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Market Watch

Ammonia, Ammonium Nitrate, Ammonium Sulfate, Asia, Black Sea, Central Florida, China, Correction, Eastern Cornbelt, Great Lakes, India, Indonesia, Market Watch, Middle East, Nitrogen Solutions, Northeast, Northern Plains, Phosphate, Potash, Saudi Arabia, Sulfur, Tampa, U.S. Exports, U.S. Gulf, Urea, Vancouver, Vietnam, West Coast, Western, Western Cornbelt

AMMONIA

U.S. Gulf/Tampa:With the Tampa DEL price set for the entire month of July, there was no movement in prices for either the Gulf or Tampa. However, as a result of the shutdown of Mississippi Phosphate’s sulfuric acid plant, which halted production, vessels of ammonia bound for there will have to find new homes – and that could weaken the market. Last week, sources said ammonia prices were still steady but trending softer.

Eastern Cornbelt: Fall prepay programs were generally over, and pricing quotes were for very limited spot business last week. The ammonia market continued to be quoted in the $460-$470/st FOB range for cash sales. Agrium’s anhydrous ammonia postings firmed on July 9 to $465/st FOB E. Duqubue/West, serving Iowa; $470/st FOB Niota, Ill., and E. Duqubue/East, serving Illinois and Wisconsin; $475/st FOB Meredosia and Marseilles, Ill.; and $485/st FOB Cincinnati/Finney, Ohio.

Western Cornbelt: Sources reported few changes to spot fertilizer markets as the region slid into the summer lull. The ammonia market was pegged in a broad range at $430-$460/st FOB, depending on location and supplier. One supplier was offering forward contract ammonia for August at $455/st FOB in Nebraska, $465/st FOB in Iowa, and $470/st FOB in Missouri.

Agrium’s anhydrous ammonia postings moved on July 9 to $430/st FOB Early, Garner, and Whiting, Iowa, and Greenwood, Neb.; $425/st FOB Hoag, Neb.; $420/st FOB Clay Center, Kan.; $415/st FOB Conway, Kan.; $410/st FOB Mocane, Okla.; and $400/st FOB Borger, Texas. Agrium’s delivered ammonia postings in Texas firmed on that date to $425/st north of Interstate 40 and $430/st south.

Northern Plains: The ammonia market was quoted at $430-$450/st FOB in the region for spot tons, with the low representing Agrium’s July 9 posting FOB Mankato, Minn. One supplier was offering forward contract ammonia for August at the $465/st FOB mark in the region.

Delivered ammonia was tagged at the $465/st mark in North Dakota. Sources said fall prepay ammonia programs were now off the table. There were reports of wind damage at an ammonia terminal in Murdock, N.D., but the extent of the damage was unavailable.

Great Lakes: With most fall prepay programs now officially off the table, sources tagged the anhydrous ammonia market at $460-$480/st FOB for spot tons in the region, with the low in Wisconsin and the high in Michigan.

Western U.S.: Effective July 9, Agrium reposted anhydrous ammonia at $440/st rail-DEL in most of Washington, Oregon, and northern Idaho; $460/st truck-DEL in Oregon and Washington east of the Cascades, and in Idaho north of and including Idaho County; and $475/st truck-DEL in Montana and northern Wyoming. Also effective July 9, Agrium’s aqua ammonia postings moved to $115/st FOB Central Ferry and Finley, Wash.

Black Sea: Even the Ukraine government thinks the price of ammonia has more to come off. The KIP remains at $225/mt FOB at a time of falling prices.

In the past, the KIP was lowered only after it was clear the market had moved below the official price level. For now, however, the price has not yet hit the KIP, but sources in Asia are convinced it should hit the $225/mt FOB level unless something big happens.

Even the up tick in demand from Yuzhnyy from American buyers due to shortages from Trinidad is not expected to help strengthen the price, observers said. One Asian trader noted that inventories have been building up in Yuzhnyy, and even with an upsurge in orders, it will take a while to work through the excess tons on hand.

While most in the industry are ready to call the market soft and none will be surprised to see sub-$230/mt FOB material this month, as of last week none were prepared to point to any hard and firm business below $230/mt FOB. Sources in Asia peg the market at $230-$235/mt FOB, with room for further softening.

Middle East: FACT/India settled a tender with QAFCO for two cargoes at $300/mt CFR for July and $303/mt CFR for August. Sources said these prices reflect a dramatic softening to $260-$265/mt FOB. The Middle East producers had been struggling to hold on to higher prices, but the global situation was not helping them at all.

Producers had been hoping that Indian buyers would step up their buying program now that the phos acid contracts are settled and shipments have begun. Sources point out, however, that buyers are holding back. One trader noted that buyers are waiting for prices to soften further before making a commitment for future ammonia purchases.

One trader figured that QAFCO was ready to push the price down quickly in an attempt to get other buyers to step in again. As Green Markets went to press that maneuver was not working, as buyers spoke up for even lower prices.

India: The FACT tender did not begin the rush to buying expected by ammonia producers. FACT paid $300/mt CFR and $303/mt CFR to Qafco for July and August deliveries, respectively. Additional purchases are expected as the phosphate industry gears up now that the phos acid shipments are arriving. Sources report buyers are still holding off, however, in the hopes of pushing the price down further.

Asia: Sources report buyers are currently content with the shipments scheduled. Customers in Taiwan and South Korea continue to take their contracted tons, and appear to be satisfied enough with delivery quantities and times that no requests for additional tons are being made.

Production remains strong at KPI and KPA in Indonesia. The only downturn in ammonia availability comes from Kaltim, which is concentrating on producing urea for export.

UREA

U.S. Gulf: Granular urea barge prices slipped last week. Sources quoted the range for most of the week at $312-$318/st FOB, with the upper level reported early in the week. Many sources talked of $315/st FOB as a commonly quoted number, but confirmation came very late in the week that a sale was concluded as low as $310/st FOB.

Several sources pointed out that with UAN prices on the rise urea was becoming a bargain in comparison, and that farmers may switch to urea over UAN when they learn about the price difference. If and when that happens, the price of urea may head north. Still, more vessels are due to arrive in August and September and world prices were well below the U.S. market, so supply will not be a problem and the price may remain stable. Lower prices from China were also said to be putting pressure on the market.

Trading for prills was thin last week. Barge prices were in the range of $280-$285/st FOB, with most quoting toward the lower end of the range.

Eastern Cornbelt: Granular urea was pegged at $350-$360/st FOB in the region, with the low out of spot river locations in early July. Several sources pegged the dealer price commonly at the $350-$355/st range FOB Ohio River terminals last week.

Western Cornbelt: Granular urea was quoted at $350-$360/st FOB in the region for spot tons, with some dealer reference levels up at the $365/st FOB level.

Northern Plains: Granular urea was quoted at $350-$360/st FOB the Twin Cities, with delivered urea pegged in the $370-$375/st range in North Dakota. One supplier was referencing forward contract urea for August at the $385/st DEL level in North Dakota and northern Minnesota. Sources reported some interest due to concerns about ammonia availability for the fall.

Effective July 9, Agrium’s granular urea postings moved to $370/st FOB Shakopee, Minn., and North Dakota terminals at Alton, Carrington, Colfax, Marion, and Scranton. The company’s rail-DEL urea postings moved on that date to $375/st in Minnesota and the Dakotas.

Great Lakes: Granular urea pricing covered a wide range. Wisconsin sources tagged the low end of the market at $350/st FOB and $360/st DEL last week, while dealer pricing out of Michigan warehouses remained as high as $400-$405/st FOB. Sources reported few new sales to test the market, however. Effective July 9, Agrium’s granular urea postings moved to $375/st rail-DEL in Wisconsin.

Northeast: Granular urea was quoted at $365-$368/st FOB Baltimore or Philadelphia to the dealer. The market FOB Savannah, Ga., was quoted at the $360/st mark.

Western U.S.: Agrium’s granular urea postings firmed on July 9 to $370-$385/st DEL in Montana and Wyoming, depending on location; $395/st FOB Washington warehouses at Glade, Kennewick, Warden, and Wilson; $400/st DEL in Washington, Idaho, Oregon, and northern Nevada from plants and/or warehouses in Alberta and Oregon; $410/st DEL in northern and central Utah; and $415/st DEL in southern Utah.

India: While MMTC and IPL take delivery of the tons purchased in the past few months, sources said at least MMTC is expected back in the market next month. The results of the last tender showed a soft market, with a three-way competition between China, Yuzhnyy, and the Middle East. MMTC took about 600,000 mt in its last tender when everyone expected them to take closer to 1 million mt.

When the next tender is called, sources again expect to see 800,000 mt to 1 million mt ordered for September and October loadings.

The big advantage for MMTC is the expected drop in the Chinese export duty beginning Oct. 1. Once the duty is halved, sources said Chinese suppliers will either force down their competitors’ prices or take all the October business. Either way, Indian buyers should see prices at least $10/mt lower than the last tender.

