AMMONIA

U.S. Gulf/Tampa: There was nothing new to report in the market last week. The last done NOLA still stands within the $270-$275/st FOB range, and Tampa for August is at $275/mt DEL. Higher numbers into Savannah and Donaldsonville in the mid-$280s/mt DEL give sellers some hope of moving Tampa up for September.

Eastern Cornbelt: In general, fertilizer prices were relatively stable last week in the region. Anhydrous ammonia had moved up from $335-$345/st FOB to $345-$360/st FOB, depending on location.

Western Cornbelt: Prices for anhydrous ammonia increased somewhat after producers and importers followed the price increase in natural gas. The price range increased from $330-$340/st FOB to $335-$360/st FOB, with CF asking the highest price last week.

Northern Plains: Prices for anhydrous ammonia were up in the region, to $365-$385/st DEL from $350-$360/st DEL in the last report, with FOB prices moving upwards by similar amounts.

UREA

U.S. Gulf: Prices continued to move up last week, with sellers claiming new sales as high as $228/st, while buyers argued that they were still able to do business at $225/st FOB. Most acknowledged that seller price ideas have moved up, with sellers generally quoting $229-$230/st FOB as the week ended.

Overall, seller optimism was building as rains were reported in the wheat belt.

Western Cornbelt: Granular urea ranged from $250-$275/st FOB, but most was still at the lower price.

Northern Plains: Granular urea, which was said to be in short supply, was also unchanged at $245-$255/st FOB and $255-$265/st DEL.

Northeast: Urea was $265-$270/st FOB at East Liverpool and $270/st FOB at Philadelphia.

Black Sea: After the flurry of activity immediately following the IPL/India tender, last week was downright boring. Sources in Europe and Asia say buyers are now taking a much more careful look at future sales. And while they look, producers are said to be pushing pricing ideas of $220/mt FOB for late September business.

The problem for the producers is that few in the industry think the current and projected market can sustain that level.

Even now with the reported $217/mt FOB done the 17^th, sources say that will most likely be the peak of the market unless a convergence of large demand meets up with reduced supply. That situation, however, is only being supported by a handful of people, with more leaning toward the idea that once Oct. 1 comes, the flood of Chinese material will provide such a hard ceiling that few see any option for stronger prices.

Asian sources say quiet inquiries with potential buyers showed that purchasing expectations were significantly lower than what can be done with current prices. For Asia, the possibility of holding off until Oct. 1, when the lower-priced and bagged Chinese urea will be available, is quickly becoming a viable option.

After a few deals into Mexico and Brazil, buying interest from Latin America dried up as buyers look more closely at what appears to them to be a softening market. As a result, producers do not have any new business booked with buyers from that region.

Even past skeptics of the IPL tender are now beginning to believe. A few in the industry held off making any commitments to buy from the Black Sea area immediately following the IPL tender, because following previous tenders the price spiked and then fell dramatically. And, said one European source, history is repeating itself.

For now, there are two schools of thought on the Black Sea market. The growing consensus seems to be that unless the producers can nail down deals quickly, they will be stuck with lots of extra material for the last part of the year. Clearly, the biggest obstacle to higher prices is the reported 500,000 mt of urea expected to be available from China beginning Oct. 1. And, even though some plants are now down for routine maintenance, they will all have to be up and running for the upcoming fall and winter or face potential problems with freezing. Finally, large sales to India and Pakistan are not likely to happen.

Add it all up, said one trader, and the Black Sea producers have little to look forward to in the next couple of weeks.

The bulls, on the other hand, say India and Pakistan will each be making large purchases and that Chinese product will not play a major role in the traditional Yuzhnyy markets. Latin American buyers will return to the table, they say, once they realize the price will not come down because of the sub-continent business. They say the $220/mt FOB being offered will look attractive come October.

Traders on three continents dismiss this as wishful thinking by holders of material with no home.

The one ray of hope to producers is that the price will not drift too far south. One source noted that as soon as the price approaches $200-$205/mt FOB, buyers will step in and provide some props to the market. The price might edge up to $212/mt FOB as a result, and then buyers will once again sit on the sidelines.

This scenario of the price fluctuating in the low $200s/mt FOB is readily accepted by several observers. Some more bearish ideas have the price dropping just below $200/mt FOB, but not by much before it makes a rebound.

