another time, sources say that the national elections that start April 16 are the largest deterrent to a quick tender.
Opposition politicians have been hammering the government about alleged urea shortages in key electoral districts. The government has replied by pressuring the buying companies to import more urea and countering the opposition’s points.
Pakistan: So far TCP has not made any awards in its last tender. Industry sources say the money is available, but no one has heard anything yet. And TCP has not officially scrapped the tender.
For some in the industry, it makes no difference what TCP does at this point. The validity dates for the offers have long expired. Add to that the fact that urea prices are now slipping and, say industry observers, there is no reason for TCP to accept prices from last month.
China: The price of urea is dropping as the application season draws to an end. Just a couple of weeks ago the price was around RMB1,900/mt ex-factory (US$280). Now it is pegged at RMB1,600/mt ex-factory (US$235).
The lower prices are also affecting plant operations. Sources say some of the less-than-efficient plants are at a point where they might have to close down. Observers in the region say shutdowns are expected.
Vietnam: With the end of the application season, sources say there is an excess of urea in the country. Reportedly, even producer Phu My has been making inquiries to international traders looking to sell tons to the regional market. The producer backed away once traders reported the softening of the global market would not support a price the producer wanted.
NITROGEN SOLUTIONS
U.S.Gulf: Barge prices continued to weaken, said sources, who were putting the market in the $185-$190/st FOB ($5.78-$5.94/unit) range. There was an unconfirmed report of a tow of barges sold at $180/st FOB. Others said it would take another $20/st drop to see much movement in UAN.
The good news for UAN may be the bad news for other nitrogens – rain and snow that covered much of the heartland last week. One source wondered if there is a bad ammonia season if there would be enough UAN to meet demand, even if inventories are full now.
January imports were off 74 percent, to 73,420 st from the year-ago 278,588 st, according to DOC. July-January imports were off 50 percent to 1.05 million st, down from 2.1 million st.
Eastern Cornbelt: The UAN-28 market was quoted at $212.80/st ($7.60/unit) FOB Cincinnati to the dealer last week, with reference prices as high as $8.50/unit FOB to the dealer out of some regional shipping points. On the low end, sources confirmed spot pricing to wholesalers at $7.00-$7.25/unit FOB in Illinois and Indiana. In areas where wet weather continued to delay fieldwork, some sources said growers might consider foregoing preplant ammonia in favor of later sidedress applications of UAN.
Western Cornbelt: UAN pricing continued to slip in the region. Iowa sources tagged the dealer market at the $8.00/unit FOB level with confirmed sales, while cash sales to wholesalers were said to be as low as $7.00-$7.10/unit FOB the St. Louis market from some suppliers. At the upper end of the pricing spectrum, reference pricing to the dealer remained at the $280/st ($8.75/unit) level FOB spot Missouri River terminals last week.
California: UAN-32 pricing covered a wide range. The low was pegged at $258-$267/st ($8.06-$8.34/unit) rail-DEL from the Midwest for March and April shipments, while the truck market was pegged at $280-$310/st ($8.75-$9.69/unit) DEL in the state. One supplier was reportedly listed at $290-$300/st ($9.06-$9.38/unit) FOB to the dealer in late March
Pacific Northwest: UAN pricing was down from last report, reportedly due to the availability of cheaper railed tons from Midwest suppliers. Sources tagged the regional UAN-32 market at $255-$305/st ($7.97-$9.53/unit) DEL, with the low for those Midwest railed tons and the upper end for trucked product. One source speculated that the lower priced tons will probably be short-lived, however, as field activities heat up in the Midwest.
Western Canada: UAN-28 pricing had reportedly firmed to $362-$378/mt ($12.93-$13.50/unit) DEL in the region.
AMMONIUM NITRATE
U.S.Gulf: Information about new ammonium nitrate barge business was hard to find last week, with the most recent reports still in the $225-$230/s FOB range.
Imports were off 56 percent in January, down to 60,085 st from the year-ago 135,585 st. July-January imports were off 44 percent, to 389,041 st from the year-ago 691,015 st.
Western Cornbelt: Ammonium nitrate remained at $270-$280/st FOB in the region. One Iowa source tagged the dealer market at the $275/st FOB level last week.
California: No market was reported for ammonium nitrate in the state. CAN-17 was moving on orchards in some sections of the state. The dealer market for that product was quoted at $255-$285/st FOB, down some $15/st from last report.
