Belton, Mo.-Specialty Fertilizer Products, which produces Avail phosphorous enhancer and NutriSphere-N nitrogen manager, will move its headquarters in December from Belton to a $450 million mixed-use project about 10 miles away directly across the border in Leawood, Kan. The company, which is becoming known more and more as SFP, will occupy 12,199 square feet in Park Place’s Aubrey Building, now under construction. Some 23 employees will be affected. “As a fast growing agricultural research, development and manufacturing company,” Jake Sanders, marketing development vice president, commented, “the larger facility will allow us to continue to expand and explore additional technologies while better serving a growing customer base.” Melanie Acklin, a spokeswoman for the privately-held company, said annual revenue grew 700 percent between 2004 and 2007. She added that the company needs more opportunities for serving and entertaining more clients, and the Park Place location will afford plentiful nearby hotels and restaurants for this purpose. Sanders also reported an addition to its marketing group, with Stephanie Russell joining SFP from RFD-TV in Nashville, where she was public relations assistant. Russell will assist the director of marketing and vice president of market development in a public relations and marketing capacity, handling tradeshow preparation, vendor correspondence, and customer relations.
All posts by traceybg@gmail.com
Management Briefs
The Mosaic Co. reports that Joc O’Rourke will join the company as a senior executive, responsible for its global mining and chemical processing operations, beginning in early January 2009. He will also serve on its senior leadership team.
“Joc brings over 25 years of experience in operating global mining operations and has spearheaded a variety of large scale expansion projects,” said Jim Prokopanko, Mosaic CEO. “Joc will not only broaden our capacity to execute on our strategy, he also brings a tremendous depth of experience and passion for mining and minerals processing and will play a key role in leading the operations of Mosaic’s two major product lines of potash and phosphate.”
O’Rourke has served as president of Barrick Gold’s Australia Pacific Business Unit since 2006. He has also held various operational positions in the global gold, copper, mining, and nickel industries. O’Rourke has a B.S. in mining and engineering from the University of British Columbia and an Executive MBA from the Institute European d’Administration aux Affaires, Fontainebleau.
Market Watch
AMMONIA
U.S. Gulf/Tampa: As Green Markets went to press just before Thanksgiving there was nothing firm on new Tampa business for December. However, the speculation was not good for sellers. Citing falling global prices and curtailments, pressure was on Tampa to fall. The only question was by how much. Buyers argued that there was just too much product on the water and in storage for prices not to crater.
In the meantime, across the Gulf at NOLA, sources reported firm offers on the table at $250/st FOB.
Trinidad: PotashCorp’s #2 plant is currently being brought back into service following scheduled maintenance. Now the #1 plant will go down for scheduled maintenance.
Eastern Cornbelt: Sources said field applications of ammonia had picked up considerably last week, with demand in central Illinois described as brisk. One source said a weekend forecast for clear skies and temperatures in the 40s promised more open fieldwork days for fall ammonia. “If we can have another week’s worth of activity, we’ll be sitting okay,” he said.
Sources tagged the ammonia market at $650/st FOB in Illinois for very limited spot sales. Most of the tons currently moving were prepaid earlier for fall. No firm offers were reported for spring prepay ammonia last week, and sources were unsure what the number would have to be to attract some interest. One supplier was referencing forward contract ammonia for January through May at $1,015-$1,025/st FOB regional terminals.
Western Cornbelt: With improved weather and the bulk of harvest completed, sources said ammonia movement to the field picked up last week. Although volumes were confined to fall prepay tons booked earlier, sources said the application pace was brisk in all three states. Dry tons were also moving to the field in some areas, and several sources said the pace should remain steady if weather conditions are cooperative.
On a truck-delivered basis, anhydrous ammonia was pegged at $475-$540/st in the region from southern production points. Out of regional terminals, the spot market was quoted at $450-$550/st FOB, with the low in Nebraska. Sources reported no new business to test the market, however.
Forward contract ammonia from one supplier was referenced as high as $1,010-$1,020/st FOB regional terminals for the January-May shipping period.
Southern Plains: Fertilizer activity remained very quiet in the region, except for some fall ammonia movement in parts of Kansas. Some areas also reported a late run earlier in November as growers finished the last of the wheat crop, but activity was spotty at best.
Anhydrous ammonia pricing reflected a significant drop from last report. Sources quoted the market at $375-$410/st FOB regional production points for spot market tons, with the upper end at $450/st FOB Kansas pipeline terminals to the dealer.
California: Effective Nov. 21, Agrium’s truck-DEL anhydrous ammonia postings dropped to $755/st in central California and $760/st in northern California. Calamco adjusted its anhydrous ammonia postings on Nov. 20, with new reference levels dropping to $755/st truck-DEL and $800/st rail-DEL in the California market. Calamco’s aqua ammonia price dropped on that date to $185/st FOB in California.
Western Canada: Agrium has idled its Redwater #1 plant, the smaller of its two plants at the site. A swing plant that goes up and down based on market conditions, it has been down for two weeks. Agrium’s Fort Saskatchewan plant is down for a week of maintenance.
Black Sea: Soft prices continue to plague the region. Sources report prices near $200/mt FOB for bids and $230/mt FOB for offers. Buyers argue the price should be at $200/mt FOB and lower because of the traditional gap between the Middle East price and Yuzhnyy. With the Middle East pegged at $160-$180/mt FOB, the Yuzhnyy price should be $180-$200/mt FOB, according to those who argue the point using math. Yet no one has been able to point to any business from the area that is near the $200/mt FOB mark.
The price slide has prompted reports of plant closings beyond the usual maintenance schedule. Now OPZ said it will stop ammonia exports and produce ammonia only for its own urea operations. The immediate effect will be to cut about 15 percent of the exports from Yuzhnyy. Industry sources say OPZ exported about 450,000 mt from January through October of this year.
The move comes on the heels of BASF announcing it was closing most of its ammonia operations as well. The BASF closings, however, also include ammonia buyers. For many in the industry, the company-wide closures or cutbacks will do little to tighten the ammonia market.
Traders in Asia say the closing of production facilities should help provide a floor to the market. The other major component is U.S. buying demand – and that is still up in the air.
Middle East: Clarification of the IFFCO/India deal from earlier this month puts the latest deal at $199/mt CFR. Earlier reports indicated a price of $190/mt CFR. For traders, however, the $9/mt difference is not big enough to see an end to the soft market.
