Indianapolis, Ind.-The top environmental office in the state is recommending that homeowners skip applying phosphorus when they fertilize lawns. In a statement issued by the Indiana Dept. of Environmental Management, Commissioner Thomas Easterly advised, “Adding more phosphorous to our lawns is like trying to fill an already full gas tank in our cars. So homeowners with plans to fertilize their lawns are encouraged to purchase zero or low phosphorous fertilizers and to check nitrogen, phosphorous, and potassium numbers on fertilizer bags.” Easterly explained that phosphorous is needed only for new growth, and once a lawn is established most Indiana soils already contain enough to do the job. He recommended a soil test first; buying and sparingly using alternatives to fertilizer high in phosphorous; applying fertilizer carefully to avoid spilling over on walkways, streets, or driveways; and maintaining a buffer strip of natural vegetation, such as wildflowers and native grasses, bordering watercourses and ponds.
All posts by traceybg@gmail.com
Minimum downwind risks from biosolids, says study
Madison, Wisc.-A new study published in the November?ÇôDecember issue of the Journal of Environmental Quality investigated levels of microorganisms in air immediately downwind of biosolids being land-applied, and found risks of aerosol-borne infection for workers are generally low, at less than 1 or 2 percent per year. The authors reported that more than 300 air samples were collected at various locations where coliform bacteria, coliphages, and heterotrophic plate count (HPC) bacteria were enumerated. Concentrations of coliforms relative to Salmonella and coliphage relative to enteroviruses in biosolids were used during this study, along with levels of coliforms and coliphages measured in air. The HPC bacteria were ubiquitous in air near land application sites whether or not biosolids were being applied, and concentrations were positively correlated to windspeed. Coliform bacteria were detected only when biosolids were being applied to land or loaded into land applicators. The conclusion was that risks from aerosolized microorganisms at biosolids land application sites appear to be lower than those previously found at wastewater treatment plants.
Biosolids moratorium urged in Ontario
Toronto-The opposition New Democratic Party, with support from farmer, environmentalist, and other activist organizations, is calling on the McGuinty provincial government to impose an immediate moratorium on the use of biosolids as fertilizer on Ontario farms. “There are too many unanswered questions about the human health effects of sludge to allow this practice to continue,” declared France Gélinas, member of the provincial parliament and NDP health critic. “Especially when we don’t know the health impacts, why take the risk and use sewer sludge on our farm fields?” Gélinas cited statistics showing that 120,000 tons of biosolids are spread on 15,000 hectares of farm fields each year in Ontario “without any systematic monitoring of related health concerns.” Both the environmental group SludgeWatch and the National Farmers Union are speaking out in support of the NDP position. SludgeWatch’s Maureen Reilly charged that in spite of health complaints, the McGuinty government has failed to address problems. “With recent outbreaks of E. coli, Salmonella, and Listeria,” Reilly noted, “it makes no sense to continue applying sewer wastes on our farmland.” Grant Robertson, NFU Ontario coordinator, said his organization has had a policy opposing biosolids use as fertilizer since 2001. “The National Farmers Union wants to protect food safety and the environment, and we know that there are many toxic residues present in sewage sludge. Until processes are in place to remove all these toxic residues, our members believe the spreading of sewage sludge should be prohibited,” Robertson asserted. He conceded that skyrocketing chemical fertilizer costs contribute to pressures to use biosolids, but cautioned that any short-term economic gain will be outweighed by the destructive long-term impact. “Until processes are in place to remove all these toxic residues from sewage sludge, we believe the spreading of sewage sludge should be prohibited,” Robertson insisted. He added that in the meantime, contractors should be required to conduct environmental impact studies before applying.
GenHydro expanding liquid fert output
Sebastopol, Calif.-General Hydroponics, which supplies hydroponic growers all over the world, expects to add more than 30,000 gallons to its daily output of liquid fertilizer specifically formulated for plants growing in water with its second U.S. manufacturing facility, to be located in Martinsburg, W.Va. GenHydro is currently transforming a vacated apple packing warehouse with 50,000 square feet of space, which its President and CEO, Lawrence Brooke, describes as a prime location for the company to serve its customer base and distributors. The new plant is expected to be ready sometime next year and employ more than 30 people. Brooke said the new location complements the company’s existing facility in Sebastopol, which provides over 10 acres for testing new crops, hydroponic systems, nutrients, and related technologies. It also has factory space of 45,000 square feet in a modern industrial setting. New nutrient formulas to enhance flavor and yield, plus vitamin and mineral content in food crops for higher nutritional value, are under development. According to Jesse Pennington in the Sebastopol sales office, the Martinsburg location will most likely concentrate on nutrients and supplements production, while the growing systems manufacturing will remain in California, at least for the immediate future. Pennington explained that the hydroponic nutrients have to provide all of the 12 or 15 essential elements to grow plants without soil. “And the way we make the nutrients available to plants without the bacterial food web in the soil is with ‘chelates,’ which are basically acids that help break down the elemental molecule of the mineral and make it usable to the plant.”