Pacific Northwest: Ammonium nitrate was unchanged at $353-$361/st DEL in the region, with the upper end reported in Idaho. CAN-17 pricing was steady as well at $250-$255/st FOB and $260-$265/st DEL in eastern Washington and northern Idaho.
AMMONIUM SULFATE
Eastern Cornbelt: Granular ammonium sulfate was steady at $225-$245/st FOB in the region. Effective March 23, Honeywell moved its ammonium sulfate postings to $225/st for granular and $215/st for mid-grade FOB warehouse and/or rail-DEL in Illinois, Wisconsin, Minnesota, Arkansas, and Mississippi.
Western Cornbelt: Granular ammonium sulfate was quoted at $225-$240/st FOB in the region, with the low in Iowa and the upper end in Missouri. Effective March 23, Honeywell moved its ammonium sulfate postings to $225/st for granular and $215/st for mid-grade FOB warehouse and/or rail-DEL in Iowa and Missouri and out of Omaha, Neb., and to $235/st for granular and $225/st for mid-grade FOB or rail-DEL in the Dakotas, Kansas, and the rest of Nebraska
Southern Plains: American Plant Food Corp. also announced new ammonium sulfate postings. Effective March 30, APF’s reference levels for granular ammonium sulfate will move up to $225/st FOB Freeport, Texas, $235/st FOB Galena Park, Texas, $250/st FOB Fort Worth, Texas, $255/st FOB Mermenau, La., and $265/st FOB Littlefield, Texas. APF’s coarse grade postings will move on March 30 to $215/st FOB Freeport, $225/st FOB Galena Park, $240/st FOB Fort Worth, and $255/st FOB Littlefield, while standard grade postings will firm to $205/st FOB Freeport and $245/st FOB Littlefield.
California: The ammonium sulfate market was steady at $255-$290/st FOB, with the low FOB Lathrop after discounts and the upper end FOB El Centro.
Pacific Northwest: The granular ammonium sulfate market was quoted at $220-$235/st DEL in the region. Agrium will raise its granular ammonium sulfate postings on April 1 to $250/st FOB warehouse locations in Washington, Idaho, Oregon, and Nevada, and $255/st DEL in those same states plus Montana and Wyoming. Those levels reflect a $20/st increase from Agrium’s March 1 postings in the region.
Western Canada: Granular ammonium sulfate was quoted at $370-$375/mt DEL in the region.
U.S. Imports: Imports were off 33 percent in January, to 23,868 st from the year-ago 35,839 st. July-January imports were off 16 percent, to 185,968 st from 220,590 st.
PHOSPHATES
Central Florida: Truckloads of phosphates were moving out of Central Florida heading to Georgia last week, until rain began to slow business late in the week. Meanwhile, the planting season was coming to an end in Florida, while much of the rest of the country was waiting for better weather. Rain and flooding were a growing problem in some areas of the Midwest and parts of the Northeast.
“It looks like we are not going to have an early spring,” one source said, commenting on the obvious.
A high-ranking executive at Mosaic commented last week that retail fertilizer sales to farmers were a problem in some areas, as a result of older, higher-priced inventories.
Many in the industry believe spring will begin to bloom for fertilizers sometime in early April, and sales may actually return to something near normal. The fall market never really happened last year, but spring offers some hope for redemption.
Mosaic has increased its phosphate production to about 75 percent of capacity, but much of what was being produced was destined for India under the recently signed contract.
The Central Florida DAP price range was unchanged from the previous week’s $315-$320/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. CF was at $315/st FOB for DAP and $20/st FOB higher for MAP. The price from Agrifos remained at $350/st FOB for trucks and $345/st FOB for rail shipments.
U.S. Gulf: As heavy rain pelted dry areas of Texas and Oklahoma, winter wheat crops were already far too gone to benefit some farmers, who will collect the insurance and plow the crop under. In Oklahoma, snow flurries were expected this past weekend, and temperatures were expected to fall back into the low thirties. Farther north in North Dakota and Minnesota, the Red River North was passing the flood stage as heavy, winter snow melted, and rain added to the problem. Spring may have arrived on the calendar, but was not in the weather forecast.
As a result of rotten weather, NOLA DAP barge sales slacked last week on the river system, but most were still hopeful spring would come soon and save farmers and the fertilizer industry.
The price of corn for December remained relatively healthy, around $4.20/bushel, which should encourage farmers to use plenty of fertilizers to obtain maximum crop yields. Last week, the December price was about $0.40/bushel above those at grain elevators.