The deal with IFFCO done from Qafco and Fertil via Kisan is part of a series of contract deals to India.
At present, said one Asian trader, it is the contracted tons into India that are setting the market price and pace. Industry watchers have been unable to name any spot deals in the past few weeks, leaving the contracts to set the regional price.
India: Demand remains firm. Buyers such as IFFCO are setting the pace in the Middle East. Through its partner, Kisan, IFFCO has been able to secure cargo from the Middle East producers. In some cases the cargoes picked up are run through another trading house. In the end, recent purchases have been at prices lower than previous deals.
UREA
U.S.Gulf: Most players put new prompt granular trades last week at $240-$245/st FOB, though there was one report that a deal as low as $235/st FOB was done. Further confirmation was not available at press time.
Trinidad: PotashCorp’s urea plant will come down for scheduled maintenance for two weeks in late December or early January.
Eastern Cornbelt: Granular urea was pegged at $335-$370/st FOB regional terminals, which was down again from last report. One Illinois source said dealer pricing in the mid$300s/st FOB was a viable spot market last week.
Western Cornbelt: Granular urea pricing continued to slide in the region. Sources tagged the dealer market at $310-$350/st FOB, with the low reported in Missouri and the upper end in Iowa. Effective Nov. 21, Agrium’s urea postings in the Northern Plains area dropped to $400/st FOB North Dakota terminals at Alton, Carrington, Colfax, Marion, and Scranton, and $405/st rail-DEL in Wisconsin, Minnesota, and the Dakotas.
Southern Plains: Granular urea pricing was quoted at $280-$290/st FOB in Oklahoma last week for spot market tons to the dealer. The Houston market was pegged at the $275/st FOB mark, but with limited supply for the near-term. One supplier was referencing forward contract urea for January through February at $343/st FOB Inola, Okla.
South Central: Urea was moving on timber acres in some sections of the South Central region last week. Urea pricing out of regional terminals had dropped considerably, with sources reporting a broad range of $290-$350/st FOB. The upper end reflected posted levels, but most acknowledged that the true dealer market was at or near the $300/st FOB level last week.
Southeast: Granular urea was quoted at $360-$390/st FOB port terminals to the dealer, with the Norfolk, Va., market tagged at the $370/st FOB level last week.
Western U.S.: Agrium’s granular urea postings dropped on Nov. 21 to $400-$415/st DEL in Montana and Wyoming, depending on location; $425/st FOB warehouse locations at Glade, Kennewick, Warden, and Wilson, Wash.; $430/st DEL in Washington, Oregon, Idaho, and northern Nevada; $440/st DEL in northern and central Utah; $445/st DEL in southern Utah; $455/st FOB West Sacramento, Calif.; $475/st truck-DEL in Central California; and $480/st truck-DEL in Northern California.
Pakistan: The TCP tender closed Nov. 22. Talks over the weekend resulted in 250,000 mt being awarded at the lowest offered price. Twelve companies offered tons to TCP, but only seven complied with the tender documents.
TCP tender offers |
||||
| Supplier | Quantity (mt) | Origin | US$/mt | |
| FOB | CFR | |||
| Keytrade | 30-35,000 | Open | 274.85 | |
| Transammonia | 30-40,000 | Ukraine/Yuzhnyy | 265.00 | 279.40 |
| 30-40,000 | Riga | 265.00 | 284.40 | |
| 25-30,000 (S/O) | Malaysia | 260.00 | 285.40 | |
| Transfert | 25,000 | Open | 284.95 | |
| Sabic | 50,000 | Saudi Arabia | 271.00 | 285.00 |
| 25-35,000 | Open | 294.95 | ||
| Multicommerce | 25-35,000 | Open | 299.80 | |
| 25-30,000 | 304.85 | |||
| 25-30,000 | 295.43 | |||
| Dreymoor | 25-30,000 (S/O) | Open | 299.97 | |
| 25-30,000 (S/O) | 299.97 | |||
| Swiss Singapore | 50,000 | Open | 311.00 | |
In the end, TCP paid $274.85/mt CFR to the following companies:
| Supplier | Quantity (mt) |
| Transammonia | 75,000 |
| Keytrade | 65,000 |
| Transfert | 60,000 |
| Sabic | 50,000 |
Terms of the tender require the suppliers to ship within 15 days of the opening of the letters of credit. Sources say that makes the shipping dates the first half of December.
Funding for the urea came through late Monday from the IMF and other international banking sources, said sources. Awards were issued Monday, and final papers for the funding were signed Tuesday.
Sources were divided on the full impact the tender will have on the market. Few believed any upward movement in the price would be seen in the next couple of weeks.
The initial offering prices into the TCP tender were higher than those in the MMTC/India tender that closed just a few days prior. Sabic, for example, added $10/mt to its pricing ideas. In the end, the Sabic shipment has an estimated netback of $265-$268/mt FOB.
Because no awards were made in the MMTC tender, the question most commonly heard around the industry is what will happen when or if MMTC retenders.
Even though TCP took all the tons it asked for, expectations are high that it will call another tender quickly.
In total, local sources expect Pakistan to import 700,000 mt of urea in November-December.
India: Talks between MMTC and companies that offered tons into the tender of Nov. 20 were able to secure some savings, but not enough to get MMTC to make awards. As a result, the conventional wisdom is that MMTC will retender within the next week or so.
Even though MMTC was able to negotiate a reduction in pricing, such as Sabic taking $2/mt off its price for its full 90,000 mt, no awards were issued. Keytrade lowered its offer to $266.90/mt CFR. As Green Markets went to press, no other company was given an award.
Sources now expect to see the tender scrapped and a new one called. Adding to the expectation that a new tender will be called is the fact that the validity of many of the offers made in the MMTC tender expired Friday, Nov. 21. One trader noted that offering companies set the short time limit so they would be able to participate in the TCP/Pakistan tender if they lost in the MMTC tender. As it turns out, TCP issued awards faster than MMTC.
Reportedly, MMTC believed it could get better prices than those offered. The results of the TCP/Pakistan tender, however, show a firming market. The Sabic price in particular showed a firmness that was absent just a couple of weeks ago.
