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Management Briefs

Management Briefs

Georgia-Pacific (G-P) Plant Nutrition, Atlanta, has announced the addition of Jon Mixson as national sales and marketing manager, and Blake Covert as sales agronomist for the western U.S. Mixson will oversee and drive nationwide sales for the Nitamin® plant nutrition business, which includes Nitamin 30L and Nitamin Nfusion® Steady Delivery® nitrogen. On the west coast, Covert will support Nitamin sales efforts, as well as agronomic research and trials.

Tom Snipes, commercial manager, says the timing could not be better for the new staffers. “It’s an exciting period for the Georgia-Pacific Plant Nutrition Group as we continue to expand our presence in key row crop and specialty agricultural markets, as well as in the turf industry,” Snipes says. “Jon and Blake bring a wealth of agricultural experience, and they will be instrumental in serving these markets.”

A graduate of Florida State University, Mixson has worked in the agricultural business for more than 15 years, and most recently was in product marketing with Bayer Crop Sciences. Covert has more than 10 years of experience in the agricultural and turf business in California. In addition to managing his family’s almond and walnut farm, Covert was also with Wilbur-Ellis. He holds a B.S. in Crop Science from California Polytechnic State University.

Sylvite Southeast has announced the addition of Johnny Wayne Lambeth to its family as the Southeast regional sales manager. He has been in the fertilizer industry for 35 years, during which time he managed four bulk blend plants. Most recently, he spent 12 years in wholesale fertilizer sales. Lambeth, who was born and raised on a dairy farm in south Alabama, has done extensive work in sulfur micros for sugar cane, melons, cotton, corn, soybeans, and peanuts.

He will represent the whole array of Sylvite’s products and services, with his primary focus being in the southeastern U.S. He will replace Donell Davies, who worked part-time for Sylvite while at the same time working for Omni-Agri’s expansion project.

Market Watch

Ammonia, Ammonium Nitrate, Ammonium Sulfate, Black Sea, Central Florida, Eastern Cornbelt, India, Market Watch, Middle East, Nitrogen Solutions, Pakistan, Phosphate, Potash, Russia, South Central, Southeast, Southeast Asia, Southern Plains, Sulfur, Tampa, U.S. Exports, U.S. Gulf, Urea, West Coast, Western, Western Cornbelt

AMMONIA

U.S. Gulf/Tampa: The markets were quiet last week, though there was some speculation that NOLA might see another uptick.

Eastern Cornbelt: Anhydrous ammonia pricing remained in the $450-$525/st FOB range, with the low for cash tons in Illinois.

Western Cornbelt: The anhydrous ammonia market was pegged at $425-$500/st FOB, with the low reported in Nebraska. Delivered ammonia to points in Missouri remained in the low-$400s/st from southern production points.

Southern Plains: The anhydrous ammonia cash market was reported at $315/st FOB Oklahoma production points on the low end, with the dealer market FOB Kansas pipeline terminals quoted in the $335-$355/st FOB range.

South Central: Anhydrous ammonia was tagged at $460-$480/st FOB regional terminals to the dealer, with the low reported at Memphis, Tenn., and the upper end FOB Henderson, Ky.

Middle East: Different stories are coming out about purchases made in the past two weeks. There are now reports that Transammonia concluded a deal with Sabic at $215/mt FOB, with the U.S. as the most likely destination. At the same time, reports circulated that Qafco – normally a leader in pushing prices down – settled with Mitsui at $260/mt FOB.

One Asian trader noted that the Trammo deal came before the Mitsui purchase, and Mitsui had a lot less flexibility in its need to load and ship the product.

The tighter constraints on Mitsui allowed Qafco to push up the price. One source said Qafco had to defer a loading for another client and demanded compensation for the “inconvenience” caused to that client.

Overall, sources expect to see prices continue to move up in the area as demand from Asia – and now, reportedly, the U.S. – strengthened.

The Arab Gulf producers remain one of the most stable suppliers of ammonia at this time. Sources continue to point to the closed Ukrainian plants in the Black Sea as evidence that any serious demand will have to be covered from the Middle East in the near future.

With increased demand, the price is expected to keep moving up.

Black Sea producers reportedly need their market to hit $325/mt FOB before they can consider restarting their facilities.

A Black Sea price of $325/mt FOB means the Middle East can push its prices to about $350/mt FOB before facing serious competition on a global scale.

Helping push the Middle East price higher are reports that Indian buyers will be stepping in for more tons under their long-term arrangement with the Arab Gulf producers. The real issue for the producers will be to correctly judge how strong the Indian market will be.

Some sources point to the Asian buying as refilling tanks that are now hitting empty. Unless the global economy picks up by April, buying could slacken as May approaches. Industry observers note that with product and freight prices low, industrial buyers can take advantage of the market to top off their tanks. They can hold onto the ammonia for use when and if it is needed.

A number of the industrial buyers in Korea and Taiwan stayed out of the market for a while because of reduced demand for their products. Buyers who can still operate are doing so at reduced levels. And so their ammonia consumption is also reduced. The purchases being made this month and next are designed to replace what was slowly used.

Looking back at the Middle East market, sources say Transammonia got a good deal from Sabic. Few say such a good deal could be found again.

Sources add that while Mitsui was forced to pay top dollar for its cargo, the producers now have it in their minds that $260/mt FOB should be the starting point for any future talks. Observers say that is not likely right away.

For now, the price remains pegged at $250-$260/mt FOB.

