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Market Watch

Ammonia, Ammonium Nitrate, Ammonium Sulfate, Asia Pacific, Black Sea, California, Central Florida, China, Eastern Cornbelt, India, Indonesia, Market Watch, Middle East, Nitrogen Solutions, Pacific N.W., Pakistan, Phosphate, Potash, Russia, Southeast, Sulfate of Potash, Sulfur, Tampa, U.S. Exports, U.S. Gulf, Urea, Vancouver, West Coast, Western, Western Canada, Western Cornbelt

AMMONIA

U.S. Gulf/Tampa: There was nothing new to report in the barge market; however, there was much anticipation for the next round of Tampa business. Sellers say the last done $745/mt DEL will soon disappear soon. Other imports have been done in the $825-$925/mt DEL range, and sellers are predicting a further boost for Tampa. Sellers said Yuzhnyy numbers continue to be strong, with claims of $860/mt.

Eastern Cornbelt: The anhydrous ammonia market remained at $1,040/st FOB river terminals in Illinois on the low end for limited cash market business, with no prepay being offered. Some suppliers remained referenced as high as $1,240-$1,250/st FOB for forward contract tons shipped in September through November.

Western Cornbelt: Spot anhydrous ammonia pricing was reported at a nominal $1,020-$1,080/st FOB in the region. Those numbers were well below reference prices for forward contract tons, which ranged from $1,230-$1,240/st FOB in the region for September through November.

California: Anhydrous ammonia was quoted at $700-$745/st DEL in California, with the low for trucked tons and the higher numbers for railed material. Although postings were as high as $1,000/st DEL, sources said suppliers were meeting the lower numbers. Higher numbers are expected in the near term, however, as new tons come in reflecting higher replacement costs.

The aqua ammonia market was reported at $185/st FOB California terminals.

One supplier noted that ammonia usage to date is about even with last year, which he said was remarkable considering the state’s water rationing. He said heavier rates on corn and vegetable crops have offset cutbacks in usage on cotton due to fewer cotton acres this year.

Pacific Northwest: Although there was only spotty new business to test the market, sources reported anhydrous ammonia sales to the dealer taking place in the $950-$1,200/st DEL range in the region in August. Those numbers were down from last report, as several sources said material from non-traditional suppliers was being railed and trucked into the region at well below producer postings in the $1,433-$1,458/st DEL range. One source described the high postings as “just a piece of paper; nothing has traded at those levels.”

Western Canada: Anhydrous ammonia pricing remained at $1,584-$1,629/mt DEL in the region.

Black Sea: Strengthening demand in Europe and the U.S., together with limits in Asian production, are pushing Black Sea prices higher. Sources now say that even with many of the ammonia plants back online, demand is still outstripping supply.

Some Asian buyers, hoping to make the market look softer than it is, talked about Yuzhnyy equivalent pricing. Basing their formulas on recent business done at $890/mt CFR between Sabic and South Korea through a Japanese trader, the Yuzhnyy price would look as if it was in the upper $700s to low $800s/mt FOB. This would indicate a softening of the market in the area.

When confronted with this formula, sources more familiar with the Yuzhnyy market said the actual trend of the market is up, with prices closer to $900/mt FOB than $800/mt FOB.

Ammonia from the region is being used to cover shortages around the globe.

Sources report the usual demand from the U.S. and Europe. In addition, traders are looking to Yuzhnyy to fill gaps created when the Burrup facility in Australia went down because of problems with the natural gas supply system.

The Australian tons were used to satisfy demand for major buyers in South Korea and Taiwan, as well as smaller buyers in the rest of Asia. Now traders are looking to pick up ammonia wherever they can.

The South Korea-Sabic deal, say sources, was done to cover lost Burrup tons. Taking ammonia from the already tight Middle East means some buyers have to look to the Black Sea for the first time.

Material is even flowing from the Caribbean to Australia, said one Asian trader.

Adding to the upward pressure on prices, sources say some more of the ammonia producers will be down for routine maintenance until mid-September. Full production in the area is not expected until sometime in October.

Until the Burrup plant comes back online and all the Black Sea ammonia producers are back in full production, sources expect to see ever-tightening supplies from the region – and ever-rising prices.

As the week closed sources were putting the market at $850-860/mt FOB, with the likelihood the price will go higher yet.

Middle East: Sources report the absence of spot FOB business means industry watchers have to pull out their calculators to figure out the current price.

A deal to South Korea from Sabic was reportedly closed at $890/mt CFR. Once freight is backed off, sources say the price range for the Middle East is $810-$830/mt FOB.

But as the week closed another deal at $900/mt CFR was also done, which indicates a netback of $820-$830/mt FOB.

Sources report both deals were done on a swap basis. The tons will be “paid back” once production in the Australian Burrup plant is resumed.

Traders were quick to point out that this range is what producers would like to see because it represents an increase across the board. Observers note the higher end of the deal should not be ignored. They add, however, that some other older deals for contracted tons indicate a low end price of $800/mt FOB should also not be ignored.

Most sources agree any new tons purchased will be closer to $850/mt or more. Even though the price of contracted Indian tons is on the rise, it still has a long way to go to reach the $800/mt FOB range.

Sources say Indian business should only be included in the discussion of available tons, not of the price.

Asian sources speculate the material that was offered in the Iranian tender will be offered to European buyers.

The general agreement is that new tons are in the $810-$830/mt FOB range.

Western Europe: Sources report demand remains strong. The price in Northwest Europe is now pegged at $900-$950/mt C&F. Observers say demand is strong enough that buyers are looking for material from any source possible.

Asia/Pacific: Reports are now coming out that the Burrup/Australia plant may not come back online for full production until the end of the year.

The issue has never been the plant itself. An explosion in the gas supply chain cut off the plant and residential and commercial neighbors. Early reports said the plant would be back up in October once the natural gas pipes were repaired.

Now sources say the repairs to the gas supply system might take a little longer than expected. They add it may also take a while for Burrup to build up sufficient gas reserves to ensure steady efficient operations.

The move by the Indonesian government to place all urea plants under one controlling company may have an impact on the ammonia supply.

Asian ammonia players are waiting to see how the new government entity will handle sales of ammonia.

Oftentimes the joint venture operations KPA and KPI have purchased or borrowed ammonia from the state-owned urea factories. Lately the emphasis of those plants has been to increase urea production, leaving no additional ammonia for sale.

The Indonesian government wants to better regulate urea supplies so the domestic market is fully covered. How those plans will affect ammonia availability is still up in the air. One observer noted that the days of getting excess ammonia from Kaltim or others may be over.

