Hong Kong-The Noble Group reports that for the second straight year, it has been has been named to the Forbes Fabulous 50, Forbes Magazine’s third annual compilation of Asia’s best public companies. To assemble the list, Forbes studied long-term profitability, sales and earnings growth, stock price appreciation, and projected earnings for every company in the region with revenues or market capitalization reaching $5 billion and above. “Noble is definitely a company on the move, transitioning to a business of owning and managing more fixed assets,” says Noble Group CEO Richard Elman. “As we expand our global pipelines in soybeans, coal and other essential raw materials, we appreciate this market recognition of our sustainable business and emerging strategy,” he added. The Fabulous 50 List appears in the Sept 17 issue of Forbes Asia.
All posts by traceybg@gmail.com
Reid seeks investigation over nitrate deaths
Washington-Sen. Harry Reid (D-Nev.) has written Dirk Kempthorne, Secretary of the Interior, and Robert Gates, Secretary of Defense, over the deaths of some 72 wild horses and one antelope at the Tonopah Test Range in southern Nevada. Reid said the animals died near a watering hole, and initial reports have suggested that the likely cause of death was high levels of nitrate toxicity in the water. Reid said there are concerns in the area that the deaths were from serious mismanagement of the test range. Reid is seeking a full investigation, noting that while the Air Force holds the primary position in the operations of the land, the same area also remains under the purview of the Bureau of Land Management.
Urea producers await ITC review of antidumping case
Washington-In a first for an antidumping trade case involving urea fertilizer in the U.S., the U.S. Court of International Trade (ITC) has been ordered by a U.S. Court of International Trade (CIT) judge to reexamine certain aspects of its 2005 sunset review decision to continue antidumping duty orders on solid urea imports from Russia and Ukraine. The six-member ITC, which is conducting the review because of an Aug. 28 appeals ruling by the CIT judge (GM Sept. 10, p. 1), is expected to issue the details of its review process in the next several weeks. The ITC commissioners in 2005 voted in a split decision to keep the antidumping duties in place for another five years, claiming that removing them would likely lead to a “continuation or recurrence of material injury” to domestic urea producers “within a reasonably foreseeable time” because of unfairly traded imports from the subject countries. The ITC’s remand decision in the case will be announced Nov. 26, after which the plaintiffs (Russian urea producers Nevinnomysskiy Azot, Novomoskovsk Azot JSC, JSC MCC Eurochem, Kuybyshevazot JSC, JSC “Azot” Berezniki, and JSC “Azot” Kemerovo) and the defendant-interveners (urea producers Agrium U.S. Inc. and the Ad Hoc Committee of Domestic Nitrogen Producers, whose members include CF Industries Holdings Inc. and PCS Nitrogen Inc.) will have until Dec. 28 to respond. The ITC’s remand review, ordered by the CIT judge after an appeal by the Russian producer group, may incorporate new evidence in the case, or it may stick with the record already established in 2004/05 when the ITC solicited testimony and briefs from the foreign and domestic producer groups. While statistics show a decision reversal is rare when the CIT remands a case back to the ITC for clarification, the ITC now has two new judges that were not a part of the original sunset review determination.
Management Briefs
Terra Industries Inc. has announced that Douglas Stone has been named senior vice president, sales & marketing. He assumes this role as Paul Thompson, formerly vice president, sales & marketing, accepts a promotion to CEO of GrowHow UK Ltd., the new joint venture between Terra and Kemira GrowHow Oyj completed last week. Stone joined Terra in 1989 and has held a variety of positions in sales, marketing, supply and distribution. He has been Terra’s vice president, corporate development and strategic planning, since 2006.
“Paul Thompson headed Terra’s UK operations prior to 2005 when he became vice president, sales & marketing,” said Terra President and CEO Michael Bennett. “We have every confidence in Paul’s ability to serve Terra’s interests well as he assumes leadership of the UK joint venture. I’m also pleased that Doug Stone will fill Paul’s former role; his background in sales and marketing, as well as his experience with corporate development, make him an excellent choice to lead our sales and marketing group.”
President Bush has announced the resignation of USDA Secretary Mike Johanns. At the White House on Sept. 20, the president thanked Johanns for his service to the department. Johanns, a Republican, is expected to run for the U.S. Senate from Nebraska. The resignation follows Republican Sen. Chuck Hagel’s announcement last week that he is retiring from the U.S. Senate after serving in that body since 1996.
H.J. Baker & Bro. Inc. announced on Sept. 10 that Greg Smith will serve as the Western Regional Sales Manager at the family-held company, which is based in Westport, Conn. In his new role, Smith will help implement the company’s strategy of combining Tiger-Sul’s marketing and sales efforts with those of H.J. Baker. Tiger-Sul Products, a wholly-owned subsidiary of H.J. Baker, is the world leader in bentonite sulfur and bentonite micronutrient technology and operates production facilities in Atmore, Ala., and Calgary, Alberta. Smith will manage distributor and dealer relationships with all key accounts in the Western U.S., and will also develop value-added activities, such as demonstration plots, educational meetings, and promotional activities.
Robert J. Morris, president of The Sulphur Institute, is leaving after a 25-year career with the organization; 17 as president. A search committee is forming for find his replacement.
