AMMONIA

U.S. Gulf/Tampa: Nothing new was reported on the Tampa market last week, though sources had said new import business was being discussed for other ports.

Eastern Cornbelt: Anhydrous ammonia remained at $1,040-$1,050/st FOB Illinois River terminals on the low end, and up to $1,100/st FOB out of inland shipping points. Some sources also talked of a $1,200-$1,210/st DEL range for ammonia, depending on time of shipment.

Western Cornbelt: Anhydrous ammonia remained in a broad range at $1,020-$1,100/st FOB regional terminals for spot tons, with little business to test the market.

Northern Plains: Current ammonia prices were difficult to come by last week, but Minnesota sources pegged the cash market at no less than $1,100-$1,125/st FOB pipeline terminals to the dealer, with reference levels at the $1,230/st FOB mark out of Minnesota terminals. Delivered ammonia in North Dakota was reported at $1,380-$1,400/st for cash tons. One source said dealers have roughly 50-60 percent of their fall ammonia needs positioned or bought, but that may translate to 100 percent if weather conditions are uncooperative during the fall application season. As it is, most are looking at a narrower application window this fall due to later-than-normal crop development.

Dakota Gasification’s Beulah, N.D., ammonia plant was still down for its summer turnaround last week, but company sources said a restart was planned for early August. Effective July 25, Agrium’s anhydrous ammonia postings in the Leal, N.D., sales area firmed yet again to $1,360/st FOB and $1,380/st DEL. Those levels reflect a $45/st increase from July 16 postings, a $116/st increase from July 10 postings, $179/st higher than July 4 reference levels, and up a total of $241/st from Agrium’s July 1 ammonia postings in that sales area.

Great Lakes: Sources tagged the ammonia market in a wide range at $1,100-$1,200/st FOB, with the upper level quoted by Michigan sources FOB Huntington, Ind., for limited spring prepay offers.

Black Sea: Even as production begins to pick up with plants coming back online from turnarounds, the price in the area remains on an upward trend. Producers are pushing for ever-higher prices. A deal for 23,000 mt was reportedly sealed late last week at $800/mt FOB. Additional business closer to $810/mt FOB was rumored. Sources say the price would have jumped even more if production facilities were not coming back online following routine turnarounds.

The OPZ plant churns out about 900,000 mt/y. Another plant responsible for 400,000 mt/y is also slated to be back online this week. All told, the return of major production facilities has slowed the rate of increase in Yuzhnyy ammonia.

Asian sources say as long as the Burrup facility in Australia remains down, demand from Asia will continue to put pressure on supplies everywhere.

One trader noted more tons from Yuzhnyy are being seen in Asia than in times past.

The upside for buyers is that with plants coming off turnarounds, many contracts will be able to be fulfilled from the Black Sea instead of scrounging for tons in the Middle East. This should ease some of the buying pressure from the Middle East and move the market into a better balance, say sources.

With $820/mt FOB the new entry price for talks, sources say the only sub-$800/mt FOB material being shipped are cargoes contracted weeks ago. Discussions of new sales were firmly in the low $800s/mt FOB by the end of last week.

Ironically, just as Yuzhnyy ammonia continues to rise, the KIP was changed. The government put the new minimum price for ammonia at $700/mt FOB.

Asian sources looked at the price and wondered if the government was anticipating a collapse of the global ammonia market. Even though the KIP is more than $100 lower than the current market level, sources point out it does reflect a $250 increase from the last KIP.

Middle East: Offtake from India has appeared to pick up. Producers are shipping more contracted tons. For a while it looked as if the Indian buyers would be taking only the minimum requirements under their contracts with the Middle East suppliers. Asian sources now report that buying has stepped up and more tons are being shipped. The increase in shipments is doing little to move up the price, however. The contracted delivered price is still way below the current pricing ideas of the producers.

Last week a small cargo was reportedly shipped to FACT via IPL for about $600/mt CFR. Producers are now claiming a price for spot tons closer to $800/mt FOB.