UREA

U.S. Gulf: Most were putting new trades last week within the $755-$765/st FOB range. Some predicted that the market may return to normal once recent import vessels are unloaded and their product is priced. On the flip side is the argument that Black Sea urea prices may be weakening as well, though for now the Mideast appears to be firm.

Eastern Cornbelt: Granular urea pricing continued to slip just slightly, with sources quoting the market at $840-$860/st FOB. The dealer market FOB Cincinnati, Ohio, was quoted at the $850/st mark.

Western Cornbelt: The granular urea market was tagged at $830-$860/st FOB, down slightly from last report but with few new sales to test the market. On a forward contract basis for September, urea continued to be referenced as high as $878/st FOB Inola, Okla., and Pine Bend, Minn.

California: The granular urea market remained at $860-$900/st FOB and $885-$925/st DEL in California.

Pacific Northwest: Granular urea pricing was reported at a firm $890-$900/st DEL in Washington, Idaho, and Oregon, with reports of limited supply. The urea market in Montana was quoted at posted levels of $875-$890/st DEL last week.

Western Canada: Granular urea was tagged at a firm $985-$1,010/mt DEL.

China: The government is holding off on announcing the changes to the export duty on urea. Sources say all the paper work is signed and sealed. The industry is waiting for it to be delivered, however, because Beijing needs to make sure local customs office and port authorities understand how the central government wants the urea taxed.

In the past local authorities differed among themselves as to how urea bound for export should be handled. Some agreed to count urea still on trains bound for the warehouse as having been in the warehouse at the time of the duty rate change. Others were literal in their interpretation and said only urea actually in dock-side warehouses could be counted. They claimed that fertilizer in railcars next to the warehouse in the process of being loaded into the warehouse could not be counted.

The differing interpretations led to much confusion and bad feelings among producers and traders.

Sources say the new duty could be announced as early as Friday, Aug. 29, or as late as Sept. 1. Whenever the announcement comes, however, industry observers are convinced the effective date will be Sept. 1. If the earlier date, said one source, the warehouses and port authorities will have the weekend to get their paperwork ready for business on Sept. 1.

An announcement on the same day the rule becomes effective – not unknown in China – will rule out any possibility of speculators taking advantage of a delay between announcement and implementation.

One cynical Asian trader noted that the delay in the announcement could also be a favor to Politburo members who have relatives in the fertilizer or trading industries. A delay could mean a larger profit margin. The trader said similar delays in changes in business law and regulations have occurred in the past, and all delays have later shown to be advantageous to people with close ties to the ruling bodies.

The new duty has gone through several permutations. The growing consensus is that for September the extraordinary duty – currently at 100 percent – will be increased to 150 percent, for a total export tax of 185 percent. Beginning Oct. 1 and for the rest of the year, the regular duty of 35 percent will be lowered to 25 percent, for a total duty of 175 percent.

The bottom line is that Chinese urea will remain uncompetitive in the global market even in the fourth quarter.

Black Sea: Prices have dropped dramatically and are expected to continue to fall until India steps in. Sources report bids circulating at $725/mt FOB, but not yet achieved. One Asian trader said it could only be a matter of days, however, before that mark is hit.

Traders throughout Asia talked of $735-$750/mt FOB as the reasonable range for the current market. One source reported $740/mt FOB done late last week.

Industry observers expect to see the Yuzhnyy price continue to soften until India steps in with its late season purchase demands. The problem for the producers and traders looking to take positions is that IPL and MMTC can hold off a while longer. And the more the Indians hold off buying, the softer the Black Sea market will get.

Adding to the softening talk are reports that $735/mt FOB has been done from the Baltic. With a usual gap of $10-$20/mt between the two, sources are firm in accepting $745-$755/mt FOB as a Yuzhnyy price. Many say because $750/mt FOB was done, anything higher than that at this time should be discounted as no longer viable.

Middle East: Prices remain stable and warehouses remain empty.

Sources report that even though deals to Bangladesh might indicate prices at $870/mt FOB, the strength of the market remains a few dollars less.

Softening in Yuzhnyy is prompting traders and end users to try to push the price below $800/mt FOB. Producers are fighting back and holding firm.

Still, said one trader, producers are willing to talk if a bid comes in at $810/mt FOB. That price represents a drop of $5/mt from the last Indian tender.

Sources say the willingness to start talking at a lower level does not mean business will be concluded at that lower level. Still, traders are convinced $810/mt FOB has been done.

Producers continue to claim they are sold out, with no reserves on hand. And buyers are accepting that argument.

Sources report that just enough urea gets to the ports to fill vessels booked for existing deals. The warehouses are being left empty as much as possible.

Observers note that by keeping reserves at a minimum the producers will not face any pressure to lower their prices to ease pressure on storage facilities.

Adding to the downward pressure on prices is the absence of Indian buyers and a sliding Yuzhnyy price.

Representatives of Indian companies have been making the rounds in the Middle East, but so far have not walked away with any deals worth writing home about. Sources say even if a deal does come through, producers will push very hard for secrecy on the price.

More pressure on the Arab Gulf suppliers comes from other Arab producers. Reportedly, Egypt is willing to seriously entertain bids in the low $800s/mt FOB.

Egypt has generally been able to get a premium netback for its product into Europe and the U.S. because of more favorable freight rates. If the new price level out of Egypt is confirmed, sources say the pressure on the Arab Gulf producers to lower their prices will intensify.

Sabic said it will permanently close its Damman plant next month. The unit turns out about 330,000 mt/y. The plant is old – built in the mid-1960s – and is in the middle of a residential area. The facility will be shuttered. The loss of production by its closing will be taken up by newer facilities currently under construction.

India: Buyers from IPL and MMTC are reportedly making the rounds to trading houses and producers. Sources say the buyers have indicated they are unwilling to spend more than the highest amount paid in the last tender – about $850/mt CFR.

With softening Black Sea prices, Asian sources say the Indians may get their wish.

Reportedly, the buyers put off meetings with the Middle East producers Aug. 27. By then, they figured, the market would have been able to digest the impact of changes in China’s export duty.

Now, China has delayed its announcement until after the meeting.

Still, say Asian sources, what China decides will make little difference unless it removes the extraordinary duty completely.

The market has been discussing duty levels of 150-185 percent for the past three weeks, said one trader. He points out that the market has heard, digested, and absorbed the concept of significantly higher prices from China.

And yet the price of Black Sea and Middle East urea is softening, he said.

Most in the industry figure IPL or MMTC will have to come back to the market soon. Many give the companies two weeks. Others say four weeks at the most.

