Washington-The industry believes a recent report in the journal Science condemning the increase in fertilizer use for large-scale environmental impacts isn’t telling the whole story. Professor Donald Canfield from the University of Southern Denmark, the lead author of the study, claimed in the Oct. 7 article that an increase of 800 percent from 1960 to 2000 in fertilizer use worldwide contributed to large-scale environmental impacts such as “dead zones” in seas and oceans, and greenhouse gas emissions of nitrous oxide from nutrient-overloaded wetlands. According to Canfield, naturally occurring microorganisms will be able to clean up the excess nitrogen that humans have created, but it will take many decades. The Fertilizer Institute (TFI) responded that Canfield’s report only looks at one side of the story fertilizer use without any regard for the tremendous yield increases that have been achieved in recent decades. “The amount of fertilizer applied per bushel of corn produced continues to decline,” TFI spokeswoman Kathy Mathers pointed out. “Fertilizer use efficiency is at an all-time high, with U.S. farmers applying 38 percent less nitrogen, 52 percent less phosphate, and 54 percent less potash fertilizer per bushel of corn produced than in 1980.” Canfield’s report advocates “several new approaches and a much wider use of more sustainable time-honored practices” to decrease nitrogen use in agriculture. Canfield reported better crop rotation; better timing of applications to limit the total amounts of fertilizer applied; the development of genetically-engineered fertilizer-hoarding crops; the improvement of wheat, barley, and rye through current breeding; and furnishing cereals and other crops with microbes that supply nitrogen. “Humans may have produced the largest impact on the nitrogen cycle since the major pathways of the modern cycle originated some 2 billion years ago,” the report declared.
All posts by traceybg@gmail.com
NRC calls for immediate anti-pollution action
Washington-The National Research Council (NRC) is calling for swift government action to reduce fertilizer pollution, including a comprehensive and aggressive commitment to cleaning up the Mississippi River basin from the headwaters in Minnesota to the Gulf Coast. Specifically, NRC scientists are advising the U.S. Environmental Protection Agency to establish a numeric limit for the amount of nitrogen and phosphorus pollutants in the waters of the northern Gulf, which raises concerns in the fertilizer and agriculture communities. For one, The Fertilizer Institute (TFI) is very much opposed to the imposition of numeric nutrient criteria as is taking place in Florida, and will oppose such action should it be taken in other states. “Even the Environmental Protection Agency’s own Science Advisory Board on numeric criteria has criticized the approach being taken in Florida,” noted TFI spokeswoman Kathy Mathers. “We support the implementation of site specific nutrient stewardship practices based on the 4R system, which promotes the use of the right nutrient source at the right time, at the right rate, and in the right place.” The NRC approach is to develop a basin-wide action plan with partner federal agencies and the Mississippi River states to reduce nitrogen and phosphorus pollution throughout the Mississippi River Basin and the Northern Gulf of Mexico. NRC says the plan should be rigorous and include clear performance measures, milestones, and deadlines. The Iowa Environmental Council describes the proposals as common sense that could mark a crucial first step in reclaiming the Mississippi River basin for future generations.
CHS acquires Lansing stake in grain terminal
St. Paul, Minn.-CHS Inc. has announced an agreement with Lansing Trade Group LLC to buy its ownership share in Erskine Grain Terminal LLC, in Erskine, Minn. This agreement includes the shuttle grain elevator on the BSNF railroad, which has been operated jointly by CHS and Lansing since 2008. Effective Nov. 5, the new business operates under the name CHS, with Doug Derosier serving as general manager. He managed the facility under the jv operation. Derosier is a 27-year veteran of the grain industry and has managed several cooperative elevators in northern Minnesota. CHS said the terminal is grain only, and that there are no plans to add inputs.
Management Briefs
Ohio-based Morral Companies LLC recently announced the addition of long-time industry veteran John Oster to its sales team. He will be headquartered in Morral, Ohio, and can be reached through their office.
Market Watch
AMMONIA
U.S. Gulf/Tampa: No agreement had been reached late last week for Tampa for December. While suppliers were hoping for a rollover from the last round, buyers appeared to be somewhat reluctant and were looking for something in the neighborhood of a $25-$40/mt DEL retreat from November.