Black Sea: Ukrainian producers remain closed. The cost of making ammonia is too dear for the current market. Industry sources say the current market peg of $210-$220/mt FOB is about $100/mt too low. The production cost for the producers is estimated at $320-$325/mt FOB. The increase in the production cost comes largely from an increase in natural gas prices from Russia.

Sources report a deal with the Russian firm Nitrochem at $210/mt FOB. That deal was reportedly the sale of tons in storage, looking for a buyer.

Sources report that the soft global ammonia market and increased production costs have affected many companies. An Asian trader noted that Nitrochem usually produces about 200,000 mt/year. So far, the company is on track to produce only half that amount.

Area producers might be able to come back on line once demand pushes the price beyond the break-even point.

One trader figured the price will rise steadily in the next few weeks. Asian demand is strong, and buyers from the U.S. are now reportedly ready to start making some serious deals.

Reports that the Trinidad facility is sold out could lead some U.S. buyers to look for the best deals further afield. Right now the Middle East producers are the only ones up and running who can satisfy the U.S. demand.

Once demand and limited supply push the price up, the Black Sea suppliers could once again have an impact on the market.

India: Sources report that buyers are looking to get what tons they can as soon as they can. Demand in India is moving up with phos acid deals concluded and DAP demand heading up. The phosphate producers are looking to the Middle East for their ammonia supplies. For the time being, say sources, there is little push-back from the buyers against the higher price expectations of the producers.

Reportedly, the buyers are convinced the price will continue to rise for at least the next 6-8 weeks. For now, the buyers are taking what tons they can before the increase curve becomes more vertical.

UREA

U.S. Gulf: Most players last week put recent prompt granular trades within the $305-$307/st FOB range. While sellers are quoting $307-$310/st FOB for the next round of business, buyers are eyeing $300-$305/st FOB. Overall, it was a very quiet market.

Eastern Cornbelt: The granular urea market was reported at $355-$365/st FOB regional terminals for cash tons, reflecting a slight drop from last report.

Western Cornbelt: The market was tagged at $350-$355/st FOB to the dealer, reflecting a slight drop from the prior week. The dealer market FOB Pine Bend, Minn., was reported at the $360/st mark last week.

Southern Plains: Several sources described urea movement as steady throughout February. Dry conditions limited fieldwork in parts of Texas in late February, but other sources said pre-plant activity was underway on corn and cotton ground in some areas, and growers were also topdressing wheat.

Granular urea was pegged at $340-$345/st FOB the Tulsa market, with most quoting the $345/st level as the common dealer price last week. Supply remains adequate, but one source said urea and dry phosphate inventories at regional warehouses are “not very deep,” a situation that has been exacerbated by the shutdown of Koch’s urea plant at Enid, Okla.

South Central: The granular urea market was pegged at $335-$345/st FOB regional terminals to the dealer, down just slightly from last report. The only fertilizer activity was some movement on pastures in the region.

Southeast: Granular urea was pegged at the $350/st mark FOB port terminals to the dealer. One Carolina source also quoted rail-delivered urea at $360/st last week.

Pakistan: In an unusually fast move, the Pakistan finance ministry released the funds for TCP to buy about 130,000 mt of urea from the last tender at a price of $322/mt CFR. They were looking for 200,000 mt.

Industry observers had expected a more drawn-out process and possible scrapping of the tender because TCP had been saying it wanted to buy at the last-done price of $284.90/mt CFR. Offers in the tender indicated that no one was going to be offering at that level. A summary of the tender offers is below.

Company Origin Quantity (mt) US$/mt CFR Remarks
Sabic Saudi Arabia 60,000 322.00 Two lots
Multicommerce Open 30-35,000 324.90
Transfert Open 30-40,000 328.00
30-40,000 325.00 Option
Helm Open 25-40,000 335.00
Keytrade Open 30-40,000 336.90
30-40,000 341.90 Seller’s Option
Dreymoor Open 25-30,000 342.00
25-30,000 Option
Transammonia Open 25-30,000 345.47
25-30,000 Seller’s Option
Toepfer Open 25-30,000 358.25
25-30,000 Option
Swiss Singapore Regrets

The offerings, as expected, were limited to one or two cargoes. Sources had expected most traders to take conservative positions during a time when the market direction is not firmly agreed to.

There was always a possibility that TCP could scrap the tender if the TCP team and the finance ministry believed the offered prices were too high. TCP first tried to get Sabic to lower its prices. Failing in that endeavor, TCP started moving down the list trying to get the other offering companies to match the Sabic number of $322/mt CFR. Only Multicommerce and Transfert came through for TCP with one cargo each.

With freight from the Arab Gulf pegged at $10-$15/mt, sources say the Sabic offer reflects the soft side of earlier Middle East pricing expectations.

Freight from the Black Sea to Pakistan is pegged at $40-$50/mt. Assuming that all the other offers are for Black Sea tons, the Yuzhnyy range is placed at $275-$310/mt FOB.

Few in the industry believe the Yuzhnyy market has moved much beyond $290/mt FOB.

Sources now expect to see another tender from TCP within a week or so.

Industry observers have noted in previous weeks that much of what is being bought under this tender and what is still expected to be purchased is for reserve tons.

During the past month opposition politicians have been complaining that many of their constituent farmers are not getting the amount of urea they feel they need at a price they can afford. Sources say rather than face a hostile agricultural voting bloc, the government is pressuring TCP to make sure there is plenty of urea in the country.

Outside the country, sources say the shortages that are occurring in select areas of the country are not due to a shortage of the product, but rather inadequate transportation facilities. Eventually, said one source, the urea gets to the local markets. Government subsidies, he added, ensure the price will not hurt the farmers.