Pakistan: Local media report delays in the shipment of the first half of the government-to-government deal between Saudi Arabia and Pakistan. Sources familiar with the arrangement say there is no delay under the letter of the agreement. One observer noted there may be differences on the perception of when loading should have started, but the differences appear to be only a matter of days. Sources say the tons will be delivered within the timeframe agreed to by both sides.

Indonesia: PIM is expected to hold off on its call for a new selling tender until the middle of next month. Sources say the delay is because the plant will be taking a turnaround starting this week.

About the same time the tender is called, sources expect to see India making its own buying tender. Asian traders say the timing for the Indonesian tender could finally depend on when Indian buyers come back into the market.

Sources expect to see the 40-60,000 mt that will be offered for sale end up as offerings to India.

The Indonesian government unveiled another plan to unify the state-run urea plants. The state enterprise minister announced the formation of PT AgroKimia Indonesia last Monday. The new company will serve as an umbrella corporation for all the urea producers. Sources say the move was made to control natural gas supplies to the urea facilities and to regulate urea exports.

Attempts have failed in the past to place control of the urea producers under one encompassing body. Sources say the past efforts were doomed because the government placed one company – usually PIM – in charge of allocations of resources and export permits. When the other companies complained PIM was holding onto the bulk of the inputs and giving itself the most export opportunities, the companies worked to dissolve the organization.

This time around, said one Asian trader, all urea companies will be part of the group and the national government will have a more direct role in the group’s operation.

The first goal, said the minister, is to secure sufficient funding to upgrade the existing facilities. Allocation of natural gas to ensure continued production will also top the agenda of the new group.

NITROGEN SOLUTIONS

U.S. Gulf: Barges were generally called $500-$505/st FOB ($15.62-$15.78/unit), with some suggesting that $495/st FOB was doable. Others maintained it was not.

Eastern Cornbelt: UAN was reported as low as $15.55/unit FOB spot river locations in the region last week for limited cash tons, but sources also reported cash market numbers for UAN-28 in the $460-$470/st ($16.43-$16.79/unit) FOB range on the upper end. On a forward contract basis for September and beyond, reference prices for UAN-32 remained as high as $596-$606/st ($18.63-$18.94/unit) FOB regional terminals.

Western Cornbelt: The UAN-32 market was pegged at $510-$525/st ($15.94-$16.41/unit) FOB terminals on the low end for cash tons. Reference levels were at the $17.20/unit FOB level or higher, depending on supplier and time of delivery.

California: UAN-32 was quoted at $15.94-$16.56/unit DEL in the region, with one source quoting $520/st ($16.25/unit) DEL as a common number to the dealer. On an FOB basis, the regional UAN market was reported at $15.63-$16.03/unit.

Pacific Northwest: The UAN-32 market was reported at $520-$530/st ($16.25-$16.56/unit) DEL in the region, depending on location.

Western Canada: UAN-28 was reported at $542-$557/mt ($19.36-$19.89/unit) DEL in the region.

AMMONIUM NITRATE

U.S. Gulf: Barge price ideas spanned a broad range. While prompt was generally called $510-$530/st FOB, others said forward product is being quoted at $560-$570/st FOB for September. Sources said a big factor is age and quality of the product.

Western Cornbelt: Ammonium nitrate pricing was $575-$600/st FOB to the dealer last week, with spot sales confirmed at the upper end of that range.

California: No market was reported for ammonium nitrate in California, and no current prices were available for CAN-17 last week.

Pacific Northwest: Ammonium nitrate pricing was up significantly from last report, with sources quoting the market at a firm $605-$629/st DEL in the region based on new replacement costs. CAN-17 was reported at $360-$365/st FOB in the region last week.

AMMONIUM SULFATE

Eastern Cornbelt: Granular ammonium sulfate was reported at $485-$495/st FOB in the region.

Western Cornbelt: Granular ammonium sulfate was tagged at $475-$495/st FOB, with the upper end reflecting dealer postings.

California: Ammonium sulfate remained at $375-$395/st FOB in the state.

Pacific Northwest: Granular ammonium sulfate remained in very tight supply, with the market quoted at $462-$470/st DEL in the region. Sources talked of allocations from some suppliers that would remain in effect for the remainder of the year.

Western Canada: Granular ammonium sulfate was steady at $555-$560/mt DEL.

PHOSPHATES

Central Florida: Tropical Storm Fay was essentially a nonevent in Central Florida last week, although it did dump a large amount of rain on the state. On the East Coast of Florida, areas received as much as 22 inches as the storm lingered nearby in the Atlantic. Fay was forecasted to begin moving westward, back onto land and most likely across northern Florida and parts of Georgia and Alabama. There was only an outside chance of it moving into the Gulf of Mexico, which could threaten oil and gas operations as well as transportation.

As were other major phosphate markets last week, Central Florida was quiet, although some prompt business was done. Mosaic was selling rail DAP cars at $1,080/st FOB, which accounted for most of the activity.

The price of corn was continuing to rebound last week, and that will make it more likely farmers will buy more phosphates for winter wheat and spring corn. Crop yield for corn will be better than originally estimated, according to the USDA.

Phosphate inventories were on the rise in July and reached about 1.1 million st. Activity has been slow during the summer months, which was normal, and allowed for the increase.

Prompt sales last week were made within the previous week’s range, so the Central Florida DAP price range last week remained $1,070-$1,080/st FOB. PCS Sales’s Central Florida reference price was unchanged at $1,070/st FOB for DAP and had a $25/st FOB premium for MAP. Mosaic’s asking price was $1,090/st FOB for DAP and $1,115/st FOB for MAP, but was making sales at $10/st FOB less for both products last week. CF dropped its asking price from $1,070/st FOB for DAP to $1,050/st FOB, and from $1,145/st FOB for MAP $1,110/st FOB, but had limited availability. In Texas, Agrifos’ DAP price continued at $1,100/st FOB for trucks and $1,095/st FOB for rail shipments.

U.S. Gulf: The summer doldrums continued last week in the NOLA DAP barge market, but farmers appeared more likely than not to buy fertilizer for the fall and spring seasons. In Kansas and Oklahoma, inquiries increased last week and buying was expected to start around the beginning of September, when winter wheat farmers begin to prepare the ground. Another positive sign was that the price of corn had risen back up to around $6.50/bushel last week and the price had been rising for more than a week. That price will be enough to give farmers a healthy profit and money to spend for phosphate and other fertilizers for all. A trader who toured Indiana to inspect crops said some yellowing was beginning to appear on crops, which was a sign the nutrients in the soil were being exhausted. The USDA said yields will be good this year and farmers want to maximize their yields and profits next season.