Black Sea: Increases in shipping rates from Yuzhnyy to India may put shipments from this area to Indian buyers at risk, sources said. When the MMTC tender closed earlier this month, the freight was about $32-$35/mt for a panamax to India. Late last week, sources pegged the market in the low $40s/mt. That increase may be enough for some winners of the tender to shift their purchases from Yuzhnyy to China.

Sources in Asia and Europe appear to disagree on where the market has moved, but they all agree the price is falling. The difference between the two is more on how one judges the market.

No business has been done below $270/mt FOB, said one trader; therefore the market remains at $270-$275/mt FOB, because that is where the last deal was concluded. Another source countered that a firm bid at $265/mt FOB would be accepted in a New York minute, and that bids of $260/mt FOB are being considered. Therefore, he argued, the market is $260-$265/mt FOB even though nothing has been done at that level.

Arguments are strong for the sub-$270/mt FOB business. When producers are willing to talk to potential buyers at the low-$260/mt FOB level and when no sales are on the books for August, industry observers say the lower pricing idea is the new market level. Adding to the argument that the price is softening away from the prices set by the last Indian tender are reports the Baltic and Chinese prices have dropped.

For purposes of general planning, sources now peg the market at $265-$270/mt FOB with further room to drop.

One major trading house is saying India – most likely MMTC again – will come back into the market in August. At that time, the conventional wisdom believes the price will have slipped into the low $260s/mt FOB. That, sources said, should make the nadir of the market.

Working against a major increase in the price of Yuzhnyy material at the time of the next Indian tender will be the continued presence of Chinese material. Even now, Chinese urea is a serious competitor. Sources said October loadings from China will be even more competitive when the export duty on urea drops to 15 percent from the current 30 percent.

Middle East: Being iced out of the last Indian tender has not helped the Middle East producers hold firm on prices. Sources said the market has moved into the $290s/mt FOB – exactly where is still up in the air. Some argue the price is in the upper $290s/mt FOB, while others claim the level is at the lower end.

Reports that the producers are willing to talk to buyers bidding at $290/mt FOB reinforce the idea that the price has slipped dramatically. Traders using Chinese material as a benchmark for pricing say the price will have to go lower than $290/mt FOB to be competitive. One estimate put the competitive price at $285-$287/mt FOB.

At this time, however, no one is talking about current tons being discussed below $290/mt FOB. Still, one producer reportedly told a trader that as long as the price is above $200/mt FOB, they are making money.

In general, prills are driving the price down. With no other major buyer around for prills except India, sources said the prill warehouses are rapidly filling. Granular supplies remain strong, but Sabic, PIC, and Qafco have all begun their shipments to the United States.

For now, with only some slight fluctuation in price, prills and granular remain at parity at $290-$300/mt FOB.

Even with contracted tons in the process of being shipped to the States, sources said the movement is not enough to provide a serious floor on the price. Industry observers are betting that MMTC representatives will begin talks with the Middle East producers for material before the Indian firm calls its next tender. Pre-tender deals are not unheard of, and often secure the buyer a reasonable price while at the same time the producers can fill their short-term order books.

Just as the Black Sea producers face a threat from China, so also do the Middle East suppliers. Chinese producers offer flexibility in shipping options that is difficult for the other producers to match. If the Chinese market remains on its current downward slide, sources said Chinese urea could either dominate the next Indian tender or force a further drop in prices from the Middle East.

China: With the image of another Indian tender on the horizon, sources say Chinese urea remains a deciding factor in the market. Currently, Chinese urea has a 30 percent export duty levied on each ton. Beginning Oct. 1, that tax will drop to 15 percent. Sources said there is nothing in the market dynamic that argues for an increase in the Chinese price. If October cargoes are offered in the Indian tender, sources say Chinese material could take the day.

Production in China has grown to a level that no longer just matches domestic needs. Sources said China has easily become an exporter of urea year-round. Chinese exporters also have the flexibility to load a variety of different-sized vessels. This flexibility allows Chinese urea to compete favorably against Black Sea and Middle East tons.

Domestic prices in China remain soft. Sources said the price has now dropped into the $260s/mt FOB.

Indonesia: Delays in new selling tenders are a sign that finding buyers is getting more difficult, sources said. Reportedly, several previously awarded lots have yet to be lifted because buyers are getting difficult to find.

The last business done was pegged at $267/mt FOB bulk. Any future tenders will be lower, say sources. Despite the dropping price, observers said the Indonesian producers are anxious to keep exporting because of the hard currency that is earned with each sale.

Vietnam: Asian sources keep reporting Vietnamese traders offering urea for export. Officially, the tons are supposed to be from the Phu My plant, though some observers are not so sure about that claim.

At first the tons were identified as re-exported Chinese material, and then as Phu My product. One trader suggested the urea is material that entered Vietnam via the land border with China and “bypassed” the normal customs regime.

Whatever the source, observers note the Vietnamese traders are able to secure a few deals with neighboring countries.

NITROGEN SOLUTIONS

U.S. Gulf: A combination of the flooding situation at Coffeyville and low warehouse inventories worked to push up solutions prices last week. Gulf barges moved from the previous week’s $250-$255/st FOB ($7.81-$7.97/unit) range up to $260-$265/st FOB ($8.12-$8.28/unit) last week. In addition, demand was said to be increasing.

Strong demand from Australia and Argentina was also said to be a factor in the strengthening solutions market. However, the higher prices were out of line in comparison with urea, which could be an alternative for farmers. Several sources speculated that either UAN would push the price of urea up or urea will pull the price of UAN back down.

Eastern Cornbelt: UAN remained in very tight supply, with some suppliers sold out through fall and others simply not quoting prices for replacement tons. The Coffeyville situation only added to the supply concerns. Illinois sources quoted terminal pricing for UAN-32 in the $295-$300/st ($9.22-$9.38/unit) FOB range last week for limited quantities. One supplier was offering forward contract UAN-32 for August in the $9.30-$9.75/unit FOB range in the region.

Western Cornbelt: UAN remained in very tight supply, and dealer prices were firming. The dealer market for UAN-32 was quoted in the $295-$305/st ($9.22-$9.53/unit) range FOB regional terminals for limited spot tons, with no prepay offers reported. Some suppliers were reportedly referenced as high as $310/st ($9.69/unit) FOB to the dealer last week.

Northern Plains: UAN pricing, provided product was available, was pegged at a firm $9.40-$9.70/unit FOB to the dealer for prompt tons. Availability was the key question, with several sources describing the terminal system as empty in the region. North Dakota sources said the last in-season sales of UAN-28 took place at the $270-$275/st ($9.64-$9.82/unit) DEL range, but were not sure what current replacement costs would be. One supplier was offering forward contract UAN-32 for August at the $310.60/st ($9.71/unit) level FOB Pine Bend, Minn.

Great Lakes: Sources reported a “flush of interest” in June for fall UAN, with some even fielding inquiries for spring 2008 solutions supplies. UAN was described as very tight, and cash market pricing was up to reflect this limited availability. The regional market was quoted at $9.38-$9.75/unit FOB terminals, with the low also reported for limited supplies of rail-DEL fill tons in Wisconsin. One Wisconsin supplier was referenced at the $9.70/unit FOB mark for prompt tons, and Michigan sources tagged the dealer market for UAN-28 firmly at $269/st ($9.61/unit) FOB Schoolcraft and $273/st ($9.75/unit) FOB Muskegon.

Northeast: The UAN market was “smoking hot,” according to one source, with “very few tons to be had.” Tight supplies were reportedly prompting some calls from Ohio Valley dealers hoping to source tons from East Coast suppliers. The Baltimore market for UAN-30 was quoted at $248-$250/st ($8.27-$8.33/unit) to the dealer, and sources said supplies were tapped out at Philadelphia. Rail-delivered pricing for UAN-32 ranged from the high-$280s/st to the low-$290s/st ($9.00-$9.13/unit) in the region, and dealer pricing out of tanks in upstate New York was pegged at the $292/st ($9.13/unit) FOB level.

The UAN-32 vessel market had reportedly strengthened to the high-$280s/mt C&F for the next round of business, up more than $20/mt from three weeks earlier.

AMMONIUM NITRATE

U.S. Gulf: The barge market continued to be quiet last week, but prices were said to be firm at $255-$260/st FOB and no change was expected anytime soon. Warehouses along the river system were not likely to make buys during the hot summer months, sources said.

Western Cornbelt: Ammonium nitrate remained at $315-$325/st FOB, where available, with the low reported in southern Missouri.

AMMONIUM SULFATE

Eastern Cornbelt: Granular ammonium sulfate remained at $230-$240/st FOB for the last sales. While reference prices continued to be reported as low as $205/st FOB, sources said those fill numbers were followed by a “call for availability” caveat.

Western Cornbelt: Granular ammonium sulfate pricing remained at $225-$240/st FOB for the last sales. Several regional suppliers were sold out of product.

Northern Plains: Granular ammonium sulfate was pegged at $205/st FOB and $210-$215/st DEL in the region, depending on location and supplier, with inventories described as tight. Some sources talked of a price increase likely in August, with product allocation for the fall season.