Middle East: Sabic set the pace for sales into Pakistan. The final agreed-to price was $322/mt CFR. With freight rates pegged at $10-$15/mt, sources now put the Middle East market at $305-$310/mt FOB. In other words, said one trader, the market has not moved at all.

Prior to the closing of the TCP tender Feb. 21, the Middle East producers had been telling traders and direct buyers the new opening price for any material was $320/mt FOB. Sources report that rather than be caught with material at or near that level, no one made any bids.

One trader said it would have been the height of folly to make a bid just as the TCP tender results were being made public. He advised waiting for the results and then seeing how the market moves.

Following the release of the tender results, he said he was justified in his earlier assessment. After the awards were made, he was even more pleased he held to his views.

Demand for Middle East material is steady and strong, say sources. The Sabic deal with Pakistan will not seriously affect other contracts the producer has, nor will it substantially create a shortage in the area.

The only ones strongly in the market are some of the smaller buyers in Southeast Asia. And even with many of them, getting from offer to signed deal is a difficult process.

Black Sea: Industry sources are assuming that Multicommerce and Transfert will be supplying Pakistan with tons from Yuzhnyy. If that is the case, say sources, the netback on the $322/mt CFR deals is $270-$280/mt FOB. Sources say this is a bit softer than the paper trades that have been going on most of the month of February.

Demand for urea into Latin America and Europe will help put a floor under the prices, say sources. But few see opportunities for a major jump in prices any time soon.

Southeast Asia: Sources report CFC and CCF in Sri Lanka have not yet made any awards in their tenders from a couple of weeks ago. One Asian trader noted this delay is not unusual. The Sri Lankan firms are known for calling tenders just to test the market. He was not critical of the companies. He pointed out gleaning an actual trend in the current market is difficult. The issue, he said, is not just will the price go up or down, but how fast.

People in the area are still reeling from the drop in prices that took place during the last quarter of 2008. Many buyers are still sitting on material in their warehouses that was delivered at $900/mt CFR.

As the reserves dwindle, new purchases are made at the current lower price to help average out the final sale price to local vendors. This means, said one trader, that many countries are buying hand-to-mouth. When a warehouse inventory drops low enough to take another cargo, the buyer will first assess the local demand. If tons are still needed, the buyer will take one cargo, mix it with the existing tons at an average price and then wait for the next opportunity to occur for a purchase.

Traders who have worked in the area a long time say this process is way outside the normal buying patterns in the area.

NITROGEN SOLUTIONS

Eastern Cornbelt: UAN-32 pricing to the dealer was quoted at $265-$285/st ($8.28-$8.91/unit) FOB regional terminals.

Western Cornbelt: The UAN-32 market was quoted in a fairly broad range at $250-$280/st ($7.81-$8.75/unit) FOB regional terminals to the dealer, with the low in St. Louis, Mo., and the upper end reported in Iowa. One Missouri source quoted the dealer market in his location at the $275/st ($8.59/unit) FOB level last week. Those levels reflect a slight drop from last report.

Southern Plains: UAN-32 was tagged at $230-$250/st ($7.19-$7.81/unit) FOB regional terminals, with several sources touting the upper end of that range as the more common dealer price for prompt tons in late February.

South Central: UAN-32 was quoted at $250-$265/st ($7.81-$8.28) FOB regional terminals from prompt tons to the dealer, reflecting a slight drop from last report, although there was little new business to test the market.

Southeast: The UAN-30 market was generally quoted in the $240-$250/st ($8.00-$8.33unit) range FOB regional terminals, down slightly from last report, with some suppliers reportedly referenced at the $260/st ($8.67/unit) FOB mark.

AMMONIUM NITRATE

Western Cornbelt: Ammonium nitrate was steady at $275-$305/st FOB, with the upper end reported in Missouri.

Southern Plains: Ammonium nitrate was pegged at $250-$260/st FOB Catoosa, down slightly from last report.

South Central: The ammonium nitrate market remained at $275-$280/st FOB regional terminals to the dealer, with the low end FOB Memphis.

Southeast: Ammonium nitrate pricing was down significantly from last report. Sources quoted the Tampa market at $320-$350/st FOB, with the upper end for truck business in Florida and the low quoted by out-of-state sources based on netbacks. Carolina sources also reported rail-delivered nitrate tons coming from the river system at the $310/st level. Sources reported some movement on citrus crops, but described it as “modest” due to price resistance from growers.

AMMONIUM SULFATE

Eastern Cornbelt: Granular ammonium sulfate was quoted at $175-$225/st FOB in the region, reflecting a slight increase from last report.

Western Cornbelt: Granular ammonium sulfate was reported in a broad range at $175-$245/st FOB in the region, with the upper end reported in Iowa for confirmed new sales. Several sources said product is potentially tight, with some suppliers not taking orders for 5-6 weeks. Delivered ammonium sulfate prices also ran the gamut; one supplier reportedly remained at $157.50/st DEL to the Midwest but was on allocation, while another supplier raised its delivered price into the region to the $235/st level in late February. Agrium’s reference price for granular ammonium sulfate was also slated to firm on March 1 to $235/st DEL in North Dakota, Minnesota, and Wisconsin.

Southern Plains: The granular ammonium sulfate market remained at $200-$250/st FOB Texas shipping points, with the low FOB Freeport and the upper end FOB Plainview. Other postings FOB Plainview included coarse grade ammonium sulfate at $240/st and standard grade at $230/st.

South Central: Granular ammonium sulfate was reported at $200-$210/st FOB in the region.