Sales of DAP and urea along the Arkansas River were picking up speed, and supplies of DAP in some areas of Oklahoma were running low last week.
Although sales were down, the NOLA DAP barge range last week rebounded a little from $310-$315/st FOB up to $315-$319/st FOB. Mosaic has a $10/st FOB additional charge for MAP, while CF’s MAP was $20/st FOB higher than its DAP price.
Eastern Cornbelt: DAP pricing out of regional warehouses remained in the $355-$375/st FOB range, with the low out of spot Illinois River locations and the upper numbers in Ohio to the dealer. MAP was $10-$15/st higher than DAP.
10-34-0 pricing remained in a broad range at $650-$750/st FOB in the region, with the low in Illinois and the upper end in Ohio. One Ohio source talked of some suppliers hanging their hats on $800/st FOB to the dealer for new 10-34-0 sales, but no actual business was confirmed at that level.
Western Cornbelt: DAP was steady at $360-$370/st FOB river terminals to the dealer, with the upper end reported at the $390/st FOB level out of some warehouse locations in western Missouri. MAP remained at $370-$400/st FOB to the dealer. 10-34-0 market remained in a broad range at $575-$680/st FOB in the region.
California: MAP and DAP were steady at $455-$460/st DEL or FOB warehouse locations in California. The 16-20-0 market was unchanged as well at $320-$327/st FOB in the state, and 10-34-0 was pegged at $477-$487/st FOB in California.
Phosphoric acid postings remained at the $11.00/unit DEL level for both SPA and MGA, with Simplot also referencing MGA at $11.20/unit FOB California warehouse locations.
Pacific Northwest: MAP was unchanged at $445-$455/st FOB or DEL in the region, with DAP at $450-$460/st FOB or DEL. 16-20-0 pricing was steady at $300-$305/st DEL, and 10-34-0 pricing was quoted at $470-$480/st FOB in the region.
Phosphoric acid remained at $11.00/unit DEL in the region for both SPA and MGA.
Western Canada: MAP was quoted in a broad range at $680-$790/mt DEL in Western Canada, with reference levels as high as $825/mt DEL to the dealer.
U.S. Export: The world’s sagging economy was taking a toll on export phosphate sales, as buyers were more reluctant to take a plunge on purchasing new supplies. The only real bright spot was India, and PhosChem was keeping its members busy producing for shipments under the recently signed agreement.
On the bright side, freight rates were on the decline and the cost of shipping to India had declined from around $55/mt FOB to about $40/mt FOB. However, rising prices for oil could reverse that trend.
With no new sales, the export DAP price range remained at $375-$380/mt FOB last week.
POTASH
Eastern Cornbelt: Potash remained at $680-$750/st FOB regional warehouses from brokers or resellers, with the low reported in Illinois on a spot basis. One source reported reference prices holding at $815/st FOB from producers, but said reseller tons were easily available at the $750/st FOB level or lower in his area. He added, however, that spring rates will be “zero to 50 percent” of normal in his trade area due to buyer resistance to high retail potash prices.
Western Cornbelt: Potash was steady at $680-$720/st FOB warehouses to the dealer, depending on grade and location, with most sources quoting $700/st as a common dealer price from brokers or resellers. Despite the posture of producers, one regional source said he is doubtful the potash price will hold through the season, citing the complete absence of new sales. “High prices take care of high prices,” he said. “We’ll have to have a market adjustment.”
California: Muriate of potash pricing remained at $849-$875/st FOB and $875-$900/st DEL in the region. “There’ve been no cuts in potash prices, so we’re not moving any potash to speak of,” said one dealer.
Sulfate of potash remained at $1,015-$1,055/st FOB for bulk tons, with the low for standard grade and the high for water soluble.
Potassium nitrate pricing was tagged at $1,310-$1,380/st FOB in the state, with the low for bulk and the upper end for bagged product.
Pacific Northwest: Potash was pegged at $824-$864/st FOB regional warehouses, with delivered tons reported in the $840-$890/st range in the region. One Washington source quoted delivered granular potash at the $864/st level from Canada in late March.
Western Canada: Reference prices for potash remained at $988/mt FOB Saskatchewan mines to Canadian customers. No updated delivered prices were reported for the region last week.
U.S.Imports: Potassium muriate imports were off 44 percent in January, to 596,232 st from the year-ago 1.07 million st. However, they are only off 14 percent for the July-January period to 5.4 million st, down from 6.34 million st.