Sources say if MMTC issues a new tender, the Middle East producers will likely try to follow up on the Sabic offer to TCP of $271/mt FOB and push the price up.
India still needs 300-500,000 mt for the current application season.
Middle East: The results of the MMTC/India and TCP/Pakistan tenders showed a strong desire by producers to secure awards and move the price up. In the Indian tender the Middle East suppliers lowered their prices $10/mt from the previous tender to ensure an award. Sabic was even willing to take another couple of dollars off to get the business. And the Indians have yet to make an award.
In the TCP tender, suppliers must have figured they would get the Indian business. Only Sabic offered, and it did so with a $10/mt bump in pricing.
In the end, Sabic got an award from TCP at an estimated netback of $265/mt FOB.
This price is higher than what was offered in the Indian tender, but lower than what the producers were hoping for. Still, said one trader, this is an indication that the market may have bottomed out.
The real proof of where the market will go should be seen when MMTC retenders.
Industry observers point to stagnant buying around the globe. They say existing stockpiles of more expensive urea could force some buyers to buy a few cargoes now to help average out the price of what they sell inland. Others say buyers don’t have the cash or available credit to come in now.
Adding to the market woes of producers is the change in export duties from China. With only a 10 percent duty on exports from China beginning Dec. 1, sources say Chinese product will be more competitive as global prices rebound.
The industry is also waiting to see what happens with U.S. purchases. The credit crunch and gloomy economic situation could cause importers to reduce their usual take. For now, the market in the area for prills and granular is at parity. Sources say the price is a mixture of the Indian and Pakistani tenders, $261-$265/mt FOB.
Black Sea: Yuzhnyy producers are not looking at a happy fourth quarter. Prices have stagnated at $235-$245/mt FOB. Sources say for some producers this already represents a price level below production costs. For others, there is still $10-$15 to go.
Shutdowns in Europe and the Baltic region are preventing prices from crashing further, but demand remains weak. Sources say unless more buyers step up soon, more plants in the Black Sea area may have to extend their maintenance programs. For some plants, such an extended shutdown could cause problems as winter approaches.
Some producers reportedly have enough orders on hand or sufficient storage capacity to avoid dramatic price reductions to ensure a sale.
Looming on the horizon for the Ukrainian producers, however, is another boost in natural gas prices from Russia.
Asia: Sri Lanka will be calling two small tenders to close Dec. 1. These tenders are the only real action taking place in the urea market outside of India, Pakistan, and Bangladesh. Sources say Southeast Asia is full. The Philippines, Vietnam, and Thailand are all reported to have plenty of reserves, albeit at prices much higher than the current global market. If local traders have enough money available, they may try to pick up some of the lower-priced urea available on the market today. They could then combine it with the expensive product to offer tons at an averaged price.
The problem for many is that the tightened credit conditions make only cash deals possible. And not many of the local traders have a lot of ready cash.
NITROGEN SOLUTIONS
U.S. Gulf: Price ideas continue to plummet, though finding an actual transaction is another matter.
Eastern Cornbelt: The UAN-32 market was generally reported in the $9.75-$11.75/unit FOB range for spot market tons, although new sales were few to test the market. One supplier was referencing forward contract UAN-32 for January at $420.80-$430.40/st ($13.15-$13.45/unit) FOB regional terminals.
Western Cornbelt: UAN was reported in a very broad range at $9.20-$11.72/unit FOB, with the low in Iowa and the upper end reported a dealer reference price in Missouri. Sources reported no actual sales to test those numbers, however.
Southern Plains: UAN-32 pricing also continued to slide. Sources pegged the regional market at $260-$280/st ($8.13-$8.85/unit) FOB, with the low end out of regional production points.
South Central: UAN-32 was reported in a broad range at $260-$285/st ($8.13-$8.91) FOB terminals to the dealer, with the low end of that range also reported on a rail-DEL basis to some locations.
Southeast: UAN-30 was pegged at $280-$300/st ($9.33-$10.00/unit) FOB regional terminals, with the upper end also quoted for rail-DEL tons into South Carolina. As was reported last week, new indications of imported UAN-32 vessel tons were in the $250-$280/mt range on the East Coast, with the low for offers and the upper end reportedly for confirmed business.
California: Agrium’s UAN-32 postings dropped on Nov. 21 to $413/st ($12.91/unit) FOB Sacramento, Calif., $435/st ($13.59/unit) truck-DEL in central California, and $440/st ($13.75/unit) truck-DEL in northern California.
AMMONIUM NITRATE
Western Cornbelt: Ammonium nitrate remained in a broad range at $400-$510/st FOB in the region, but sources acknowledged that the dealer postings at the upper end of that range were “way out of whack,” and would have to be lowered to spark any interest.
Southern Plains: Ammonium nitrate pricing had reportedly dropped to $400/st FOB the Tulsa market, but sources described inventories as limited.
South Central: Ammonium nitrate was quoted at $400-$470/st FOB.
Southeast: Ammonium nitrate remained at $540-$550/st range FOB Tampa based on the last done business. There were reports of rail-DEL tons coming into the region in the $400s/st last week, but no actual business was confirmed to test those numbers.
AMMONIUM SULFATE
Eastern Cornbelt: Granular ammonium sulfate remained at $200-$210/st FOB or DEL in the region. Agrium’s Nov. 21 granular ammonium sulfate postings included $305/st rail-DEL in Wisconsin, Minnesota, and the Dakotas.
Western Cornbelt: Granular ammonium sulfate remained at the $200-$205/st FOB mark from most locations. Honeywell announced a prepay program for shipments completed Jan. 1 through July 10, 2009, for the Iowa, Missouri, Kansas, Nebraska, Illinois, Wisconsin, Minnesota, and Dakotas region. The program has granular ammonium sulfate at $210/st rail-DEL or FOB warehouse, and mid-grade sulfate at $190/st rail-DEL or FOB warehouse. Program terms also specify that customers must provide an estimated shipping forecast by Jan. 23.
Southern Plains: The granular ammonium sulfate market was pegged at $250-$300/st FOB Texas shipping points, with the low FOB Freeport.
South Central: Ammonium sulfate was reported in the $225-$285/st FOB range in the region, depending on location, with the low in Arkansas. Delivered granular sulfate continued to cover a wide range at $200-$335/st.