The tightness in the Middle East market is expected to ease somewhat as Yuzhnyy producers come back online. Sources say a number of traders who had depended on Black Sea ammonia have been picking up what tons they could from whatever source to satisfy their contracts.

Buyers were hit with a double whammy of the shortages in Yuzhnyy and the unexpected shutdown of the Burrup plant in Australia. With Yuzhnyy production coming back to normal, sources say the market is left with regular pressure from Asian buyers and traders looking to replace lost Burrup tons pushing on the Middle East market.

IPCC/Iran closes a selling tender August 8 for 8,000 mt. Sources say the results of the tender will help provide some indicators of how the spot market is moving, but not in the same way as if Sabic was conducting the sale.

Observers note the extra steaming time to the Iranian port adds to the freight costs of any deal with IPCC. Others have commented that bureaucratic issues have also delayed delivery in the past.

One Asian source agreed with all the problems of dealing with an Iranian tender, but added that at least there will be some clear evidence of what people think of the current value of ammonia in the region.

For now, the market is firmly in the low $800s/mt FOB, with producers trying to push the price higher. Increased demand from India is expected to support the higher costs.

Asia: Sources report the first inklings of pushback from downstream buyers.

Reportedly, the ever-increasing cost of ammonia is finally being felt by industrial users. One trader noted that Taiwanese and South Korean businesses are finding it harder and harder to pass on higher input costs to their consumers. At least one company has sent word it will be cutting back on its production because the price of inputs – including ammonia – has moved higher than the market can bear.

Asian sources say the Burrup facility in Australia should be back online by October. The plant was shut down following an explosion in the gas supply system.

UREA

U.S. Gulf: Most players said the prompt granular market was somewhere around the $800/st FOB mark last week, with no new business to test the market. However, there was definitely concern that the market might be shaky due to various influences. Some said buyers are spooked by lower corn prices and fearful of buying. Others noted that Sabic is bringing in a vessel in mid-August, with some buyers wanting to get prices lower in order to get a good deal off that vessel. Still others cited lower postings by Koch at Enid, Okla., where postings were widely reported to have dropped $55/st, to $780/st FOB. Several said that the latter was an anomaly, and they were not moving their pricing either inland or on barge NOLA to follow.

While Koch had not returned calls at press time, others offered that the company’s inventories at Enid had built up in anticipation for a fall outage, which would be in line with the company’s planned expansion, also at Enid. Sources said some other regional price points were sold out.

There was one report of a transaction as low as $770/st FOB. Many sellers were skeptical, saying there was no need for such a drastic drop. One suggested there might be more to the sale than simple supply and demand.

The regular milk run of vessels from major importers of granular is expected to start coming in during the near term. Some three or four prill vessels are due in, say sources, with some suggesting this may put pressure on those numbers. Others dispute this assessment, saying there is no need for price pressure on prills.

Eastern Cornbelt: Granular urea was quoted in a broad range at $860-$890/st FOB regional terminals.

Western Cornbelt: Sources reported few pricing changes from the previous week and little demand, although urea prices were reportedly under some pressure from lower spot inland values and weaker corn prices. Sources continued to report regional terminals in the $840-$870/st FOB range to the dealer, but Koch adjusted its Enid, Okla., urea price down from $835/st to the $780/st FOB mark on Aug. 5, reportedly due to a build-up of inventories. The company is reportedly planning to take the Enid facility down as part of an upgrade there in October.

Northern Plains: Granular urea pricing was tagged at $805-$825/st FOB the Twin Cities. Although there were few new sales to test the market, most reported the dealer market firmly at the upper end of that range last week.

Agrium’s granular urea postings firmed on July 25 to $875/st FOB North Dakota warehouses at Alton, Carrington, Colfax, Marion, and Scranton, and $880/st rail-DEL in Minnesota, Wisconsin, and the Dakotas. Those levels reflect a $30/st increase from Agrium’s July 16 reference levels, a $70/st increase from July 10 postings, a $105/st increase from July 4 reference levels, and a $140/st increase from the company’s July 1 urea postings in those locations.