Market Watch
AMMONIA
U.S. Gulf/Tampa: The NOLA and Tampa markets remained quiet over the holidays, though sources are anxiously awaiting news of January Tampa prices.
El Dorado, Ark.: On Dec. 8, 2008, El Dorado Chemical Co., (EDC) a unit of LSB Industries Inc., received the executed anhydrous ammonia sales agreement, to be effective Jan. 1, 2009, with Koch Nitrogen International Sarl (Koch). Koch will supply EDC 100 percent of the ammonia required by EDC for processing at EDC’s El Dorado, Ark., chemical processing facility. The agreement follows a previous sales agreement, dated March 9, 2005, as amended, between EDC, Koch, and Koch Nitrogen Co., that was to terminate Dec. 31, 2008.
Eastern Cornbelt: In spite of wet weather and flooding concerns in several areas of the region, sources said growers were making some year-end fertilizer purchases. Several said growers were committing money, but leaving actual prices and volumes to be negotiated at a later date. Fertilizer prices at the wholesale level continued to show weakness.
The ammonia market was quoted at $450-$525/st FOB in Illinois, with the low for cash market tons and the upper end reported for confirmed sales of spring prepay tons.
Western Cornbelt: Delivered prepay ammonia to points in Missouri was quoted anywhere from $400-$500/st from southern production points in late December. Out of regional terminals, the ammonia market was pegged at $450-$565/st FOB, with the upper end reflecting cash market pricing FOB Palmyra, Mo.
California: The anhydrous ammonia market remained at $755-$800/st DEL in California based on the most recent postings, but sources said another pricing adjustment is likely in early January. Aqua ammonia was also unchanged at $185/st FOB in late December.
Pacific Northwest: Sources pegged the anhydrous ammonia market at $550-$595/st DEL in the region, down significantly from last report. Agrium’s Dec. 12 anhydrous ammonia postings included $565/st rail-DEL in Washington, Oregon, Idaho, and Utah; $585/st truck-DEL in northern Idaho, and in Washington and Oregon east of the Cascades; and $590/st truck-DEL in Montana and northern Wyoming. Agrium’s aqua ammonia postings moved on that date to $146/st FOB Central Ferry and Finley, Wash.
Western Canada: The anhydrous ammonia market was pegged at $730-$775/mt DEL in Western Canada at year’s end, down significantly from last report.
UREA
U.S. Gulf: The market continued to show strength over the holidays, with most calling newer trades within the $210-$220/st FOB range for granular.
Eastern Cornbelt: The granular urea market was tagged at $280-$295/st FOB in the region for cash or prepay tons.
Western Cornbelt: Granular urea continued to slide, with the dealer market quoted at $260-$290/st FOB regional terminals in late December. There were reports that urea postings out of the Catoosa, Okla., market were at the $270/st FOB level last week.
Several dealers reported fairly brisk year-end business at the retail level, although one characterized it as more tire-kicking than actual buying. Others said growers were willing to commit funds but wanted to price actual product at a later date, when they believe retail fertilizer prices will be lower.
California: Granular urea was steady at $450-$455/st FOB and $450-$480/st DEL in the state in late December.
Pacific Northwest: Granular urea pricing was down from last report at $330-$350/st DEL in the region.
Western Canada: Granular urea was pegged at $521-$546/mt DEL in the region.
Pakistan: The TCP tender closed December 30. The company called for offers for 250,000 mt. The tender had been delayed from December 27 to 30. The tender required all prices to reflect delivered costs.
| Company | Source | Quantity | US$/MT CFR |
| Dreymore | CIS – Arab Gulf – Egypt | 60-75,000 | 236.17 |
| 242.17 | |||
| Keytrade | Open | 30-40,000 | 242.00 |
| 30-40,000 (S/O) | |||
| Multicommerce | Black Sea – China – Middle East | 30-35,000 | 249.40 |
| 23-35,000 | 254.90 | ||
| 25-35,000 (S/O) | 254.90 | ||
| Transammonia | Open | 30-40,000 | 252.50 |
| 25-30,000 | 262.50 | ||
| Emirates Trading | CIS – Arab Gulf | 30,000 | 252.97 |
| Sabic | Saudi Arabia | 50,000 | 265.00 |
| Ameropa | Open | 30-35,000 | 259.40 |
| Toepfer | Open | 50,000 | 268.00 |
| Transfert | Malaysia – Open | 100,000 | 269.00 |
| MidGulf | Ukraine | 25,000 | 273.75 |
| Mid Link General | Ukraine – CIS | 25,000 | 275.00 |
All told, a maximum of 570,000 mt firm offers were submitted. An additional 75,000 mt were offered at the seller’s option.
The netbacks for the Middle East tons indicate prices have not moved. The Black Sea material, however, shows a weakness that people talked about in mid-December but could not confirm.