Eastern Cornbelt: The anhydrous ammonia market remained at $690-$705/st FOB, with continued reports of brisk movement and spot outages at terminal locations.
Western Cornbelt: Although dry conditions have made fall ammonia applications difficult in some locations, one Iowa contact said ammonia allocations at major terminals had brought the ammonia market “to a crawl” at mid-month, with some retailers saying they are out for the season.
Sources continued to quote the anhydrous ammonia market at $670-$700/st FOB for prompt tons, where available, with the low in Nebraska and the upper end in Iowa. There were reports of spot loads in western Iowa being quoted as high as $750/st DEL from southern production points.
Northern Plains: Ammonia continued to move to the field as weather conditions permitted. The market was tagged at $670-$700/st FOB. The low end reflected producer postings, but Minnesota sources were more inclined to quote the upper end of the range for new sales at mid-month. Delivered ammonia in North Dakota was pegged at the $655/st level for cash market tons out of Leal.
Effective Nov. 2, Agrium’s anhydrous ammonia postings firmed to $670/st FOB Mankato, Minn. In the Leal/Beulah sales area in North Dakota, Agrium’s ammonia postings moved to $670/st FOB and $690/st DEL.
Black Sea: The industry is looking for a weakening of prices from the area next month. After a steady rise in prices, sources now say that the market has seen the price slip below $400/mt FOB. Just how far down, said one source, will largely depend on what the U.S. does.
For now, the price is centered on $400/mt FOB, with sources calling the market $390-$410/mt FOB.
UREA
U.S. Gulf: NOLA urea barges were under pressure last week with sources calling new granular business within the $380-$383/st FOB range. Sources said farmers were more concerned with applying potash and phosphate and will probably wait a little longer before using much more urea.
Eastern Cornbelt: Granular urea was reported at $420-$440/st FOB regional terminals, up slightly from last report.
Western Cornbelt: Granular urea was firm at $420-$440/st FOB regional terminals to the dealer.
Northern Plains: Sources tagged the granular urea market at a firm $440/st FOB Minnesota terminals, up significantly from last report. Effective Nov. 2, Agrium’s granular urea postings firmed to $445/st FOB North Dakota terminals at Alton, Carrington, Colfax, Scranton, and Grand Forks, with rail-delivered urea postings moving on that date to $450/st in Minnesota and the Dakotas. Those levels reflected a $20/st increase from Oct. 14 postings.
Northeast: Granular urea pricing was pegged at $400-$415/st FOB Philadelphia and Baltimore, up from last report. Sources tagged the E. Liverpool urea market at the $420/st FOB level last week.
Eastern Canada: Granular urea was quoted at $530-$540/mt FOB in Ontario, up some $65-$80/mt from last report.
India: Possibly the last tender of the Indian buying season closes Nov. 22. IPL called the tender late last week without specifying how many tons it will take.
After STC booked about 900,000 mt earlier this month, India is still short by 300-600,000 mt. Chances are, say sources, IPL will most likely take that amount if the price is right.
And getting the price right for a buyer will prove difficult.
Sources of urea are getting fewer as the year closes. With reports that China will raise its export duty effective Dec. 1 and Indonesia holding onto more of its tons for domestic use, the only possible suppliers come from the Black Sea or Arab Gulf.
The delivered price into India has been steadily moving up with each of the past tenders.
The Indian government’s target price of $310/mt FOB was nicked in the August IPL tender when the buyer accepted west coast deliveries at $311/mt CFR.
The shattering of the $310/mt CFR barrier seriously came in September when MMTC accepted prices in the $347/mt CFR range.
Earlier this month, STC accepted offers in its October tender in the $360s/mt CFR range.
Industry sources speculate that at least another $20 will be added to the prices offered on Monday. Some bulls are saying even $400/mt CFR will be offered in all seriousness.
If IPL takes the quantity sources expect it to, India might be ready to sit out the first quarter of the year. New purchases won’t take place until after the new fiscal year starts and the accountants get together with the agronomists in the second quarter.
Black Sea: Prices keep moving up. Sources say a firm deal at $379/mt FOB was concluded, and there are reports that $381/mt FOB was also done.