Southeast: The granular ammonium sulfate market was quoted at $290-$300/st FOB, with delivered granular sulfate in the $335-$363/st range in the region. Standard grade was reported at $285-$310/st DEL.
Pacific Northwest: Agrium’s granular ammonium sulfate postings dropped on Nov. 21 to $300/st FOB warehouses in Washington, Idaho, Oregon and Nevada, and $305/st DEL in those states plus Montana and Wyoming.
PHOSPHATE
Central Florida: Last week was Thanksgiving, but there has been little for the industry to be thankful for during the second half of the year. Prices have fallen by roughly half, and dealers and traders were filled to the brim. Meanwhile, producer inventories had grown to near maximum and places to put more phosphates were rapidly disappearing. The domestic and world markets essentially have shut down, and the outlook for any kind of change before the end of the year was bleak.
CF was performing a turnaround at its Plant City, Fla., plant, and PCS has shut down one of its production plants at White Springs. Mosaic still claimed to be cutting production by 500,000 to a million st, but raw material suppliers believe it must be even more.
CF’s move last week to slash prices to $490/st FOB at both Central Florida and New Orleans put traders and dealers in a financial bind because the price change lowered the value of their inventories, which doesn’t look good on the balance sheet.
With no new prompt sales and no new offers, prices in Central Florida were unchanged last week at $490-$500/st FOB. CF had the lowest asking price. PCS Sales was still holding to its posting of $1,070/st FOB. Mosaic had no posted price for Central Florida. The most recent price for Agrifos was $755/st FOB for trucks and $750/st FOB for rail shipments, but those will likely change once the market begins to move.
U.S. Gulf: The biggest turkey during Thanksgiving week was the market, although real turkeys were at least cooking. The NOLA DAP barge market was as dead as the turkey on the table last week, and there appeared to be no good news on the horizon. Prices were down, and profits for the year were sure to follow.
In other depressing news, IFA issued a report that said the reduced use of fertilizers worldwide would have a negative impact on food supplies, which means even more people in the world will face starvation.
Meanwhile, the credit crunch was affecting lending from banks, and warehouses were full of phosphates that have not sold. Some on the dealer level had filled at prices between $1,000/st FOB and $1,200/st FOB, and took a big hit last week when CF announced its new low prices. The situation for terminals was even worse. They have contracts with producers, which required them to take delivery of NOLA DAP barges at current market prices, even though it was difficult – if not impossible – to sell what they already had in stock.
Warehouse prices also took a hit last week. As a result of CF’s move, most dropped to the $525-$575/st FOB level – a hit of $200/st FOB or more. Last week, there was still no one predicting movement would begin around the first of December. Now, January would be nice.
One positive note last week – the price of corn moved up a bit during early week trading. Also, if the weather in the Midwest gets cold enough in the next couple of weeks, farmers will be able to get into their fields and put phosphate and potash on the ground.
Based on CF’s new prices and other somewhat recent offers, the NOLA DAP barge range was $500-$550/st FOB. Mosaic had no posted price.
Eastern Cornbelt: Sources reported some movement of phosphates to the field last week, but activity was limited. The DAP market was reported at $535-$575/st FOB most river warehouses in the region, with MAP at a $25/st premium. Those numbers were down some $150/st from last report following a big downward pricing adjustment by CF at mid-month. One regional supplier was referencing forward contract DAP for January at $540/st FOB Peoria, Ill., and $545/st FOB Cincinnati, with a $15/st increase slated for shipments in February through June.
No current market information was available for 10-34-0 last week.
Western Cornbelt: Phosphate pricing continued to plummet. Sources quoted the DAP market at $525-$675/st FOB regional warehouses to the dealer, and several sources said they were starting to pick up some very limited spot business at the low end of that range. The problem continues to be lots of high priced inventory in dealer bins, with reports that retail prices continue to reflect these earlier replacement costs, so growers are holding back.
MAP was $545-$700/st FOB. The 10-34-0 market was tagged at $880-$900/st FOB in the region. Noting lower ammonia and acid costs, however, several sources said that market has to come down.
As of Nov. 21, Agrium had lowered its super phosphoric acid (SPA) and merchant grade acid (MGA) postings in the continental U.S. to $1,150/st rail-DEL for shipments from Nov. 21 through Dec. 31. That was down from November pricing levels at the $1,750/st DEL level and October postings at the $2,500/st DEL mark. Agrium said it will not post phosphoric acid pricing beyond Dec. 31 at this time, but “will continue to monitor the market situation and communicate a January SPA/MGA price before year end.” The company also clarified that it will not be repricing any SPA or MGA shipped on or before Nov. 21 to the new price level.
Southern Plains: Phosphate pricing was down significantly from last report. Sources quoted the DAP market at $520-$540/st FOB Inola and Catoosa, Okla., with MAP $25/st higher than DAP. One supplier was referencing forward contract DAP and MAP for January at $540/st and $565/st FOB Inola, respectively, with a $15/st increase for February-June shipments.
10-34-0 was reported in a broad range at $750-$900/st FOB in the region last week, also down dramatically from last report.
South Central: One source said phosphate and potash usage in his trade area was only 15-20 percent of normal this fall. DAP pricing had reportedly dropped to $475-$570/st FOB regional warehouses to the dealer, with the low end confirmed in Arkansas. MAP was $20-$25/st higher than DAP, and TSP was quoted at $450-$550/st FOB in the region last week.
Western U.S.: Agrium’s MAP postings dropped on Nov. 21 to $585/st DEL in Montana and Wyoming; $590/st DEL in southern Idaho, Utah, Nevada, and Oregon’s Malheur County; $590/st FOB and $595/st DEL in Washington, northern Idaho and Oregon excluding Malheur County; and $600/st FOB warehouse or rail-DEL in California and Arizona.
U.S. Export: No new export transactions were found last week, and prospects appeared dim for any serious movement in the near future. India and Pakistan may need additional phosphate before the end of the year, but no large tenders had been issued. In South America, Argentina, which had a farmers strike for much of the year, had no need for additional supplies.
With no new deals last week and no new offers, the export DAP price range remained unchanged at $533-$555/mt FOB.
POTASH
Eastern Cornbelt: Potash was quoted at $775-$850/st FOB regional warehouses, depending on grade and location. One dealer said that while growers are showing some interest in phosphates after the long harvest, many continue to draw the line at potash. “Growers are telling us to go ahead and spread some phosphate, but no potash,” said one.