Warehouse prices for phosphates were generally stable last week, or were showing a slight decline. The previous week, the lowest-priced barge sales sunk to $1,040/st FOB for DAP. Last week, the only sale confirmed on the river system was a buy at the same price from a third party that needed to liquidate three floating barges. The high cost of capital and storage were said to be motivating factors. Bins in many areas were full, but those that were not were not planning to refill immediately. Instead, many of those plan to wait and hope phosphate prices move down a bit more.

Based on sales last week, the NOLA DAP barge price range dropped to a flat $1,040/st FOB from $1,040-$1,080/st FOB. MAP barges were $25-$60/st FOB more than DAP, but supplies remained scarce. Mosaic’s asking price for NOLA DAP barges was $1,100/st FOB and $1,125/st FOB for MAP, and its prices for October and November will increase $10/st FOB. CF dropped its DAP price by $20/st FOB and lowered the premium it charged for MAP to $60/st FOB from $75/st FOB, so its prices fell from $1,070/st FOB to $1,050/st FOB for DAP and from $1,145/st FOB to $1,110/st FOB for MAP for prompt deliveries.

Eastern Cornbelt: The DAP market was quoted at $1,093- $1,143/st FOB regional warehouses, with the low out of spot river locations in Illinois and the upper end reported in Ohio to the dealer. The MAP market was pegged at $1,125-$1,163/st FOB last week. One Ohio source said summer phosphate applications on hay have been well off the normal mark, so he anticipates fall usage cutbacks in phosphates in his trade area.

One source said 10-34-0 could still be had on a spot basis for $1,075/st FOB last week, but others claimed any available tons would be firmly in the $1,150-$1,200/st FOB range.

Western Cornbelt: DAP remained at $1,080-$1,100/st FOB regional warehouses, with MAP reported at $1,120-$1,150/st FOB. 10-34-0 was reported at $1,175-$1,200/st FOB in the region for any available spot tons, but supplies remained extremely tight.

Effective Sept. 1, Agrium’s phosphoric acid postings for both SPA and MGA will firm to $2,600/st rail-DEL in Iowa, Missouri, Nebraska, North and South Dakota, Minnesota, Colorado, Kansas, New Mexico, Oklahoma, Texas, and eastern Wyoming. Postings will firm to $2,650/st rail-DEL in October, and to $2,700/st rail-DEL in November. Simplot also reported that its SPA and MGA postings in the Midwest would firm to $26.00/unit DEL on Sept. 1, to $26.50/unit DEL on Oct. 1, and to $27.00/unit DEL on Nov. 1.

California: Several sources talked of phosphate usage reductions, particularly in dairy producing areas. One Central Valley source said rates in his market area are down to just 30 percent of the levels from two years ago, and higher prices are the primary reason.

DAP and MAP were up from last report based on higher reference prices. Both products were pegged at $1,180-$1,200/st FOB or DEL, depending on supplier. Effective Aug. 12, Agrium reposted MAP at $1,210/st FOB or rail-DEL in California and Arizona. Simplot’s postings in the California market firmed $25/st on Aug. 21, and will move up $25/st again on Sept. 15.

16-20-0 was up from $60/st from last report, with sources tagging the regional market at $675-$680/st FOB. Another $10/st increase is slated from Simplot on Sept. 15. 10-34-0 remained at a firm $940-$960/st FOB in California, but sources said an increase of at least $30/st will occur on Sept. 1.

Super phosphoric acid (SPA) and merchant grade acid (MGA) were quoted at $24.00/unit DEL in California, with Simplot referenced at $24.20/unit FOB Lathrop for MGA. Simplot is slated to firm on Sept. 1 to $25.00/unit DEL, on Oct. 1 to $25.50/unit DEL, and on Nov. 1 to $26.00/unit DEL.

Effective Sept. 1, Agrium’s phosphoric acid postings will firm to $2,500/st rail-DEL in California and Arizona for both SPA and MGA. Postings will firm to $2,550/st rail-DEL in October, and to $2,600/st rail-DEL in November.

Pacific Northwest: DAP and MAP pricing in the region had reportedly firmed to $1,170-$1,200/st DEL in the region based on new postings. Effective Aug. 12, Agrium reposted MAP at $1,195/st DEL in Montana and Wyoming, $1,200/st DEL in southern Idaho, Utah, Nevada, and Oregon’s Malheur County, and $1,205/st FOB or DEL in Washington, northern Idaho, and Oregon excluding Malheur County.

Effective Sept. 21, Simplot’s reference levels for DAP and MAP moved to $1,170/st DEL in western Montana, Wyoming, and western Colorado; $1,175/st DEL in Idaho and Utah; and $1,185/st DEL in eastern Montana, with a $25/st increase planned for all locations on Sept. 15.

16-20-0 was up as well, to $660/st FOB and $665-$675/st DEL in the region, depending on location. Simplot’s reference price will firm $10/st on Sept. 15 to $685/st DEL in the region. Simplot also adjusted its 0-45-0 TSP postings on Aug. 21 to $1,020/st FOB Pocatello, Idaho, with a move to $1,040/st DEL slated for Sept. 15.

10-34-0 was also up significantly from the last report, with sources quoting product in a very broad range at $985-$1,072/st FOB in mid-August, depending on availability and supplier.

SPA and MGA were reported at a firm $24.00/unit DEL in the region. Simplot’s postings will firm on Sept. 1 to $25.00/unit DEL, on Oct. 1 to $25.50/unit DEL, and on Nov. 1 to $26.00/unit DEL. Effective Sept. 1, Agrium’s phosphoric acid postings will firm to $2,500/st rail-DEL in Idaho, Montana, Nevada, Oregon, Utah, Washington, and Wyoming for both SPA and MGA. Postings will firm to $2,550/st rail-DEL in October, and to $2,600/st rail-DEL in November.

Western Canada: MAP remained at $1,335-$1,370/mt DEL in the region.

U.S.Export: No new export phosphate sales were made last week, but The Fertilizer Institute said more DAP was exported in July and so far this calendar year than during 2007.

Total exports of DAP were up 26.6 percent in July compared the same month last year, and were higher by 19.5 percent for the calendar year. India accounted for the majority of DAP sales – 384,449 mt in July, while the total for the month increased 26.6 percent to 486,282 mt. Peru and Chile bought 18,184 mt and 17,035 mt, respectively. For the calendar-year-to-date, India has claimed more than half the total, 1,641,897 mt – a 245.6 percent increase over 2007 – of 2,749,506 mt exported.