Prior to the closing of the tender, industry sources had expected to see prices come up. They argued that the 500,000 mt purchased by IPL last month, coupled with the Pakistan and Bangladesh tenders, would move prices out of the basement.
Apparently that did not happen.
TCP is expected to talk with the lowest offering companies to try to shave even a few bucks off the offers. A decision is expected quickly.
Once settled, sources say this should cover the country’s needs for the current season.
Bangladesh: BCIC closed four tenders for 75,000 mt each of bagged prilled and granular urea.
The tender documents called for each shipment at 12,500 mt. Delivery is expected in early 2009. The shipments are to be in bagged cargoes of 12,500 mt each.
Results for the prilled tender follow.
| Company | Source | Quantity MT | US$/mt CFR Bagged |
| Ameropa | China/Indonesia/Egypt | 37,500 | 269.50 |
| 272.73 | |||
| 275.73 | |||
| 298.00 | |||
| 301.23 | |||
| 304.23 | |||
| Gavilon | UAE | 25,000 | 269.59 |
| 272.09 | |||
| 304.84 | |||
| 307.34 | |||
| Toepfer | Qatar – CIS – Indonesia – Egypt – China | 12,500 | 260.00 |
| 307.30 | |||
| Bulk Trade | Open | 37,500 | 284.30 |
| 282.30 | |||
| 279.30 | |||
| 314.30 | |||
| 312.30 | |||
| 309.30 | |||
| Wilson Industrial | Open – China | 12,500 | 278.87 |
| 309.87 | |||
| Liven | Open – China | 12,500 | 285.57 |
| 316.57 |
The country reportedly desperately needs the urea.
Middle East: The offer made by Sabic in the TCP/Pakistan tender indicates that prices are softer, but not dropping.
The estimated netback from the tender puts the Sabic price at $240/mt FOB. This is just a shade under the IPL price from the region of $241-$243/mt FOB.
Black Sea: Asian sources put the lowest netback from the TCP/Pakistan tender at $205/mt FOB.
This price level confirms year-end rumors that the price from the area had softened. Even though people had talked about softer prices, no one could confirm anything lower than the previously done deals around $220/mt FOB.
Depending on the freight rate, the netback could be as low as $205/mt FOB or as high as $220/mt FOB on the lowest offer in the TCP tender.
India: Even though IPL concluded deals for about 500,000 mt just as the year ended, sources said more will need to be purchased within the next month. The amount of urea still needed for this season ranges from an additional 500,000 mt to 1 million mt.
NITROGEN SOLUTIONS
U.S. Gulf: A small amount of new business was reported over the holidays, taking the market to $190-$200/st FOB ($5.94-$6.25/unit).
Eastern Cornbelt: UAN-32 was pegged at $280-$295/st ($8.75-$9.22/unit), with the upper end quoted for spring prepay offers in Illinois. There were reports of one supplier offering prompt, cash market sales as low as $240/st ($7.50/unit) FOB regional terminals, but actual business at that level was not confirmed and very few have room for any cash tons.
Western Cornbelt: UAN was quoted at $8.75-$9.20/unit FOB regional terminals to the dealer, with the upper end reported for spring prepay offers from some suppliers.
California: UAN-32 was quoted at $380-$400/st ($11.88-$12.50/unit) FOB and $380-$410/st ($11.88-$12.81/unit) DEL in California in late December.
Pacific Northwest: UAN-32 was pegged at $350-$380/st ($10.94-$11.88/unit) DEL in the region. Agrium’s Dec. 12 UAN-32 postings included $350/st ($10.94/unit) DEL in Washington, northern Idaho, and Oregon excluding Malheur County; $355/st ($11.09/unit) rail-DEL and $360/st ($11.25/unit) truck-DEL in southern Idaho and Oregon’s Malheur County; and $380/st ($11.88/unit) DEL in Montana and northern Wyoming. UAN-28 reference prices moved on that date to $333/st ($11.89/unit) DEL in Montana and northern Wyoming.
Western Canada: UAN-28 pricing was quoted at $329-$345/mt ($11.75-$12.32/unit) DEL in the region.
AMMONIUM NITRATE
Western Cornbelt: The ammonium nitrate market was pegged at $250-$300/st FOB in the region, reflecting another pricing drop from last report.
California: No market was reported for ammonium nitrate in California. CAN-17 pricing remained at $315-$335/st FOB in the state.
Pacific Northwest: Ammonium nitrate pricing was down from last report, with sources quoting the dealer market at $368-$400/st DEL in the region.
CAN-17 was $250-$255/st FOB, reflecting a sizable drop from last report. Agrium’s CAN-17 postings moved on Dec. 12 to $255/st FOB Kennewick, Wash. The company’s ammonium nitrate solution (20-0-0) posting also moved on that date, to $210/st FOB Kennewick.
AMMONIUM SULFATE
Eastern Cornbelt: Granular ammonium sulfate was steady at $200-$210/st FOB or DEL in the region.