Market Watch
AMMONIA
U.S. Gulf: The most recent Tampa numbers continue to be called $297-$303/mt DEL. The current market is problematic in light of the Yuzhnyy market, which does not support business with Tampa. With Yuzhnyy recently trading as high as the low $280s/mt and Tampa at around $300/mt, only $20/mt is left over for freight, which will not hack it in today’s market. Either Tampa is going to have to go up or the Black Sea sink in order for the two to work.
In the meantime, the latest business at NOLA is called $275/st FOB.
Eastern Cornbelt: The regional ammonia market continued to be quoted at a firm $480-$495/st FOB regional terminals, with the low out of spot river locations. There were reports of reference prices at the $500/st FOB mark or higher at some locations, but sources reported little new business to test the market.
Offers for forward contract ammonia for October through December were still on the table from one supplier at $490-$500/st FOB in the region, depending on location. Agrium’s reference prices for ammonia moved on Sept. 18 to $505/st FOB E. Dubuque, Ill., and Niota, Ill.; $510/st FOB Meredosia, Ill., and Marseilles, Ill.; and $520/st FOB Cincinnati/Finney, Ohio.
Western Cornbelt: The ammonia market was quoted at $470-$490/st FOB regional terminals, but sources reported few sales to test those numbers. One Missouri source talked of a wide discrepancy between warehouse and delivered pricing, with the former referenced as high as $490/st FOB and the latter reported as low as $445-$450/st from Oklahoma and Kansas production points.
Forward contract ammonia remained on the table for October through December at $475-$490/st FOB, with the low in Nebraska and the high in Missouri. Agrium’s anhydrous ammonia postings moved on Sept. 18 to $490/st FOB Hoag, Neb.; $495/st FOB Greenwood, Neb., Mankato, Minn., and Iowa terminals at Early, Garner, and Whiting; and $500/st FOB E. Dubuque/West, Iowa. The company’s postings in the Leal, Velva, Grand Forks, and Beulah sales area in North Dakota moved on that date to $500/st FOB and $520/st DEL.
Southern Plains: Ammonia movement continued on preplant wheat in some areas, and was effectively over in others. Sources tagged the market in a very broad range at $385-$390/st FOB Oklahoma production points, $390-$395/st FOB Kansas production points, and $410-$430/st FOB pipeline terminals in Kansas to the dealer. That range was up from last report, and sources said additional increases are likely.
Agrium’s ammonia postings moved on Sept. 18 to $455/st FOB Borger, Texas, $475/st FOB Mocane, Okla., $480/st FOB Conway, Kan., and $485/st FOB Clay Center. Delivered postings in Texas on that date included $480/st north of Interstate 80 and $485/st south.
South Central: The anhydrous ammonia market was tagged at $405-$410/st FOB Memphis, Tenn., for prompt tons, with Blytheville, Ark., pricing roughly $10-$15/st higher than Memphis, and Henderson, Ky., another $10-$15/st higher than Blytheville.
Pacific Northwest: Agrium’s anhydrous ammonia postings moved on Sept. 18 to $455/st rail-DEL and $475/st truck-DEL in Oregon and Washington east of the Cascades, and in Idaho north of and including Idaho County. Agrium’s truck-DEL postings in Montana and northern Wyoming moved on that date to $490/st, with maximum outbound freight of $35/st.
UREA
U.S. Gulf: While several players saw little change in the NOLA granular market last week, others disagreed, saying any barges on the water and ready to go north would garner a premium as they would be able to meet upriver closings. While some called trades working their way up from $335/st FOB to $340/st FOB by week’s end, others said well-positioned barges garnered as high as $343/st FOB or higher. Prills continued to be reported at a premium, called $348/st FOB.
Eastern Cornbelt: Granular urea remained in the $365-$370/st FOB range to dealers.
Western Cornbelt: The granular urea market was steady at $365-$375/st FOB in the region, with the low reported FOB St. Louis, Mo.
Southern Plains: Granular urea was pegged at $360-$362/st FOB Inola and Enid, Okla., with several sources saying the market had never quite fully reached the $365/st FOB posted level. One supplier was referencing forward contract urea for October at the $378/st level FOB Inola.
South Central: Granular urea was quoted at $358-$365/st FOB regional terminals to the dealer. The dealer market FOB Vicksburg, Miss., was tagged at the $360/st mark.
Southeast: The urea market was trending upward, with sources tagging the dealer price last week at $370/st FOB Savannah, Ga., and $375/st FOB Wilmington, N.C., and Norfolk, Va. Reference pricing out of the Baltimore, Md., and Philadelphia, Pa., markets was pegged at the $385/st FOB level.
Black Sea: Prices have stabilized even as demand increases. While some players argued early last week the price was below $300/mt FOB and others said the price was closer to $320/mt FOB, the consensus by the end of the week put the market at $310-$315/mt FOB.
One trader reported a deal done late last week at $303/mt FOB, but whether that indicates a new trend or was a one-off deal is still up in the air. Some in the industry contend the price needs to come off if Yuzhnyy cargo is to be competitive in the Indian and Latin American markets.