In July, MAP exports rose 35 percent to 143,708 mt. Mexico was the biggest buyer at 34,290 mt, Australia was next at 27,557 mt, and Chile third with 23,095 mt. For the calendar-year-to-date, MAP sales were down 18.7 percent from last year, to 1,022,722. Canada has been the most active customer, taking 292,248 mt; Argentina has taken 215,503 mt, and Brazil 213,007 mt so far this year.

The export DAP price range last week was unchanged at $1,215-$1,220/mt FOB.

POTASH

Eastern Cornbelt: Sources continued to quote the potash market at $875-$930/st FOB regional warehouses, depending on grade and location. Several expressed concerns about the strike at the three PotashCorp mines, noting that further reductions in domestic supply could result if the labor dispute is prolonged.

Western Cornbelt: Sources put the potash market in a broad range at $875-$925/st FOB regional warehouses to the dealer, with most suppliers closer to the higher level and confirmed sales at that number.

California: Although potash prices for the August shipping allotment remained at the $614/st FOB or DEL level, sources said prices will firm to at least the $875/st FOB or DEL level for fall shipping allocations, depending on grade.

Sulfate of potash was also up from last report, with sources quoting the market at $1,010-$1,045/st FOB, depending on grade and quantity. Sources reported tight supplies and strict product allocations. K+S North America reports that due to unprecedented global potash pressures, it will be raising sulfate of potash prices by $150/st on all grades, effective with shipments on Sept. 8. At that time, granular SOP will be priced at $1,140/st FOB terminal locations on the East Coast, and $1,195/st FOB terminals on the West Coast.

No current prices were reported for potassium nitrate in California last week.

Pacific Northwest: Potash was reported at $850/st DEL by one Washington source on the low end, while another reported spot tons from brokers or resellers firmly at the $914-$920/st FOB range. Those levels were up dramatically from last report and reflect new pricing levels for tons shipped in September and beyond.

Western Canada: No current prices were reported for potash in the region.

Southeast: Effective Aug. 13, Agrium’s 60 percent coarse potash postings firmed to $850/st FOB Wilmington, N.C., and Georgia shipping points at Bainbridge and Tifton.

North America: TFI reported that potash shipments increased 12 percent in July over the year-ago month. While production was up 27 percent for the month, potash stocks were down 27 percent.

Sulfate of Potash: K+S North America reports that due to unprecedented global potash pressures, effective with shipments on Sept. 8 it will be raising sulfate of potash prices by $150/st on all grades. At that time, granular SOP will be priced as follows: East Coast U.S.: $1,140/st FOB terminal; and West Coast U.S.: $1,195/st FOB terminal.

Russia: JSC Silvinit reports that JSC Kamskaya Mining Co., a subsidiary, recently paid 35.14 billion rubles for mining rights at the Polovodovsky area of the Verkhnekamskoye potassium and magnesium deposit. The license was acquired as a result of the auction held in March. According to estimates, potash reserves at the area exceed 3 billion mt. Silvinit says the reserves will help it more than double the mining capacity of the enterprise. The area is adjacent to the one of the Third Mining Division (Solikamsk 3) at JSC Silvinit, which will help an earlier commencement of the development of the area given the infrastructure available.

In related news, Silvinit has reportedly obtained a three-year loan of $1.5 billion from VTB that will help it pay for the deposit.

SULFUR

Tampa: The next round of negotiations for contract prices was still seven weeks away, but both sides were positioning for the talks. The phosphate industry has been watching prices on the world market decay recently and wants a decrease, a big drop in the fourth quarter. Sulfur points out that since declines have been modest and world prices were still more than $100/t above the Tampa market, any decrease should be small – if at all. Phosphate companies think the price hike from the previous quarter should be reversed, while sulfur was of the opinion that it should stay the same or perhaps decrease slightly. When the time comes, an agreement will be difficult to reach and phosphate producers will likely hold out as long as possible, hoping world prices fall.

China has continued to take a hard line in its negotiations with sulfur producers, and was said to be willing to hold out. However, the Olympics were coming to an end, its phosphate plants were getting ready to get back into operation, and they will need sulfur. That situation should be resolved before negotiations for the fourth quarter domestic prices get underway, and will have a major impact.

Last week, refineries were running as well or better than they have all year as a result of lower oil prices and better margins. That meant more sulfur was flowing into the system and inventories were beginning to build for both suppliers and phosphate companies.

However, a large number of industrial customers were still seeking additional supplies. If inventories start rising quickly, expect more sulfur to go to prill operations for export.

West Coast: Sulfur suppliers and buyers were still locked in negotiations last week, and it appeared the most likely outcome would be little or no change in the price. That market serves the world market, where prices have stagnated or declined in the past month.

Vancouver: Negotiations with the Chinese were continuing last week, but no progress was reported. China was seeking lower prices, but Canadian sulfur suppliers were holding out for a price of about $650/mt FOB.

The Week in Fertilizer Stocks

Fertilizer Stocks
Producer Symbol Price Week Ago Year Ago
Agrium AGU 86.79 81.61 41.43
CF Industries CF 145.54 137.03 57.60
Intrepid Potash IPI 46.78 42.86 N/A
Mosaic MOS 108.12 104.35 39.00
PotashCorp POT 184.20 179.18 82.50
Terra Industries TRA 51.66 47.28 24.03
Terra Nitrogen TNH 105.24 99.94 75.46
Distribution/Retail
Andersons Inc. ANDE 44.30 45.78 44.77
Deere & Co. DE 66.98 66.90 63.81
Scotts SMG 24.61 24.66 45.08

Intrepid Potash earnings up seven-fold; company upgrades, staffs for future

Featured, News

Intrepid Potash Inc. reported a seven-fold increase in pro forma earnings for the second quarter ending June 30, 2008. Net earnings were $32.4 million ($.43 per diluted share) on sales of $105.2 million, compared to the year-ago $4 million ($.05 per share) and $56.1 million.

Six-month pro forma net earnings were $51.7 million ($.69 per share) on sales of $189.5 million, versus the year-ago $7.6 million ($.10 per share) and $104.3 million, respectively.

“We are facing the first demand-driven agriculture market in modern times,” said Bob Jornayvaz, Intrepid CEO. “The most recent USDA report indicates that yields will come in better than initially expected, yet still leave us with low levels of stocks. The increase in crop yield demonstrates the positive returns on the fertilizer investments made by the farming community and that fertilizers are doing their jobs. It is widely believed that a tight global food supply is a long-term situation and the demand for potash will continue to increase. Intrepid is focused on the long-term by appropriately and aggressively investing capital in new capacity and efficiency projects to bring on additional lower cost tons to satisfy the needs of our customers.”