Southeast: Granular ammonium sulfate was quoted at $165-$175/st FOB mark in the region last week as new postings take effect. DSM is on allocation, and is firming its postings some $20/st in the Southeast market. As a result, granular ammonium sulfate is moving to $175/st FOB Augusta, Ga., and $214/st DEL into Florida, and standard grade is now posted at $149/st FOB Augusta and $178/st DEL in Florida. Sources said Honeywell’s granular ammonium sulfate posting is moving to $180/st FOB Hopewell, Va., as of March 1.

Western U.S.: Effective March 1, Agrium’s granular ammonium sulfate postings will firm to $235/st DEL in Washington, Idaho, Oregon, Nevada, Montana, and Wyoming, and to $230/st FOB warehouses in Washington, Oregon, Idaho, Nevada, and Utah.

PHOSPHATES

Central Florida: Business out of Central Florida picked up last week, as both traders and producers generally make more sales and at higher prices. After inventories dipped a bit the previous month, production was on the upswing – with the exception of PCS Sales, where production facilities remained shut down. Sulfur suppliers said Mosaic had increased the amount of sulfur they were receiving, but could not be certain if that necessarily reflected a direct correlation to increased production of phosphate products. Another possibility was the company was filling its capacity while the price was still $0.00/lt, which would be wise.

Farming activity in Florida and Georgia was well underway last week, and sales of phosphate into those markets were said to be very good. In addition, phosphate railcar sales into Ohio, Indiana, and the Northeast were also up last week, as some product was moving into the fields. For points in the Midwest, one source noted that if product had not been shipped by Easter, it would be too late for the season.

The general trend for phosphates during the past month has been up, and with the spring season just beginning, that will likely continue in the near future. Traders out of Central Florida were making sales of railcars around $325/st FOB for DAP and $10/st FOB more for MAP, although a few sales were made as low as $312-$313/st FOB. Mosaic was getting $315/st FOB for DAP, and CF posted a price of $320/st FOB. Mosaic charges $10/st FOB more for MAP than DAP, and CF has a premium of $20/st FOB for MAP.

The Central Florida DAP price range moved from $310-$320/st FOB to $312-$325/st FOB based on sales last week. PCS Sales had no published price. The price from Agrifos remained at $350/st FOB for trucks and $345/st FOB for rail shipments.

U.S. Gulf: Although generally steady, sales on the Gulf river system slowed last week after a flurry of activity following the announcement of PhosChem’s sale to India the previous week.

Several sources said farmers were still evaluating the markets and had not made a decision on what to plant. The corn-ethanol situation was growers’ biggest concern. A number of ethanol plants have closed or gone bankrupt, and the price of corn sagged into the mid-$3/bushel level early last week, but made resurgence later in the week to the low-$4/bushel range. In areas farther south, some farmers were hedging their bets and planting half corn and half soybeans, but beans were not bringing top dollar, either. As a result of the trepidation of farmers, dealers were still uncertain how much of what products they should use to fill. Urea was selling well, and DAP was moving out of terminals and warehouses at a decent rate, but no clear picture has emerged. How that shakes out will determine the success of the spring season for the phosphate industry.

In Oklahoma, which is normally the first area to start the season, DAP sales were steady and supplies were running low. The weather has been warmer than normal, which was good, but dry, which was bad. The wheat crop was taller than usual, but in poor condition, according to sources. Temperatures in the Midwest were pleasant – as high as the low 70s last week – but a cold front was expected on the weekend.

Warehouse prices for phosphates depended on location and some inland prices were lower than on the rivers, again depending on location. A low price of $365/st FOB was found on the Arkansas, but listings as high as $385/st FOB were reported in the northern regions.

The NOLA DAP barge price range last week moved up from a low of $310-$320/st FOB the previous week to $318-$325/st FOB.

Eastern Cornbelt: The DAP market was steady at $365-$385/st FOB regional terminals, with MAP at a roughly $15/st premium. An Illinois source pegged the warehouse market in his trade area at $370/st FOB for DAP and $380/st FOB for MAP. 10-34-0 pricing remained in a broad range at $650-$825/st FOB in the region, with the low in Illinois and the higher numbers further east.

Western Cornbelt: Prior to winter precipitation late in the week, some areas reported dry spreading activity on frozen ground in the region. One source said soil moisture profiles were saturated as the month ended, but dry spreading activity was steady throughout the month in his location, with phosphate volumes exceeding potash by a two-to-one margin.

DAP was quoted at $360-$370/st FOB most regional warehouses to the dealer, with MAP tagged at $375-$385/st FOB. One source said the only thing moving out of regional warehouses was prepay and early bookings, with minimal new sales taking place. The 10-34-0 market continued to be quoted in the $625-$700/st FOB range in the region.

Effective March 1, Agrium’s phosphoric acid postings will firm to $1,050/st rail-DEL in Iowa, Minnesota, Nebraska, Wyoming, and the Dakotas for both super phosphoric acid (SPA) and merchant grade acid (MGA).

Southern Plains: DAP was quoted at $350-$360/st FOB Catoosa, Okla., with MAP pegged at $370-$375/st FOB to the dealer. Agrium’s phosphoric acid postings will firm on March 1 to $1,050/st rail-DEL for both SPA and MGA in Colorado, Kansas, New Mexico, Oklahoma, and Texas.

10-34-0 pricing covered a broad range, from $500-$600/st FOB, with the low in south-central Texas. Most other locations in the region were reportedly holding to the $575-$600/st FOB range for new tons to the dealer. Those levels were down from last report.