Western Cornbelt: Potash was reported in the $750-$860/st FOB range in the region last week, with the upper end quoted for white granular potash on a spot basis in Missouri. One Iowa source pegged the common dealer price for red granular potash at the $775/st FOB level.
Southern Plains: The potash market was pegged at $800-$825/st FOB regional warehouses, with the mine price FOB Carlsbad, N.M., quoted at $794-$800/st, depending on grade.
South Central: Potash was pegged at $810-$830/st FOB regional warehouses to the dealer.
Southeast: Carolina sources pegged the potash market at $825-$850/st DEL last week, with the lower number reportedly for some dealer-to-dealer trades.
Russia: Uralkali says weakened demand for fertilizer has prompted the company’s decision to cut production in November and December by 50 percent. It says this will result in a 10 percent reduction in annual output, and will affect Uralkali’s financial performance. The company expects that the 500,000 mt decline in production in Q4 will result in a decrease in the company’s cash revenues by US$650 million. Uralkali believes the unfavorable market situation is likely to continue through early 2009, and the company’s production will be curtailed as a result. It says it is currently unable to give firm guidance for utilizing its production facilities in 2009.
The company has designed a turnaround program that includes intensified repairing of its production facilities, canceling overtime work and optimizing employees’ schedules, suspending the bonus plan, and reducing various expenses.
In other news, it reports that it has set the upper price limit for potash fertilizers intended for direct application by Russian farmers at 3,700 roubles per mt (FCA, exclusive of packaging) in first half 2009.
SULFUR
Tampa: With phosphate production in Central Florida and the rest of the world cut back to survival levels, sulfur producers were seeing their inventory levels growing rapidly for the last month or more.
The priller at Galveston was running full steam last week, and a vessel was loaded with 53,000 mt for shipment to an undisclosed location – most likely Brazil. Another sulfur vessel was scheduled to be loaded. Martin plans to bring a second priller online at Galveston by March 1, which will help ease some, but far from all, of the burden of excess sulfur.
In addition to the curtailment of phosphate production, the economy was forcing industrial customers to reduce the production of a variety of products that require sulfur, which was adding to the problem for oil companies.
The only transportation problem last week was a buildup of sulfur railcars at Central Florida, which was expected due to phosphate curtailments.
Expectations last week were for sulfur prices for Tampa to take another dive for the first quarter, possibly to $50/lt, but that could be conservative. Low freight rates will help cushion the financial blow.
West Coast: Most, if not all, fourth-quarter sulfur prices were settled last week at negative or nearly negative prices, believed to be $0.00-($30).
The Week in Fertilizer Stocks
| Producer | Symbol | Price | Week Ago | Year Ago |
| Agrium | AGU | 28.16 | 23.31 | 53.29 |
| CF Industries | CF | 48.70 | 39.38 | 83.22 |
| Intrepid Potash | IPI | 17.90 | 14.34 | N/A |
| Mosaic | MOS | 27.85 | 22.31 | 61.10 |
| PotashCorp | POT | 59.22 | 55.46 | 110.24 |
| Terra Industries | TRA | 14.30 | 11.25 | 34.47 |
| Terra Nitrogen | TNH | 94.28 | 83.40 | 93.04 |
| Distribution/Retail | ||||
| Andersons Inc. | ANDE | 15.88 | 13.72 | 42.95 |
| Deere & Co. | DE | 33.10 | 28.77 | 71.46 |
| Scotts | SMG | 29.47 | 25.62 | 35.11 |
SPOT BARGE PRICES
Phosphate Holdings 3Q income triples; 4Q off to difficult start, curtailments eyed
Phosphate Holdings Inc. (PHI) the sole shareholder in Mississippi Phosphates, reported a 207 percent increase in net income for the third quarter ending Sept. 30, 2008, to $12.6 million ($1.56 per diluted share) compared to the year-ago $4.1 million ($.50 per share). Net sales were up 310 percent during the quarter, to $171.6 million versus the year-ago $41.9 million.
“The third quarter of 2008 represented another solid quarter for the company,” said Robert Jones, PHI CEO. “We maintained near-record sales prices per ton of DAP sold, but did see our margins decline significantly as a result of higher raw material input costs.”
Despite the upbeat results for the third quarter, PHI said the fourth quarter is off to a difficult start due to declining sales volumes in an increasingly illiquid phosphate market. PHI said phosphate demand began to decline late in the third quarter and that it has continued to the point that there is now very limited demand. As a result, prices have fallen and the company is now evaluating production curtailments in the fourth quarter. PHI would use this time to do maintenance.
Jones expects a lack of demand will cause curtailments in all exporting countries, with reports that Russia has cut production by 50 percent. Jones said one sulfuric acid plant was down in October for nine days and that the DAP plant was down several days in early November for a repair. Jones noted that because of the current situation the company did not work 24/7 to get the plant back up.
Jones downplayed the idea of a flat-out cold curtailment, the total shutdown of the plant. He said such would cost about $1 million per month.
Current DAP inventories are put at 40,000 st, with storage capacity at 55,000 st. The company said it has 200,000 st of phosphate rock in stock, which is higher than in the past. It traditionally carries low levels of ammonia and sulfur in inventory, and says it has not begun negotiations for first quarter 2009 phos rock purchases. Rock is at historically high levels. Jones expects to negotiate a new rock contract by the end of the year. He said current rock prices will not support DAP production at current levels – the price of rock will have to come down, DAP go up, or there will have to be curtailments. He estimated that 30 percent of the world production is based on purchased rock. Jones also noted that the company may have to take a write-down on the value of its inventories in the fourth quarter.
Jones said prompt demand is virtually non-existent and that sales are “very, very weak.”
“Buyers are essentially on strike,” Jones told analysts. Citing low corn prices, Jones said $4.00 corn going forward is still a good price. He added that there is a very full supply chain in the U.S. and Latin America, which has retarded movement to warehouses.
“Buyers are unwilling to catch the falling knife.” He said they fear prices will fall further.
Jones said warehouses in the U.S. are full and that once the late harvest is completed, inventories can quickly be depleted. He hopes this will happen during the rest of the year.