Second-quarter potash sales were 213,000 st, down from the year-ago 245,000 st, though production was 210,000 st for the current and year-ago quarters. Second-quarter average potash prices were $425/st versus the year-ago $182/st. Sales volumes for langbeinite were 47,000 st, down from the year-ago 52,000 st. Average prices were up at $188/st from $109/st.

Six-month potash sales volumes were 426,000 st, down from the year-ago 454,000 st. Average prices rose to $360/st from $182/st. Langbeinite sales volumes were 141,000 st, up from 100,000 st. Prices were $145/st versus the year-ago $109/st.

Intrepid expects to produce 870-890,000 st of potash in 2008, with production costs of $140-$150/st. It expects to produce 210-230,000 st of langbeinite, with production costs of $75-$85/st. Intrepid posted potash and langbeinite prices as of Aug. 1 were $782/st and $356/st, respectively.

Intrepid said it spent $24 million in the first half on its capital program. This includes an upgrade of the mining fleet with the addition of three new underground miners, two replacement miners at the West Mine, and one miner to create an additional operating panel at the East Mine to allow it to increase ore throughput. The storage and hoisting upgrade at the West Mine has moved forward with the installation of the new cable and the upgrade of the skips. The next phase will be the construction of the underground storage system, which is expected to be complete in 2009. Intrepid said this should increase productive capacity without any additional fixed costs.

Intrepid said it is moving forward with the permitting process for the HB Mine, which is a solar evaporation solution mining project in Carlsbad.

Intrepid expects total capital expenditures to be $80-$95 million in 2008, and said that it is ahead of schedule in its core sustainability and debottlenecking plans.

Intrepid said the production costs increased to $142/st for the second quarter, up from the year-ago $120/st.

The company said it is focused on growing production volumes, with an eye toward the future. As a result, it has added a trainee program at its mining operations, added another operating panel in the East Mine, increased contract maintenance labor, and added personnel to increase its maintenance staff. It said this increase in personnel and higher natural gas prices have put upward pressure on production costs. However, the expanded workforce is designed to minimize the impact of any turnover and increase the reliability and throughput of the mines. Intrepid said it is adding full-time employees to its maintenance and mining support roles throughout the remainder of the year, which will be partially offset by a decrease in contract maintenance expense.

CVR nitrogen helps offset refining results

Featured, News, Nitrogen

Positive results at CVR Energy Inc.’s nitrogen business helped offset lower refining results during the second quarter ending June 30, 2008. Nitrogen operating income was $23.1 million on sales of $58.8 million, compared to the year-ago $11.7 million and $35.8 million.

“The fertilizer business enjoyed improving nitrogen fertilizer prices in the second quarter, while high crude costs and weak crack spreads limited our petroleum business,” said Jack Lipinski, CVR chairman and CEO. “The outlook for our fertilizer business is positive. The business is exhibiting upward momentum from an already strong performance in recent quarters. Fertilizer prices have continued to rise, and market demand is strong. Mid-continent refining margins have improved somewhat from recent lows, but they continue to be below historical levels. In aggregate, the improvement in our fertilizer business helps offset weakness in our refining business.”

For the second quarter, average plant gate sales prices for ammonia and UAN were $528/st and $303/st, versus the year-ago $366/st and $218/st, respectively. Second-quarter ammonia and UAN sales volumes were 19,100 st and 138,600 st., versus the year-ago 13,400 st and 126,800 st, respectively.

Six-month nitrogen income was $49.2 million on sales of $121.4 million, versus the year-ago $21 million and $74.3 million, respectively.

CVR was also impacted by $52.4 million in realized losses associated with cash flow swaps. It expects the impact of these swaps will lessen beginning July 1, 2009, when the notional volumes of the swap decrease significantly. In addition, the company recognized $3.7 million in bad debt expense related to the bankruptcy of energy trader SemGroup LP, which is expected to fully cover the company’s exposure.

Petroleum operating income was $101.9 million in the second quarter on sales of $1.46 billion, compared to the year-ago $166.3 million and $809 million, respectively. Six-month petroleum income was up at $165.5 million on sales of $2.63 billion, versus the year-ago $102.9 million and $1.16 billion, respectively.

CVR second-quarter net income was $31 million ($.36 per diluted share) on sales of $1.5 billion, versus the year-ago $100.1 million ($1.16 per share) and $843.4 million, respectively. Six-month net income was $53.2 million ($.62 per share) on sales of $2.73 billion, versus the year-ago loss of $54.3 million ($.63 per share) and $1.23 billion, respectively.

Agrium reaches agreement on Egyptian nitrogen facility

Egypt, News, Nitrogen

Agrium Inc. said Aug. 11 that, through two wholly-owned subsidiaries (collectively referred to as Agrium), it has entered into an agreement with MISR Oil Processing Co. S.A.E. (MOPCO) of Egypt, whereby MOPCO will acquire the EAgrium project, and EAgrium shareholders will obtain an equity interest in the combined entity. Agrium will own a 26 percent interest in the combined entity, including the recently completed 675,000 mt urea MOPCO facility, which is expected to commence commercial production by the start of the fourth quarter of 2008. The combined entity intends to construct two additional urea trains on the MOPCO site, which will increase the total annual capacity to approximately two million mt of urea. Agrium’s share of the annual production would be 175,000 mt of urea until the expansion is complete in 2011, after which it would increase to approximately 525,000 mt annually.

“We are extremely pleased that we have been able to reach an agreement with the Egyptian Government that allows us to establish an immediate presence and long-term strategic position in Egypt, as well as providing additional earnings and cash flow almost immediately. We believe that this agreement provides considerable benefits to EAgrium, MOPCO and their respective shareholders and Egypt. I would like to take this opportunity to thank the Egyptian Government for the time and effort they have dedicated to deal with this matter. Their full support and cooperation was instrumental in resolving the issues. As a foreign investor in Egypt it gives us comfort to see such commitment on the part of the Government,” said Mike Wilson, Agrium president and CEO.

As part of the agreement, MOPCO will acquire EAgrium and all related contractual rights and obligations through a share swap, after which EAgrium will become a wholly-owned subsidiary of MOPCO and the shareholders of EAgrium will become shareholders in MOPCO. The share swap is expected to occur by the end of the third quarter of 2008. The applicable current contracts for the engineering, procurement, and construction for the two additional urea trains, as well as the gas supply agreement, marketing off-take agreement, and various other commitments, will be retained in relation to the second and third production trains and transferred to the MOPCO site.