Part of the exuberant pricing comes from reports that China will not be in the international market after Dec. 1, and India still needs to buy about half a million tons.
The price in the region took a major pounding in 2008 when it dropped from $800/mt FOB to $215/mt FOB in just 13 weeks. Since then the price only visited $300/mt FOB in February of this year – and then dropped again.
In June 2010, however, the price began its steady rise as global demand strengthened and supply stagnated.
Most of the sales from Yuzhnyy went to Turkey and Europe. The usual suspect for major buying – India – stayed away from the Black Sea because of the abundance of material from Iran and China.
With China out of the picture and global prices coming into line with each other, Yuzhnyy as a source for India has once again opened up.
As traders prepared their paperwork for the IPL tender, sources put the Black Sea market at $379-$385/mt FOB.
Pakistan: The government is expected to get about $400 million from Saudi Arabia, which was announced by the latter at the Pakistan Development Forum (PDF) early last week. Of the $400 million, $300 million will be in the shape of soft loans. Saudi Arabia has offered this assistance to mitigate flood effects in Pakistan. Market sources observed that soft loans would be utilized for the import of urea from Sabic during the Rabi season if the product is needed. Pakistan’s National Fertilizer Development Centre (NFDC) has warned that local production may decrease due to curtailment of gas and the late commissioning of the new Engro plant.
Middle East: Producers are grinning in anticipation of the IPL tender.
The buying options for India will drop to Yuzhnyy and the Arab Gulf if reports of a December increase in Chinese export duties are accurate.
The problem for the Arab producers is that Iranian producers are willing to offer tons at rates just a notch below the Arab pricing ideas.
Indian buyers have not been shy about taking Iranian urea.
In the tender that settled earlier this month, STC took about 400,000 mt from Iran. Previous tenders have taken similar quantities.
The Arab producers have been offering material in Indian tenders at rates they knew the Indians would reject. But they only offered token tons – 25,000-40,000 mt – in each tender. Sources say the producers were just making a point about where they think the market should be.
By last week, the producers were getting their wish as sources reported $390/mt FOB was done in a private sale.
The price had been languishing in the $360s/mt FOB because contract sales from the Arab producers and the tender sales to India from Iran kept the price stagnant.
Now sources say the latest deal will push up the price the Arabs and Iranians offer into India this week.
There is talk that some deals were done above $400/mt FOB, but sources could not confirm these sales.
For now, prills and granular are pegged at $390-$400/mt FOB.
China: Sources say it is a 99.99 percent certainty that Beijing will change the export duty beginning Dec. 1.
The government has become concerned that too much urea is being shipped offshore and helping drive up the price of urea. By imposing the higher duty sooner, the central planners in Beijing hope to increase the nation’s domestic reserves and get prices down for local farmers.
The move will push up the date for a higher export duty by one month.
Even during the summer, sources speculated that China would not extend the current lower rate into January as it had in the past two years. By the end of summer, rumors of imposing a higher rate before the end of the year started to float.
By the time of the regional IFA meeting in Hanoi a couple of weeks ago the rumor was being taken as gospel, and buyers
of Chinese urea stepped up their search for vessels to pick up contracted tons.
Sources say the Chinese government will most likely allow buyers with urea already in bonded warehouses and contracts and vessels in hand by the end of this month to ship their product after the Dec. 1 deadline. One source said the grace period may most likely extend only until Dec. 15.
Reportedly, the traders who got contracts from STC/India in the last tender have been moving rapidly to secure their tons and vessels. Sources say there is no clause in the STC contract that allows the seller to declare a force majeure because the source country changes its export duty.
Speculation is that China will move the duty up to 110 percent in December. One trader, however, suggested Beijing may take a middling position for December and then move up to 110 percent in January.
Also circulating are reports that the export planners may do away with the smaller windows of export opportunity that occurred in the past two years.
Next year may only see June, July, and possibly October as months with lower export duties.
Indonesia: Sources report state-owned producers have about 250,000 mt to unload by the end of the year.
Reportedly, one producer was ready to issue a selling tender for 40,000 mt but quickly withdrew the offer.
A number of private deals have taken place since the last tender earlier this month.