Great Lakes: Ammonium sulfate was quoted at $200-$210/st FOB in the region, but supplies were limited, especially at the bottom of that range. A Wisconsin source quoted mid-grade sulfate at the $185/st FOB mark for the last sales, but said the market may have firmed $20/st from in-season levels.

Northeast: Granular ammonium sulfate remained at $200-$215/st FOB in the region, with limited availability. No delivered prices were reported for ammonium sulfate in the region.

PHOSPHATES

Central Florida: Although prompt phosphate sales out of Central Florida were far from abundant last week, they did occur. Mosaic sold 5,000 st of rail-delivered DAP at $380/st FOB, and had a small amount still available for prompt delivery. That price was $5/st FOB below its asking price, but $8/st FOB above the previous week’s high in the range.

Domestic phosphate prices were strengthened last week when Mississippi Phosphates announced that a component failed at its sulfuric acid plant and the facility would have reduced production of 1,000-2,000 st/d for approximately 30 days. That situation will primarily affect the Gulf market, but will probably have some carryover to Central Florida and possibly the export market. On the plus side, the summer has been and will likely continue to be slow for phosphate sales, so the impact will not be dramatic.

The DAP price range changed to $372-$380/st FOB based on actual sales, from $370-$372/st the previous week. Mosaic’s asking price was $385/st FOB for DAP and $381/st for MAP. CF was listing a price of $375/st FOB for prompt, $378/st FOB for September, and $382/st FOB for October. PotashCorp’s Central Florida reference price remained at $385/st FOB. In Texas, Agrifos was asking $410-$415/st FOB for truck sales and $410/st FOB for railcars. Agrifos was sold out into late September.

U.S. Gulf: The Arkansas River was closed to commercial traffic last week, not because of flooding or lock maintenance, but rather due to fast flows. Water was reportedly building up in the reservoir behind the Keystone Dam and had to be released to prevent an overflow. The normal flow was about 22 million cubic feet/second, but by Wednesday it had been increased to 59 million cf/s, and had reached 70 million cf/s by Thursday. That effectively closed the river to barge traffic, and it was expected to remain closed until sometime in the coming week, at least.

Barges on their way upriver were forced to fleet at Rosedale as a result. That situation created an opportunity for some buyers. Rather than pay fleeting costs, at least one of the phosphate barges was sold at $398/st FOB, which was the price range for the previous week but a couple dollars below current levels. In the meantime, warehouses along the river will go unsupplied, but that should not be much of a problem because sales are slow at this time of year.

The situation on the Arkansas might have the effect of slowing the price rise of phosphate barges. Prices began to move up shortly after the July 6 announcement by Mississippi Phosphates of its sulfuric acid plant problems as Pascagoula (see news briefs).

Confirmed barge sales took place as high as $401/st FOB last week in the wake of the announcement, and by late in the week sellers were asking $403-$405/st, but no sales could be confirmed at those levels. A source said sellers were no longer soliciting business, but that buyers were calling them instead. Demand was relatively low, but so was supply.

The DAP barge price range was $398-$401/st FOB, based on actual sales. Mosaic’s asking price last week was $403/st FOB for prompt sales, but quantities were limited.

Correction: DAP and MAP barges traded at a flat $398/st FOB for the Green Markets dated July 9. While this was reported in the text on page 8, the change was not made on the price scan pages.

Eastern Cornbelt: DAP and MAP were quoted at $425-$435/st FOB in the region, with the low out of spot river locations in Illinois. The dealer market FOB Cincinnati had reportedly firmed to the $430/st FOB mark as of July 9. Several sources said they were well positioned for fall plowdown demand, and some even reported booking out phosphate fill for the spring 2008 season. One supplier was referencing forward contract DAP for August at $432/st FOB Peoria, Ill., and $435/st FOB Cincinnati.

10-34-0 remained at $335-$350/st FOB in the region for the last sales.

Western Cornbelt: DAP and MAP remained at $420-$430/st FOB most river warehouses in the region. 10-34-0 was unchanged at $325-$350/st FOB.

Northern Plains: DAP and MAP were quoted at $425-$430/st FOB warehouses in the region, with rail-DEL MAP reported at the $450/st mark in North Dakota. Forward contract pricing for August FOB Pine Bend was referenced by one regional supplier at the $438/st mark for DAP and $435/st for MAP. The 10-34-0 market was reported at the $325-$335/st FOB level in Minnesota for spot tons, with no prepay offers available.

Great Lakes: DAP was pegged at $430-$443/st FOB regional warehouses, with the upper end in Michigan and the low quoted by Wisconsin sources. Truck-DEL DAP was quoted at the $440/st mark by one central Wisconsin source. MAP was pegged at $430-$439/st FOB, with the upper end again in Michigan to the dealer. No current prices were reported for TSP.

10-34-0 was pegged at $335-$351/st FOB, with the low in Wisconsin and the high in Michigan. Sources in both states said a price increase is imminent based on new, higher replacement costs for acid.

Northeast: DAP and MAP pricing were up from last report. Sources tagged the dealer market at $430-$437/st FOB the warehouse, with the upper end FOB E. Liverpool, Ohio. 10-34-0 pricing was also up, with the market quoted at $315-$325/st FOB. The upper end of the range was reported out of tank locations in upstate New York.

U.S. Export: Prices on the export phosphate market appeared to have become firm at $440/mt FOB, which was still highly profitable for producers. Last week, PhosChem made a sale of 8,000 mt to an undisclosed customer in an undisclosed country at that price. PhosChem was also holding discussions with the Indians, who will need a great deal more phosphates this year. In addition, PhosChem made an offer to Pakistan, but the prospects of a sale appeared dim because Pakistan wants to obtain product for $500/mt DEL or less, which will make it difficult for PhosChem or any other North American company due to the high cost of ocean freight.

POTASH

Eastern Cornbelt: Potash supplies remained very tight, with reports that producers are no longer accepting new orders for October forward shipment. Strong export demand is expected to keep the pressure on domestic prices and supplies, with allocations continuing through fall. The regional warehouse market was quoted at $235-$245/st FOB for limited spot tons, depending on grade and location.

Western Cornbelt: Potash pricing continued to firm on very tight inventories. The market last week was quoted at $237-$245/st FOB warehouses to the dealer, depending on grade and location.

Northern Plains: Potash supplies remained tight and firm at $202-$212/st FOB Saskatchewan mines, depending on grade, with granular muriate quoted at the $207/st FOB mark or higher at the mine. Granular potash FOB the Twin Cities was pegged at the $245/st FOB level for limited spot tons; one source said no large volumes were being offered at that level.

Effective June 19, Agrium reposted 60 percent red premium potash at the $220/st mark FOB Vade, Saskatchewan, with rail-DEL postings at the $247/st mark in northern Minnesota and $249/st in southern Minnesota.

Great Lakes: Potash pricing was up from last report. The warehouse market was quoted at $234-$254/st FOB in the region, with the low end reportedly available only from some suppliers, reserved for existing customers, and limited to fill ton quantities of past purchases. Several Wisconsin sources pegged the spot warehouse market in the low- to mid-$240s/st FOB last week, with limited availability and nothing being offered on a prepay basis for fall.

Northeast: Tight supplies continued to push up potash prices in the region. Sources pegged the market last week at $242-$245/st FOB E. Liverpool for red granular tons. Delivered potash was pegged at $257-$284/st, depending on grade and location, with the upper end reported for soluble potash.

SULFUR

Tampa: Mosaic announced last week that it had settled third-quarter sulfur pricing at $17/lt up from the previous quarter with one of its major suppliers, but that may not be the end of the game. Sulfur industry sources described the possibly record price increase as “soft,” considering inventories and supply shortages. A phosphate source said that although not all of the contracts had been settled, they were getting closer. At least one of the sulfur suppliers was said to be pushing for a bump of between $25-$30/lt for sulfur delivered to Tampa.

Historically, sulfur negotiations have been concluded on the Friday before the beginning of the Southwest conference, and that may be the case again this round.

Several refineries were operating below normal – and some not at all – last week. Naturally, the flood-damaged Coffeyville facility was a casualty and will remain down for some time. In addition, Valero’s refinery at Texas City also experienced flooding from extremely heavy rain, although not as serious as at Coffeyville. The Texas City plant was just beginning a turnaround and some of its sulfur supplies would have been curtailed as a result, but the flooding will stop all sulfur production until the situation is corrected. Valero’s Houston ultra-low-sulfur diesel plant, which was still having problems with the switchover to the new product, went down on July 9 for three days. The amount of lost production from those three refineries was not available, but will be felt in an already tight market.

West Coast: A sulfur vessel will be leaving from Long Beach bound for China in early August, and another will leave soon after from Stockton. Prices for sulfur on both of those vessels will be in excess of $100/mt. Negotiations for new contracts for the West Coast had yet to begin last week, but prices will go up substantially.