Another factor backing the bearish arguments are reports that freight rates to Latin America have gone up $6-$8/mt. This increase, combined with the current FOB price levels, puts urea at levels unpalatable to buyers in the Americas.

Baltic sales have also been at levels that argue for a lowering of the Black Sea price, despite one bit of business that came in at $220/mt FOB after a long string of estimates on land freight costs and frontier fees. People are still trying to figure out why anyone would pay that much for material.

So once all is said and done, sources say the price is somewhere around $210-$217/mt FOB, with pressure from the producers to move it up to $220/mt FOB and from the rest of the world to bring it down. But sources don’t expect to see any decline until the October business becomes public.

The lineup for September looks healthy for suppliers, but once the middle of the month passes there are fewer and fewer vessels currently lined up for loadings.

Middle East: With sales of prills and granular to India taking up their order books through September, the Middle East producers are confident there exists no reason to lower their prices.

Sabic, Fertil, and PIC have filled their September order books and are looking forward to repeating that performance in October. They may get their wish.

Sources report IPL/India is currently engaged in quiet discussions with producers to nail down some fourth quarter tons before calling a tender. This is similar to what they did in the last tender. Still, said one Asian trader, the idea that IPL will move this early following a run-up in prices does not carry much weight.

Whatever the argument, many are convinced IPL will work with Middle East producers to procure a large number of tons at a decent price and then call a tender to verify that price.

By securing the tons early, IPL should be able to get a good deal on significant amounts. Producers, while having to accept lower prices than they are currently touting, will get guaranteed sales. Even if the price is not to their liking, said one Asian source, anything is better than having full warehouses and no potential buyers.

For September, the granular market appears to be in balance. Between the previous Indian sales and a shutdown at Sabic, granular supplies in the Middle East appear to be under control.

Sources report Safco IV is now up and running and will soon be offering tons for export. Unfortunately for buyers, Safco II went down for a routine maintenance check. The slow start-up of the new plant and the shutdown of the older one is keeping the supply side in balance.

Granular will face continued pressure as more buyers are more willing to shift between granular and prilled urea based solely on price. At the same time, there is already a growing surplus of granular on the international market. And once all the Sabic facilities are up and running, that surplus could grow.

One source noted it is now up to the American granular buyers to provide a floor on the price. Even if that happens, said one source, the current pricing ideas from U.S. importers carry an estimated netback of $213/mt FOB. That matches with the price PIC did with IPL just before the Indian tender.

Without the Americans, the price for any purchases from other sources – for example, IPL – will continue to show signs of weakness. Sources say only large-scale purchases from the U.S. can save the Middle East granular price at this time.

And there appears to be little interest coming from the States. Reports are the factories in the States are running just fine, and weather predictions point to fewer deadly storms in the Gulf region.

Prilled urea in the Middle East remains steady.

Producers point to a sale by Fertil to Africa at $225/mt FOB as evidence the market is holding its own. The only problem, said one Asian trader, is that deal was concluded months ago and only now consummated.

If and when IPL issues its tender, sources expect to see aggressive numbers come in from the Middle East suppliers to win the awards. That means, said one source, that the industry should not look for any major jumps in prices. In fact, he said, IPL will most likely be looking for a lower price than what it paid in its previous tender.

At best, said one source, the IPL tender could provide a ceiling on prices, and the best they can hope for under current circumstances is a top price of $226-$228/mt FOB.

At present, sources peg the market much lower – at $215-$220/mt FOB, based on the last IPL tender. And they add there is little to support higher prices at this time.

Middle East suppliers will try to cover business in upcoming India and Pakistan tenders, but to be competitive against the Black Sea and China the prices will have to be at levels set in the previous IPL tender or lower. Even sales into Vietnam are likely to be tough after Chinese product hits the market.

By and large, folks expect to see prills drop come Oct. 1 when the Chinese urea becomes available on the open market.

In the meantime, Syria closed a tender last week. Offers – in Euros – follow:

Sources say there is nothing earth-shattering about the tender or the results. It does, however, provide a snapshot of how producers and traders looked at the market last week.