South Central: The DAP market was tagged at $345-$355/st FOB regional warehouses, with MAP at a $10-$15/st premium. TSP was $25/st lower than DAP, or $320-$330/st FOB to the dealer. One source said he expects brisk phosphate movement this spring, especially since rates were cut some last year.

Western U.S.: Agrium’s phosphoric acid postings will firm on March 1 to $1,100/st rail-DEL for both SPA and MGA in Arizona, California, Idaho, Montana, Nevada, Oregon, Utah, and Washington.

U.S. Export: After its sale of 1.25 million mt to India the previous week, PhosChem reported no new sales last week. However, Transammonia made a sale of 6,000 mt into Latin America at a price of around $380/mt FOB.

Export sales have picked up since the beginning of the year, but were still trailing the year before. Still, the prime time for exports will not begin for more than a month.

Based on the most recent sales, the export price range last week moved up from $365-$367/mt FOB to $367-$380/mt FOB last week.

POTASH

Eastern Cornbelt: Most sources tagged the potash market in the $700-$750/st FOB range in the region from brokers or resellers, with no new sales to test the market. Based on some February dry spreading activity on frozen ground, one dealer reported moving about four pounds of phosphate to every one pound of potash.

Western Cornbelt: Potash out of regional warehouses was tagged in the $700-$750/st FOB range to the dealer, depending on grade and location, with most sources touting the low end of that range as the common dealer price from secondary sources.

Southern Plains: Reference prices for potash FOB Carlsbad, N.M., remained at $794-$800/st, depending on grade. Out of regional warehouses, the potash market was pegged at $700-$730/st FOB from secondary sources. Sources said some were pulling tons ordered last fall for spring, but new sales were few and far between.

South Central: Potash was pegged at $700-$750/st FOB regional warehouses to the dealer, with minimal business to test the market. “I’m not sure what the number would have to be to spark interest,” said one source, who added that spring application rates for potash could be off by 50 percent or more.

Southeast: Sources continued to peg the potash market at $810-$840/st DEL in the region. “At these numbers, there’s not a whole lot that will be moved,” said one source. Another noted that the only material changing hands is dealer-to-dealer, as retail sales are all but nonexistent.

SULFUR

Tampa: Sulfur remained in an oversupply situation last week and that is not likely to change soon, but conditions were far less desperate than the previous couple of months. Refineries were producing only slightly less than normal and some were conducting turnarounds, which helped. Dumping excess sulfur into landfills was continuing.

Prill production was running full out last week, which was assisting in reducing the excess inventory, but as much as 170,000 mt of prill will be moving out of Martin’s Beaumont facility in less than a month. Four vessels were in line to load there, and two more were believed due after the middle of March. Most of the prill being produced was headed to China.

As more of a balance between supply and demand re-establishes itself in the coming month or so, the chances were that quarterly prices would increase from their extreme of $0.00/lt for the next quarter. However, not by much.

Transportation was not a problem last week, as railcars were rotating close to normal. Mosaic was said to be increasing the amount of sulfur it was receiving. Phosphate production was on the increase, but phosphate companies were taking advantage of the low price to fill storage facilities.

West Coast: Contracts for refiners to prillers were settled by last week. Those in Southern California will see a price of around $0.00, while for those in the northern part of the state the price dipped under the new contract to -$20/mt FOB.

Vancouver: Sulfur suppliers had not reached new semester contracts with Brazil last week; it was unlikely the $200/mt price will hold for the new term.

MARKET NOTES

India: IFFCO will set up a fertilizer and chemicals plant in Qatar in partnership with Qatar Fertilizer Co. (QAFCO) under a joint venture. An agreement to this effect was signed by IFFCO Chairman Dr. U.S. Awasthi and QAFCO’s acting Managing Director Yousef Al-Kuwari in New Delhi Feb. 24. IFFCO will hold a 49 percent stake in the jv. It will be entitled to buy the entire production from the plant at market price and mutually-agreed terms and conditions. Speaking after the signing of the agreement, IFFCO’s chairman said, “This agreement is in line with a series of Memoranda of Understanding signed with companies in countries like Australia, Russia, Germany, U.S.A. and Kazakhstan so as to make our country self-reliant in the production of fertilizers.”

Pakistan: A delegation of Thyssen-Krupp Technologies AG, Germany, led by its Chairman, Dr. Olaf Berlien, called on Pakistan Prime Minister Syed Yusuf Raza Gilani and discussed the possibility of cooperation for investment in fertilizer, cement, shipyards, and windmill energy sectors. They also showed keen interest to help Pakistan in the fertilizer sector, according to local sources.