The current price level makes it difficult to secure deals with Indian buyers, who are looking at $335/mt CFR and smaller cargoes to allow for delivery to different ports.
The one thing that might help producers sell their product is the need by traders to replace cargoes that were originally booked out of China.
It seems the Chinese ports remain jammed with product, and getting vessels in and out after Oct. 1 is becoming more difficult to arrange. At the same time, reports are surfacing that some producers are backing off their deals with international traders.
Sources say the backlog at the ports is preventing the shipment of urea from the plant to the port. Producers are reportedly yelling for guarantees that vessels will be in the ports right away to lift the tons. Buyers are countering that no shipments are taking place until after Oct. 1, and so no guarantees can be given as to when the tons will be lifted.
The port congestion, combined with the apparent renegotiations on deals in China, could force some traders to look to the Black Sea for material. The price, however, remains the real obstacle to nailing down deals.
One trader noted that the producers will have to come down in their prices in order to meet the top price Indian buyers are willing to pay, or the Indians will have to adjust their ceiling.
So far, said one observer, neither side appears ready to budge.
Middle East: Following a series of pre-tender deals with Indian buyer IPL, sources peg the area market at $310-$315/mt FOB. The lower price fits in with the estimated ceiling Indian buyers have reportedly placed on their purchases. The higher price could work with a great freight rate, or with some flexibility on the buyers’ side.
No matter what happens, say sources, the producers are firm in their pricing position. Attempts to bid at $315/mt FOB and below are being rebuffed. Reportedly, one producer quoted $320/mt FOB to one trader as a non-negotiable price.
At $320/mt FOB, the Indians would have to alter their price ceiling drastically. At $315/mt FOB, they might be able to work around the cost if they also secure cheaper tons to help average out the total cost.
India: International traders around the globe were juggling two major issues as the week closed, and they both involved selling product to India.
On one hand, as of press time late last week IPL had not called a tender. Many in the industry figured it would be called just as the TFI World gathering closed in Boston. One observer noted it would have been more dramatic if the tender was called just as participants in the conference were boarding their planes for home.
The bottom line, say traders, is that IPL has to call a tender soon. India needs the tons, and IPL needs a tender to ratify the $335/mt CFR price it negotiated with a handful of traders earlier in the month.
Just before the TFI event started, IPL had booked about 175,000 mt from perhaps four trading houses. Most of the tons were expected to come from China or Bangladesh.
Reportedly, some traders are having difficulty with their Chinese sources because of crowded port facilities and difficulty lining up vessels for loading. How that will play out with sales to India is still up in the air.
One trader said he was getting indications from his Chinese representatives that producers with whom he had deals may pull back from their arrangements. The producers are angry that the tons cannot be railed to the ports because the ports are full. The ports are full because no one has shipped anything since August. No shipments are expected until after Oct. 1, when the export duty is halved.
Ship owners are not anxious to allow their vessels to enter a Chinese port for urea unless they know it can be loaded and back at sea in a short period of time. Port operators cannot give that guarantee.
As the Chinese urea situation becomes muddled, traders are looking for other sources to supply tons to India.
With IPL already committed to $335/mt CFR, sources say the current Middle East market might allow for this price if the producers offer at the low end of the market, and if favorable shipping rates are nailed down.
Selling Yuzhnyy material at $335/mt CFR is not in the cards, say sources.
That takes everyone back to China and the problems of the ports.
One trader noted that once IPL calls the tender, that $335/mt CFR price might not be sustainable. New estimates of where the price might go are as high as $345/mt FOB.
India remains the main game in the international urea market. Sources say the tender results confirm price movements that normally meander just under the radar. With so many other sales done by long-term contract or by indexed deals, most in the industry look forward to the touchstone the Indian tenders offer.
China: The delay in shipping until after Oct. 1 is causing no end of grief for traders. Sources report that producers are unable to move their product to the ports because the seaside warehouses are full. The warehouses are full because the material sitting there is committed for October shipment to take advantage of the halving of the export duty from 30 percent to 15 percent.
Ship owners are reportedly leery of sending their vessels into Chinese ports for early October loadings because of expected loading delays.
With the backlog in product now reaching back to the inland factories, sources say some producers are walking away from their contracts with international traders.
One trader said he was told by a producer that unless the tons were sent to the port and shipped immediately, the producer would sell his product elsewhere. The trader explained that he, like his counterparts around the globe, do not want to ship until after Oct. 1 – per the contract – and that it is difficult right now to secure transportation.
Eventually the tons will move out, with most cargoes expected to head to India. However, say sources, it may take a while to shake out the logjam in the ports.
The shipping window is small, said one trader. By Jan. 1, the export tariff will go back up to 30 percent. So far, the reason so many tons are lined up for export is that buyers are expecting to pay only the 15 percent.
Even though producers argue they can get more for their tons if they signed new deals, sources say the price remains in the low $280s/mt FOB bagged at the port.
Bangladesh: BCIC has issued a tender to import 50,000 mt of granular urea in bags in a maximum of four lots on a CFR Chittagong or Mongla basis. The minimum offer is 12,500. Offers shall be received up to Oct. 31 and will be valid up to Dec. 2.