Western Cornbelt: Granular ammonium sulfate remained at the $200-$210/st FOB mark out of most locations, with the low for prompt tons and the upper end for spring prepay.
California: The ammonium sulfate market was quoted at $350-$385/st FOB in California, but sources said a downward pricing adjustment is expected in early January.
Pacific Northwest: The ammonium sulfate market was quoted at $220-$270/st DEL in the region, reflecting a $30-$50/st drop from last report.
Western Canada: Granular ammonium sulfate was reported at $350-$355/mt DEL in Western Canada.
PHOSPHATES
Central Florida: Any jingle heard in the Central Florida DAP market last week was undoubtedly Santa Claus, because it certainly wasn’t a telephone or a cash register. Those who bothered showing up for work were rewarded with golden silence. All was quiet and all was calm.
The year ended on a down note, with the price of DAP about $200/st FOB lower than a year earlier, and more than $700/st FOB down from six months ago. To make matters worse, little had been sold for the past three months. Buyers, it seemed, were looking for the bottom. Meanwhile, phosphate processing plants in Florida were at reduced capacity or shut down altogether.
Sometime, perhaps in another month, most in the industry were predicting sales, but not that prices would be taking off.
With no new sales last week, the Central Florida DAP price range remained at $300-$305/st FOB. CF had the lowest asking price at $490/st FOB. PCS Sales was still holding at $1,070/st FOB, and Mosaic had no posted price for Central Florida. The most recent price for Agrifos was $500/st FOB for trucks, but no price was available for rail shipments.
U.S. Gulf: Somewhat unexpectedly, a couple of NOLA DAP barges sales were done last week and they fell within the previous week’s price range, which could be a good sign. Perhaps the market has found that bottom it had so hopefully sought.
However, the problem between farmers and dealers remained. Many dealers paid $1,000/st FOB or more for the phosphate they have in their bins, and farmers were looking for prices of less than half that amount. How and if that is resolved will determine how many of the dealers, especially small ones, will be in business in the beginning of 2010.
At the end of last year, prices were more than double the current amount of a year earlier, which was closer to current price. The middle of the year was the high point and everyone was singing the praises of phosphate. Those were the good old days. The situation will be different for the New Year.
Phosphate production operations in the river system were curtailed or simply shut down, and there were nearly enough loaded NOLA DAP barges on the Mississippi to walk from New Orleans to Minnesota. That number will have to be greatly reduced before production resumes a normal schedule.
Based on transactions last week, the NOLA DAP barge price was unchanged at $275-$300/st FOB, and will not likely increase this week. Mosaic had no posted prices last week, and CF’s last price offering was $500/st FOB
Eastern Cornbelt: The DAP market was quoted at $400-$450/st FOB most river terminals to the dealer, with MAP priced either the same as DAP or at a $20-$25/st premium, depending on supplier. There were reports of Chinese phosphate tons priced as low as $350/st FOB out of spot Illinois River locations, but actual sales at that level were not confirmed last week.
10-34-0 was pegged in a broad range at $675-$800/st FOB in the region, with no new sales to test the market.
Western Cornbelt: The DAP and MAP markets were quoted at $400-$450/st FOB regional warehouses to the dealer, reflecting another drop from last report. The 10-34-0 market was quoted at $550-$675/st FOB in the region, also down from last report. The low end was reported in western Iowa, while Missouri sources tagged the common dealer price at the $625/st FOB level in late December.
California: DAP and MAP were steady at $595-$600/st FOB or DEL in the state. 16-20-0 was quoted at $380-$387/st FOB and $380/st rail-DEL in California, also unchanged from last report. 10-34-0 pricing, however, was quoted at $525-$535/st FOB, down some $200/st from last report.
Super phosphoric acid (SPA) and merchant grade acid (MGA) remained at December pricing levels of $11.50/unit DEL in the region, with Simplot referenced at $11.70/unit FOB for MGA in California.
Pacific Northwest: DAP and MAP remained at $585-$595/st FOB or DEL in the region. 16-20-0 was tagged at $380-$385/st FOB or DEL. 10-34-0 pricing in the region was quoted at $535-$570/st FOB.
SPA and MGA remained at $11.50/unit DEL in the region. One source talked of a potential posting hike to $12.00/unit DEL in January, but that pricing adjustment was not confirmed.
Western Canada: Western Canada sources tagged the MAP market at $790-$825/mt DEL to the dealer in late December.
U.S.Export: No export transactions were found last week, but that was to be expected.
India, which bought more than half of U.S. phosphate exports, wound up with the award for the most active supporter of the North American phosphate industry for 2008 and will likely be on top again for this year.
The export DAP price range last week ended the year at $390-$395/mt FOB.
Bangladesh: BCIC called a tender to close Jan. 2 for 15,000 mt of phosphate rock at 65 percent BPL or better.
The winner of the tender is to deliver the product within 21 days of receiving the letter of credit for the deal.
While many have complained about the way BCIC has handled its nitrogen tenders, sources have been complimentary about the efficient manner in which the phosphate tenders have been conducted.