Russia: UralChem OJSC, one of the largest producers of nitrogen and phosphate fertilizers in Russia and the CIS, recently reported production results for 2008. For the full 12 months of 2008, UralChem enterprises produced 4,438,797 mt of commercial products, a 1 percent decrease compared to the same period in 2007 (including Azot, OJSC, and Voskresensk Mineral Fertilizers, OJSC). By product, the company said 2008 ammonia production was down 10 percent from 2007; ammonium nitrate and its derivatives were up 4 percent; urea production was up 13 percent; DAP was down 14 percent; MAP was down 17 percent; phosphoric acid was down 39 percent; and sulfuric acid production was up 18 percent in 2008 from 2007. “The first nine months of 2008 were very favorable for the company; we managed to achieve great results regarding the output of a number of products,” said CEO Dmitry Osipov. “However, in the 4th quarter of 2008, due to decreased overall demand on the global markets, the company shifted its production to those products still in demand by consumers. As a result, the output of some products was adjusted to lower levels.” UralChem also announced its unaudited IFRS financial results for the nine months ended Sept. 30, 2008. Nine-month revenue increased to US$1,621 million, compared with $305 million for the same period in 2007. The company’s operating profit totaled $588 million, or 36 percent of the revenue, compared with $35 million, or 11 percent of the revenue, for the first nine months of 2007. Net profit for the first nine months of 2008 totaled $363 million, compared with $18 million for the same period in 2007, while EBITDA increased to $643 million compared with $63 million in the same period in 2007. Export sales totaled $1,146 million for the 2008 nine-month period, compared with $209 million in 2007. More than 70 percent of the company’s sales for the first nine months of 2008 were export sales, and sales volume of commercial products increased by 7 percent to 3,509,317 mt for the first nine months of 2008. As of Sept. 30, 2008, the company’s total debt amounted to $1,183 million. “At the beginning of 2009, world fertilizer demand became more brisk,” Osipov noted. “The most significant growth in sales was seen by ammonium nitrate and urea, so, correspondingly, the company’s production assets were loaded at full capacity for these products.” Osipov said the Russian domestic market “has seen increased sales of ammonium nitrate, followed by increased demand for complex fertilizers, which is caused by both seasonal changes and the fact that farmers are willing to compensate for the low volume of fertilizers applied in autumn.”

The Week in Fertilizer Stocks

Fertilizer Stocks
Producer Symbol Price Week Ago Year Ago
Agrium AGU 34.89 39.29 65.30
CF Industries CF 62.75 54.54 113.65
Intrepid Potash IPI 21.06 22.68 N/A
Mosaic MOS 39.66 41.73 102.95
PotashCorp POT 83.84 82.44 160.10
Terra Industries TRA 24.60 23.91 38.62
Terra Nitrogen TNH 119.00 121.30 108.90
Distribution/Retail
Andersons Inc. ANDE 12.42 13.93 44.24
Deere & Co. DE 27.18 30.38 80.82
Scotts SMG 27.31 29.68 34.01

CF files antitrust documents, says no problem with CF/Terra merger

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CF Industries Holdings Inc. said Feb. 18 that it has filed notification with the U.S. Department of Justice and the Federal Trade Commission as required under the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended, relating to its proposed acquisition of Terra Industries Inc. (NYSE: TRA).

“We are committed to a combination of CF Industries and Terra and are confident that the transaction will be approved in all relevant jurisdictions,” said Stephen R. Wilson, chairman, president, and chief executive officer of CF Industries. “We continue to believe a combination is in the best interests of both CF Industries and Terra shareholders.”

In addition, CF posted a report from the Federal Trade Commission dated Sept. 2, 2008, in response to a Congressional inquiry into pricing in the fertilizer industry in North America, to www.transactioninfo.com/cfindustries. The report stated, among other findings, that “markets for fertilizer products in different countries are highly integrated, indicating that fertilizer prices are based on world market conditions.” FTC also “found no indication that changes in concentration in North America had any significant effect on domestic or foreign fertilizer prices.”

On Jan. 15 CF proposed to acquire all of the outstanding common shares of Terra Industries Inc. for 0.4235 shares of CF per common share of Terra Industries in a deal valued at $2.1 billion (GM Jan. 19, p. 1). CF shareholders would own 53 percent of the new company and Terra’s 47 percent. At the time of the announcement, the proposal represented a premium of 34 percent based on the 30-day volume weighted average prices for the shares of the two companies, and a 29 percent premium based on the 10-day volume weighted average. CF noted that since the announcement, Terra’s stock price has increased by over 40 percent.

Yara reports best year, posts 4Q loss; fertilizer volumes off 43 percent

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Yara International ASA reported its best year as an independent standalone company in 2008; however, extra charges and inventory write-downs put the company into the loss column for the fourth quarter. Yara reported a fourth-quarter loss of $325.5 million ($1.12 per share) on sales of $2.9 billion, versus the year-ago net income of $375 million ($1.29 per share) and $3.2 billion, respectively. EBITDA was a positive $250.9 million, versus the year-ago $464.4 million.

Fourth-quarter fertilizer sales volumes decreased 43 percent from the year-ago quarter. Yara said deliveries in all regions except North America were down, with the largest declines in Latin America and Asia. Deliveries in Europe dropped 40 percent, with NPKs and urea down by about 50 percent and nitrates by 24 percent. Inventories of third-party sourced products were written down by $262.3 million to reflect lower market prices. In addition, the company made a $55.4 million inventory adjustment due to its Saskferco Inc. acquisition Oct. 1, 2008.

“The fertilizer industry has since September experienced an unprecedented slow-down in deliveries and decline in international fertilizer prices,” said Jorgen Ole Haslestad, Yara president and CEO. “Despite challenging market conditions, we deliver a strong underlying performance excluding write-downs on third party sourced inventories and currency effects on debt, demonstrating the strengths in Yara’s flexible business model. We have taken action to mitigate the effects of the slow-down by reducing third-party sourcing and curtailing production, and we are benefiting from cheaper ammonia import.”

Yara said it has cut 29 percent of its global ammonia capacity and 43 of its European urea capacity. It has cut NPK production, though it continues to run nitrate production at full rates, preparing for a spring recovery and deliberately building inventory. However, it said it would cut production later in the spring for both NPK and nitrates if the recovery does not materialize.

Yara said its own global deliveries in January were down 40 percent compared to last year. It estimated that overall European and U.S. deliveries were down 15 percent in second half 2008.