Pakistan: The Ministry of Agriculture is expecting a shortfall of about 100,000 mt of urea during rabi season, with the quantity expected to be imported in December. TCP will be the buying agent; however, it is not yet decided whether the private sector will play any role. In the last rabi season Pakistan consumed about 2.153 million mt of urea, which was 12.3 percent less than the prior year’s season.
NITROGEN SOLUTIONS
U.S. Gulf: Price ideas for barges continue to move up, with sources saying it is hard to find anything on the prompt market. In the meantime, imports to the East Coast are called $290-$300/mt DEL.
Eastern Cornbelt: UAN-32 was steady at $300-$310/st ($9.38-$9.69/unit) FOB regional terminals, with the lower numbers again out of spot river locations. One Illinois source quoted most of the dealer pricing in his location at the $9.50/unit FOB level or higher last week for new sales, although there were few to test the market. Forward contract tons for October through January were still available from one supplier last week at $9.56-$9.86/unit FOB in the region.
Western Cornbelt: UAN-32 was steady at $295-$310/st ($9.22-$9.69/unit) FOB regional terminals, with the upper end reflecting dealer reference pricing out of some locations
Southern Plains: UAN-32 remained at $275-$290/st ($8.59-$9.06/unit) FOB regional terminals, with the low at production points in Oklahoma and the upper numbers FOB Kansas terminals to dealers. Sources quoted reference prices as high as $300-$305/st ($9.38-$9.53/unit) FOB in Kansas last week.
South Central: UAN-32 was pegged in a broad range at $280-$295/st ($8.75-$9.22/unit) FOB in zthe region, depending on location, with the higher numbers farther up the river system.
Southeast: The UAN market was described as thinly traded last week. UAN-30 was quoted at $253-$255/st ($8.43-$8.50/unit) FOB port terminals to the dealer, up slightly from last report, with some talk of sellers eyeing reference prices in the $8.59-$8.75/unit FOB range if the terminal price catches up to replacement vessel costs. The UAN-32 vessel market was reportedly being indicated in the mid-$290s/mt C&F range.
AMMONIUM NITRATE
Western Cornbelt: Ammonium nitrate remained at $320-$325/st FOB in the region, where available.
Southern Plains: Ammonium nitrate was steady at $315-$320/st FOB the Tulsa market.
South Central: Ammonium nitrate was unchanged at $315-$320/st FOB most terminals to the dealer, where available, with the low quoted at $305/st FOB Yazoo City, Miss.
Southeast: Ammonium nitrate was quoted at a firm $325/st FOB Tampa, Fla. On a delivered basis, a North Carolina source reported significantly higher pricing from last report, at $395/st for bulk and $430/st for bagged product.
AMMONIUM SULFATE
Eastern Cornbelt: Granular ammonium sulfate was unchanged at $220-$240/st FOB.
Western Cornbelt: Granular ammonium sulfate remained at $220-$230/st FOB in the region, with reports that supplies have loosened up somewhat.
Southern Plains: Granular ammonium sulfate remained at $200-$230/st FOB in Texas, with the low FOB Freeport and the upper end to dealers FOB Plainview. Sources talked of a near-term increase, but nothing was confirmed last week.
South Central: Granular ammonium sulfate pricing was down slightly from last report at $230-$235/st FOB, with reports that inventories have loosened up a bit.
Southeast: Granular ammonium sulfate remained at $205-$210/st FOB, with the low FOB Hopewell, Va., and the upper end FOB Augusta, Ga. Ammonium sulfate postings from DSM Chemicals include $235/st rail-DEL in Florida for granular and $172/st rail-DEL for standard, with standard grade sulfate also referenced at the $155/st mark FOB Augusta for all customers outside of Florida.
PHOSPHATES
Central Florida: The Central Florida DAP market was busy last week, with sales made on both a prompt and future basis by both producers and traders. At the same time, inventories continued to shrink, with heavy delivery schedules for both the domestic and export markets. All of that was coming at a time when sulfur supplies continued to tighten. As a result of the sulfur shortage, Mosaic moved up the timetable for the turnaround at its Bartow processing plant from October to September. While production will not be affected in the long run, it will be in the short term.
As demand for phosphates continued to grow, Mosaic announced it has increased the price for its products in Central Florida. The Gulf’s river market will not be affected. The increase of $5/st FOB will bring the price of DAP to $390/st FOB and MAP would become $386/st FOB, although no new prompt sales had been made at that price as of late last week. CF’s price remained at $385/st FOB last week.
Last week, traders were looking forward to the beginning of the wheat season, which could start next week in areas served by rail from Central Florida. Once dealers empty their bins to meet farmers’ demands, reordering will begin. That could begin as soon as this week.
The Central Florida DAP price range remained a flat $385/st FOB. Mosaic’s posted price moved up to $390/st FOB for DAP and $386/st FOB for MAP. CF’s prices remained at $385/st FOB, and PotashCorp’s Central Florida reference price was still $385/st FOB. In Texas, Agrifos’ truck price was $430/st FOB and $410/st FOB for railcars, but was sold out through the end of September for rail-delivered phosphates.