Sources say the producers are anxious to make sure they do not get caught selling to only one or two countries.
One trader noted that if the producers relied only on the tenders for their sales, the end users would most likely end up being the U.S. or India. Dependence on these two buyers could, the trader noted, bring pressure to lower prices.
By making smaller sales to a number of regional buyers, the producers hope to keep the balance of power in negotiations on their side of the table.
Sources say the rising price of rice in the region, along with stronger demand for urea, could help the producers develop trades that involve importing cheaper rice in exchange for reasonably priced urea. One trader even suggested that barter deals with major rice producers, such as Vietnam, might be worked out.
Vietnam: The Vietnamese government announced last week that it would ban the export of all fertilizers until the end of the year, especially urea.
Area traders say the imposition of a ban is common place this time of year. And just as common are efforts by importers and traders to get around the ban.
One way importers get around government edicts such as the most recent one is to not report the full amount of any imports.
If a local buyer then comes asking for urea, the holder can either get a higher price by “discovering” some excess tons, or he can re-export the material to an off shore buyer for a nice profit.
Whatever happens, however, sources say it is clear Vietnam needs urea.
The Vietnam Fertilizer Association told state-run media that demand for the next six months will be about 500,000 mt. He added that domestic producers will only be able to satisfy about 60 percent of the need.
Sri Lanka: The government closed a tender for 60,000 mt of urea Nov. 12.
Only three companies offered material in the tender. Sources say the offers were submitted before the Black Sea and Middle East prices began their dramatic increases.
Results of the tender follow.
| Offering Company | Quantity (mt) | US$/mt FOB | US$/mt CFR | ||
| Sight | 180 days | 270 days | |||
| World Epsyzon | 60,000 | 360.00 | 410.00 | 415.00 | 479.50 |
| Valency | 12,000 | 434.31 | 469.87 | 477.78 | 481.24 |
| ETA | 36,000 | 440.00 | 464.97 | 472.97 | 479.97 |
| 24,000 | 435.00 | 459.97 | 472.97 | 479.97 |
NITROGEN SOLUTIONS
Eastern Cornbelt: UAN continued to be quoted at $10.50-$10.89/unit FOB terminals, depending on location and time of delivery. An Illinois source last week tagged the UAN-32 market solidly at the $340/st ($10.63/unit) FOB level to the dealer.
Western Cornbelt: UAN-32 remained at $325-$340/st ($10.16-$10.63/unit) FOB regional terminals for cash tons, with spring prepay reported in the $340-$350/st ($10.63-$10.94/unit) FOB range.
Northern Plains: Minnesota sources tagged the UAN market at $10.71-$10.94/unit FOB, depending on location and time of delivery, with the upper end quoted for spring prepay. Delivered UAN-28 was pegged at $320-$330/st ($11.43-$11.79/unit) in North Dakota, with the low for prompt tons and the upper end for spring prepay.
Northeast: Sources quoted the UAN-30 market at $295.50/st ($9.85/unit) FOB Baltimore for prepay tons pulled before March 2011, with monthly increases scheduled for shipments after that. Another contact quoted UAN-30 prepay in the $305-$310/st ($10.17-$10.33/unit) range for tons pulled by June 2011 and ordered by Dec. 15, 2010. Out of the E. Liverpool, Ohio, market, spring prepay UAN-28 was quoted at the $10.55/unit FOB mark.
Prompt UAN-32 tons out of terminals in upstate New York had reportedly firmed to the $11.00/unit FOB mark.
Eastern Canada: The UAN-28 market had firmed significantly, to $350-$355/mt ($12.50-$12.68/unit) FOB Ontario terminals. One source pegged the dealer market for UAN-32 at the $397/mt ($12.41/unit) mark last week.
AMMONIUM NITRATE
U.S.Gulf: Although prices remained unchanged last week at $300-$302/st FOB, it appeared the price may rise after the Thanksgiving Holiday or early December. Product has been offered for $320/st FOB for December.
Western Cornbelt: Ammonium nitrate was steady at $355-$365/st FOB in the region for any available tons, with the upper end quoted in the Iowa market.
Eastern Canada: Ammonium nitrate was pegged at $447-$470/mt FOB in Eastern Canada, depending on location. An Ontario source quoted the CAN-27 market last week at $440/st FOB in his trade area.