Vancouver: Sulfur suppliers in Vancouver settled second semester contracts with South African customers last week at prices between $105-$110/mt FOB, and those new, much higher prices will be the benchmark for other contracts up for negotiation. Some contracts will be settled at later dates, so the spread on the Vancouver price range became very wide last week – $57-$110/mt FOB, but that situation was only temporary.

India: Steep hikes in sulfur prices have forced FACT to close down its caprolactum plant. The ailing company may also be forced to close down its ammonia plant in the coming days, sources said. The company expects to be able to continue producing other fertilizers. FACT consumes about 200,000 mt sulfur and 300,000 mt phos rock annually as raw material for its main plants. For production of caprolactum, FACT requires oleum, a variant of sulfuric acid, for which sulfur is needed, company sources said. Sulfur prices have increased by 100 percent in four months, from $89/mt to $168/mt. The price of phos rock had also gone up from $79/mt to $125/mt. FACT depends on sulfur imports from the Middle East, the US, and Canada. The company has at present a stock of ammonium sulfate equivalent to two months production and does not see a shortage in the near future.

MARKET NOTES

India: The Department of Fertilizers has projected the gas requirement for the sector to increase from 41.02 million standard cubic meters per day (mmscmd) in 2007 to 55.889 mmscmd by 2009-10, and further to 79.36 mmscmd by 2011-12. The demand is expected to hit 95.36 mmscmd – assuming a 5 percent per annum increase in the demand for urea – by 2016-17. DOF has made it clear that if the demand for gas is suitably met, production capacities in existing units would increase, closed fertilizer units would be revived, and non-gas-based fertilizer plants would be converted into gas. This would lead to an increase in the overall production capacity of urea to more than 30 million mt by 2011-12, and further to 38 million mt by 2016-17. Sources say government officials indicated that gas allocated to fertilizer production would have priority.

The country’s monsoon rains were above normal in June and have covered most parts of the country, likely spurring the sowing of crops such as rice, cotton, and soybeans. Rainfall since June 1 has been 7 percent above the average recorded between 1941 and 1990, said the director at the India Meteorological Department’s National Climate Centre.

The government-owned Rashtriya Chemicals and Fertilizers Ltd (RCF) has told the DOF that it wants to build two greenfield fertilizer projects – a coal-based urea and chemical unit, and a greenfield urea plant based on natural gas as feedstock. RCF is keen on setting up the coal-based urea and chemical plant in collaboration with the Gas Authority of India Ltd. (GAIL). RCF has zeroed in on a site where a defunct unit of the Fertilizer Corp. of India at Talcher in Orissa is located. The site for the gas-based unit has not been decided, but it could possibly be Durgapur, where FCI had a urea unit.

In other news, RCF plans to get into making alternative building materials from gypsum that will subsequently make load-bearing panels to substitute bricks. The project, claimed by RCF to be the first of its kind in India, will produce 1.4 million square feet of panels every year that can be used to build up to 10,000 houses. “This will revolutionize mass housing projects in the country,” said the company chairman. Gypsum comes as a byproduct when rock phosphate is processed to make phosphoric acid. RCF produces up to 150,000 mt/y of gypsum. RCF claims houses built from these panels are also resistant to earthquakes of magnitude 8.5 on the Richter scale.

South Africa: Recent problems with Chinese products have reached the fertilizer industry, with claims by South African pineapple growers that the government allowed highly-contaminated zinc sulfate from China into the country. The product was reportedly sold to farmers via Protea Chemicals, a unit of Omnia Holdings. Farmers found out about the problem only after they shipped their pineapple to Switzerland, which rejected them. Later tests revealed high levels of cadmium, arsenic, and lead in the fertilizer.

Saudi Arabia: The Saudi Arabian mining company Ma’den has signed a contract for building a factory for the production of ammonia with a capacity of 3,300 mt/d within the framework of the phosphate project, which is considered the largest in the world. The SR 3.6 billion contract was signed with the Korean company Samsung. The factory completion date is December 2010.

Jacobs Engineering Group Inc. reports that it received a contract to provide the basic design package for a 900 mt/d sulfur recovery unit (SRU) for the Khursaniyah Gas Plant. Officials did not provide the contract value. The new SRU will use Jacobs’ proprietary SUPERCLAUS® technology to recover sulfur from acid gas feed streams to produce molten elemental sulfur. It will be designed to achieve 99 percent sulfur recovery at the end of a two-year run. This 900 mt/d SRU train will be added in parallel to three SUPERCLAUS® trains now under construction. Together, the four units will recover 3,600 mt/d.

The Week in Fertilizer Stocks

Fertilizer Stocks
Company Symbol Price Week Ago Year Ago
Producer
Agrium AGU 43.74 44.33 24.00
CF Industries CF 60.74 62.49 13.74
Mosaic MOS 39.74 39.05 15.26
PotashCorp POT 80.50 80.10 29.15
Terra Industries TRA 27.99 28.22 6.46
Terra Nitrogen TNH 129.00 133.95 22.98
Distribution/Retail
Andersons Inc. ANDE 47.94 47.30 45.27
Deere & Co. DE 128.33 123.06 79.95
Scotts SMG 44.32 42.12 40.95
UAP UAPH 30.65 30.65 18.51

Coffeyville closes facilities due to flooding; nitrogen on higher ground; company aids community

Featured, News, Nitrogen

Coffeyville Resources announced Sunday, July 1, that it had to shut down its 108,000 b/d oil refinery and 700,000 st/y nitrogen fertilizer plant due to flooding from the Verdigris River. Coffeyville spokesman Steve Eames told Green Markets that the entire facility was flooded with water, though the nitrogen facility is on higher ground and would not be as severely damaged. Estimates were that the entire complex had at least two-to-six feet of water.

Eames said the company is still assessing the extent of the damage and when the plants will be able to restart. He noted that any impact on electrical systems would complicate matters. Industry sources recalled that water-damaged electrical systems were a major problem for the Mississippi Phosphates facility that was significantly damaged by Hurricane Katrina. On the other hand, Katrina brought with it more corrosive salt water. Regardless, left to speculate, both the oil and fertilizer industries last week opined that the outages could be more like months as opposed to weeks, with one source predicting the facilities may not be back up until after Labor Day.

Even if the nitrogen plant could resume operations before the refinery, it sources most of its petroleum coke feedstock from the refinery. Petcoke could conceivably be sourced elsewhere in the interim.

Flooding in Coffeyville was some 12.17 feet above flood stage on July 1, and much of the area had been pummeled with 18-19 inches of rain in the prior week.

Coffeyville management also confirmed July 1 that a tank system containing crude oil overflowed during the early hours of the flood, and flood waters swept the oil from containment areas within the refinery. Local reports estimated that 42,000 gallons of oil spilled, and that it was due to a pumping malfunction. Initial fears were that the oil would make its way downstream to the reservoirs of several local communities; however, sources said late in the week that it dissipated before reaching the Oologah Lake, which serves Tulsa.

The company also reported a small ammonia release to the atmosphere and believes there was no threat to the immediate community.

On July 3 company representatives entered the operations by boat for a preliminary assessment, in addition to monitoring the plant by air. They were able to confirm that a refinery tank containing crude oil that overflowed has been isolated and secured. With the overflow stopped, officials are investigating to determine the root cause of the spill and the amount of crude oil lost during the flood.

The company began moving back into its administrative facilities and some warehouses on July 4 at its refinery and fertilizer plant, as water from weekend flooding slowly receded. As of that date, part of the facility still remained under water.

“We will not resume operations at either facility until it can be done safely,” Jack Lipinski, Coffeyville Resources CEO, said July 4. “Once we know the extent of the damage, we will have a better idea of when we might be able to restart the facilities.”

In the meantime, the company said its crude oil gathering system in Oklahoma and Western Kansas remains fully operational, and crude oil disbursements are being handled in a timely manner. Officials are managing crude supplies through a combination of time trades, storage, and resale.

As of July 4, some workers at the refinery and the fertilizer facility had already returned to work. Others have been told to remain home until contacted by their supervisors to return.

Local estimates in the city of around 11,000 were that some 80 businesses were destroyed, along with 500 homes being uninhabitable.

The Coffeyville refinery had just ended a major $77 million upgrade in April, with plans for $156 million in additional upgrades by the end of 2007 (GM June 25, p. 15). The upgrade and derivative losses caused the company to post a $154.4 million loss in the first quarter.

On July 5, the company participated in a local Town Hall meeting to bring residents up-to-date on the flooding. In addition, the company announced that it has established a toll-free number to help local residents file claims related to the flooding and the oil overflow.

Call center operators will schedule appointments for insurance adjusters to visit area homes and assess damages. Operators also will be able to direct callers to local, state, and federal disaster response agencies for additional assistance. The toll-free number, which will be answered 24 hours a day, is 1-800-958-5380. In addition, a claims office has been opened at 900 Hall Street in Coffeyville.

“We are committed to helping our neighbors in the community recover from this disaster as quickly as possible, even as we work to restore operations at our facilities,” said Lipinski. “We’re all in this together.”