U.S. Gulf: Normally, the winter wheat crop would already be underway in Oklahoma by this time of year, but will be delayed. That’s for a couple of reasons. First, many farmers were still in the process of harvesting their corn crops, but more importantly, it’s a weather thing. Last year, when wheat was planted about now, a freeze swept in and seriously damaged the crop. Not wanting to see a repeat, farmers plan to wait, so that when a freeze does come, the wheat will not be as high and will be less likely to sustain damage. When the planting will begin was uncertain. That means that terminals at Inola and Catoosa will continue to be long on DAP supplies, but once the planting begins DAP and potash will move quickly; still, the market for urea may be less than normal.
The Army Corps of Engineers had still not released any information on the status of its dredging project north of Lock 17 at Muskogee, but barge traffic was continuing to move through a narrow passage. Because terminals at Inola and Catoosa were still full, fewer barges were on the river and no backups had developed.
Miss Phos announced more problems at its recently repaired sulfuric acid plant, which originally went down in July and returned to service in August. The company was hopeful that the plant could return to service by Oct. 1, but it could take as long as two months if the repairs are more extensive. That will limit its production of phosphates to between 1,300 and 1,500 tpd, but the company said it would be able to meet all of its commitments to customers and suppliers during the outage.
The DAP market on the river system was extremely quiet last week. That could continue until the end of the month, and then activity should be brisk until around the first of November. However, the upriver area above St. Louis will likely close about Oct. 15. Due to the lack of activity the past several weeks, phosphate prices remained soft.
The NOLA DAP barge price range last week was unchanged at $397-$400/st FOB. Prices will likely firm to the $400/st FOB range within the next couple of weeks, when bins begin to empty.
Eastern Cornbelt: DAP remained at $430-$438/st FOB in the region; one Ohio dealer quoted the market last week at a flat $435/st FOB river terminals. Forward contract DAP for October through January was being offered from one supplier at $435/st FOB Peoria, Ill., and $438/st FOB Cincinnati, Ohio.
MAP was unchanged at $430-$435/st FOB in the region. 10-34-0 was pegged at $350-$360/st FOB.
Western Cornbelt: DAP and MAP were steady at $430-$435/st range FOB regional warehouses to the dealer. One Missouri River source pegged the market last week at $435/st FOB for DAP and $432/st FOB for MAP. 10-34-0 pricing was firm at $350-$365/st FOB in the region.
Southern Plains: DAP was quoted at $430-$433/st FOB Catoosa, Okla., with reference prices tagged at the $435/st mark there and as high as $440/st FOB in Kansas. MAP was quoted at $427-$430/st FOB the port. Some sources talked of the possibility of phosphate cutbacks on wheat acres as growers react to high input costs.
10-34-0 was pegged at $325-$350/st FOB and in very tight supply in the region.
Agrium’s phosphoric acid prices in Colorado, Kansas, Oklahoma, Texas, and New Mexico included $690/st railDEL for merchant grade acid (MGA) and $700/st rail-DEL for super phosphoric acid (SPA). Postings for both products will increase by $15/st in October, followed by another $10/st increase in November and again in December.
South Central: DAP and MAP were steady at $420-$430/st FOB regional warehouses, with the low FOB Vicksburg. TSP remained at $395-$405/st FOB to the dealer.
U.S. Export: No new export sales were made last week, but it wasn’t for a lack of demand. India issued three separate tenders, seeking additional phosphate supplies, but PhosChem was unable to make an offer because of a lack of inventory. Business has just been too good. However, part of the problem is the ongoing sulfur shortage. Mosaic will move up the turnaround at its Bartow processing plant from October to September as a result of the lack of sulfur.
At The TFI World Conference in Boston last week, the announcement that CF Industries had agreed to purchase 50 percent of Keytrade for $25 million generated the most interest. However, as a result of that business move, CF notified PhosChem that it would be withdrawing within 90 days, which will be just before the end of the year. PhosChem already has long-term export commitments, which must still be met by its remaining two members, Mosaic and PotashCorp. CF will begin selling through Keytrade. Another beneficiary will be Miss Phos and Transammonia, which sells Miss Phos export production. Overall, inventories of phosphates will continue to be lower than normal, and that will keep the price firm or force it up somewhat into next year.
The price range for export DAP remained unchanged last week at $430-$433/st FOB.
India: The Ministry of Finance has announced an antidumping duty on phosphoric acid due to dumping from China. The government introduced these anti-dumping duties due to China exporting phos acid to India below the product’s normal value, which in turn has led to a negative impact on the domestic phos acid industry. The anti-dumping duty placed by MOF is reported to be US$242.63/mt.
POTASH
Eastern Cornbelt: Potash was quoted at $265-$270/st FOB regional warehouses, depending on grade and location, with inventories described as very tight. PCS Sales announced last week that pricing for all potash grades would increase $30/st on Dec. 1. One regional source said some suppliers had pulled offers for spot tons off the table in the wake of the PCS announcement.
Western Cornbelt: Sources tagged the potash market last week in the $265-$275/st FOB range, depending on grade and location.
Southern Plains: Sources quoted the potash market at $217-$222/st FOB Carlsbad, N.M., depending on grade. Out of regional warehouses, the market was pegged at a firm $250-$260/st FOB, with talk of another $20/st increase Oct. 1 at the mine and warehouse locations.