AMMONIUM SULFATE
Eastern Cornbelt: The granular ammonium sulfate market was steady at $250-$260/st FOB, with mid-grade sulfate referenced at $240/st FOB and $250/st rail-DEL.
Western Cornbelt: Granular ammoniums sulfate was unchanged at $250-$260/st FOB in the region.
Northern Plains: Granular ammonium sulfate had firmed to $250-$260/st FOB in the region. Effective Nov. 8, Honeywell’s granular ammonium sulfate postings moved up to $250/st FOB Roseport, Minn., with mid-grade moving to $240/st FOB Roseport. On a rail-delivered basis in Minnesota, Honeywell’s postings moved to $260/st for granular and $250/st for mid-grade ammonium sulfate.
Northeast: Granular ammonium sulfate pricing had reportedly moved up to $210-$220/st FOB and $230-$240/st DEL in the region.
Eastern Canada: Dealer reference prices for granular ammonium sulfate remained at a solid $320/mt FOB in Ontario.
PHOSPHATES
Central Florida: With winter just around the corner, prompt sales of phosphate from both producers and traders slid to a halt last week and some in the industry were already taking advantage of the Thanksgiving holiday, which will not start for another week.
Still, the Florida market was at least $10/st FOB higher than the export market, but producer inventories remained low, even as phosphate-processing plants were running full steam ahead. Much of what will be produced in the near future will still be needed to meet PhosChem’s contractual obligations with India.
With sulfur expected to be scarce during the next several months, Mosaic has bought and brought about 400,000 mt to Galveston for re-melting as insurance.
Phosphate from Central Florida was being used in the Eastern Cornbelt in preparation for spring planting. Even as corn prices slid back somewhat, the crop will still bring more than it has in the past couple of years, which was an inspiration to growers to maximize the use of their land.
Prices for phosphate from Central Florida fell back to a more normal relationship in comparison to the NOLA barge market. The difference last week was about $10/st FOB.
Mosaic made one or more prompt railcar sales of DAP at $550/st FOB, which came late in the week.
With no new prompt sales last week, the Central Florida DAP price range fell to $540-$550/st FOB from the previous week’s $560-$563/st FOB. Smaller lots from traders could cost $5-$10/st FOB more. CF hiked its price from $535/st FOB to $540/st FOB. Mosaic’s price was $550/st FOB. MAP was listed at a premium of $10/st FOB in comparison to DAP. PCS Sales was making sales at comparable prices to the market. Agrifos’ price for truck sales was $580/st FOB, and rail – if available – was $570/st FOB The company had no MAP available for sale. Agrifos was expected to have enough product to carry it through the first quarter of next year.
U.S. Gulf: The shades came down on the NOLA phosphate barge market last week after buyers went into hibernation until mid-December, when the prepay season was expected to begin.
Activity at terminals and warehouses in some areas was still brisk, as farmers were eager to put heavier applications on the ground to maximize their crop yields for next year. Terminal prices were in the $590-$630/st FOB range last week.
Corn prices dipped a bit last week on the futures board from $5.70/bushel for next month to $5.41/bushel and were $5.08/bushel for December 2011. Soybeans were also down from $12.80/bushel to $11.56/bushel. Wheat for July 2011 was $7.25/bushel late in the week. Although prices for grains were down from the previous week, they were still more than strong enough for farmers to make an investment in fertilizers.
The deafening quiet of the market last week came as no surprise. It was normal for this time of year. The north river markets were unable to receive barge shipments at this late date, because the river that far north was closed. Buyers in other areas had no real need to make a move. The next wave of buying will probably not begin until the middle of December, and those will be prepay for spring. Prompt sales will likely be few and far between for the next couple of months, said sources.
Traders said they had made offers to sell in the $550-$555/st FOB range last week, but found no takers at that price. The paper market posted a price of $545/st FOB, and a trader said he thought sales were possible in the $540s/st FOB range, but he declined to make offers at that price. A trader who was concerned about the falling market sold one NOLA DAP barge at $525/st FOB after finding no takers in the $550/st FOB range – or anything in the $540s/st FOB – and finally wound up taking a low-ball bid at $525/st FOB. That will be difficult to reproduce anytime soon.