Great Lakes: Granular urea prices were up considerably from last report. Sources tagged the dealer market at $865-$900/st FOB terminals to the dealer, with the low in Wisconsin and the upper end in Michigan.

Northeast: Granular urea was tagged in a broad range at $857-$890/st FOB, with the upper end reflecting dealer reference levels and the low end reported for recent spot business FOB Philadelphia and E. Liverpool, Ohio. Those levels were up significantly from last report.

Black Sea: Sources report the market has settled down. Producers continue to argue for $820/mt FOB and up, but traders and end users are hard pressed to see any justification for the move at this time. Sources report the lower end of the market has tightened, but added that some deals are still coming in the upper $790s to low $800s/mt FOB.

The bottom line for producers right now is that no one wants to take a position. Even with reports of Indian buyers nosing around the Middle East, sources say there is no enthusiasm for buying at this time.

One trader noted that by all general rules of economics the market price should have kept on moving up following the IPL/India tender. Large quantities of urea were purchased at high prices, and more purchases in the near future are expected. By this logic, he said, the price should not be softening. But that is just what it is doing.

Sources report the lethargy being felt in the market is being translated into a downward pressure on prices.

Producers are pushing as hard as they can to stay above $800/mt FOB, but a number of industry watchers are saying now is the time for a market correction.

Even reports that China will tack on an additional 50 points to its export duty have done nothing to move buyers and traders from their view that the price needs to come down.

One trader noted that the fourth quarter will be the main determining period for price shifts. If Indian demand remains at the estimated 1.3 million mt and if Middle East producers are successful in holding the line with their prices, sources say the Yuzhnyy price could once again move upward.

Few are expecting to see a dramatic rise, however.

For now, the market is still hovering around the $800/mt FOB level. Asian traders say a safe bet in gauging the price is $790-$810/mt FOB.

Middle East: Granular urea remains a hot commodity. Egypt is now quoting $850/mt FOB, and Arab Gulf suppliers are hearkening back to business from late last month at $870/mt FOB. For granular from this area, sources say $850-870/mt FOB is a reasonable range to use for calculating a deal. While producers are happy with these record high numbers, sources say the near-in target is $900/mt FOB.

Prills remain in the doldrums. The last bit of public business in prills was the IPL tender. That means prices officially are around $815/mt FOB.

Sources say producers argue that any new deal involving prills would need to start at $850/mt FOB from the Arab Gulf just to keep in line with the traditional gap between prills and granular. Traders say tradition is nice – but this is business.

Industry observers continue to peg the prilled market at $815-$820/mt FOB, knowing full well that once any tender involving Middle East prills comes out, the price could jump a minimum of $30.

Buyers and sellers agree the market situation in the region is tight. Contracts for prills and granular ensure enough sales through this quarter to keep the producers happy.

Reports continue to surface of the producers keeping their warehouses as empty as possible. Some say the move is a ploy to ensure no reserves build up that could push prices down. Others say the order books are so full that the producers are doing all they can just to keep up with the shipping demands.

China: The rumors about what Beijing will do with their urea export tax after the Olympics are getting more dire for international buyers. The latest report says the government will tack on an additional 50 points to the “special export duty.” That means on top of the standard 35 percent duty, exporters will be charged an additional 150 percent – for a total tax of 185 percent. Some have said the new rate could take effect as early as Aug. 20. Others say it may not take effect until September.

What has become clear, however, is that the political leaders in Beijing are working overtime to ensure urea does not leave the country.

The fourth quarter may see a reduction in the total tax bill. One source said the duty should be lowered to 160 percent for October through December.

Once January 2009 rolls around, sources say almost anything can happen.

Sources report that in addition to increasing the export duty, the relevant agencies are working to close loopholes in the shipping process.