“While the worsening financial crisis has had a sudden and dramatic effect on phosphate demand, we firmly believe that phosphate fertilizer demand will resurface in the near term because an adequate supply of phosphates is so essential to world agriculture,” said Jones. “Phosphate fertilizers play a critical role in producing food for a growing world population. If the financial and credit issues constraining international phosphate trade are not resolved, an already tight food supply chain could be unduly stressed.”
“We are not making Gucci purses at Pascagoula,” Jones told analysts. “We are manufacturing food. And that food is essential to feed a growing world population.” “We firmly believe DAP demand will return,” Jones continued, adding that the “return to normalcy” should be “sooner, rather than later.” He said the basic drivers – population growth and improving diets worldwide – have not suddenly changed in the past three weeks. “This does not feel like a cyclical downturn,” added Jones. “I have been through a lot of those in 35 years and this is not one of those.”
He said global DAP demand is impacted by the global financial crisis. “Banks will not loan to buyers or confirm letters of credit,” he said, particularly to emerging countries.
“This has caused a clamp down on international trade.” “The sole respite has been sharply lower raw material costs,” said Jones. He cited the recent drop in Tampa ammonia from $931/mt to $350/mt and Tampa sulfur from over $600/lt to $150/lt. PHI called sulfuric acid prices at $100-$150/st down from $250/st one month ago.
The average sales price for DAP for the third quarter was $1,045/st, a 167 percent increase over the prior-year price of $392/st. DAP tons sold during the quarter were put at 162,926 st. Operating income was $20 million during the quarter, up from the year-ago $6.6 million. EBITDA was $22.5 million, up from $8.7 million.
Nine-month net income was $54.6 million ($6.75 per share) on sales of $410.0 million, up from the year-ago $37.7 million ($4.67 per share) and $151.8 million. Nine-month operating income was $85.9 million versus the year-ago $22.9 million. EBITDA was $94.3 million, up from $66.2 million. Net income and EBITDA for the year-ago nine-month period included hurricane-related insurance recoveries of $37.8 million.
While PHI continues to progress with its IPO before the Securities Exchange Commission, Jones said the drop in public fertilizer stock values by over 70 percent since June/July may cause the company to defer this option. He said if conditions are as they are now when the SEC process is complete, the company will not launch the IPO.
Proceeds from the IPO were to fund a new sulfuric acid plant. The company has submitted a permit request for the new plant and has ordered a new absorption tower. However, this can either go to a new plant or replace one of the existing four towers.
Spectrum to exit fertilizers and growing products by Jan. 31, 2009; closes Sylacauga plant
Spectrum Brands Inc. reports that it plans to shut down operations at all of its growing media businesses by Jan. 31, 2009. This includes subsidiary United Industries Corp.’s Sylacauga, Ala., fertilizer plant, which has approximately 77 full-time employees. Some 30 additional administrative jobs in Birmingham are also expected to be eliminated.
Spectrum/United has traditionally supplied the lawn and garden market via its Home & Garden segment. Spectrum bought the Sylacauga business and much of its fertilizer assets from Pursell Industries back in 2002 (GM Jan. 7, 2002, p. 10; Oct. 7, 2002, p. 10).
Spectrum said it is eliminating unprofitable businesses, including fertilizer, enriched soils, mulch, and grass seed. The company has been trying to sell these businesses and has not been successful.
“We believe that the inability of interested buyers to obtain the necessary working capital financing proved to be an insurmountable issue,” Kent Hussey, Spectrum CEO, told analysts. “Our growing products segment required a working capital investment in the peak of the production cycle of nearly $100 million. While these products delivered revenues of $267 million for fiscal 2008, gross margins for the growing products business were down 16 percent year-over-year, creating a significant drag on the rest of our businesses. Adjusted EBITDA for our growing products in 2008 was a loss of $11.3 million; including allocated overheads of approximately $9 million, the loss was over $20 million.”
Hussey told analysts that the growing products delivered an adjusted EBITDA loss of $11.9 million for the fourth quarter, while the controls unit delivered positive adjusted EBITDA of $17.1 million. Consolidated EBITDA for the company was $84.8 million versus the year-ago $93.3 million. FY’08 company EBITDA was $281.3 million, a 1.3 percent increase over the prior year.
Hussey also cited a sluggish housing market, tight inventories at retailers, low levels of foot traffic, and unprecedented commodity impacting the growing products category. Despite recent declines in urea, Hussey said DAP and potash prices remain at historically high levels.
As a result of the growing products shutdown, Spectrum expects an annualized net savings of $15-$20 million. It is also expected to eliminate some $90-$100 million of investment in working capital during the growing products’ peak season. Spectrum expects to record charges of $60-$75 million during fiscal 2009 related to its decision to exit this portion of the business.
According to its SEC filings, Spectrum both owned and leased H&G lawn and garden blending, packing, and distribution locations in Orrville, Ohio. It owned locations in Cave City, Ky., and Livingston, Texas, and leased sites in Winterhaven, Fla., Los Angeles, Calif., Sylacauga, Ala., and Brantford, Ont.
Spectrum has had exclusive brand arrangements for its Vigoro brand at The Home Depot, for its Sta-Green brand at Lowe’s, and for its Expert Gardener brand at Wal-Mart. As such, these products have been positioned as the “value” option to other name-brand products. Hussey told analysts that the company is currently working on transferring its fertilizer brand names to its retail customers. As for whether there will be any compensation for that he said, “We’re still working on that.”
Primary competitors for the H&G business have been The Scotts Miracle-Gro Co. and Central Garden & Pet Co. Last week, primary competitor Scotts (GM Nov. 17, p. 11) said it is in negotiations with retailers to take over the private label branding that was exited by Spectrum.
Spectrum sold its Canadian lawn and garden business about a year ago (GM Oct. 8, 2007, p. 12) for $15 million. This included lawn and garden blending, packing, and distribution locations in Woodstock, Ont., Crossfield, Alberta, Abbotsford, B.C., and Laval, Quebec.
Spectrum is not totally deserting the home and garden sector. It plans to retain its control business, which includes indoor and outdoor insecticides, pesticides, herbicides, and personal repellants. It said these products generated over $300 million in revenues during fiscal 2008 and have high gross margins, less seasonality, and lower peak working capital investment. Control brands include Spectracide, Hot Shot, Cutter, and Repel. Spectrum controls locations include leased manufacturing at Vinita Park and Bridgeton, Mo., and distribution at Orrville, Ohio, San Bernardino, Calif., Vinita Park, Mo., Pendergrass, Ga., and Edwardsville, Ill.