Company officials have been invited to meet with U.S. Senators Sam Brownback and Pat Roberts, U.S. Rep. Todd Tiahrt, and several civic and community leaders in Coffeyville as a part of a tour of the area, which includes the Coffeyville Resources facilities. “We are coordinating closely with city, state and federal agencies as they work to mitigate the environmental impact of the oil overflow, and are actively reaching out to those people affected,” Lipinski said.

Besides establishing its toll-free claims center line, the company also announced it will make a $25,000 contribution – as well as a dollar-for-dollar match of employee donations – to the local chapter of the American Red Cross to assist local families who have been displaced by recent flooding, and to cover all expenses of the area animal rescue operation. The company is also expected to keep its approximately 600 employees on the payroll.

At least one law firm had put up on its website their offer to give Coffeyville residents a free case review – www.yourlawyer.com.

Gasoline and fertilizer players were expecting higher regional prices for their respective commodities last week. UAN prices were already showing strength the few weeks prior to the flooding, and the event fed into the existing hoopla (See Market Report). Still, the industry is in its traditional mid-summer lull prior to the Southwestern Conference. The incident will likely give ammonia and UAN legs going into that meeting, according to sources.

During the three months ended March 31, 2007, Brandt Consolidated Inc. and MFA accounted for 23.1 percent and 18.9 percent of the business’s ammonia sales, respectively, and Agriliance LLC and ConAgra Fertilizer accounted for 2.2 percent and 22.9 percent of its UAN sales, respectively.

Approximately 80 percent of Coffeyville’s nitrogen goes to the ag market, with other major buyers including MFA, United Suppliers Inc., Interchem, GROWMARK, Inc., Mid West Fertilizer Inc., and DeBruce Grain Inc. The remaining 20 percent goes to the industrial market, with major customers including Tessenderlo Kerley Inc. and Truth Chemical.

Coffeyville sold 117,300 st of ammonia in calendar year 2006, and 20,700 st in first quarter 2007. It sold 645,500 st of UAN in 2006, and 166,800 st in first quarter 2007.

Coffeyville is owned by the investment firms Goldman Sachs and the Kelso Fund. They have filed with the Securities Exchange Commission to sell stock in the company under the name CVR Energy Inc.

UAP 1Q fertilizer sales up 44 percent; company-wide earnings up 50 percent

Featured, News

UAP Holding Corp. reported that its fertilizer sales increased 44 percent for the first quarter ending May 27, 2007. Fert sales were $480.1 million, versus the year-ago $334.3 million. UAP said $30 million of the increase was due to sales from acquired businesses. The remainder came from increased volumes sold and an improvement in the per-ton selling prices. These were due to increased grower demand, as they switched from soybeans to corn and needed to replenish nutrients in the soil, said UAP.

Potash volumes led the way during the quarter, UAP President and CEO Kenny Cordell told analysts, up 40 percent, while nitrogen and phosphate volumes were each up 34 percent. UAP suspects growers shifted fert buying into the first quarter ending in May. UAP noted that some 75 percent of its annual sales occur in its first and second quarters.

Despite the good first-quarter fert volumes, UAP said June appears to be roughly flat with year-ago levels, due in part to heavy rains in Iowa, Illinois, and Missouri that have deterred sidedressing, though the activity can still happen.

Cordell said if there is any upside going into the fall, it should be fertilizer. He noted that this fall will follow two bad fall seasons, one of which included Hurricane Katrina. He expects to see a more normal fall this year, with stable pricing and strong grower financials. He said the overall outlook is terrifically optimistic.

Company-wide, net income rose 50 percent, to $87.7 million ($1.66 per diluted share), versus the year-ago $58.3 million ($1.11 per share). Sales were up 15 percent, to $1.6 billion from the year-ago $1.40 billion.

First-quarter seed sales were up 11 percent, at $358 million versus the year-ago $321.6 million. Sales from acquired businesses contributed about $28 million. The rest of the increase was mainly due to corn seeds, which saw a more than 40 percent increase in volumes. Cotton and soybean sales were off, as more folks switched to corn. Cordell told analysts that the big switch to corn in the South was a surprise, with acres going to corn from cotton almost on an acre-by-acre basis. He noted that Mississippi cotton acreage was off 50 percent. Overall, Cordell said many in the industry were surprised by the USDA 93 million acre of corn assessment that was released June 29.

Chemical sales were up only two percent, to $732 million from $714 million, with $50 million of this attributed to new acquisitions. Herbicide and fungicide sales were both up ?Çô particularly glysophate – due to increased use of glyphosate-tolerant corn. Insecticide sales were off due to the increased use of insect resistant corn to protect from corn rootworm.

UAP said it was narrowing its earnings guidance for fiscal 2008 to $1.60-$1.75 per diluted share from the $1.50-$1.75 given in April.

In fiscal 2007 UAP acquired new retail assets that accounted for $300 million in revenues, and it expects to match this number in fiscal 2008. While no acquisitions were made in the first quarter, the company expects them to be recorded in the second half. Cordell said grower consolidation expedites retail consolidation. In the meantime, the company did spend $4 million of its $8.8 million in first quarter capital expenditures on fertilizer for new construction in Alabama (GM June 18, p. 10), Ohio, and Washington.

TFI takes issue with Gulf hypoxia report, argues against fert taxes, usage reductions

News

The Fertilizer Institute (TFI) last week submitted 14 pages of comments to EPA on its Draft Science Advisory Board (SAB) Hypoxia Report, in which TFI disputes several report recommendations, including the implementation of fertilizer taxes and a 40 percent reduction in phosphorous loadings to the Gulf, which TFI said would seriously impact U.S. farmers’ phosphorous fertilizer use.

TFI cited a USDA economic analysis to refute the effectiveness of fertilizer taxes, arguing that an increase in fertilizer prices is unlikely to affect fertilizer demand, and specifically that a tax on fertilizer is unlikely to reduce fertilizer use in corn production. TFI also argued that the poor correlation between nitrogen and/or phosphate fertilizer use and the size of the Gulf hypoxic zone indicates “a more complex problem than simply nutrient over-enrichment,” and that the report should take into account all sources of nutrients and their ability to be controlled.

“Synthetic fertilizers comprise a variety of sources including enhanced efficiency products that delay the release of nitrogen; or more closely approximate the uptake curve of the crop,” TFI said. “The implementation of nutrient management plans and best management practices are most easily accomplished with synthetic nitrogen fertilizers, with more predictable release and dissolution curves, and significantly less volatilization into air per unit nitrogen.”

TFI further argued that fertilizer use efficiency is at an all-time high, and estimated that U.S. farmers since 1980 are applying 41 percent less nitrogen and 53 percent less phosphate per bushel of corn produced. “The science of best management practices has grown,” TFI said, “providing farmers with a variety of practices that promote the use of the most appropriate nutrient products, applied at the right rate, time and place.” TFI said progress has also been made in conservation practices such as wetland and riparian buffer creation and restoration.

TFI said the final SAB report should dedicate more time to examining current adoption of best management practices and potential means of enhancing farmer’s nutrient stewardship strategies. TFI also disagreed with the report’s conclusion that reduced fertilizer use translates into reduced nutrient loss to the environment, and argued that lower fertilizer application rates may actually mean increased losses of nutrients to the environment, depending on site-specific conditions.

“Maximized nutrient use depends on several factors, including balanced nutrition and interrelationships among nutrients for efficient plant uptake and use,” TFI said. “While crops can mine soil nitrogen reserves to counter short-term nitrogen application reductions, arbitrary fertilizer reductions will result in longer-term increases in edge-of-field nutrient losses. This is particularly true in high-yield farming practices in use today.”

A second draft of the EPA SAB hypoxia report will be released later this year. Congress established the EPA Science Advisory Board in 1978 and gave it a broad mandate to advise EPA on technical matters. The SAB will report its advice and recommendations to the EPA Administrator; its duties are solely advisory in nature.

Management Briefs

Management Briefs

William H. Wurster, 84, passed away June 18 at his residence in Haverford, Penn. After creating the Buccaneer Line, an independent shipping company, he joined Woodward and Dickerson, a small Philadelphia trading company, as traffic manager. He rose to chairman and CEO, seeing the company grow into a global entity before selling it to ConAgra Inc. After his retirement, he continued as an entrepreneur and philanthropist.

He is survived by two children and five grandchildren. Memorial donations may be made to the Morris Arboretum of the University of Pennsylvania, 100 E. Northwestern Ave., Philadephia, Penn.

Market Watch

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

AMMONIA

U.S. Gulf/Tampa: The markets remained quiet last week, with $303/mt DEL still reported as the number for Tampa. While there was some speculation of possible business at NOLA, nothing had come in at press time.

Eastern Cornbelt: Several sources talked of record ammonia prepay bookings for the fall application season, indicating grower confidence in this year’s crops and a likely trend toward heavy corn plantings for next year as well. The ammonia market was tagged at $460-$470/st FOB regional terminals for spot tons, with most suppliers no longer taking fall prepay orders last week.