When the government first began imposing higher export duties on urea, different port authorities used different interpretations of the regulations to help or hinder exporters. In some cases the port authorities accepted the idea that urea being loaded on a train at the factory bound for their port was the same as if the urea was already in a bonded warehouse.

In other cases the authorities used the literal meaning of “in the bonded warehouse,” and sought to impose the higher tax on portions of urea shipments that were alongside the warehouse and in the process of moving into the warehouse but that were still outside the building.

For the economic planners in Beijing, the issue is more ensuring the proper tax is collected at the proper time.

Indonesia: PIM closed a tender last week for 60,000 mt. Three winners – Ameropa, Helm, and Transammonia – will each get 20,000 mt at $790/mt FOB. Sources say the material will be used for India. PIM is expected to issue another tender later this month or early September for an October lifting.

Reports of PIM needing to go into an early turnaround were apparently misguided. Sources now report that PIM will have to cut back on production because it will face a shortage of natural gas. It seems the natural gas supplier will be stepping down its operations for maintenance work. The reduction in natural gas will affect PIM and other downstream users.

NITROGEN SOLUTIONS

U.S. Gulf: Most saw little change to the market, still calling it $500-$515/st FOB ($15.63-$16.09/unit).

Eastern Cornbelt: UAN was quoted at $515-$525/st ($16.09-$16.41/unit) FOB regional terminals.

Western Cornbelt: UAN-32 was reported at $510-$525/st ($15.94-$16.41/unit) FOB terminals to the dealer.

Northern Plains: The UAN market was reported in a broad range at $16.50-$17.40/unit FOB, with the upper level reflecting dealer postings FOB Winona, Minn.

Great Lakes: UAN was up dramatically from last report. Wisconsin sources tagged the cash market at $17.00-$17.40/unit FOB, while Michigan sources quoted dealer reference prices for UAN-28 as high as $539-$544/st ($19.25-$19.43/unit) FOB in early August.

Northeast: UAN-30 pricing was up considerably from last report. Sources tagged the market at $470-$490/st ($15.67-$16.33/unit) FOB, with the upper end reflecting reference pricing FOB Philadelphia, Pa. Out of terminals in upstate New York, the UAN-32 market was reported at $16.50-$17.00/unit FOB.

Sources said UAN prices should continue to firm based on replacement costs; one said sales of vessel tons have been concluded at $550/mt C&F, and new business could equate to a $596-$600/mt range if those tons are routed to the East Coast.

AMMONIUM NITRATE

U.S. Gulf: Barges were called $500-$520/st FOB.

Western Cornbelt: Ammonium nitrate remained firm at $550-$600/st FOB.

AMMONIUM SULFATE

Eastern Cornbelt: Granular ammonium sulfate was reported at $475-$495/st FOB in the region, up slightly from last report, with the upper end of the range reflecting new postings from some suppliers.

Western Cornbelt: Granular ammonium sulfate was steady at $455-$475/st FOB in the region, although postings were said to have firmed to the $495/st FOB level from some suppliers.

Northern Plains: Minnesota sources tagged the granular ammonium sulfate market at $450-$475/st FOB. Dakota Gasification was referenced at $470/st DEL in North Dakota, $475/st DEL in South Dakota, and $480/st DEL in northern Minnesota. Effective July 25, Agrium’s granular ammonium sulfate postings firmed to $475/st DEL in Minnesota and North Dakota, up $15/st from the company’s July 16 posting, and $35/st higher than the July 11 reference price in that location.

Great Lakes: Ammonium sulfate was up from last report at $480-$495/st FOB in the region. A Wisconsin source pegged delivered ammonium sulfate pricing in early August at $480/st for mid-grade and $495/st for granular. Effective July 25, Agrium’s granular ammonium sulfate postings firmed to $475/st DEL in Wisconsin, up $15/st from the company’s July 16 posting and $35/st higher than the July 11 reference price in that location.

Northeast: Granular ammonium sulfate remained at $442-$475/st FOB in the region.