SULFUR
Tampa: As the end of the quarter drew near, speculation on the price of sulfur for the second quarter got a boost, although no official negotiations had begun. As could be expected, the range was wide – from a rollover to as high as $50/lt for Tampa. A somewhat clearer picture could emerge this week at a sulfur industry conference at Madrid, where it was certain to be a major topic of discussion.
Generally, the market was continuing to move into balance last week, but there were still areas of both overabundance and shortage. Some producers were seeking better deals on the spot market, while some customers were doing the same in reverse.
Refineries were running fairly smoothly in most cases, as many of the turnarounds were coming to an end before the summer driving season begins. Valero’s Delaware City was still a problem, and was expected to remain down until May, according to a source.
No major transportation issues were found, and surcharges for rail and truck were far down from several months ago – but higher oil prices could change that situation.
Vancouver: Brazil was continuing its negotiations with Canadian sulfur producers for new semi-annual contracts, but was said to be in no great need for new supplies. A new contract, which would begin in April, could see prices fall from $200/mt to somewhere between $30-$40/mt.
U.S.Imports: Imports were down a whopping 83 percent in January, to 34,873 st from the year-ago 206,179 st. However, they are only off 3 percent for July-January, to 1.19 million st from 1.23 million st.
The Week in Fertilizer Stocks
| Producer | Symbol | Price | Week Ago | Year Ago |
| Agrium | AGU | 39.90 | 37.83 | 65.30 |
| CF Industries | CF | 74.00 | 69.42 | 113.65 |
| Intrepid Potash | IPI | 20.31 | 17.28 | N/A |
| Mosaic | MOS | 48.20 | 43.50 | 102.95 |
| PotashCorp | POT | 89.30 | 79.22 | 160.10 |
| Terra Industries | TRA | 30.07 | 27.92 | 38.62 |
| Terra Nitrogen | TNH | 141.78 | 129.86 | 108.90 |
| Distribution/Retail | ||||
| Andersons Inc. | ANDE | 14.44 | 13.34 | 44.24 |
| Deere & Co. | DE | 35.92 | 31.83 | 80.82 |
| Scotts | SMG | 36.50 | 32.41 | 34.01 |
SPOT BARGE PRICES
Agrium commences cash and stock offer for CF; retailers voice opposition to Agrium/CF combo
Following the March 9 rebuff from CF Industries Inc.’s board of directors to its Feb. 25 buyout proposal, Agrium Inc. on March 16 decided to take the $3.6 billion offer directly to CF shareholders. Agrium commenced an exchange offer on that date for all outstanding shares of common stock of CF Industries Holdings Inc., providing for the same cash and stock consideration that was previously rejected by CF’s board.
Under the offer, CF shareholders would receive $31.70 in cash and one common share of Agrium for each CF share. CF stockholders would also have the option of receiving for each CF share either 1.7866 common shares of Agrium or $72 in cash, subject to proration. In a March 16 statement, Agrium said not more than 44 percent of the shares tendered will be exchanged for cash, and not more than 56 percent will be exchanged for Agrium common shares. The company said the offer and withdrawal rights would expire at midnight New York City time on May 19, 2009, unless extended.
“CF’s refusal to engage in discussions with Agrium left us with no choice but to take our offer directly to CF stockholders,” said Agrium CEO Mike Wilson. In a March 9 letter to the Agrium board, CF had called Agrium’s initial proposal grossly inadequate, opportunistic, and a transparent attempt to interfere with CF’s proposed business combination with Terra Industries Inc. (GM March 16, p. 1).
“We believe the Agrium offer is a far superior alternative for CF stockholders as they receive a premium rather than pay a premium to Terra stockholders,” Wilson said. “We are committed to this compelling combination and urge CF stockholders to send a message to the CF board by tendering their shares into the Agrium offer.”
Wilson added that Agrium would be prepared to increase its offer if the CF board and management could demonstrate additional value arising from the combination of the two companies.
The unfolding drama involving the three companies began in mid-January when CF submitted its original offer for Terra, valuing Terra at $2.1 billion and Terra shares at $20 per share (GM Jan. 19, p. 1). Terra rejected the offer on Jan. 28 (GM Feb. 2, p. 1), saying it did not create additional value for shareholders and substantially undervalued Terra on an absolute basis and relative to CF.