Spectrum reports that Amy Yoder, United Industries president, voluntarily resigned in October to pursue other opportunities. She signed a separation agreement entitling her to an approximate $1 million in salary and other pay, as well as additional bonuses for which she may have been eligible in FY’08, according to SEC filings. David Lumley, Global Batteries president and co-chief operating officer of Spectrum, has assumed day-to-day operations of the H&G operations, including the control business, which will remain as an ongoing business.
Lumley and Hussey, along with Anthony Genito, CFO and chief accounting officer, and John Heil, co-chief operating officer, have all signed long-term incentive agreements in addition to existing long-term incentives. The aggregate payable to each is as follows: Hussey, $721,875; Genito, $187,000; Lumley, $393,750; and Heil, $337,500. The total amounts are payable in two equal installments, one on Dec. 31, 2008, and another Dec. 31, 2009. Lumley and Neil also each received a boost in salary as of Nov. 1.
Hussey also received a retention agreement in which he can receive $1.2 million if he remains with the company through the end of 2009.
Write-offs put Spectrum well into the red during the fourth quarter and for fiscal year 2008. Spectrum reported $550.4 million in goodwill and trade name impairments during the fourth quarter, versus year-ago impairments of $148.4 million. Only about $60 million of the fourth quarter 2008 impairments came from the home and garden segment, with the rest coming from other areas of the company.
Total fiscal 2008 impairments were $721.9 million, versus the prior year impairment of $323.8 million. Some $150.9 million of FY’08 impairments were attributable to the home and garden business.
Spectrum just reported a net loss of $492.6 million ($9.68 per diluted share) on sales of $706.5 million for the fourth quarter ending Sept. 30, 2008, versus a year-ago loss of $333 million ($6.60 per share) and $659.2 million, respectively. The H&G business reported fourth-quarter profit of $1.8 million on sales of $123.7 million, compared to the year-ago $6.2 million and $111 million. Of this, $36.4 million in profits came from the control portion of H&G on sales of $84 million, versus the year-ago $32.9 million and $78.2 million, respectively. Spectrum actually reported sales growth in all three of its major business segments for the quarter, including H&G, Global Batteries & Personal Care, and Global Pet Supplies. While H&G profits were off, they were up for Global Batteries and down slightly for Global Pet. Hussey said he believes the company will have free cash flow next year.
For the year ending Sept. 30, Spectrum’s loss was $931.6 million ($18.29 per share) on sales of $2.69 billion versus the prior year loss of $596.8 million ($11.72 per share) and $2.56 billion. The H&G segment reported profit of $8 million for the year on sales of $595.7 million versus the year-ago $47 million and $570.2 million, respectively. FY’08 control sales were $328.7 million.
In other news, Spectrum is in danger of losing its listing – SPC – on the New York Stock Exchange. It received notice Nov. 4 that it was “below criteria” for the NYSE’s continued listing standards because its average total market capitalization was less than $75 million over a 30-day trading period and, at the same time, its stockholders’ equity was less than $75 million. As of Oct. 31, 2008, the latter was $72.4 million. The company has 45 days from the date of the notice to submit a plan to come into compliance within 18 months.
“While we are extremely disappointed in the recent performance of our stock, which was pressured during the last few months by an extremely volatile market as well as by the distribution of over 12 million shares held by our largest shareholder, Thomas H. Lee Partners, a private equity firm, in conjunction with the winding down of one of its investment funds, we do not believe that this notification reflects the performance of our businesses,” said Hussey. T. Lee Partners was formerly Spectrum’s largest shareholder, representing almost 25 percent of shares outstanding. Hussey pointed to the positive performance of the Global Batteries and Global Pets segments, adding that the company has $105 million in cash and $108 million of availability on its $225 million ABL and is in compliance with the requirement under senior and subordinated debt agreements. Hussey did say that companies like Spectrum, which have high levels of debt, have been more severely impacted during the current financial crisis as investors have made a flight to security.
Spectrum is also in danger of NYSE delisting because its stock price recently dropped below $1.00. If it remains below $1.00 for a consecutive 30-day period, the stock could be delisted.
Chinese government releases new tariffs
The Chinese government released their newest tariff rates Nov. 14. The new rates retain the two-tier pricing for many products to discourage exports during periods of high domestic demand. A premium surcharge of 75 percent will be added to a high season duty of 35 percent for a total of 110 percent on urea, TSP, NPK, MAP, and DAP exports.
The low season duty varies by product. Urea, MAP, DAP, and TSP will have a 10 percent duty, while NPK will have a 95 percent export duty imposed.
The full list of products and duties follows.
| Name of Product | High season | Low season | High season total | Low season Total |
| Urea | 35 | 10 | 110 | 10 |
| AMSUL | 0 | 0 | 0 | 0 |
| AC | 0 | 0 | 75 | 75 |
| Other nitrogen | 0 | 0 | 75 | 75 |
| TSP | 35 | 10 | 110 | 10 |
| SSP | 30 | 30 | 105 | 105 |
| MOP | 30 | 30 | 105 | 105 |
| SOP | 30 | 30 | 105 | 105 |
| NPK(NP) | 35 | 20 | 110 | 95 |
| DAP | 35 | 10 | 110 | 10 |
| MAP | 35 | 10 | 110 | 10 |
| Others | 0 | 0 | 75 | 75 |
High season for urea is February through June and Sept. 1 through Nov. 15. High season for TSP is February through May. DAP/MAP high season runs February though May and August through October.
The tax authorities have also set base rates that could kick in additional duties. The urea export tax base is US$337/mt FOB. If the selling price is higher, a tax rate equal to 1.1-base/sales price times 100 is applied. A similar formula is used for TSP with a base rate of US$454/mt FOB, DAP at US$582/mt FOB, and MAP at US$542/mt FOB.
Asian sources had noted that Chinese urea and DAP producers have been facing a great deal of pressure in the past two months. Lower domestic prices combined with earlier purchases of expensive inputs to put a squeeze on the producers’ bottom line. Earlier reports out of China had the government planning to eliminate the DAP duty to encourage offshore sales.