India: Major suppliers are reportedly still dragging their feet on new phos acid contracts. However, local sources report that IFFCO is able to obtain product as low as $650/mt DEL from its joint venture partner ICS Senegal. Foskor from South Africa is reported to be supplying product on a provisional basis at $1,200 mt DEL.
No new agreements were reported on rock; however, sources say in light of the phosphate market, they would have to be much lower.
POTASH
Eastern Cornbelt: Potash was quoted at $750-$800/st FOB regional warehouses, depending on grade and location. Sources continued to speculate on whether potash pricing would hold its ground or fall. Several dealers said they would not need to buy any potash tons until late spring, based on the amount of inventory they already had in the bin.
Western Cornbelt: Potash was quoted in the $750-$775/st FOB range, though there was minimal business to test the market. The low end of the range was reported for red granular tons in both Missouri and Iowa, while white granular potash was quoted by one Missouri supplier at the $760/st FOB mark last week.
California: Muriate of potash was steady at $849-$900/st FOB and $875-$900/st DEL in the region. Sulfate of potash remained at $1,105-$1,195/st FOB, depending on grade and supplier. Potassium nitrate was steady 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 remained at $840-$900/st DEL in the region.
Western Canada: No current prices were reported for potash in the region.
SULFUR
Tampa: After reaching a high price no one ever dreamed possible during 2008, the price ended the year at a price the sulfur industry had only dreamed of in the past. However, even that bit of good news won’t last for long. First quarter sulfur price negotiations will begin shortly and the new price will likely be somewhere around where it started in 2007 – but only if the sulfur interests do a bang-up job in the discussions. Otherwise, the price could be worse than the industry ever dreamed.
Phosphate processing plants, which normally account for about 75 percent of sulfur’s consumption, were curtailed or shut down and had no room for more sulfur. With the recession threatening to grow worse, other industries were also cutting back on consumption.
Meanwhile, Martin was rushing to complete its second priller at Beaumont and sulfur was still being blocked at Galveston. Motorists were driving less and fuel consumption was down, and production of gasoline was following the trend.
MARKET NOTES
China: The Chinese government is accelerating reforms to the fertilizer industry that could lead to some regional disruption in the domestic fertilizer market.
Changes approved by the State Council in the last two weeks of the year will allow for the price of urea and various phosphates to shift with the market instead of adhering to strict government prices.
The government will continue relief on electricity, gas, and railway charges. Some local tax breaks will also be continued.
The decision also does not address local subsidies to fertilizer plants.
In the past, provincial and local governments have provided some financial support to local producers to ensure the continued employment of the local work force. Many of the smaller plants that have come to depend on these local subsidies are viewed by international fertilizer traders as the most expensive and inefficient plants operating in the country.
The central government has discouraged local governments from subsidizing factories that cannot compete in the market. The local governments, however, feared rising unemployment or angry farmers more than budget deficits, and kept the subsidies flowing.
The decision by the central government to move fertilizer supply and distribution is another step, said one international trader, to getting rid of the inefficient plants. Even if a number of the older plants closed, this trader said, China would still produce enough urea to satisfy farmers’ needs.
Beijing had earlier revised its export duty schedule from one that imposed a virtual ban on all exports. Duties of 35 percent and an additional tax of 150 percent were imposed on urea exports to push the domestic price down to satisfy farmer demand.
The resulting lower prices began driving some producers near bankruptcy unless some state subsidies were supplied.
The new measures, coupled with the changes in the export tariffs, are designed to allow market forces to set the urea and phosphate price.
The new policy did not address possible subsidies to farmers to help them smooth out the ups and downs of fertilizer price changes. In recent years the central government has been removing some restrictions on what farmers could charge for their crops.
The price for potash will continue to be regulated by the central government. Potash is the one key fertilizer input China is still required to import.
Russia: The government is discussing the creation of a state holding company, consisting of raw material producers for mineral fertilizers, several industry sources told the Interfax news agency. Specifically, the government is reported to be eyeing a proposal to buy controlling stakes in potash producers Uralkali and Silvinit and phosphate maker Apatit and merge the three. Sources noted that all three have sought government support, and Uralkali is under review for the mine accident at Berezniki.
Poland: Local sources report that the fertilizer industry has not been hit as hard by the global financial crisis as other industries in the country, though there are significant concerns about getting natural gas from Gazprom. Officials say Gazprom is reluctant to sign new agreements.
Prime Minister Donald Tusk is rather optimistic after his November visit to Qatar and Kuwait, where he held talks on gas delivery and possible investment in fertilizers and chemical industries. He is also planning a January 2009 visit to Saudi Arabia, which expressed earlier interest in fertilizer industry, oil delivery, and construction projects in Poland.
South Korea: The South Korean government said it would not restore vital aid to North Korea unless the Pyongyang government resumed talks on re-unification and denuclearization.
“As long as North Korea shows no change in its attitude, the situation is expected to remain the same as now,” Unification Minister Kim Ha-Joong told the South Korean news agency Yonhap.