South Central: Potash remained firm at $255-$265/st FOB regional warehouses to the dealer, with some sources talking of a move to $270-$280/st FOB in the near term.
Southeast: Sources tagged the potash market in the mid$260s/st rail-DEL in the region last week, with warehouse levels in roughly the same range. Product remained in very tight supply.
SULFUR
Tampa: The sulfur shortage has taken a toll. Mosaic will move up the turnaround of its Bartow, Fla., processing plant from October to September to help ease the problem. Whether other turnarounds will be moved up has not been decided.
At the TFI World Conference at Boston last week, neither sulfur producers nor phosphate companies had any discussions about fourth quarter sulfur prices. A source said the industries were watching the world situation and hoping for a clearer picture before beginning talks.
Hurricane Humberto caused major problems at three refineries along the Gulf Coast the previous week. The plants were out of service for most of the week, and late last week were just beginning to return to production. That situation will not help the ongoing sulfur shortage.
Meanwhile, a disturbance that formed over Florida last week was moving west into the Gulf of Mexico, and forecasters said it could form into a tropical storm, which could threaten the Gulf Coast oil industry. One sulfur vessel bound for Tampa was unable to enter the port due to heavy seas caused by the storm.
Vancouver: Negotiations for new semester contract prices for Brazil and quarterly prices for China were expected to get serious this week, as sulfur industry representatives were scheduled to visit those countries. The general belief was that contact prices for both countries will take a sharp jump up.
Bangladesh: BCIC has issued a tender to import 15,000 mt of sulfur on a C&F Chittagong basis. Offers shall be received up to Oct. 29 and should be valid up to Nov. 29.
MARKET NOTES
India: There are concerns that food security is in jeopardy if the country is unable to buy close to 1 million mt of fertilizer for the coming rabi season. The biggest crisis is expected in DAP, where India has become highly dependent on imports. A worried government is now planning to itself import an extra 600,000 mt urea and 100,000 mt DAP, and give the highest priority to ships carrying fertilizers at all important ports until November, when the critical sowing period starts. Six crops – rice, wheat, cotton, sugarcane, rapeseed and mustard – use more than two-thirds of the total fertilizer supply in the country.
DAP supplies are reported to be so short the government is eyeing other phosphates such as MAP and TSP. IPL has already bought 165,000 mt MAP overseas and is ready to contract more once it gets the go-ahead from the government.
Government estimates say that in addition to the imports already contracted by private companies and IPL, India will need to source at least 112,000 mt DAP/MAP to maintain adequate supply of phosphate. However, shifting to MAP would not be easy.
In the case of urea, India needs to import 3.217 million mt for the rabi reason. This does not include imports from Oman India Fertiliser Co. (Omfico). The steering committee of secretaries has already permitted imports of 2.0 million mt. Since the actual demand estimate for urea is still not final and the country has a buffer stock of 625,000 mt, the DOF believes further imports of 600,000 mt may be sufficient for the season.
MOP demand is put at over 1.6 million for the season, with the need to import 1.5 million mt over the winter.
The Week in Fertilizer Stocks
| Company | Symbol | Price | Week Ago | Year Ago |
| Producer | ||||
| Agrium | AGU | 49.87 | 48.96 | 26.01 |
| CF Industries | CF | 69.50 | 63.09 | 16.95 |
| Mosaic | MOS | 47.42 | 45.50 | 16.66 |
| PotashCorp | POT | 98.00 | 88.56 | 33.30 |
| Terra Industries | TRA | 27.86 | 25.29 | 7.87 |
| Terra Nitrogen | TNH | 116.07 | 114.29 | 23.73 |
| Distribution/Retail | ||||
| Andersons Inc. | ANDE | 48.06 | 47.67 | 36.95 |
| Deere & Co. | DE | 144.48 | 137.95 | 79.60 |
| Scotts | SMG | 43.93 | 45.13 | 43.40 |
| UAP | UAPH | 30.78 | 29.48 | 21.58 |
SPOT BARGE PRICES
Coffeyville flood expected to cost $125 million; first-half earnings off due to $292.4 M in derivative losses
The recent flood at Coffeyville Resources is expected to cost approximately $125 million once all the variables are added together, according to a recent filing with the SEC. The company detailed the impact of the June 30/July 1 flood on its facilities in Coffeyville, Kan., saying actual physical damage to facility should have a third party cost of approximately $85 million. Of this, only $4 million is attributed to the nitrogen plant, while $81 million is for the oil refinery.
The river crested more than 10 feet above flood stage, setting a new record for the river. Approximately 2,000 citizens and more than 300 homes were affected. Nearly 1,000 extra contract workers were hired to help repair and replace damaged equipment at the refinery. Substantially all units at the refinery were back up by Aug. 20. The nitrogen plant initiated startup on July 13.
Coffeyville said its employees had to shut down and secure the refinery in six to seven hours, rather than the 24 hours typically needed to do so. It estimates that 1,919 barrels (80,600 gallons) of crude oil and 226 barrels of crude oil fractions were discharged from the refinery into the Verdigris River.