India: IPL is expected to call another tender, but for now the company is playing its cards close to its collective vest. Sources say there have been a few discrete inquiries by IPL representatives to Middle East suppliers for cargoes to be loaded in October and November. Traders in Asia and Europe reported hearing the same reports and wonder how accurate they are at this time.

One trader noted that it would be foolish for IPL to begin talking about additional purchases right now, just as the Black Sea price is apparently peaking and when the Middle East suppliers are doing all they can to justify higher prices. And one thing the IPL buyers are not, said an Asian source, is foolish.

Chances are some tire kicking was taking place to figure out where the market is sitting and where it is heading, said one observer. This action is by no means an active search for tons, agreed another.

One source said if any serious talks are taking place they are most likely because IPL is looking to shore up its prilled inventories rather than granular. Or, he said, they could be looking at shipments exclusively for the East Coast.

One source noted that if IPL schedules its tender so loadings do indeed take place during October, the industry should be prepared to see lots of Chinese material offered.

Still, estimates put the Indian needs for the rest of this year and through the first quarter of next year at 800,000 mt.

Pakistan: There is no doubt TCP will call a tender, but the issue is when. The country has high inventories that were purchased earlier in the year. At the same time, recent floods make it difficult to justify new purchases. Sources report government ministers will meet Sept. 7 with TCP to decide when or if a new tender will be called. The betting around the industry is that a tender will be called sometime late September for October shipment. If that happens, said one Asian source, expect to see Chinese material offered heavily.

Bangladesh: A high-level government cabinet meeting agreed last week to release funds to import 100,000 mt of urea and to purchase 400,000 mt from local company Kafco. The imported tons will come from the July tender won by Sumit.

Still in the wings is a decision from BCIC on the August tender for 100,000 mt each of prilled and granular. From the offers made at the time, Liven Agrichem is the apparent winner with Chinese product, but no announcement has yet been made.

Sources expect BCIC to call another tender for 100,000 mt each of prilled and granular urea. A tender slated to be called early October is now rumored to have been scrapped.

Reportedly, the delay in awarding the August tender, in making the September tender official, and in scrapping the October event is all tied to the upcoming change in government.

China: Producers are quoting $223-$225/mt FOB bagged for export material, but sources in Asia say the real price once the export tax is reduced Oct. 1 should be lower. The ex-plant price is now reported closer to $190/mt FOB bagged. The transportation to the port is not $30/mt, say sources, so there is some serious room for the export price to soften.

Buyers from Pakistan, India, and Vietnam are waiting to see how many tons will really be made available for export. India and Pakistan in particular are said to be anxious, so they can use the availability of Chinese urea to hammer the price down from the Black Sea and Middle East. Vietnamese buyers are anxious because they will be able to secure smaller cargoes of material that can be shipped directly to nearby ports instead of to larger facilities that would then entail additional transportation costs.

Indonesia: Rumors are circulating that Kaltim will have tons available for export next month or early October. At the same time, these same rumors are once again saying Indonesia may end up having to import prilled urea to make sure farmers have enough for the next application season. Both rumors are dismissed by many in the industry. Still, just the possibility that more granular urea is available is enough to spook the market.

Malaysia: Reports are coming out of this country that some U.S. buyers are agreeing to take tons during October. There is little available on this rumor, but Asian sources say the price for the product and freight would have to be pretty good to make the sale work.

NITROGEN SOLUTIONS

Western Cornbelt: UAN-28 was becoming difficult to find, and the price at terminals had gone up last week from $5.40-$5.78/unit FOB to $5.90-$6.25/unit FOB.

Northern Plains: UAN, which was difficult or impossible to find in some areas, was $6.60/unit DEL, while the FOB price of $5.55-$5.85/unit had not changed.

Northeast: UAN was unchanged at $6.00-$6.13/unit FOB Baltimore, and $6.50-$6.75/unit FOB for Upstate New York.

AMMONIUM NITRATE

Western Cornbelt: Ammonium nitrate was slow moving and the price showed some sign of weakness, with the range down on the bottom by $10/st FOB, from $255-$260/st FOB to $245-$255/st FOB last week.

AMMONIUM SULFATE

Western Cornbelt: Ammonium sulfate was still in the range of $150-$155/st FOB or $155/st DEL, but in some locations the price could run as high as $175-$185/st FOB.