South Korea has provided fertilizer to its northern neighbor for the past several years. That aid was combined with other programs to help lift North Korea out of its famine conditions and poverty.
The aid stopped in early 2008 when the north walked out of talks following the election of Lee Myung-Bak as president in the south. Despite offers from Seoul to continue fertilizer and rice shipments as humanitarian aid, the Pyongyang government refused to accept support from the conservative Lee government.
The announcement by Kim that aid will only resume once North Korea returns to a series of talks with South Korea came as Kim was briefing the president on policy goals for 2009.
Shipments of fertilizer to the north started less than a decade ago, when famine struck North Korea. Initially, the North Korean government refused any fertilizer from the south that came in bags that clearly showed South Korean origin.
At first, some material was re-bagged by international humanitarian organizations. Eventually the north accepted direct deliveries from South Korea.
Previous shipments of urea and NPKs to North Korea have totaled as much as 600,000 mt per year.
Israel: ICL Fertilizer, a unit of Israel Chemicals Ltd., is cutting production, according to the Israeli press, which reports that the company will be reducing phosphate production in Israel. In addition, ICL will cut potash production at two plants in Europe; however, it will continue to produce the product in Israel, with new European sales using potash stockpiles in Israel. More specifics from ICL were not immediately available.
The Week in Fertilizer Stocks
| Producer | Symbol | Price | Week Ago | Year Ago |
| Agrium | AGU | 33.00 | 32.19 | 72.99 |
| CF Industries | CF | 47.63 | 50.60 | 111.99 |
| Intrepid Potash | IPI | 19.92 | 20.21 | N/A |
| Mosaic | MOS | 34.20 | 34.75 | 95.84 |
| PotashCorp | POT | 73.80 | 74.22 | 144.19 |
| Terra Industries | TRA | 16.33 | 16.76 | 49.13 |
| Terra Nitrogen | TNH | 93.74 | 102.47 | 129.81 |
| Distribution/Retail | ||||
| Andersons Inc. | ANDE | 16.11 | 18.76 | 45.54 |
| Deere & Co. | DE | 37.65 | 38.67 | 90.54 |
| Scotts | SMG | 29.13 | 28.76 | 37.66 |
SPOT BARGE PRICES
Terra, Yara announce more curtailments; PotashCorp cuts earnings guidance
Terra Industries Inc. and Yara International ASA continued to announce curtailments last week and industry giant PotashCorp cut earnings guidance, all due to soft demand.
Terra said Dec. 18 that it has idled its Woodward, Okla., manufacturing facility to manage inventories in light of lower industrial ammonia demand resulting from the economic slowdown. The Woodward facility has the capacity to produce 440,000 st/y of ammonia annually, about 305,000 st/y of which is sold as a finished product. The remainder of the Woodward facility’s ammonia – 135,000 st/y – is upgraded into urea ammonium nitrate (UAN) solutions (currently 300,000 st/y) and urea liquor (25,000 st/y).
On May 8, 2008, Terra announced its intention to build a 525,000 st/y UAN plant at the Woodward facility, which will increase its UAN capacity to 825,000 st/y and decrease its available merchant ammonia capacity to 100,000 st/y. Terra management expects the project to be completed by the end of 2010.
“The current market environment reinforces our belief that the planned upgrading expansion project will add value to the Woodward facility,” said Terra President and CEO Michael Bennett. “The new UAN capacity will use ammonia as a feedstock, thereby substantially reducing the amount of merchant ammonia available from this site.”
Terra has also idled the Woodward facility’s methanol loop, which operates in conjunction with the ammonia process and has an annual capacity of 40 million gallons. The Woodward facility’s staff will continue to work full-time to keep the site in a condition to resume production quickly when market conditions warrant a restart.
Also, on Dec. 18, Terra and joint venture partner Yara International ASA announced that their GrowHow UK Ltd. is temporarily idling ammonium nitrate fertilizer production at the Ince facility to manage inventories. Effective Jan. 2, 2009, GrowHow will idle ammonia production at Ince in anticipation of a mid-January maintenance turnaround. The site has an annual capacity of 365,000 mt of ammonia and 500,000 mt of ammonium nitrate. The ammonia and ammonium nitrate plants will start up when market conditions improve.
Terra said GrowHow has adequate inventory to fulfill all current orders.
As previously reported, effective Dec. 17, 2008, GrowHow temporarily idled ammonium nitrate fertilizer production at the Billingham UK facility to manage inventories (GM Dec. 15, p. 1).
Sources last week expected that more companies will report curtailments over the Holidays or come January. The recent curtailments (see p. 14) have received positive reviews from analysts, prompting stock increases in some cases.