Agrium anticipates its ownership in MOPCO would result in earnings contributions beginning in the fourth quarter of 2008 on its share of production, which would be reported as equity earnings. MOPCO will arrange the proposed project financing facility of approximately $1.1 billion after completion of the share swap, which is required to finance all future project costs. Under the current financing plan, Agrium would not be required to put any further equity into the project beyond the approximately $280 million of equity already committed to the EAgrium project. The agreement is subject to a number of conditions that are expected to be concluded prior to the end of the third quarter, including confirmation from the Government of Egypt on key agreed deliverables and establishment of an interim financing facility.

USDA increases corn estimate; Douglas astonished by government optimism

News

The USDA said Aug. 12 that it expects 2008 U.S. corn production to be 12.3 billion bushels, up 573 million, or 4.9 percent from last month’s projection, with higher forecast yields and increased harvested area. “Nearly ideal growing season weather across much of the Corn Belt since late June has supported crop development and increases yield prospects,” said the report.

USDA now sees acres planted at 87 million acres, down from the 87.3 million acres assessed last month. In 2007, some 93.6 million acres were planted. USDA now predicts some 79.3 million acres will be harvested in 2008, up from July’s 78.9 million acres. Yield per acre is now 155 bushels, up from 148.4.

Industry veteran Dr. John Douglas of Douglas Associates was surprised by the USDA report. “I made a personal tour of Indiana, Illinois, Iowa, Missouri, Mississippi, Kentucky and Tennessee and north Alabama two weeks ago,” he told Green Markets. “And I’m astonished at their extreme optimism for the corn crop. In all the Corn Belt states we saw much evidence of lack of nitrogen showing up as scattered yellow patches throughout the field. Also in Illinois, Iowa and Missouri we saw many spots where pools of water had killed the corn. Some had not been replanted and were bare. Others had been replanted but were only knee-to-waist high and will need a very late frost in order to mature. As a result of the above I doubt seriously that we will see more than 11 billion bushels harvested this year, and thus will have carryover of well less than one billion bushels, (an S/U ratio of less than 8 percent).”

In the meantime, Deere & Co. Manager of Investor Relations Susan Karlix told analysts the USDA corn price is still extremely attractive to grain farmers while lessening the burden on livestock producers and consumers.

USDA raised corn feed and residual use estimates 100 million bushels with the larger crop and lower expected prices. Ethanol use is raised 150 million bushels, as increased supplies and lower prices are expected to improve plant operating margins and capacity utilization rates. Exports are unchanged as competition from wheat feeding limits prospects for U.S. shipments. Ending stocks for U.S. corn are projected at 1.1 billion bushels, up 301 million from last month. The season average farm price is forecast at $4.90-$5.90 per bushel, down 60 cents on both ends of the range.

USDA forecast soybean yields to be down to 40.5 bushels per acre, down 1.1 bushels from last month’s trend yield projection. The survey forecast U.S. production at 2.973 million bushels, down 27 million from the July projection, but 388 million bushels above last year’s crop. Soybean stocks are down 5 million from last month at 135 million bushels as reduced supplies are only partly offset by a lower crush. The U.S. season-average soybean price for 2008/09 is projected at $11.50-$13.00, down 50 cents on both ends of the range.

USDA increased its forecast for wheat by 2 million bushels. However, it said feed and residual use is projected 35 million bushels lower as increased supplies of feed grains and sharply lower projected feed grain prices reduce prospects for domestic wheat feeding. The all wheat season-average farm price is projected at $6.50-$8.00 per bushel, down 25 cents on each end from last month.

Yara exec discusses new world order of fertilizer supply & pricing at CFI conference

News

The new world order of fertilizer supply and pricing is due largely to a shift away from the manner markets have traditionally worked – this is the view expressed by Dag Tore Mo, Yara International ASA vice president, market analysis. Speaking at the Canadian Fertilizer Institute’s 63rd Annual Conference in St. John’s, Newfoundland, and Labrador Aug. 11-13, Mo said the fertilizer industry produced at over capacity for “a long time,” and now that grain stocks are at an all time low, the need for fertilizer has increased. For the decade between 1997 and 2008 the world did not need to produce more food, but the interest in using food as an energy source other than eating has led to shortages, he adds.

“In terms of phosphate rock, it could be bought for $40/t for the last 45 years and now it is selling at $400/t because there is a genuine shortage,” Mo told the crowd of industry insiders. When the United States reduced its exports of phosphate in 2007 the difference was made up by China, he explained, and the trend continues in 2008. “Phosphate trade is up 5.6 percent in the first quarter of 2008.”

Urea markets have been affected largely by political reasons in the past, Mo explained. The collapse of the Soviet Union, and China and India importing again, plus the expansion of low gas prices in the Middle East contributed to a “super down cycle” in the past decade for urea. “However, global trade in urea went up 20 percent in 2007 and it’s already up 21 percent in the first quarter of 2008,” Mo reported. “China is covering these increases with exports for now, but there are rumors that China intends to increase export tariffs by 50 percent, which would definitely affect the market.

“It’s hard to see how the world could survive without Chinese exports in the years to come because there are few new production facilities coming and those that are planned are having problems getting up and running.”

“Higher gas costs means it’s expensive to invest in new capacity, so it’s understandable there are few new projects in the pipeline,” said Mo.

With the fertilizer market being driven by the need for food, Mo reported the stocks-to-use ratio is at an all time low. While the global market appears to be satisfied that demand will be met in 2008, he suggested the grain crop in 2009 will have to increase because consumption continues to increase. “It is my hope that all farming sectors will have a good year,” he concluded.

In addition to Mo’s presentation on world fertilizer and an update on the success of North American agriculture, the conference also hosted a panel on world climate change and the affects agriculture – and, specifically, fertilizer – has on it. The panel consisted of topics on the science of climate change, action by Canadian farmers to mitigate change, responses to climate change in Europe, and strategies for managing fertilizer in support of mitigation. While the future of the planet was presented as grim unless changes are made, the work of Canadian farmers and the research around best management practices for fertilizer use put a positive spin on the topic as it proved the industry is taking the issue seriously and is working towards solutions.

Tribe concerned over Superfund site

News, Phosphate

Several Shoshone-Bannock tribal members voiced concerns about how contamination from J.R. Simplot Co. and FMC phosphate processing operations on the Eastern Michaud Flats Superfund site could adversely impact the adjacent reservation where they live, grilling U.S. Environmental Protection Agency officials at a recent public information meeting at Fort Hall.