PHOSPHATES

Central Florida: The rate hike CSX Transportation will put into effect on Sept. 1 helped phosphate producers make sales out of Central Florida last week as the deadline drew near. CSX will add its seasonal adjustment of $250 per car, or $2.50/st. In addition, the railroad will hike its fuel surcharge from 19.2 to 20.8 percent. To locations in the Midwest, that will mean about an additional $4/st FOB. The fall season should be kicking off about the time the rate hike goes into effect next week, and some heavier buying should occur within a couple of weeks of that time.

However, some negative conditions existed in the market last week. While much of the cornbelt and wheat-growing areas began receiving more rain, dealers were reluctant to begin ordering more phosphates until farmers start buying. The industry took a beating last year and dealers were hurt to a greater degree than their suppliers, so they are reluctant to make a move until absolutely necessary. Farmers have their own problems. Prices for corn were still below $2/bushel last week, and yields will likely be down this season because of the heat and drought in much of the Midwest.

The Central Florida DAP range remained at $223-$226/st FOB last week. Mosaic’s posted price was $228/st FOB, but was selling as low as $226/st FOB, and CF’s posted price was said to be $227/st FOB, with sales at $223/st FOB. Prices do not include discounts; however, some large buyers can obtain a lower price without a discount from some producers. CF was said to be selling DAP as low as $223/st FOB. Mosaic discounts MAP $4/st from the price of DAP, while CF has no price difference. PotashCorp’s Central Florida reference price remained at $245/st FOB. In Texas, Agrifos’ prices were unchanged at $255/st FOB for DAP and $261/st FOB for MAP.

U.S. Gulf: Oklahoma and parts of northern Texas finally began receiving some rain last week after a long drought. The area has also suffered from extreme heat conditions, with temperatures generally exceeding 100 degrees on many days. Almost as soon as the rain came, activity at warehouses along the Arkansas River began to bustle with activity, and sales of DAP and urea began to take off. The urea won’t last long, and the DAP will run out too early. The U.S. Army Corps of Engineers will close two locks on the Arkansas on Sept. 4 for maintenance, and will not reopen them until Sept. 14, which is normally the peak season on that waterway. Warehouses there do not have sufficient supplies to meet the demand during that period.

New spot NOLA DAP barge sales were stagnant last week; one source said his company needed to buy two DAP barges for its own system, but was holding off for lower prices. The source said offers were made at $223-$224/st FOB, which was below the NOLA DAP barge price range. The cheapest barges were coming from resellers of Miss Phos, which loads around 25 barges a month. While that product was cheaper than what Mosaic offers, a lack of buyers was forcing the owners of Miss Phos barges to either pay high storage charges or take a loss. For many, it would be less costly to simply sell, but how low will they go? That game can only go on for another few weeks, until the season actually gets into gear – then prices should at least stabilize.

A lack of new sales last week left the NOLA DAP barge price range at $225-$231/st FOB. Freight played the biggest factor in the difference in barge prices, but the most expensive were from Mosaic and the least from Miss Phos.

Eastern Cornbelt: Phosphate products remained at $260-$270/st FOB for both DAP and MAP. The price range for 10-34-0 was still $250-$265/st FOB.

Western Cornbelt: DAP and MAP prices at terminals were in the $255-$260/st FOB price range, which was down from the previous $260-$270/st FOB range. The price for 10-34-0 was stable at $255-$265/st.

Northeast: Phosphate prices were stable at $275-$280/st FOB, with the same prices for MAP.

Eastern Canada: Phosphates were unchanged at $384-$395/mt FOB for DAP, while MAP was $374-$390/mt FOB; TSP remained at $341-$343/mt FOB.

U.S. Export: PhosChem made a sale of 6,000 mt into Central America last week at $263/mt FOB, which was the highlight of the week for the wholesale phosphate markets. Nevertheless, PhosChem has a full schedule for a month or more simply loading vessels for its previous sales to India, and one a month to China. India and Pakistan appeared to be the most likely customers for new phosphate export sales during the next couple of months, as well as Latin America. Producers in the U.S. have an advantage over their competition in Latin America because of escalating freight rates. They also have an edge in India and Pakistan, because Russia, Jordan, and most of North Africa are short on supply. With the lull in the U.S. domestic market, that will help producers keep their plants running.