Western Cornbelt: Missouri sources said prepay ammonia could still be had for as low as $435-$440/st DEL last week; another source, however, said fall prepay pricing out of regional terminals was more commonly in the $460-$470/st FOB range to dealers, where available. Most prepay programs were now off the table, and several sources said a spot pricing uptick may be on the horizon in July.

California: Anhydrous ammonia was tagged at $435/st truck-DEL in the state, with the upper end quoted at $450/st rail-DEL.

Pacific Northwest: The anhydrous ammonia market was steady at $430-$440/st DEL and $410-$420/st FOB in the region.

Western Canada: Anhydrous ammonia was quoted at $666-$711/mt DEL in Western Canada, down significantly from in-season levels that climbed to as high as $809-$844/mt DEL in the region for spot tons.

Trinidad: Reports last week were that BP Trinidad will begin repair work on a gas platform July 8 for 60 or so days. Sources say this could reduce overall ammonia production by as much as 15 percent during the period.

Black Sea: Asian sources noted the Yuzhnyy market remains soft, but could soon be in for a move upward. Observers note the price is now hovering just under $240/mt FOB and has probably bottomed out.

The way back for prices is expected because of planned turnarounds in the area, shutdowns in Trinidad, and continued steady demand from the U.S. Gulf.

Asian sources note the price is probably closer to just under $240/mt FOB, while others say the price is near $230/mt FOB. Looking to mollify both camps, one source called the market $232-$238/mt FOB.

Middle East: Area producers are said to be in balance. One Asian trader noted that when producers use the term “balanced,” they really mean “surplus.”

The price has not moved in the area recently. The latest deal by Qafco showed a delivered price to India’s West Coast of $313/mt CFR. One trader estimated the netback to be $273/mt FOB.

Producers are trying to hold on to a higher price level because India is finally getting its shipments of phos acid. With the acid deliveries, the DAP producers will need more ammonia for their production. Still, as of late last week inquiries from India were limited.

Industry observers continue to peg the market at $270-$275/mt FOB, with rising expectations because of the potential Indian business.

India: FACT called a tender for July and August deliveries. Sources speculate this is the first wave of tender calls now that the phos acid is being delivered.

Middle East producers point to the FACT call as evidence the price should start moving up again. Others in Asia, however, expressed doubts FACT has the funds readily available for the deals.

Others opined that the reserve tanks in the Middle East are already filling up, and that it will be some time before these tons are liquidated and the price moves up.

UREA

U.S. Gulf: The urea barge market appeared to be quiet last week, with most calling it still within the $320-$324/st FOB range for granular. However, there was one report late in the week that some business may have fallen below the $320/st FOB mark. Others said they did not expect to see much happen in terms of price shifts until the Southwest Conference at the end of the month.

Prills continued to be called $290-$292/st FOB.

Eastern Cornbelt: Granular urea was quoted at $360-$365/st FOB regional terminals, with few sales to test the market.

Western Cornbelt: Granular urea was pegged at $355-$365/st FOB in the region, with most dealer quotes reported in the $360-$365/st FOB range out of river terminals in the region.

California: Granular urea was tagged at $380-$400/st FOB and $390-$410/st DEL in the state.

Pacific Northwest: Granular urea was unchanged at $385-$390/st DEL in Washington, Oregon, and Idaho, and roughly $365-$370/st DEL in Montana.

Western Canada: Granular urea was quoted at $475-$500/mt DEL in the region, down from $550-$575/mt DEL during the spring planting season.

Argentina: Agrium Inc. said July 5 that its 50 percent owned nitrogen facility in Bahia Blanca, Argentina, Profertil SA, is experiencing supply interruptions of natural gas. To date, the supply interruptions have not had a material impact on Agrium’s financial performance. The facility has been out of production at different times since April 2007 for a total of 24 days, most recently for the past five days, due to gas deliverability issues associated with increased energy demand in Argentina during the winter period.

Profertil continues to meet with the Argentine regulatory authorities to stress the importance of restarting the facility as soon as possible to supply nitrogen to Argentine farmers for the upcoming corn planting season.

Profertil SA is the largest supplier of nitrogen to the Argentine market. Agrium’s 50 percent share of the Profertil facility has a capacity of about 635,000 mt of primarily urea per year (1,800 mt of urea per day), and accounts for less than 10 percent of Agrium’s Wholesale annual revenues.

India: MMTC took about 600,000 mt and stopped. Industry observers had expected to see MMTC award 800,000 – 1 million mt from the tender that closed earlier this month.

About 200,000 mt were secured from Black Sea sources prior to the calling of the tender in handshake deals that were then confirmed by the tender. The remaining purchases came as a result of other traders meeting or beating the pretender prices.

All in all, for the Indians July was a good month for buying. The price had come off in Yuzhnyy and China sufficiently that MMTC could secure a price lower than what IPL paid and at the same time prevent the international price from running away.

MMTC publicly awarded just under 500,000 mt. Results follow.

Supplier Qty ‘000 mt US$/mt CFR Discharge Port
Toepfer 1 x 45-60 321.75 Mundra
ConaAgra 1 x 50-60 322.00 Mundra
Keytrade 1 x 50-60 322.00 Mundra
1 x 50-60 322.00 Mundra
Transammonia 2 x 40-60 321.90 Mundra
2 x 20-35 324.50 Tuticorin
325.50 Chennai
Helm 2 x 35-50 324.00 Kandla
EuroChem 1 x 35-45 324.00 Kandla

Sources in Asia say another 100,000 mt or so was booked after the tender. These tons will also most likely come from either the Black Sea or China.

The bottom line is that the Middle East producers were left out in the cold, while Chinese and CIS producers got the contracts.

Sources say the MMTC team played the market just about right. With prices softening, they took just enough material to satisfy their customers’ needs into early September. And with only India around as a major buyer, observers say the market will continue to soften.

Growing inventories in the Middle East, combined with continued softness in the Black Sea and China, could mean another tender might be called in the next 45-60 days with prices lower than this round.

Reportedly, some of the IPL material that was ordered back in May has yet to be lifted. Sources say the delay is because the authorities at the ports where the tonnage is to be offloaded have asked the shippers to hold off to avoid major congestion.

Despite the admonitions of the government, sources say the discharging and inland movement of urea once again face delays. The main culprit this month seems to be the steady rains that come at this time of the year. If the rains do not affect the port operations, they are definitely affecting the inland transportation, said one source.

No one is saying the problem at the ports is as bad as last year – when vessels sat at anchorage for days, if not weeks – but they are saying the delays are enough to cause some concern with ship operators and producers looking to move their product.

Still waiting in the wings is IPL. Sources say this other major buyer should be stepping back into the market soon as well.

Just when IPL will come in is up in the air. One trader noted that odds are IPL could enter any day now. Sources report that IPL has been conducting quiet talks with MITCO in Malaysia to secure a few cargoes.

In the past, IPL has been much more aggressive about securing cargo before a tender than MMTC. Sources point out that in previous tenders IPL walked in with almost half of its requirement covered by quiet pre-tender deals. The recent MMTC actions on this latest tender were not hard and fast deals, because it is limited to buying by tender. However, said one trader, MMTC did set a price it was not willing to exceed, and was able to get enough offers to cover their needs.

This is exactly what IPL did last time, and what is expected to happen with its next tender.

Black Sea: Sources report the bulk of the business to India will come from this area. That is the good news. The bad news is that MMTC is only taking a few cargoes, and no one else is stepping up to the plate for more cargoes.

The competition from China remains a major influence on Yuzhnyy pricing.

Helping the area producers nail down deals with India was the reluctance of the Middle East suppliers to lower their prices. Rather than spend a lot of time arguing, sources say MMTC just went with the Black Sea and China and ignored the Middle East.

Even with several cargoes coming out of the area, sources say the lack of Latin America purchases, along with other buyers sitting on the sidelines, means prices may still come off in the next few weeks.

In an effort to show the softness of the market, one trader noted the estimated netback of some of the MMTC business is closer to $270/mt FOB than the $275/mt FOB producers claim.

One observer noted a firm bid at $270/mt FOB would be accepted in a New York minute. A trader commented that with producers so willing to settle at that level, the market has to be on a downward slope.

For now, the market is pegged at $270-$275/mt FOB with expectations of a price drop.

Middle East: The area producers were aced out of the MMTC tender. Sources say the offers of $305/mt FOB were too high once compared to the Chinese and Black Sea offers. Rather than spend time haggling over a few dollars, MMTC apparently just took what tons they needed from the east and west of the Arab Gulf and let the producers stew.

Sources say in order to have been competitive into India, based on the Yuzhnyy and Chinese numbers, the Middle East producers would have had to lower their price to $300/mt FOB.

Apparently the loss of any awards in the Indian tender prompted some producers to start knocking on traders’ doors offering spot prompt tons.

Reportedly, Fertil offered a cargo of bagged material at $302/mt FOB to an African buyer. Once the cost of the bags is backed off, sources say the price is $292/mt FOB.

At the same time, some traders are reporting hints from producers that if $290/mt FOB bulk is bid, a deal could be consummated.

Such enthusiasm for a deal told one trader that an even better price might be found in a few weeks.