Haslestad said farm economics should support strong fertilizer demand for the current season, and that Yara is well positioned to benefit from such a recovery. “Our flexible cost structure also protects us in the event of a further delayed recovery, should farmers choose not to apply optimum amounts of fertilizer this season. However, a drop in fertilizer application would negatively affect food production, thereby tightening grain markets further and requiring a stronger recovery in fertilizer demand next season.”

The company noted that urea prices started to improve in the past month.

Yara estimates that 10 percent of global urea and 15 percent of ammonia capacity was curtailed at the end of the fourth quarter, while phosphate and potash had been halved. On the urea side, it estimated that only 100,000 mt of Chinese urea was exported in the fourth quarter with a 10 percent export tax, versus the year-ago 2.9 million mt. Halsestad said that China, now with a 110 percent export tariff effective Feb. 1, will not likely send urea into the world market due to its internal demand. Likewise, he said their urea is not able to compete in the international market at current pricing, with as much as 8 million mt/y of their capacity currently curtailed.

“If we look at the Q4 results in isolation, we see that when we add back the special write-downs of that quarter, it was clearly better than the same quarter last year,” said Halsestad. The year-ago 2007 quarter also posted higher results due to a $145.9 million one-time gain from the sale of gas assets. Another positive going forward is lower energy costs. He noted that so far Yara hasn’t seen any considerable effects on the financial crisis on food consumption, which should mean that a normal amount of fertilizer will be spread. He said farmers in North America and Europe have acceptable margins and they can borrow money, whereas the impact of the financial crisis on South America is larger.

Yara posted a $383 million foreign exchange loss in the fourth quarter as the U.S. dollar appreciated 21 percent against the krone and up to 19 percent against emerging market currencies such as the Brazilian real.

For 2008, Yara reported net income after minority interest of $1.27 billion ($4.36 per share) on sales of $13.7 billion, versus 2007’s $1.11 billion ($3.78 per share) and $10.5 billion, respectively. Yara attributed the results to higher fertilizer prices. 2008 EBITDA was $2.76 billion versus 2007’s $1.55 billion.

Yara is proposing a dividend of $.69 per share compared to the year-ago $.73 per share.

4Q-08 4Q-07 2008 2007
Sales (000 mt)
Fertilizer 3,496 6,104 20,540 21,303
Industrial 905 1,000 3,898 3,289
Total 4,401 7,104 24,438 24,592
Fertilizer Sales by Region (000 mt)
Europe 1,956 3,269 11,230 10,624
Outside Europe 1,540 2,835 9,309 10,679
Total 3,496 6,104 20,540 21,303
Production (000 mt)
Ammonia 1,386 1,469 6,342 5,759
Finished fert/indust. 4,022 4,188 16,802 14,550
Total 5,408 5,657 23,144 20,309
* Krone conversion rate to U.S. dollars used was $6.48 for 2008 and $5.45 for 2007.

SIE still eyes 2009 for groundbreaking on $1 B fertilizer plant

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Southeast Idaho Energy (SIE), a unit of Refined Energy Holdings of New York, still hopes to break ground by the end of 2009 on its $1.0 billion coal gasification-based fertilizer plant near American Falls, despite the global economic financial crisis and an extended comment period that pushed back the project by five months, according to John Burk, company spokesman. SIE was recently issued an air quality permit by the Idaho Department of Environment (GM Feb. 16, p. 13) for the plant.

Some engineering work on the project remains to be done before the company will go to lending institutions to secure financing, which Burk conceded will be more difficult than a few years ago. Still, he said, SIE is confident it will be obtained because of the project’s viability. “The best I can tell you right now is we have a good project from a financial standpoint. We’re optimistic,” Burk said, adding that getting the IDEQ permit to construct is an important, encouraging step in the project’s development. Burk called the project an economic stimulus that will inject up to $500 million into Idaho’s economy, contributing to local and state tax bases and enhancing creation of additional jobs, which is needed as the nation faces difficult economic times.

Long-time fertilizer industry sources, however, have seen many fertilizer plant proposals come and go. Their mantra is financing is key and they will believe it when they see it, especially in today’s economic climate.

The project will produce up to 500 st/d of anhydrous ammonia, up to 1,800 st/d of granular urea, and up to 1,600 st/d of a urea ammonium nitrate solution. SIE has decided against producing diesel fuel or generating electricity at the site as originally planned.

SIE estimates it would need to import about 2,000 tons of coal daily, mostly from Colorado, for the plant, which would use advanced technology to keep emissions reduced. Opponents, however, say the plant would discharge 2.3 million tons of carbon dioxide annually, contributing to global warming.

“We have demonstrated our commitment to keeping emissions low and meeting these requirements by voluntarily planning to enclose coal handling operations and through the use of various advanced technologies,” Burk said.

Burk said his company expects to meet CO2 regulations when they become applicable to the plant, but there currently are no federal or state laws or regulations regarding carbon dioxide. “We have made it clear that we are committed to sequestering CO2 by transporting it by pipeline to western oil fields for enhanced oil recovery. We keep our commitments. At this point, CO2 is unregulated. It seems likely that Congress will deal with CO2, and we will meet whatever requirements are established.”

Potato experts give fertilizer insights

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During the 41st Annual Idaho Potato Conference held in conjunction with the 30th annual Ag Expo at Idaho State University in Pocatello, spud growers were coached at well-attended sessions on how to reduce their fertilizer expenses, which vaulted and then retreated somewhat in 2008.