The export DAP price range was unchanged last week at $260-$263/mt FOB.

POTASH

Eastern Cornbelt: Potash fell slightly, from $195-$200/st FOB to $189-$198/st FOB last week.

Western Cornbelt: Potash moved up slightly, from $193-$200/st FOB to $198-$202/st FOB, although supply was not a problem. However, producers were pushing to increase the price in October to $10/st FOB, which many dealers believed would not stick.

Northeast: Potash was put at $210-$231/st DEL, and East Liverpool was said to be $206/st FOB.

India: Local sources report that the country is expected to import 3.5-4 million mt of potash from August through March. As previously reported, buyers inked a new deal with Belorussian Potash Co. and other sellers for a rollover in prices, which local sources equate to $220.00/mt CFR with 180 days credit.

SULFUR

Tampa: Valero’s problems at three of its refineries during August will take nearly 8,000 lt of sulfur out of the supply line. Its facility at Texas City lost about 4,200 lt of production, and St. Charles lost 2,000 lt, while Paulsboro in New Jersey had a 1,700 lt loss. Still, sources said both Mosaic and PCS had asked some of their suppliers to voluntarily cut back on deliveries of sulfur to their facilities. That could be the result of lower production from plant closings in Central Florida, or it could be a negotiating ploy aimed at getting another price reduction from sulfur suppliers. As a result of significantly increased freight rates, netback prices on the world sulfur market continued on a downward trend, which makes turning excess molten sulfur into pellets for export not practical.

Fourth quarter contract negotiations for sulfur will probably begin at The Fertilizer Institute’s conference in San Francisco in September. Considering the condition of the world market and the reduction in supplies from U.S. phosphate producers, some predict prices may be settled at least $3-$5/lt below the current contracts.

A hike in sulfur railcar rates for 2007 will likely be announced by the railroads sometime during the next couple of weeks. Phosphate buyers will begin paying higher rates on Sept. 1.

MARKET NOTES

U.S.: Agrium has announced a fuel charge decrease effective for loads shipped Aug. 22 going forward. The decrease is 23.5 percent for Iowa, the Dakotas, Nebraska, Minnesota, Oklahoma, Missouri, Kansas, and Wisconsin, and 22.5 percent for Texas and New Mexico.

India: Oil and Natural Gas Corporation (ONGC) resumed industrial gas production in the second phase at Hazira on Aug. 18, with the processing of another 6mmscmd bringing the total gas production to 12 mmscmd, two weeks after suspending it due to the unprecedented floods in the Tapi River that had submerged the plant premises. A Hazira official said customers are now being supplied with 6 mmscmd. “The normal gas processing of 40 mmscmd may, however, take at least two more weeks,” he added.

Locals estimate that as much as 300-500,000 mt of urea may have been lost due to the flooding and that local urea plants are slow coming back up, despite any gas availability, as they need time to make their own repairs.

China: Hanfeng Evergreen Inc., Toronto, recently had the official launch of its sulfur-coated urea into the Chinese market. Hanfeng touts its SCU plant in Jiangyan, Jiangsu, as the only modern, commercial capacity, slow-release fertilizer plant in China. The technology has Canadian roots, as it was licensed from Nu-Gro Inc., an Ontario company recently purchased by Agrium Inc. of Alberta. The local government provided support to Hanfeng by way of bringing in all required infrastructure to the land, and securing utility supplies at favorable rates, a five-year tax holiday, and low cost of land. The plant, which was completed March 31, reached 85 percent of capacity in June and has an annual capacity of 100,000 mt.

Haifa, Israel: Haifa Chemicals says it is returning back to normal now that the country is in the midst of a cease fire. Haifa said that during the bombing it operated and produced almost as normal. Haifa said its activity did not cease for even a day in spite of the daily bombardment in the Haifa area. Haifa’s continued operation during the bombing is a bit of a controversy in Israel, where some argue the plant should have shut down during the bombing. Critics argued that a direct hit on Haifa’s anhydrous ammonia tank could have resulted in 100,000 casualties and 10,000 fatalities, assuming the wind blew in the wrong direction. They also note that an ammonia vessel was even allowed into the port to unload during the period. According to the local press, military officials felt the odds of the ammonia tank being hit were so remote as to allow the facility to continue in operation.