CF’s bid for Terra then turned hostile, with CF declaring on Feb. 3 that it would nominate independent directors to replace three members of Terra’s board at Terra’s 2009 annual stockholders meeting, and that it was also planning to commence an exchange offer for all of the outstanding shares of Terra common stock at the same exchange ratio specified in CF’s Jan. 15 proposal (GM Feb. 9, p. 1). CF commenced the exchange offer on Feb. 23, and Terra issued a press release advising its stockholders to take no action with respect to the offer.
Agrium then jumped into the fray on Feb. 25 with its bid for CF, saying the offer was contingent on CF terminating its bid for Terra (GM March 2, p. 1). CF rejected the Agrium offer on March 9 and upped the ante for Terra, agreeing to an exchange ratio based on $27.50 for each Terra share, above its initial offer of $20 per share.
Terra, however, wasted no time in rejecting CF’s second offer. On March 11, Terra said its board had unanimously concluded that CF’s updated proposal continues to run counter to Terra’s strategic objectives, substantially undervalues Terra both absolutely and relative to CF, and would deliver less value to its shareholders than would owning Terra on a stand-alone basis (GM March 16, p. 1).
CF announced on March 19 that it had voluntarily withdrawn its notification made on Feb. 18 with the Federal Trade Commission (FTC) and U.S. Department of Justice in connection with its proposed acquisition of Terra, and that it plans to refile on Monday, March 23. CF said the withdrawal and refiling of its premerger notification is a customary step in the regulatory process to allow the FTC more time to review the information submitted by CF and Terra. Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, antitrust regulators are required to review pending acquisitions. CF said it remains confident that the transaction will be approved in all relevant jurisdictions.
While the three companies continue to maneuver, the rest of the industry is pondering what would result from any of the proposed combinations. And some retailers are voicing concerns about Agrium’s play for CF.
In a March 16 letter to Agricultural Retailers Association President and CEO Jack Eberspacher and the ARA executive committee, one member voiced his strong opposition to the deal on behalf of “many ARA members,” saying he believed “the so called ‘synergies’ that are projected to accrue as a result of the Agrium/CF merger will largely come at the expense of the American farmer and his traditional retail supplier.”
“Over the last ten years we have witnessed considerable consolidation amongst fertilizer manufacturers,” the letter said. “The majority of these mergers were viewed as being necessary by the merging partners as well as their customers. However, we have now reached a point where further consolidation is no longer required to insure survival nor welcomed by those being swallowed up. Consolidation is now occurring to create an even more captive marketplace and further improve shareholder returns at the expense of the farmer and others in the supplier chain.”
“Fertilizer manufacturers have already amassed unprecedented earnings and pricing power as a result of their earlier consolidation,” the letter continued. “While amassing this leverage they have simultaneously downloaded much of their former price risk to the supply chain and to farmers. Further consolidation will allow fertilizer manufacturers more freedom to dictate the price and terms of fertilizer movement and will leave farmers and retailers exposed to increased risk while handling and using a commodity that cannot be easily hedged.”
The letter goes on to say that while American agriculture is a competitive venture and the survival of any business is not guaranteed, “we must see to it that retailers and farmers are never forced into becoming captive customers.” The letter said some retailers “are fearful that the fertilizer companies could retaliate against them or that they may drop their membership if we object to further consolidation.”
In response to this and other inquiries from concerned members, ARA told Green Markets on Thursday that it is “currently conducting a thorough review of the potential ramifications from further consolidation in fertilizer manufacturing.”
Others in the industry are taking a more resigned view. “If they got enough cash, it doesn’t matter,” said one in regard to Agrium’s bid for CF. “Just let me know who I’m supposed to be dealing with now.”
CF said on Monday that it would file the required Schedule 14D-9 with respect to the Agrium offer within 10 business days. Morgan Stanley and Rothschild are acting as financial advisors, and Skadden, Arps, Slate, Meagher & Flom LLP is acting as legal counsel to CF Industries. On Agrium’s behalf, RBC Capital Markets is acting as dealer manager; Paul, Weiss, Rifkind, Wharton & Garrison LLP and Blake, Cassels & Graydon LLP as legal counsel; and Georgeson Inc. as information agent in connection with the offer.
PotashCorp announces more potash production cuts; PCS Trinidad ammonia plant down following fire
PotashCorp on March 16 said it plans to reduce 2009 potash production by an additional 1.5 million mt, bringing the total expected curtailments of operational capacity this year to at least 3.5 million mt. The company said the additional curtailment “reflects the continuing near-term draw-down of customer inventories as they work through stockpiles built prior to the global economic crisis.”