The Middle East producers once had to worry only about competing with the Black Sea for major contracts. If a buyer was looking at a panamax, the deal often went to the Black Sea. Those desiring more flexibility in vessel size and port assignment went to the Arab Gulf.

Now, however, China is competing against both of the traditional suppliers by being able to offer panamaxes and smaller vessels into various ports. Once traders offer tons into tenders with open sources, often the deal will go to a Chinese supplier.

The Arab Gulf suppliers are also facing buyers who have shifted to price buying instead of insisting on prills or granular.

India is the latest buyer to take either flavor of urea, pitting prill and granular suppliers against each other.

For now, the offers made around the MMTC tender for prills and granular set the high end of the price range. The Fertil business and other possible offers put the price a few dollars lower. Asian sources peg the market at $300-$305/mt FOB, with a real possibility the price could come off in the coming weeks.

China: A number of the awards issued in the MMTC tender were from traders offering “Open” sourced tons. After the initial 200-250,000 mt from the Black Sea involved in the pre-tender deals are eliminated, sources say the bulk of the remaining 400,000 mt or so could easily come from China.

Traders in Asia talked about the flexibility of Chinese suppliers as a key component of doing business there. The ever-softening Chinese market hasn’t hurt as well. Sources say the market in China has now dropped into the $260s/mt FOB. Just a few weeks ago, the price was $290/mt FOB. Some say the granular price is holding up better than the prills, but few think the difference will last long.

The flexibility that some traders seem to like is the ability of Chinese suppliers to move tons in various sized vessels, as well as adjusting loading dates to accommodate interruptions in discharging at the delivery port.

Indonesia: PIM closed a selling tender as Green Markets went to press. It offered the usual 20,000 mt.

Asian sources expect the price to go sub-$270/mt FOB.

Chances are the standard practice of awarding small quantities – about 5,000 mt – to a series of local traders will continue. Major international trading houses would then be forced to line up separate deals to get a cargo worth selling on the international market.

One trader noted that the major houses might forego the tender this time around unless the price is exceptionally low.

With little demand in the world, major houses may want to sit out the operation and let the smaller traders sell their lots to regional buyers such as Malaysia or the Philippines.

Vietnam: Buyers are looking for tons, but they are only bidding at $295/mt CFR, which equates to about $253/mt FOB from China. Even with a softening market, the Chinese material is not that cheap. At the same time, offers to sell are coming out of Vietnam at $260/mt FOB. The material being offered is Vietnamese and Chinese tons.

NITROGEN SOLUTIONS

U.S. Gulf: UAN price quotes rose at NOLA last week, though sources could pinpoint no actual trades. Sources said several factors were in play. While the Coffeyville psychology could be argued to run up prices, sources said many players were on vacation and that UAN barges are hard to find.

Sources said barge prices had already firmed up to $250-$255/st FOB ($7.81-$7.97/unit) by the end of the prior week, with quotes now at $260/st FOB ($8.13/unit) for the next round of business.

Eastern Cornbelt: UAN prices were difficult to come by last week. One source said the flooding situation at Coffeyville had a “huge impact” on the market, with suppliers “pulling in their horns” and not offering pricing for forward or spot tons until inventories are assessed. When pressed, sources said the terminal market had likely firmed back up to in-season levels, with most quoting the regional range last week at $288-$300/st ($9.00-$9.38/unit) FOB for any available spot tons.

Western Cornbelt: One regional source said UAN was the subject of choice on the fertilizer front last week, due to short supply and higher prices. Some sources continued to talk of fill tons being offered at the $285/st ($8.91/unit) FOB or DEL mark on the low end, but material was very limited at that level. Dealer pricing for cash market tons was quoted in a broad range at $288-$305/st ($9.00-$9.53/unit) in the region, with reference pricing quoted as high as $310/st ($9.69/unit) FOB some locations.

California: The UAN-32 market remained at $300-$310/st ($9.38-$9.69/unit) FOB and $320-$330/st ($10.00-$10.31/unit) DEL in the state.

Pacific Northwest: Liquid nitrogen continued to move through irrigation systems in the region. The UAN-32 market was quoted at $300-$310/st ($9.38-$9.69/unit) DEL in the region, with dealer reference prices in the $315-$325/st ($9.84-$10.16/unit) DEL range.

Western Canada: UAN-28 was pegged at $295-$311/mt ($10.54-$11.11/unit) DEL, compared with $341-$356/mt ($12.18-$12.71/unit) DEL at last report.

AMMONIUM NITRATE

Western Cornbelt: Ammonium nitrate was quoted at $315/st FOB in southern Missouri, with the upper end of the range at $325/st FOB for the last sales. Nitrate was in short supply in the region.

California: No market was reported for ammonium nitrate in California. CAN-17 pricing was steady at $220-$230/st FOB in the state last week.

Pacific Northwest: Ammonium nitrate remained at a nominal $327-$335/st DEL in the region. CAN-17 was unchanged at $222-$227/st FOB and $232/st rail-DEL.

AMMONIUM SULFATE

Eastern Cornbelt: Granular ammonium sulfate remained at $230-$240/st FOB for the last sales. Sources said summer fill postings as low as $205/st FOB were on paper only, with no tons available for sale at those levels.

Western Cornbelt: Ammonium sulfate was quoted at $225-$240/st FOB for the last sales.

California: Granular ammonium sulfate pricing was unchanged at $210-$230/st FOB, with the high reported in desert areas of the state.

Pacific Northwest: Granular ammonium sulfate remained at $205-$220/st DEL in the region.

Western Canada: Granular ammonium sulfate was quoted at $295-$300/mt DEL last week, down $55/mt from posted prices during the spring planting run.

PHOSPHATE

Central Florida: The July Fourth holiday fell in the middle of last week, so naturally many in the industry took off two days before and two days after, which did little to stimulate new business.

Despite some recent rains drought conditions continued over much of the Midwest and the eastern U.S. last week, which was not helping crops and was keeping fire indexes on the high side. However, in Texas, which is served primarily by Agrifos, the opposite was a problem – far too much rain and disastrous flooding.

Prompt phosphate sales out of Central Florida were nonexistent last week, although producers were busy loading orders from their recent fill programs. While the Central Florida index has not changed in several weeks due to a lack of prompt sales, asking prices were $3-$5/st higher than the range. The DAP price range last week remained at $370-$372/st FOB, which reflected the most recent transactions a few weeks ago. Mosaic’s asking price was $385/st FOB for DAP and $381/st FOB for MAP. CF was listing a price of $375/st FOB for prompt, $378/st FOB for September, and $382/st FOB for October. PotashCorp’s Central Florida reference price remained at $385/st FOB. In Texas, Agrifos was asking $410-$415/st FOB for truck sales and $410/st FOB for railcars. Agrifos was sold out into late September.

U.S. Gulf: Heavy rains were beginning to ease last week in Kansas, Oklahoma, and Texas, but fields remained so wet and soggy that farmers could not get in to harvest their wheat crops. As of last week only 59 percent of Oklahoma’s wheat crop had been harvested, and much of what remains was beginning to rot in the fields. Normally, phosphate sales for that area are strongest in the spring, but if farmers lack the money, many will reduce or eliminate the use of phosphate in the spring. That could spell a problem for the industry in that area. At the very least, wheat prices will go up.

Although heavy rain eased in most of Oklahoma and Kansas last week, much of Texas continued to be facing flooding. The weather forecast claimed that could last another two weeks or more.

With many in the industry stretching the one day off for the Fourth of July into an entire week, not a lot of trading took place on the river system last week. One company did purchase four barges – one for the second half of July and the remainder for August loading. The price for the July barge was at the top of the range at $398/st FOB, while the three for August were priced at $399. With the $405/st FOB Mosaic was asking, speculation was that the new higher price will hold, and possibly go higher. Last week, Mosaic rejected offers to sell NOLA DAP barges at $399/st FOB.

In addition, the river system will have to compete with the export market for phosphates this spring. India was almost certain to come back into the market for several hundred thousand metric tons, and Pakistan was also in a buying mode. Recently, Pakistan bought two vessels of phosphate from Australia, and more will be needed.

As demand continues to outstrip supply both domestically and the world, prices are not likely to go down but probably will go up.

The NOLA DAP barge price range last week narrowed from $390-$398/st FOB the previous week to a flat $398/st FOB, based on actual sales. Mosaic’s price last week was $405/st FOB for prompt sales, if supplies exist.

Eastern Cornbelt: DAP and MAP remained firm at $425-$432/st FOB to the dealer, with the low out of river locations in Illinois. Prompt phosphate sales out of Central Florida were nonexistent last week, although producers were busy loading orders from their recent fill programs.

10-34-0 remained at $335-$350/st FOB in the region for the last sales.

Western Cornbelt: Sources said a fair amount of phosphate fill was booked earlier in the $415-$420/st FOB range. With those programs now over, sources pegged the spot market at a firm $420-$430/st FOB for DAP and MAP. 10-34-0 remained at $325-$350/st FOB, with limited tons available.