“Regardless of what the cost is going to be, it’s not going to be low” in 2009, Jeff Stark said during a workshop titled “Hooked on High Fertilizer Rates? Time to Break the Habit.” Stark chairs the horticultural services division of the University of Idaho’s Idaho Falls R&E Center.

The efficiency of nitrogen and phosphate fertilizers depends on the target, soil condition, and limiting factors, Stark said. If new treatments are applied at inappropriate times, yields can be reduced, having a deleterious effect on potato quality, he added.

Dr. Bryan Hopkins, an environmental scientist at Brigham Young University in Provo, Utah, said nitrogen is the most important element for potato growth. “We don’t see much benefit to phosphorus at all” for the short term, he said. The earlier nitrogen fertilizer is applied, the more likely growers will lose it. He recommended it be applied no sooner than 35 days after seed is planted.

By the 50th day after planting, tubers start to grow, consuming about 50 percent of the nitrogen. By the 75th day, most of it has been absorbed by the plant. By the 90th day, the nitrogen leaves the vines, going into the tubers. Between the 35th and 85th days after planting is when the nitrogen needs to be delivered to the plant, Hopkins recommended. “Put fertilizer where it needs to be and lay off where it doesn’t need to be.”

“Fertigation,” or applying fertilizer in irrigation systems, is time-consuming and more expensive than traditional ways of applying it, Hopkins said. Slow-release fertilizers haven’t always worked as well. Polymer-coated or encapsulated fertilizers do not move with water as readily.

Research in Eastern and South Central Idaho shows it’s important to apply fertilizer at the time of a plant’s emergence, the BYU professor said.

“At a Maximizing Your Fertilizer Dollars” session, Hopkins said fertilizer prices are at a temporary low, but will go back up with natural gas and petroleum prices. The biggest impact on fertilizer prices will be a demand increase in China and India, which he said “are going crazy agriculturally. … To this day, all the fertilizer spread in these two countries is spread in bags.” That will change as they modernize, he said.

Most growers, he said, under-manage and over-fertilize their crops. Farmers with the highest yields are not usually the ones with the highest profits, Hopkins said, advocating more moderate rates of fertilizing, citing the law of diminishing returns. “At this point, it’s no longer good to throw money at it. … Apply inputs only when it’s reasonable to expect more return than cost.”

Paraphrasing Charles Dickens, Dr. Joe Guenthner, extension economist for the University of Idaho, said these are the best and worst of times for Idaho’s potato industry. While spud prices have climbed, so have costs for fuel, fertilizer, property, and other inputs. He predicted Idaho potato growers could be in for more chills and thrills in 2009, noting they paid record high prices for fertilizer in 2008.

Marieke de Rijke, an assistant vice president and industry analyst with Rabobank International, a food and agribusiness research and advisory corporation based in The Netherlands, said fertilizer costs are a very important influence on the potato sector. Although wholesale fertilizer prices have come down, farmers haven’t really seen it, she said.

About 1,150 people attended the Idaho Potato Conference this January, up 200 from 2008, said Dr. Nora Olsen, conference chairwoman.

Fire idles Cherokee nitric acid plant

News Briefs, Southern Plains

Oklahoma City-A small nitric acid plant at El Dorado Chemical Co.’s complex in Cherokee, Ala., was damaged by fire Feb. 5, according to El Dorado parent LSB Industries Inc. LSB said the fire was immediately extinguished and there were no injuries. The cause of the fire is under investigation, and the extent of the damage is still to be determined. It is also not known when repair or replacement will be completed and the nitric acid plant put back in operation. LSB said the original manufacturer recently rebuilt the compressor for the nitric acid plant, and it appears that the compressor may have been involved with the cause of the fire. The nitric acid plant that suffered the fire, with a current 182 st/d capacity, is the smaller of the two nitric acid plants at Cherokee. While the volume of production of finished product at Cherokee will be impacted, the site will continue production with the larger of the acid plants. The company believes it can supplement the smaller plant’s outage with acid from its other facilities. Insurance provides for business interruption coverage after a 30-day waiting period for lost profits and extra expense coverage and a $1 million property loss deductible.

Trinidad bailout leads to nitrogen speculation

News Briefs, Nitrogen

Port-of-Spain-Trinidad and Tobago is having its own industry bailout, with the government and the Central Bank of Trinidad and Tobago intervening in the affairs of major conglomerate C.L. Financial and its related companies. C.L. Financial has been involved in a broad range of businesses, including insurance, banking, methanol, and ammonia. One of its later ventures has been real estate investing in South Florida. As a result of the global financial crisis, as well as the sinking commodity markets, C.L. Financial is in major trouble. C.L. Financial has signed a Memorandum of Understanding with the government that allows the Central Bank to essentially take whatever action it sees fit. In a statement Feb. 13, the bank stated the company’s financial position is worse than originally envisaged. The bank has retained a Canadian firm to disentangle the company’s complicated financial transactions. The company has already agreed to turn over its control of Republic Bank Ltd. and Methanol Holdings Trinidad Ltd. to the government, and there is speculation that it may also have to do likewise with the $1.5 billion ammonia-urea nitrate-melamine complex (AUM). When completed in the second half of this year, AUM will comprise seven plants generating 1.5 million mt of UAN-32 and 60,000 mt of granular melamine per year. One source said the project is expected to continue to completion with no impact expected, regardless of the fate of C.L.’s majority stake. Helm Fertilizer Corp. will be handling offtake from AUM, and recently announced that it has entered into a long-term lease agreement with IC Rail Marine Terminal to construct a 60,000 ton capacity UAN solution terminal in Convent, La. (GM Feb. 9, p. 9).