Specifically, PotashCorp’s Rocanville mine will go down for four weeks, from April 5 through May 2, while the Allan and Lanigan mines will go down for eight weeks, from April 19 through June 13. The company said 940 employees would be affected, but roughly a third of those will be called back to help maintain the plants during the idled periods.
“Farmers, like other consumers, have been on a buying hiatus, but they cannot remain on the sidelines indefinitely,” said PotashCorp President and CEO Bill Doyle. “People need to eat; farmers need to grow and sell crops; and maintaining soil fertility is essential for those things to happen.”
Many in the industry have wondered if potash producers would lower prices to spark movement for the spring planting season, but Doyle’s comments indicated a pricing cut was unlikely. “It has been demonstrated in other fertilizer products that significantly lowering prices does not encourage additional volume and, in potash, would carry additional risks to capacity expansions that are necessary to ensure future supply,” he said. “We operate with a long-term view and our goal is to be ready when more potash is needed ?Çô not only in the second half of 2009, but for the years ahead.”
PotashCorp’s initial announcement of potash production curtailments came last December, when it said it would reduce 2009 potash output by 2 million mt beginning in January due to a short-term deferral of demand around the world (GM Dec. 15, 2008). The company followed that announcement by sending temporary layoff notices to 940 workers at the Rocanville, Allan, and Lanigan mines in Saskatchewan, indicating the layoff was to span from Jan. 18 to March 14, 2009 (GM Jan. 5, p. 1).
PotashCorp said the additional curtailment is “consistent with our strategy of matching potash production to market demand as we have over the past two decades. With all key markets expected to be largely depleted of inventories in the second quarter, we anticipate a strong rebound in potash demand in the second half of 2009 that should continue into 2010.”
PotashCorp added that it will be well positioned to deliver more potash from newly-completed capacity expansion projects at its Lanigan and Patience Lake facilities. In addition, work will continue at its remaining expansion projects as the company prepares for what it anticipates will be strong demand over at least the next five years.
In other news, PotashCorp reported that the Number 04 ammonia plant at the PCS Trinidad nitrogen complex was down following a “loud noise” and a fire that occurred at 7 p.m. on March 12. The fire was quickly put out and no injuries were reported, but PotashCorp said the plant was closed while an investigation is completed to determine exactly what happened. A company source estimated that the plant will remain down for a month, and would not speculate on the extent of the damage until the investigation is complete.
The Number 04 ammonia plant has annual capacity of 635,000 mt and is one of four ammonia plants at the 130-acre Trinidad complex. The incident did not affect the urea production facility that is also located there. The company said all regulatory authorities were notified following the incident.
EPA proposes tougher pollution controls at Simplot plant
The U.S. Environmental Protection Agency’s proposal to add phosphorus as a major contaminant of concern at the J.R. Simplot Co.’s phosphate fertilizer plant west of Pocatello could end up costing Simplot $50 million in cleanup costs to minimize discharges into the nearby Portneuf River.
EPA held meetings in Pocatello and Fort Hall March 17-18 to allow public comment on the proposal. It estimates that water flows through a 320-acre gypsum stack behind Simplot’s Don Plant at about 1,000 gallons a minute and later reaches the Portneuf via springs and an underflow, causing overgrowth of algae and dissolving oxygen levels for fish and other aquatic life. Waste material from phosphoric acid production is pumped onto the gypsum stack.
Operational changes also need to be implemented to reduce the Don Plant’s contaminant discharges, including heavy metals, from leaching into groundwater and the river, according to EPA.
“Simplot already is proactively moving forward with plant actions,” said Kira Lynch, EPA regional project manager, noting EPA will be working closely with Simplot the next six to nine months to raise the subsurface pH level so contaminants can be better absorbed in the soil. Last fall, Simplot spent about $4 million on plant upgrades, she said.
Lynch said EPA doesn’t believe an extraction wells system alone will reduce Simplot’s phosphorus load to the Portneuf River by 80 percent as agreed in a 2003 implementation plan. Some hot spots are 100,000 times higher than the concentrations needed to achieve that reduction, she said.
EPA recommends that Simplot install a high-density polyethylene liner atop the gypstack to help reduce contaminated water infiltration. That would be done in three phases, starting in 2010 and concluding by 2014. Initial surge pond construction should begin this year.