EPA officials gave updates about the Simplot, FMC, and off-plant “operable units” on the Superfund site, which covers 2,530 acres west of Pocatello, Idaho. FMC manufactured about 250 million pounds of elemental phosphorus annually within reservation boundaries until December 2001, when its plant was shut down. The Simplot phosphate fertilizer plant converts nearly two million tons of phosphate ore each year into five grades of solid fertilizer and four grades of liquid fertilizer east of the FMC site, but off the reservation.

An FMC pond that leaks phosphine gas and a large, unlined Simplot phosphogypsum stack behind its Don Plant that leaches into groundwater and discharges into the nearby Portneuf River and Batiste Springs generated the most heated questions from tribal members. Eastern Michaud Flats was listed as a Superfund site in August 1990 after investigations showed elevated levels of arsenic, lead, and cadmium above federal drinking water standards down gradient from the two plants, which were constructed in the latter 1940s.

In 1998, EPA signed a Record of Decision that identified cleanup methods. Primary contaminants of onsite groundwater are antimony, arsenic, fluoride, manganese, nitrate, radium-226, selenium, thallium, gross alpha, and gross beta. Offsite soils contain elevated levels of fluoride, radium-226, total phosphorus, zinc, arsenic, cadmium, and chromium. Onsite soils contain elevated levels of cadmium, chromium, copper, lead, nickel, silver, vanadium, zinc, radium-226, lead-210, total gamma radiation, and fluoride.

In 1994, the Portneuf River was listed as impaired for not meeting Idaho water quality standards for dissolved oxygen and nutrients, including orthophosphate. Its phosphorus level is above the Total Maximum Daily Loads (TMDL) of 75 micrograms per liter. The American Falls Reservoir downstream from the Portneuf is also impaired by low dissolved oxygen and algae blooms.

In April 2008, Simplot and the Idaho Department of Environmental Quality signed a compliance agreement in which Simplot agreed to reduce phosphorus discharges 50 percent by December 2013, 75 percent by December 2015, and 94 percent by December 2021 via source control, groundwater extraction, recycling, or treatment.

Simplot recently completed a field investigation to collect hydraulic properties of the aquifer and assess groundwater quality to fill in data gaps and help finalize how to remedy the contamination problem.

“Water is sacred to us Indians above all else. Any pollution to it is a bad thing,” Cleve Davis, a tribal member, said after Kira Lynch, EPA remedial project manager of Seattle, mentioned that EPA has reduced the maximum contaminant level for the Portneuf River.

Tribal council member Blaine Edmo questioned the wisdom of spraying contaminated water from about a dozen Simplot extraction wells onto the gypsum stack for dust suppression or expanding the stack that slopes toward the Fort Hall Reservation. If Pocatello or Chubbuck were directly north of the Simplot or FMC plants instead of Fort Hall, it would be a “different story,” he said. “Because the water flows back onto the reservation…nobody cares.”

A tribal woman criticized EPA for relying too much on studies by Simplot and FMC. “I can guarantee this isn’t something being done in a vacuum by the companies,” Lynch responded. Another woman asked, “How are you keeping FMC’s feet to the fire since the company is no longer operating there?” Lynch explained that FMC remains obligated to a cleanup because of a negotiated legal settlement. Elemental phosphorus has been detected as far as 85 feet below the surface to groundwater and extends 500 feet laterally on the FMC property, she said.

Eight capped FMC waste ponds range from three acres to 13 acres in size onsite and contain from 27 acre feet to 140 acre feet of waste. Their construction started in 1993; they were closed by 2006. In February 2006, high concentrations of toxic, flammable phosphine gas were detected escaping from Pond 16S. EPA ordered that a system be installed to capture and monitor the gas, which it declared was an imminent threat to human health and the environment. Pond 16S was the only FMC pond to have a complex mixture of wastes pumped into it, officials said.

Nitrogen pushes up Rentech revs and guidance; technology expenses spur loss

News, Nitrogen

Strong demand and pricing from Rentech Inc.’s Rentech Energy Midwest Corp. (REMC) unit pushed revenues for the parent company to $60.4 million for the third quarter ending June 30, 2008, up from the year-ago $50.4 million. Nine-month revenues were $136.4 million, up from $102.7 million.

Rentech told analysts that while record rainfall in eastern Iowa during the spring planting season reduced application of UAN and ammonia, the weather did not have any meaningful financial impact due to REMC’s ability to move product beyond its normal trade zone at or above its budgeted levels.

The company says it continues to consider opportunities to enhance the efficiency of the REMC plant in East Dubuque, Ill., to further capitalize on the strong demand for fertilizer in the Corn Belt. Rentech says the facility has achieved a new UAN production record, as well as record product sales for the nine-month period. Rentech says its has sales agreements on ammonia for 95 percent of its projected fiscal 2008 shipments at an average sales price of $520/st, compared to an average price of $351/st in 2007 and $300/st in 2006. It reports UAN sales agreements for 100 percent of projected fiscal 2008 shipments at an average sales price of $286/st, compared to $209/st in 2007 and $161/st in 2006.

The company said it has 100 percent of fiscal 2008 prepaid products sales margin locked in with gas purchases, inventory produced, or product produced. As a result, Rentech is raising its guidance for fiscal 2008 EBITDA at REMC to $50 million or greater from its previous projection of over $40 million. “We are pleased with the continued robust performance at REMC, which has exceeded our expectations,” said Hunt Ramsbottom, Rentech president and CEO. “In fiscal 2009 we expect increased EBITDA performance from REMC and reductions in spending now that construction of our Product Demonstration Unit (PDU) is complete. We also expect corporate overhead reductions as a result of our company-wide cost review program.”

Rentech says it has executed prepaid product sales for 40 percent of fiscal 2009 UAN shipments and 57 percent of 2009 ammonia shipments, and has locked in the sales margin for these sales with gas purchases, inventory purchased, or product purchased.

Rentech says the PDU is the only synthetic fuels facility in the U.S. today producing transportation fuels. It is designed to produce about 420 gallons per day of synthetic jet and diesel fuel, specialty waxes, and chemicals.

Due to its new technology expenses, Rentech continues to post losses. Third-quarter losses applicable to shareholders were $7.8 million ($.047 per share) versus the year-ago $6.9 million ($.044 per share). Nine-month losses were $54 million ($.327 per share), compared to the year-ago loss of $32.8 million ($.223 per share). Rentech noted that the new credit agreement REMC executed in June limits the company’s flexibility to continue using REMC’s cash flow for new technology in the future, so the company will need to raise additional working capital during fiscal 2009.