PHOSPHATES

Central Florida: After dealers filled their warehouses throughout the spring and with the fall season still a couple of weeks away, phosphate movement out of Central Florida ground down last week – at least for new, prompt orders.

Falling corn prices – down to around $5.50/bushel – were on the front burner last week, but the reaction from the phosphate industry was mixed. Some felt the lower price would lead corn farmers to reduce applications for the next year, while others insisted the drop may actually force them to use more in order to obtain maximum yields. One source said he thought that if the corn price dropped to $4.50-$4.80/bushel it would cause a 20 percent reduction of phosphate applications in the Midwest and as much as 50 percent in the East.

Prices for soybeans and wheat were also on the decline, but less phosphate is needed for beans, which may lead some to switch crops in the spring. Others argued most farmers have already sold their crops on hedge at $7-$8/bushel and will not have a problem with cash flow.

The biggest problem producers face has been the rising cost of raw materials. Sulfur moved up to $615.50-$618.50/lt and ammonia was expected to rise again, with some suggesting it may go to around $800/mt. In addition, producers who must import phosphate rock from North Africa were paying around $450/mt, so a big drop in phosphate prices could put a squeeze on those producers.

The Central Florida DAP price range last week was unchanged at $1,070-$1,080/st FOB. PCS Sales’s Central Florida reference price remained 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. CF was asking $1,070/st FOB for DAP and $1,145/st FOB for MAP. In Texas, Agrifos’ DAP price was $1,100/st FOB for trucks and $1,095/st FOB for rail shipments. Price changes were not likely for this week.

U.S. Gulf: The number of phosphate barges on the river system was extremely limited last week, which matched the amount needed by the market. While some feared that might be a sign phosphate prices may finally start a decline, don’t count on it. Business in August is never exactly robust, and this year is more like normal. The only thing that might throw a wrench into the system was a lack of early ordering for the upriver areas, considering the river will close sometime in mid-October. The problem was that due to cold and wet weather in the spring, farmers in the upriver region were late getting their crops into the ground, and most won’t even begin harvesting until sometime in early October this year. Most dealers in the area filled their bins earlier this season when the price of phosphates was taking giant steps on a nearly daily basis; they were reluctant to refill at the current high prices until the farmers begin drawing down some of those supplies. By the time that happens it will too late for barge traffic, and railcar shipments out of Central Florida will be jammed.

One of the biggest obstacles faced by traders and dealers has been the high cost of capital and fertilizers. Borrowing the money to buy inventory that will not be needed for several months has become extremely difficult and expensive.

In Oklahoma, farmers will begin putting their wheat crops in during August, so business for phosphates there was expected to pick up soon. People in that state were rejoicing last week when a cold front moved in and plunged temperatures below 100 degrees and the possibility of rain increased.

The NOLA DAP barge price range last week remained unchanged at $1,070-$1,080/st FOB. MAP barges were $25-$75/st FOB more than DAP, but supplies were 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 was seeking $1,070/st FOB for DAP and $1,145/st FOB for MAP for prompt deliveries, if available.

Eastern Cornbelt: DAP was steady at $1,100-$1,104/st FOB river terminals on the low end, with the upper end reported at $1,120-$1,130/st FOB at inland warehouses. MAP was $1,110-$1,150/st FOB. Sources reported no current prices for 10-34-0, but noted the product remained extremely tight if not completely unavailable on the spot market.

Western Cornbelt: DAP remained at $1,080-$1,125/st FOB regional warehouses, with MAP at $1,110-$1,145/st FOB. No current prices were reported for 10-34-0.

Northern Plains: The DAP market was pegged at $1,125-$1,150/st FOB regional warehouses to the dealer, with MAP at $1,175-$1,225/st FOB. 10-34-0 was reported in a very broad range and in extremely tight supply, with black product quoted at $1,100/st FOB on the low end and any available green tons pegged as high as $1,200-$1,250/st FOB.