La Coop federee buys Agronomy Co. of Canada
La Coop federee, Land O’Lakes, Inc. (LOL), and CHS Inc. (CHS) have announced the signing of a share purchase agreement under which La Coop federee will acquire the shares of Agronomy Co. of Canada Ltd. (ACC), a LOL/CHS 50-50 joint venture. Terms of the acquisition, expected to close Dec. 31, 2008, were not disclosed.
In the transaction, La Coop federee will acquire the shares of ACC, including the ACC corporate office and grain assets based in Belton, Ont.; Wellburn Agromart Ltd., a crop inputs and grain subsidiary of ACC located in Wellburn, Ont.; an ownership position in 20 Agromart retail businesses across four Eastern Canadian Provinces, operated as joint ventures between ACC and independent business partners, with ACC continuing as a joint venture partner (owned by La Coop federee); and indirect ownership interests in affiliated companies serving the Agromart businesses, including Agromart Terminals, Inc. and Agromart Processing Co. Inc.
Claude Lafleur, La Coop federee CEO, said the acquisition supports the Canadian cooperative’s focus on being the first cooperative marketer and supplier in Eastern Canada for Canadian agricultural producers. “For some years now, La Coop federee has been pursuing its expansion throughout Canada thanks to acquisitions comparable to the one being announced today. We are convinced that our expertise, when combined with that of our new partners involved in this transaction, will benefit all our clients,” Lafleur said.
LOL and CHS also positioned the transaction as a positive strategic initiative. “This transaction enables us to further intensify our focus on wholesale crop nutrients and crop protection products,” LOL President and CEO Chris Policinski and CHS President and CEO John Johnson said in a joint statement. “Further, we were pleased to be able to position Agronomy Co. of Canada with a buyer that offers considerable experience and expertise within the inputs, seed and crop protection industry. We believe this transaction is a positive strategic move for Land O’Lakes and CHS, La Coop federee and ACC.”
La Coop federee is a federation of agricultural cooperatives in the province of Quebec, Canada. Originally founded in 1922, it now comprises 95 cooperatives belonging to 76,000 members. As a wholesaler, La Coop federee supplies farmers in Quebec, Ontario, and New Brunswick. Through its subsidiary, Olymel LP, it is involved in pork and poultry processing and marketing. La Coop federee and its network of affiliated cooperatives employ nearly 17,000 people, with cumulative sales approaching $5 billion dollars.
River pollution, unhappy neighbors among problems after Virginia fertilizer tank leak
Officials with Allied Terminals are still struggling to deal with the aftermath of the disastrous collapse of a storage tank at their Chesapeake, Va., site (GM Nov. 17, p. 12). The spill released 2 million gallons of fertilizer that flooded a nearby community, raised concerns over river pollution, and brought to the scene a full compliment of federal and state inspectors.
The reason why the structure came apart while it was being worked on Nov. 12 is still being investigated. Residents returned to their homes after leaving when the liquid ammonium nitrate flowed down their streets and into their yards. No one was available at Allied’s corporate office in Norfolk to explain how the loss will affect the companies that own the fertilizer.
At the same time, Kinder Morgan reported virtually no impact on operations at its terminal in Wilmington, N.C., where another tank with 2.5 million gallons of liquid fertilizer started leaking Nov. 7. KM officials there said the quick response minimized environmental damage and reduced product loss to a minimum.
Recovery efforts at Chesapeake were joined by three private cleanup companies plus a small army of federal and state inspectors. Local fire department spokesman Steve Johnson counted nearly a half dozen agencies on the scene, including EPA, Virginia Dept. of Environmental Quality, U.S. Coast Guard, and U.S. and state public health services. “It’s almost easier to figure out who wasn’t there,” Johnson remarked. He told the local press that with a million gallons contained inside a berm and 800,000 gallons scooped up by vacuum trucks, about 200,000 gallons of liquid fertilizer remains unaccounted for.
Johnson said a top priority for cleanup crews was flushing out streets, ditches, and drains in South Hill across from the terminal, where the liquid fertilizer flowed after the tank collapse. Approximately 30 people left their homes voluntarily, he reported, and the company paid for 20 of them to spend three nights a local hotel. Allied opened a dialogue with residents at a face-to-face meeting, where the main concerns were whether it could happen again and if there could be side effects from the spill, despite assurances from health authorities that UAN fertilizer was harmless except when ingested.
But state and federal environmental inspectors said while the fertilizer poses no serious risks to humans, it could cause problems in the Elizabeth River, where an undetermined quantity of the fertilizer flowed after the release. “The fertilizer contains ammonia and nitrogen, both of which have the potential to pollute the water,” said Bill Hayden with the Virginia DEQ. “The nitrogen should not be a problem this time of year, but the ammonia can be toxic to fish and other creatures in the water. So now we have to wait and see how much of the fertilizer got into the river.”
The release at Kinder Morgan’s Wilmington terminal came from a crack in the tank’s floor, but the cause still hasn’t been pinned down. Terminal Manager Bruce Kirk told Green Markets the floor is undergoing an internal X-ray scan, which should disclose any thin spots left by corrosion. “We’ll probably be going in and replacing at least the outer parts or possibly the whole floor,” Kirk commented.
Kirk said that fortunately the leak was discovered at almost the instant it happened by an employee making the rounds of the terminal. Despite occurring at quitting time on a Friday afternoon, he said KM was able to quickly marshal the equipment, including four vacuum trucks, a front-end loader and backhoe, and personnel needed to handle the situation. Being able to transfer product to other tanks plus a barge with about 400,000 gallon holding capacity saved the day, Kirk reported.
Final figures aren’t available yet, but Kirk estimates that less than 300 tons are unaccounted for. He said that amount can be replaced, meaning that the six owners won’t suffer any loss. Owner interests typically are co-mingled, and Kirk said he was unable to divulge any names of customers.
Indications are that the environmental impact has been minimized. Kinder Morgan reported that after getting aerators on the water to dilute the product, creek levels have tested within safe limits and no fish kill has been seen. Since much of the lost product is believed to have soaked into the ground in the berm area, a secondary dike was built to stockpile soils, which will be donated to farmers – with permission from USDA and the state DEQ. In fact, Kirk revealed he’s already had several calls from parties eager to get the fertilizer-rich material.