The majority of the refinery’s process units were under four-to-six feet of water, and portions of the refinery’s tank farms and wastewater treatment area were covered with eight-to-ten feet of water. As a result, both the refinery and nitrogen plant sustained major damage and required extensive repairs.
The refinery sustained damage to a large number of pumps, motors, tanks, control rooms and other buildings, electrical equipment, and electronic controls, and required significant clean-up in areas surrounding the water and wastewater treatment plants.
The nitrogen plant, situated on slightly higher ground, sustained less damage than the refinery. Bringing the nitrogen plant back online involved replacing or repairing 30 percent of all electric drives, repairing 60 percent of the plant’s motor control centers, refurbishing 100 percent of distributive control systems and programmable logic controllers, and repairing the main control room.
On July 10, Coffeyville entered into a consent order with the U.S. Environmental Protection Agency. The company agreed to perform specified remedial actions to respond to the discharge. The company said it has worked with EPA throughout and noted that it may be required to reimburse EPA’s costs under the federal Oil Pollution Act. It expects remediation to continue through December 2007.
Coffeyville estimates the total costs of oil remediation will be between $7-$10 million. Resolution of third-party property damage claims is estimated to cost $25-$30 million. As a result, the total is expected to be $32-$40 million. This does not include possible fines or costs from class action lawsuits.
On July 19, Coffeyville began a program to purchase approximately 380 homes and certain other properties impacted by the flood and the oil discharge. It offered to purchase the property of approximately 330 residential landowners for 110 percent of their pre-flood appraised value without release or other waiver of any rights by the landowners, and without deduction for the greater harm caused to these properties by the flood itself. It estimates that this program will cost approximately $16 million, excluding certain costs associated with remediation.
It also noted that two class action suits have been filed, one in federal and one in state court. It plans to vigorously defend both and doesn’t believe the resolution of either will have a significant adverse effect on business.
Coffeyville gave more insight into its insurance. It believes that its property insurance should cover substantially all of the estimated physical damage to the property, noting that insurers have cited potential coverage limitations and defenses. The company expects the matter will eventually be settled by negotiation or litigation. While the company had business interruption insurance, there was a 45-day waiting period for business interruption loss. However, both plants came back up within that period.
In addition, Coffeyville has another $50 million in environmental liability insurance and $100 million in umbrella insurance, both with limitations and deductibles.
Coffeyville maintains property damage insurance, which includes damage caused by a flood of up to $300 million per occurrence, subject to deductibles and other limitations. The deductible for property damage is $2.5 million.
Going forward, Coffeyville says the flood and crude oil discharge will have a significant adverse impact on third quarter 2007 results. It expects reduced revenue due to the closure of its facilities, as well as significant costs related to the flood as a result of the necessary repairs to the facilities and environmental remediation.
For the first half ending June 30, 2007, Coffeyville results include pretax costs of $2.1 million associated with the flood, primarily including write-offs of property and inventories that are uninsured due to insurance deductibles. Additional costs will be recorded in future periods as they are increased, primarily related to the repair and clean-up efforts.
First-half earnings saw another kind of flood – one of red ink from $292.4 million in derivative losses. Year-ago derivative losses were $126.5 million. First-quarter 2007 derivative losses were $137.0 million, versus the year-ago $17.6 million (GM June 25, p. 15). Coffeyville said the derivative losses were primarily attributable to its cash flow swap and the accounting treatment for all derivative transactions.
The increasing derivative losses, along with a first-quarter turnaround and a decline in petroleum and nitrogen results, caused a company-wide net loss of $54.3 million on sales of $1.23 billion for the first half, versus the year-ago net income of $41.8 million and sales of $1.55 billion. Current operating income was also off, at $123.8 million from the year-ago $214.9 million.
Company-wide net earnings for the calendar year ending Dec. 31, 2006, were $191.6 million on sales of $3.04 billion.
Petroleum operating income was down, at $102.9 million on sales of $1.16 billion, versus the year-ago $178.0 million and $1.46 billion, respectively.
Nitrogen operating income was $21.0 million on sales of $74.3 million for the six months ending June 30, 2007, versus the year-ago $37.1 million and $95.6 million. For the year ending Dec. 31, 2006, operating income was $36.8 million on sales of $162.5 million.
First-half ammonia production was off as well, with 169,000 st produced, down from 205,600 st. UAN production was 304,600 st, down from 328,300 st. For the year ending Dec. 31, 2006, the company produced 369,300 st of ammonia and 633,100 st of UAN.
First-half ammonia sales were 34,100 st at an average price of $354/st FOB, versus the year-ago 66,300 st and $376/st. UAN sales were 293,500 st at $190/st, versus the year-ago 339,300 st and $181/st, respectively.
Ammonia prices were off 6 percent, while UAN prices were up 5 percent. Coffeyville noted that year-ago fertilizer prices benefited from higher natural gas prices resulting from Hurricanes Katrina and Rita, as much product is sold on forward contracts.
Overall for nitrogen, decreased operating income resulted from reduced sales volumes, partially offset by higher plant gate prices and increased direct operating expenses – primarily the result of increases in labor, repair and maintenance, equipment rental, outside services, utilities, and insurance. The increase in repairs and maintenance was specifically related to preventative maintenance performed during a two-day air separation unit outage and repairs to the nitric acid plant during the past six months.