California: DAP and MAP prices were also on the rise in the wake of recent posting hikes. MAP was quoted at $445-$450/st FOB or DEL in California last week, with DAP roughly $5-$7/st higher. 16-20-0 pricing was also up from last report, with the market pegged at $295-$300/st FOB or DEL.

Agrium’s ammonium phosphate postings in California and Arizona moved on June 25 to $300/st rail-DEL or FOB warehouse for 16-20-0, and $450/st rail-DEL or FOB warehouse for MAP.

Simplot’s 11-52-0 MAP postings moved on June 18 to $450/st rail-DEL in California and Arizona. Warehouse postings in California as of that date included $450/st FOB French Camp, Helm, Edison, Richvale, and Dixon, and $455/st FOB El Centro. Simplot’s postings for 11-52-0 SSP (Simplot Stabilized Phosphate with Avail®) moved on June 18 to $522/st DEL in California and Arizona, $522/st FOB French Camp, and $527/st FOB El Centro.

Simplot’s 16-20-0 postings moved on June 18 to $300/st FOB Richvale, Dixon, and Lathrop, and $320/st FOB El Centro. Simplot’s 0-45-0 postings moved on that date to $415/st FOB French Camp and DEL in California and Arizona, and $420/st FOB El Centro.

Super phosphoric acid pricing remained firm at $7.00/unit DEL in the state, with merchant grade at $6.90-$7.00/unit DEL. A nickel/unit increase for both products is slated for August, and again in September.

10-34-0 was quoted at $315-$325/st FOB in the state.

Pacific Northwest: MAP was quoted at $435-$445/st DEL in the region, with the low in Montana. DAP was pegged at $442-$452/st DEL, also up significantly from last report. The 16-20-0 market was on the rise as well, with the market tagged at $295/st FOB and $300-$305/st DEL in the region. 10-34-0 remained at a solid $315-$325/st FOB in the region.

Simplot issued new dry phosphate postings for the region, effective June 18. Adjusted levels for 18-46-0 DAP include $447/st DEL in Montana, Wyoming, Idaho, Utah, and the West Slope of Colorado; $452/st DEL in Nevada; and $452-$457/st DEL in Washington, Oregon, and the Idaho panhandle.

Simplot’s 11-52-0 MAP postings moved on June 18 to $440/st DEL in Montana, Wyoming, Idaho, Utah, and Colorado’s West Slope; $445/st DEL in Nevada; and $445-$450/st DEL in Washington, Oregon, and the Idaho panhandle. Simplot’s postings for 11-52-0 SSP (Simplot Stabilized Phosphate with Avail®) moved on June 18 to $512/st DEL in Montana, Wyoming, Idaho, Utah, and Colorado’s West Slope; $517/st DEL in Nevada; and $522/st DEL in Washington, Oregon and the Idaho panhandle.

Simplot’s 16-20-0 postings moved on June 18 to $295/st FOB Hopmere, Ore.; $300/st DEL in Montana, Wyoming, Idaho, Utah, Nevada, and Colorado’s West Slope; and $300-$305/st DEL in Washington, Oregon, and the Idaho panhandle. The company’s 0-45-0 postings moved on that date to $370/st FOB Pocatello, Idaho, and $385/st FOB Hedges.

Effective June 25, Agrium’s ammonium phosphate postings firmed to $300/st DEL for 16-20-0 and $435/st DEL for MAP in Montana and Wyoming; $300/st DEL for 16-20-0 and $440/st DEL for MAP in southern Idaho, Utah, Nevada, and Oregon’s Malheur County; and $300/st DEL and $445/st DEL for MAP in Washington, northern Idaho, and Oregon excluding Malheur County. Agrium’s warehouse postings moved on that date to $295/st FOB for 16-20-0 and $440/st FOB for MAP in Washington, northern Idaho, and Oregon excluding Malheur County.

Phosphoric acid pricing remained firm at the $7.00/unit DEL level for super phosphoric acid, and $6.90-$7.00/unit DEL for merchant grade acid. A nickel/unit increase is scheduled for August, and again in September.

Western Canada: MAP was tagged at $530-$565/mt DEL in the region, roughly $65-$75/mt less than in-season levels.

U.S. Export: As were the domestic markets, the export DAP market was quiet last week, with neither PhosChem nor any other firm reporting sales. However, the market remained healthy, with India, Pakistan, and possibly Brazil likely to make purchases in the near future. Inventories both domestically and worldwide remain low. With no new sales, the export DAP price range last week remained flat at $440/mt FOB.

POTASH

Eastern Cornbelt: Potash pricing continued to show strength due to tight inventories, both for current sales and going forward. Sources tagged the potash market out of regional warehouses at $232-$242/st FOB, depending on grade and locations. One source said some producers were not offering current pricing, and others were offering sales only at new prices technically slated to take effect this fall. One supplier was referenced at a firm $249/st rail-DEL in the region for red potash.

Western Cornbelt: Potash prices were all over the board, but sources agreed that the market was strengthening. Red granular potash was still available out of spot warehouses for as low as $227/st FOB in Missouri last week, but only through July 6, after which an increase of $5-$10/st was on the books. Iowa sources pegged the granular potash market last week as high as $242/st FOB, with new warehouse postings from some suppliers reportedly as high as $249-$252/st FOB.

California: Potash pricing was firm at $254-$260/st FOB in the state, depending on grade. Potassium nitrate remained at $480/st FOB for bulk and $540/st FOB for bags. Sulfate of potash (SOP) pricing was quoted at $368-$378/st FOB in the state.

Pacific Northwest: Potash was pegged at $260-$267/st FOB and $265-$272/st DEL in the region, up from last report, with continued talk of tight inventories and strict allocation. Effective June 19, Agrium’s postings for red premium potash firmed to $267/st rail-DEL and $262/st FOB in southern Idaho, Utah, and Oregon’s Malheur County; $272/st railDEL and $267/st FOB in Washington, the Idaho panhandle, and Oregon excluding Malheur County and the Willamette Valley; and $279/st rail-DEL and $274/st FOB in Oregon’s Willamette Valley.

Western Canada: Potash pricing in the region was up from spring levels. The market last week was pegged at $270-$285/mt FOB regional plant sites or warehouses, roughly $10/mt higher than last report.

SULFUR

Tampa: The midweek holiday slowed negotiations for third-quarter sulfur contract prices last week, and both sides indicated they were far apart on a settlement. One source said that if the sulfur industry and oil companies decide to be reasonable, they will accept an increase of $10-$20/lt – but it was not clear what they may consider reasonable. The biggest problem facing domestic phosphate producers was the wild ride the world sulfur market has been taking the past couple of months. Last week in Abu Daubi, the price of sulfur increased from $120/mt FOB to $150/mt FOB. Also last week, Iran made a deal to sell 25,000 mt of sulfur at $175/mt FOB, which was the highest of the 24 bids they received.

Unless the bottom falls out of the sulfur market soon – which appears highly unlikely – prices on the world market will continue to increase steadily. That will not help domestic phosphate producers get a better deal. As several sources said, it would be better for phosphate to settle sooner than later.

U.S. Gulf: Valero’s Houston refinery, which was switching to producing ultra-low-sulfur diesel fuel, was at near capacity last week, and was producing 120-150 t/day. The company’s Lake Charles facility was having a problem with one of its refining units, and production had fallen from the normal 380 t/day to 265 t/day. Exxon’s refinery at Beaumont was said not to have come fully back on line as of last week following a turnaround.

West Coast: Spot prices have risen to more than $100/mt FOB. Contract prices there were established earlier in the year at much lower prices, but those contracts will be coming up for renewal soon and will be much higher.

The Canadians will likely move as much of their sulfur production from deliveries to the U.S. to the world market, where prices will be much, much higher.

It was not at all clear how long the sulfur shortage will continue, but if sulfur producers drive prices too high for domestic phosphate producers in this round of negotiations, they will probably pay the price when the market makes its ultimate – and long-term – correction to an oversupply situation. As one source said, “People are in a panic mode. When the pendulum swings too far in one direction, momentum builds for a swing in the other direction.”

Vancouver: Negotiations for second semester sulfur contracts were still underway, but sulfur producers were said to have asked for prices that would amount to about $120/mt FOB. A finalization of contracts could take place as early as this week. China was believed to have settled some of its contracts at $160/st DEL. Deliveries to Vancouver were back to near normal following recent railroad strikes.

The Week in Fertilizer Stocks

Fertilizer Stocks
Company Symbol Price Week Ago Year Ago
Producer
Agrium AGU 44.33 43.80 23.57
CF Industries CF 62.49 60.09 14.03
Mosaic MOS 39.05 38.93 15.51
PotashCorp POT 80.10 77.09 27.97
Terra Industries TRA 28.22 24.46 6.40
Terra Nitrogen TNH 133.95 126.50 21.25
Distribution/Retail
Andersons Inc. ANDE 47.30 46.65 41.80
Deere & Co. DE 123.06 119.38 81.75
Scotts SMG 42.12 42.92 42.34
UAP UAPH 30.65 29.94 21.91