Citing the current softness in demand due to widespread uncertainty in the global economy, on Dec. 18 PotashCorp announced the downward revision of full-year 2008 earnings guidance to approximately $10.75 per share, which is 10 percent below the midpoint of its last indicated guidance range. Fourth-quarter earnings are expected to be the third-highest in the company’s history, behind only the second and third quarter 2008. Full-year 2008 earnings will be the company’s fifth consecutive record year, and should be more than triple the $3.40 per share earned in 2007. The company said the revision was precipitated by weaker fourth-quarter sales volumes in all three nutrients, lower potash volumes to higher netback spot markets, and lower prices and margins in nitrogen and phosphate segments. These impacts have been partially offset by a 1 percent reduction in the consolidated reported corporate income tax rate.
PotashCorp anticipates total potash sales volumes for 2008 will be below 9 million mt, with potash gross margin more than triple that of 2007. PotashCorp earlier announced a 2 million mt (GM Dec. 15, p. 1) curtailment of production beginning in January. It expects 2009 potash volumes could be similar to slightly above 2008 levels, with a strong final three quarters next year. Annualizing expected fourth-quarter 2008 per-mt potash prices alone could push 2009 realizations to almost $200 per mt higher than those for full-year 2008, without considering price increases already achieved by Canpotex for first-half 2009 shipments to Korea and Japan or upcoming contract settlements with China and India for 2009.
PotashCorp noted that potash prices remain strong due to reduced global production while some customers defer purchases and to customer recognition that higher prices are necessary to justify investment in greenfield potash capacity, which has a multi-billion-dollar cost and takes at least five to seven years to develop. Given difficult global credit conditions and increased geopolitical risk in certain regions where prospective potash capacity might have been added over the next decade, PotashCorp believes that the 8 million mt of brownfield capacity it is adding over the next five years is even more valuable today than it was when the projects were announced.
With high levels of nitrogen and phosphate in the supply chain when the financial crisis hit, and with raw material input costs declining dramatically, selling prices for these products have fallen precipitously in recent months, said the company. As a result, it adjusted fourth-quarter volumes and margins downward. It now expects full-year 2008 nitrogen gross margin to exceed 2007 levels by 35 percent and 2008 phosphate segment gross margin to be approximately 2.5 times higher than 2007 levels.
While the company expects a slow start to 2009 for all three nutrients, it believes global production curtailments – the logical economic response to supply/demand imbalances when buyers step away from the market – will significantly tighten these markets when demand returns, which it expects during the second-quarter of 2009.
“Like every other industry, agriculture has felt the impact of the global financial downturn,” said PotashCorp President and Chief Executive Officer Bill Doyle. “Unlike other industries, however, food production and fertilizer applications cannot be delayed indefinitely. The global food crisis captured the world’s focus early in 2008, but attention and capital is currently being diverted to economic issues. That does not mean the food crisis has been resolved. In reality, it could become more severe, increasing the need for and value of fertilizers, especially potash. Given the essential nature of our products and the underlying fundamentals for our business, we anticipate strong demand will return as 2009 progresses, creating even greater opportunities for growth.”
Rentech upbeat about 2008-09 nitrogen results, opportunities under Obama Administration
Operating income at Rentech Inc.’s nitrogen business, Rentech Energy Midwest Corp. (REMC), nearly tripled during the company’s fiscal year ending Sept. 30, 2008, to $46.7 million, up from the prior year’s $13.2 million. REMC nitrogen revenues were $210.3 million, up from the year-ago $131.8 million. Total tons shipped from REMC’s East Dubuque, Ill., plant in fiscal 2008 were 534,000 st, up from the year-ago 468,000 st., with most of these being ammonia and UAN. REMC’s income is plowed into Rentech’s developing alternative energy business and to pay off debt.
REMC gross profit was $50 million, up from $15.9 million. REMC took an $8.7 million write-down due to natural gas inventories that had to be written down as gas prices declined. Rentech told analysts this is due to its policy of locking in margins by buying gas forward against the forward sales of fertilizer. Rentech said it purchased and used some 11.044 Bcf of gas in fiscal 2008, up from the year-ago 9.019 Bcf. Net income at REMC increased from $11.9 million to $45 million.
REMC EBITDA for fiscal 2008 was $53.8 million on guidance of $50 million.
REMC achieved new production records for UAN and liquid urea. For ammonia, the average gross selling price was $539/st in 2008, compared to $343/st in 2007. For UAN, the price was $308/st, up from $209/st.
“Looking ahead at REMC, we have already entered into significant prepaid sales agreements for a significant portion of production for fiscal 2009,” Rentech CFO Dan Cohrs told analysts. “For ammonia, 60 percent of our projected shipments for fiscal 2009 have already been contracted at an average sales price of $816/st. For UAN, 40 percent of our projected shipments for next year have been contracted already at an average sales price of $396/st. On all of those forward sales we’ve locked in gross margins through purchases of natural gas.”