Great Lakes: DAP was pegged at $1,140-$1,195/st FOB regional warehouses to the dealer, with the upper end reported in Michigan. MAP was $1,155-$1,210/st FOB, with the high again in Michigan. No current pricing was reported for TSP.

Michigan sources pegged the 10-34-0 market at $1,137-$1,145/st FOB, depending on time of delivery. No current prices were reported in Wisconsin, but one supplier said new numbers would likely be at the $1,250/st FOB level or higher when spot tons are available again.

Northeast: The DAP market was quoted at $1,097-$1,127/st FOB in the region, with MAP reported at $1,117-$1,170/st FOB. The 10-34-0 market was at a solid $1,100/st FOB shipping points in upstate New York.

U.S. Export: PhosChem made a sale of between 5,000 mt and 6,000 mt of DAP into Central America last week at $1,215/mt FOB. In addition, a trader who had made sales amounting to 15,000 mt into Mexico the previous week was able to sell an additional 5,000 mt there, which lowered the freight rate and increased the FOB price from $1,215/mt to $1,220/mt.

PhosChem has completed several deals to sell 500,000 mt into Australia under contract at formula pricing. Deliveries will begin in August and continue through the winter.

North African suppliers were taking a hard line in price negotiations with India on phosphoric acid and were seeking a new contract price of about $2,500/mt, up from the previous price of $1,985/mt, which has put a strain on India. If it cannot obtain the acid at a price it can afford, it will be difficult to make up the difference in DAP buys from the U.S.

The export DAP price range last week increased from $1,212-$1,215/mt FOB to $1,215-$1,220/mt FOB.

India: Buyers are stepping up in a big way. So far, IPL has booked about 280,000 mt from Australia and Mexico for local buyers. Sources say deals for another 50-80,000 mt might soon be concluded.

RCF closed its tender Aug. 7 for 325,000 mt. Only three companies offered tons in the tender.

Source: Industry Sources

Reportedly, RCF bid KIT at $1,268/mt CFR, but has not heard back. The buyer is also said to have asked the offering companies to extend their validity dates so talks can continue over the weekend.

China: Reports are circulating that Beijing may lower or remove the export duty on phosphate fertilizers as early as Aug. 20. The government apparently has a desire to push more DAP into the global market. Sources report that DAP is piling up in warehouses across the country. So far the government has been providing subsidized storage for the DAP, but is doing little to ensure the DAP producers are earning enough to keep their plants in operation.

Bangladesh: BCIC has issued a tender to import 30,000 mt (65.5 percent BPL Min.) of rock phosphate. Offers will be received up to Sept. 14 and will be valid for 30 days.

BCIC has also issued a tender for 20,000 mt of phos acid (52-54 percent), with offers to be received up to Sept. 1.

POTASH

Eastern Cornbelt: Sources quoted potash prices at $875-$930/st FOB in the region last week.

Western Cornbelt: Sources put the potash market in a broad range at $890-$950/st FOB regional warehouses to the dealer, with most suppliers closer to the higher level.

Effective Aug. 1, Intrepid Potash’s postings FOB Carlsbad, N.M., moved to $776/st for 60 percent standard, $782/st for 60 percent granular, $794/st for 62 percent standard, $797/st for 62 percent fine standard, and $800/st for 62 percent granular. Intrepid’s potash postings FOB Moab, Utah, moved to $776/st for 60 percent standard and $782/st for 60 percent granular, while postings FOB Wendover, Utah, moved on Aug. 1 to $794/st for 60 percent standard and $800/st for 60 percent granular.

Northern Plains: Potash was quoted at a firm $900/st FOB level for brokered or reseller tons out of Minnesota warehouse locations, but cash market tons were limited.

PCS Sales will raise its North American potash postings across the board by $250/st FOB, effective Sept. 1 through Nov. 30. The company’s Saskatchewan mine prices for that period will move to $767/st FOB for standard, $780/st FOB for soluble, $772/st FOB for granular, and $780/st FOB for white granular.