In the past, phosphorus often has not been regulated as a contaminant because it has been considered a nutrient fertilizer, said Bruce Olenick, the Idaho Department of Environmental Quality’s regional administrator. EPA, IDEQ, the Shoshone-Bannock Tribes, and Simplot will cooperate in amending the Record of Decision to include phosphorus as a contaminant of concern. A public comment period expires on April 15.
A 1998 EPA Record of Decision identified a number of contaminants under the plant site, including arsenic, boron, chromium, mercury, nickel, radium, vanadium, and zinc. Phosphorus wasn’t included because it was presumed extraction wells designed to meet federal drinking water standards for arsenic would sufficiently address phosphorus.
The Simplot plant sits on the Eastern Michaud Flats Superfund Site, which encompasses 2,475 acres and includes the adjacent FMC elemental phosphorus plant that closed in December 2001. Groundwater under the site contains contaminants of concern from both phosphate factories.
EPA cites the Simplot plant as the primary contributor of phosphorus to the Portneuf River, contributing about 82 percent of the total maximum daily load. The Portneuf contributes about 65 percent of the phosphorus load that flows into the American Falls Reservoir downstream, or about 387 tons per year, as opposed to the Snake River, which infuses about 167 tons per year into the reservoir.
The Portneuf River at Siphon Road has the highest concentration of phosphorus of any site in Idaho at between 900 and 1,000 parts per billion, as opposed to the federal standard of 75 ppb ?Çô far exceeding levels in the Snake River at Blackfoot and Hells Canyon, the Boise River at Parma, and the Spokane River on Idaho’s border with Washington state. The standard may soon be set at 70 ppb.
Lawrence Gebhardt of Pocatello urged EPA and Simplot to look at securing federal stimulus funding to ease the financial burden on Simplot and soften the impact on the Don Plant’s viability and jobs in the region.
Annual wages and salaries paid at Simplot’s Don Plant and its Smoky Canyon phosphate mine near Idaho’s Wyoming border exceed $52 million. About 375 are employed at the Pocatello plant, while there are approximately 200 workers at the mine. Another estimated 1,450 people are indirectly employed by the operations, whose annual property taxes exceed $3 million.
TFI, ARA, others urge Congress to renew CFATS
Washington, D.C.-The Fertilizer Institute and the Agricultural Retailers Association joined some 32 other industry groups in sending a letter to Congress on March 2 urging it to reauthorize the current U.S. Department of Homeland Security (DHS) Chemical Facility Anti-Terrorism Standards (CFATS) regulations without substantial changes. Unless reauthorized by Congress, the current CFATS rules are set to expire on Sept. 30, 2009. When the CFATS regulations were first approved in 2007, ARA and TFI voiced strong opposition to an inherently safer technologies (IST) mandate, which would have required chemical companies to switch to safer chemicals if alternatives to more dangerous products were available. The chemical industry remains concerned that the IST mandate will be inserted into permanent CFATS regulations due to pressure from environmental groups and some lawmakers who believe the current rules don’t go far enough to ensure security. In the letter, ARA, TFI, and the other groups said an IST standard “is not measurable and would likely lead to confusion, loss of viable products, prohibitive legal liability, and business failures.” TFI said another proposed change would removal an exemption for facilities that are regulated under the Maritime Transportation Security Act. According to ARA, the House Homeland Security Committee is expected to vote on a chemical security bill by the end of May. The Senate Homeland Security and Governmental Affairs Committees have not indicated when they plan to act on similar legislation, but the issue remains a top priority for the committee, ARA said. The CFATS rules require all “high-risk” chemical facilities to complete a security vulnerability assessment, develop site security plans, and implement security measures at their facility to meet risk-based performance standards established and enforced by DHS.
TFI steps up efforts to fight EFCA legislation
Washington, D.C.-The Fertilizer Institute has voiced opposition to the Employee Free Choice Act (EFCA), which seeks to allow employees to form unions by getting a majority of workers to sign cards instead of holding a secret ballot. The legislation was introduced by Sen. Tom Harkin (D-Iowa) and Rep. George Miller (D-Calif.) TFI said it is actively lobbying against its passage, and has joined the Coalition for a Democratic Workplace (CDW). TFI is also participating in the National Association of Manufacturers’ efforts to combat this bill. Additionally, TFI launched a letter-writing campaign that encourages its membership to write to their Congressional representatives to request that they vote against the measure.