Rentech is not worried about getting the money on its forward contracts, saying that most of it would be through Agrium Inc., its major buyer, and it is take or pay, with customers putting down at least 25 percent up front. “To the extent that there is credit risk in the contract falls at the Agrium level,” explained Ramsbottom. “It doesn’t go through the distributor or the farmer.” In a response to questions, Rentech said it does not have account receivables insurance and does not know if Agrium does. Agrium declined to comment on the insurance, but a spokesman said Agrium is probably Rentech’s strongest customer financially. Rentech says Agrium purchased approximately 81 percent of its nitrogen production in fiscal 2008.
To date, Rentech has not responded to inquiries about a possible production curtailment at REMC’s East Dubuque, Ill., plant. As other nitrogen producers curtail production, sources have speculated that REMC may do likewise.
Company-wide, Rentech reported a net loss from continuing operations of $63 million ($0.380 per basic and diluted share) on sales of $211 million for the fiscal year 2008, versus the year-ago loss of $94.9 million ($.606 per share) and $132.3 million, respectively. Rentech had a fourth-quarter net loss of $8.9 million ($.054 per share) on revenues of $74.6 million, versus the year-ago $59.1 million ($.360 per share) and $29.6 million.
“We are extremely pleased with REMC’s results, as the plant continues to perform exceptionally well,” said Rentech President and CEO Hunt Ramsbottom. “REMC achieved record production volumes and we were able to capture the record prices found in the market. We presently believe our recent corporate cost reductions, in conjunction with the expected continued strong performance of REMC, will enable Rentech to achieve positive consolidated EBITDA for fiscal 2009. This is a significant milestone as it marks the first time in our company’s history that we have projected positive consolidated EBITDA performance.”
Rentech believes that REMC will have fiscal 2009 net income over $33.1 million, with EBITDA in excess of $50 million.
“We are fortunate that we have a profitable operating asset and are able to forecast improved financial results even in this difficult macro-economic environment,” added Ramsbottom. “We believe that these attributes, in addition to operating the only synthetic transportation fuels facility in the U.S., positions us well within the alternative energy sector. In the short time that we have operated the PDU (Product Demonstration Unit at Commerce City, Colo.), we have not only sent samples of our products to potential customers, but through 20 percent greater catalyst productivity and improved catalyst composition, we have identified opportunities to enhance the economic returns of facilities utilizing the Rentech Process by reducing capital requirements and operating costs.”
Rentech noted that it is in discussions with its lenders to make it easier to transfer money within the company. One of the covenants it would like to modify is one in which for every dollar brought in from REMC to the parent that is upstreamed, one is required to pay down on the loan.
As for the new Obama Administration, Ramsbottom said Rentech has folks on his advisory committee that have met with Obama’s transition team. He said Rentech knows incoming Secretary of Energy Steven Chu through its advisors, and feels it has good direct ties into the administration. He added that Rentech is now hearing that the new Administration will pump up to $1 trillion into the economy, and much of that will be into energy. Ramsbottom said the company’s proposed Natchez, Miss., alternative energy plant is well poised to get Administration approval since it can provide jobs within the next 24 months, and it will have a very good solid carbon footprint that would provide renewable diesel and jet fuel.
However, Ramsbottom noted that right now, while it continues to talk to potential partners for the Natchez project, credit is a major issue. “We can have all the discussions we want with partners, but the credit markets have to cooperate.”
In other news, Rentech noted that its poison pill, anti-takeover measure has expired. Ramsbottom said the board has no plans to renew it, and feels it has several other provisions in place to protect shareholder value in case of an abusive takeover attempt.
Intrepid joins chorus, reports drop in sales levels
Denver-Intrepid Potash Inc. said Dec. 18 that, consistent with announcements from other fertilizer producers, the company has seen the reduction and deferral of sales of potash and langbeinite, which normally would occur in the fourth quarter, into early 2009. Due to these reductions and deferrals, the company expects sales levels for the fourth quarter 2008 to be less than half of the levels seen in the third quarter of this year. In addition, the company anticipates producing potash and langbeinite volumes for the full year that are below the previous guidance range and anticipates that its corresponding annual cost of goods sold for both potash and langbeinite will be higher than previous guidance. The higher cost per ton numbers are a function of the company strengthening its workforce and continuing infrastructure improvements, while at the same time producing fewer tons. In order to manage some variable cost elements, the company has recently elected to reduce its contract labor in Carlsbad, N.M., through the end of 2008 and into 2009 as long as the current market conditions exist. As a result of entering 2009 with relatively higher than historical inventory levels, and in an effort to manage the supply demand balance, the company currently anticipates that 2009 potash production will be below 800,000 tons. Intrepid CEO Bob Jornayvaz stated, “We are evaluating the market in a real-time fashion and taking the appropriate actions to navigate the company through this period of general market uncertainty. We will continue to actively monitor sales and production rates to manage inventory levels against the near-term market demand profile while at the same time being thoughtful about long-term fundamentals. We firmly believe that the macro potash trends of world population growth, improved diets and farmers investing for yield remain unchanged. The strength of our debt-free balance sheet allows us to make these proactive, real-time, operating and marketing decisions that are in the best long-term interests of our stockholders.”