Great Lakes: Potash was reported in a broad range at $850-$925/st FOB for brokered or reseller tons.

Northeast: Potash was reported at $847-$895/st FOB on the secondary market, and in short supply in the region. Sources reported no updated delivered potash prices last week. One dealer said he expects significant usage cutbacks this fall, and noted as well that a fair amount of tonnage was carried over from the spring season.

Russia: Uralkali said that it has reached agreement with domestic customers – producers of complex fertilizers – Eurochem and Phosagro, to hold the price of potassium chloride at 3500 RUR per ton (FCA) until the end of 2008 for the production of complex fertilizers for domestic agricultural producers. Uralkali will hold the price at 3000 RUR per ton (FCA, including package) for all the direct supplies of potassium chloride for Russian agricultural producers, and there are currently no plans to raise this price.

Uralkali said the price for potassium chloride for the production of exportable complex fertilizers will be based on the formula as agreed between Uralkali and the Federal Antimonopoly Service of the Russian Federation. This formula links domestic prices to a certain minimum export market price (currently – FOB China), while adjusting for certain export costs.

Uralkali says that its potash production was up 5.3 percent for the first six months of the year, to 2.66 million mt, up from the year-ago 2.52 million mt.

SULFUR

Tampa: Tropical Storm Edouard caused only minor disruptions to the oil industry and had no real impact on sulfur production as it cruised into the Texas coast last week. Marathon Energy did shut down its refinery at Texas City and evacuated personnel from its drilling platforms in the Gulf of Mexico, but restarted operations shortly after the storm passed. The storm was described as a “non-event.”

Valero Energy reported a sulfur release at a sulfur-loading tank at its Houston refinery last week, and four workers were taken to the hospital for evaluation. The facility has a capacity of processing 130,000 barrels of oil a day.

The price of sulfur on the world market continued to soften, but phosphate producers and the sulfur industry settled their contracts a couple of weeks ago, up $165/lt FOB. The world market will have an important impact on sulfur negotiations for the fourth quarter, but what the market will be doing at that time was still unclear.

Vancouver: China was said to have settled its contracts at lower prices than the previous quarter, around $770/mt DEL compared to about $810/mt DEL the previous quarter. China stopped importing sulfur after the devastating earthquake a few months ago, due to the damage to the phosphate industry and the then upcoming Olympics, which started Aug. 8. China’s phosphate industry was expected to bring the damaged phosphate processing plants and a mine back into production in August and September. That and an end to the Olympics could increase their sulfur imports.

MARKET NOTES

India: A fertilizer supply crisis may be looming as the Department of Fertilizers, which clears subsidies due to fertilizer makers, has almost exhausted its budgetary allocation of Rs 309.86 billion for 2008-09. DOF’s request for an additional Rs 664.53 billion has not been accepted by the finance ministry. Since the subsidy component accounts for over 80 percent of the retail price of fertilizers, any delay in reimbursement will hit the industry hard, say DOF officials. Industry estimates suggest the budgetary allocation, which was just one-third of the estimated subsidy requirement for 2008-09, was only enough to clear subsidy bills up to July 2008. “The fertilizer companies are facing a severe working capital crunch. Any delay or non-payment of subsidy dues even for a month will disrupt production, import and availability of fertilizers,” said an industry representative.

A government official also agrees that the remaining funds are sufficient only to clear the payment dues up to the end of August. “There is enough money to clear the subsidy claims made by industry for fertilizers supplied up to July and not beyond that,” the official said. “However, the industry will not stop the production of fertilizers. At most, it may cut down the production, thereby causing inadequacy in supplies for a short period,” he said. Meanwhile, the DOF has asked the finance ministry to provide the entire supplementary grant in cash to ease the liquidity crunch being faced by the industry. “It is for the finance ministry to decide the quantum of amount to be allocated under the supplementary demand for grants. The industry need not panic. Some funds will come soon,” the official added.