Coffeyville is still considering a $40 million expansion that would increase UAN capacity by 50 percent, to 1 million st.
Despite lower production in the first half, the company noted that overall its capacity utilization has been up in the past three years. For 2002-2004 the gasifier, ammonia, and UAN capacity was 87, 75.5, and 89.9 percent, respectively. For 2005-June 2007, it was 94.4, 94.9, and 117.2 percent, respectively. However, for the first half it was off, at 90.6, 84.9, and 112.2 percent, versus the year-ago 97.3, 103.2, and 120.9 percent.
For the calendar years 2005 and 2006, as well as the first six months of 2007, the top five ammonia customers represented 55.2, 51.9, and 74.3 percent of ammonia sales, while the top five UAN customers represented 43.1, 30.0, and 38.8 percent. During the first six months of 2007, the top two ammonia buyers were Brandt Consolidated Inc. at 20.1 percent and MFA Inc. at 20.8 percent, while the top UAN buyers were ConAgra Fertilizer at 19.5 percent and Interchem at 8.6 percent. For the year ending Dec. 31, 2006, Brandt and MFA accounted for 22.2 and 13.1 percent of ammonia purchases, while ConAgra and Agriliance accounted for 8.4 and 6.3 percent of UAN.
In the meantime, the owners of Coffeyville are in the midst of an IPO to sell $375 million shares of the company under the name CVR Energy Inc., based in Woodland, Texas (GM May 21, 2007, p. 1).
As for June 30, 2007, Coffeyville had $773.1 million in term loans and $150 million in funded letters of credit outstanding under its credit facility and availability of $76.2 million under revolving credit facility. In August, company subsidiaries entered into three additional credit facilities: a $25 million secured term facility and a $25 million unsecured term facility, both of which are fully drawn, and a $75 million unsecured facility, of which none was outstanding as of Aug. 31, 2007.
Agrium coal gas project clears another hurdle; Alaska governor signs bill that will aid finance
In August Alaska Governor Sarah Palin (R) signed House Bill 299, which allows the Alaska Railroad Commission to issue over $2.5 billion in tax-free industrial development revenues bonds to finance Agrium Inc.’s planned coal gasification project at its Kenai nitrogen plant. The bill was passed by both houses of the Alaska Legislature in May (GM May 21, p. 1).
The U.S. Internal Revenue Service must also rule whether the bonds qualify as tax-exempt.
The coal gas project is necessary to assure that the Kenai plant can remain operational. Due to gas shortages in the area it is now a seasonal plant, with an expected operations schedule this year of May through October.
Under the coal gas plan, coal would be shipped from Usibelli Mine Inc.’s mine in Healy, in inland Alaska, via the Alaska Railroad to the Port of Anchorage, where it would be barged to Kenai.
Currently, Agrium is still studying the feasibility of the coal gas option. It is expected to make a firm decision by the fall of 2008. Once a decision is made and construction begins, the project could be completed by 2011-2012.
Mosaic offers park, fire station as benefits for mining approval
The Mosaic Co. has offered a new fire station and a 70-acre park to the community of Duette, Fla., if Manatee County approves the company’s request to mine an additional 2,000-plus acres, which would be an extension of its approximately 50,000-acre Four Corners Mine. Even if the company does not receive approval it will still donate the land for the park, although the improvements would probably not be as extensive, according to Mosaic spokesman David Townsend. However, there were some conflicts with the proposal.
One problem was that the county does not have the money in its budget to maintain the proposed park, and Mosaic will not provide funds for that purpose. Townsend said the money to maintain the park would qualify to be taken from the severance tax the company pays for each ton extracted. He said currently there were several million dollars unspent in that account.
In addition, the county’s environmental staff has recommended rejecting the request because of damage that would result to 300-plus acres of natural wetlands. Also, the mining would take place next to 438 acres of wetlands the county has just finished restoring. Although the company plans to restore more wetlands than it destroys, county officials were dubious the artificial wetlands would effectively replace what will be lost.
Mosaic will present evidence at upcoming hearings from experts hired by the company to counter that argument. The county and others also fear the mining would affect the water quality of the Peace River, which supplies drinking water for rapidly growing Southwest Florida. Townsend said three judges from the state Division of Administrative Hearings have determined there would be no significant impact on water quality or quantity from mining. He also pointed out that the project has received approval from the Florida Department of Environmental Protection and from the local water supply authority, and Charlotte County has dropped its opposition.
The community appeared to favor the deal, because it cannot afford to build the $1 million park or the $500,000 fire station. The newspaper quoted the local fire chief, who said the area would not be able to afford to build the new station for several more years. The district’s tax collections for the fire department amount to only $150,000 a year. The current fire station has only used trucks and no living space for a full-time unit of firefighters. Townsend said the current station has only a roof on poles, “more like a carport, and is a significant need for the community.”
Such deals have been done in the past in the case of a home developer and others. Townsend said it was normal to offer extra benefits for projects in the home communities where mining takes place. He added it was not a substitute for the regulatory requirements, which he said the project has already met.
The county’s planning commission will review the request on Sept. 20; the Manatee County Commission will vote sometime in November.