But the Fertilizer Association of India (FAI) is not as confident. “The DOF is making all efforts to avoid any delay. However, the government functions within a system, and several clearances are required before the supplementary grant can come to us. Ultimately it (the additional demand for funds) has to be passed during the monsoon session of Parliament, the dates of which are not yet clear,” said Satish Chander, director general, FAI. Chander added that a five-fold increase in cost of production, a severe liquidity crunch, and increasing bank interest rates are all issues plaguing the industry. Official estimates indicate that the steep increase in raw material costs has increased the fertilizer subsidy burden for 2008-09 by at least 25 percent in just three months. The government has revised its subsidy estimates from Rs 950.13bn as estimated in March, to Rs 1,197.72bn in June. The latest revised estimate is, therefore, three times larger than the actual subsidy burden (Rs 403.38bn) shouldered by the government in 2007-08. The revised fertilizer subsidy burden is now estimated at 2.25 percent of GDP for 2008-09. The government had issued fertilizer bonds worth Rs 75bn in 2007-08.

India: Indian fertilizer companies are planning to invest around $5 billion (Rs 210bn) in overseas joint ventures over the next three years. These companies are in negotiations for 19 such ventures, said government officials. These joint ventures are aimed at sourcing nitrogen, phosphate fertilizers, and other raw materials. The companies involved in the talks include domestic fertilizer majors such as Indian Farmers Fertilizer Cooperative (IFFCO), Rashtriya Chemicals & Fertilizers (RCF), Nagarjuna Fertilizers & Chemicals, Coromandel Fertilizers, and Mangalore Chemicals & Fertilizers, among others. The talks are being spearheaded by the DOF. While the proposed ventures in Argentina, Canada, Jordan, Morocco, and Ukraine are primarily aimed at potash production, the government is looking at countries such as Algeria, Australia, Azerbaijan, Egypt, Iran, Kuwait, Mozambique, Nigeria, Ukraine, and Saudi Arabia for ammonia and urea. DOF has already announced plans for Coromandel Fertilizers and Gujarat State Fertilizer Co. to set up a joint venture with the Tunisian firm Group Chimique Tunisia for a phosphoric acid production facility.

Similarly, RCF is joining hands with South African firms for setting up an integrated fertilizer plant in Mozambique, based on rock phosphate from the Foskar mines in South Africa and gas from Mozambique. Officials added that the attempt is to encourage jv ammonia and urea projects in countries where adequate gas is available at reasonable prices.

India: There is a face off between the finance ministry and the DOF over the manner in which the sick fertilizer units of Hindustan Fertilizers Corp. (HFC) and Fertilizer Corp. of India (FCI) will be revived. The finance ministry, which has already turned down DOF’s plea for providing the budgetary support of Rs 75bn for the revival process, has argued that the private sector should be involved, while DOF favors involvement of only profit-making fertilizer units such as Rashtriya Chemicals & Fertilizers (RCF), National Fertilizers Ltd. (NFL), and Krishak Bharathi Co-operative Ltd (Kribhco).

DOF reiterated that an investment of about Rs 150bn for the revival of the Barauni, Sindri, Ramagundam, Talcher, and Ghorakpur units would be required, and it would not be feasible without budgetary support of at least Rs 75bn. The DOF has argued that land use permissions granted to these units by state government make it easier for these units to be revised under the public sector umbrella. According to sources, “The DOF wants only the public sector to be involved, whereas the finance ministry wants that no budgetary support be sought from the government. The finance ministry is averse even to the joint venture route.”

Sources noted that Reliance Industries, which has already announced its intentions to pursue its plans in the fertilizer sector – mainly because of the commencement of gas production from KG D6 block from September – may be able to participate in the revival of sick units.

Pakistan: The Privatization Commission will reportedly hold bidding for the privatization of 90 percent of the shares of Hazara Phosphate Fertilizers Ltd. (HPFL) in September.

Poland: A new calendar for the privatization of the fertilizer industry is reportedly due out Sept. 10 by the government.