Last week, the NOLA DAP barge price range was $550/st FOB based on offers to sell, down from the previous week’s range of $558-$560/st FOB. Prices will remain soft into midDecember. MAP, where available, was bringing a premium of about $10/st FOB for NOLA barges last week, but was $10-$20/st FOB higher at warehouses.
Eastern Cornbelt: DAP was unchanged at $615-$630/st FOB and in tight supply. MAP was pegged at $625-$645/st FOB, where available. 10-34-0 was quoted firmly in the $520-$525/st FOB range for very limited tons.
Western Cornbelt: The DAP market remained at $610-$620/st FOB most regional warehouses for available tons. MAP remained in extremely tight supply, with sources quoting the spot market at $640-$650/st FOB for fall tons, “if you can find them.”
The 10-34-0 market remained at a firm $520-$525/st FOB, if you could find any tons. “There are no sellers willing to price at this time,” according to one Iowa contact.
Northern Plains: DAP was quoted at $600-$620/st FOB in Minnesota, with MAP at the $624-$640/st FOB mark, where available. Out of North Dakota warehouses, the MAP market was pegged as high as $650-$660/st FOB last week.
Minnesota sources pegged the 10-34-0 market at $490-$520/st FOB, also up significantly from last report. A North Dakota source said the last delivered 10-34-0 price out of Brandon, Manitoba, was $535/st, but no tons were available from any shipping points there last week.
Northeast: MAP was pegged at $630-$650/st FOB regional warehouses, where available, with the low confirmed out of warehouses in western Pennsylvania. DAP was quoted at $615-$625/st FOB on a spot basis, with the low reported at E. Liverpool for January shipments.
10-34-0 pricing had firmed significantly, with sources quoting the market at $525/st FOB terminals in upstate New York. That price was up some $70/st from last report.
Eastern Canada: Fall potash, phosphate, and lime volumes were up significantly. With brisk movement on what most sources described as a big winter wheat crop, several sources said inventories were low. “Fall consumption has been very strong,” said one contact. “There have been some supply logistics issues. We’ve been hand-to-mouth for the latter part of the season.” He added that “the industry has some catch-up to do to get recharged for spring.”
Sources pegged the MAP market at $755-$770/mt FOB in the region, up some $60-$70/mt from last report. An Ontario source quoted DAP at the $765/mt FOB level in his trade area.
U.S. Export: PhosChem made a sale of 5,000/mt of DAP, which was for an undisclosed destination. That was the same price – $600/mt – that PhosChem received for another sale the previous week.
Export sales could get a boost now that the Federal Reserve has moved to reduce the value of the U.S. dollar, but inventories were already extremely low and the North American market was paying a premium to the export business. Tampa export was still $10/st FOB below the Central Florida price.
While the export market was expected to continue restrained in the near future, exports could get a bounce if China imposes its 110 percent levy on its own phosphate exports. The Chinese government had not announced a decision late last week.
The export DAP price range last week moved from $580-$600/mt FOB the previous week to a flat $600/mt FOB based on the two most recent sales, although they were few and were for small volumes.
Sri Lanka: The government closed a TSP tender for 24,000 mt Nov. 12. Delivery is slated for March 2011. The tally for the tender follows.
| Offering Company | Quantity (mt) | US$/mt FOB | US$/mt CFR | ||
| Sight | 180 days | 270 days | |||
| ETA | 2×12,000 | 451.00 | 475.97 | 488.97 | 493.97 |
| Helm | 2×12,000 | 475.00 | 510.00 | 524.75 | 534.50 |
| Valency | 12,000 | 516.90 | 551.90 | 559.18 | 566.18 |
| Muscat Overseas | 30,000 | 598.00 | 690.00 | 698.00 |
POTASH
Eastern Cornbelt: Potash was tagged at $510-$515/st FOB regional warehouses for any available tons.
Western Cornbelt: One source said potash summer fill shipments were finally starting to arrive in mid-November. Potash was pegged at a firm $510-$515/st FOB for very limited warehouse tons in the region, with delivered tons pegged as high as $525/st in western Iowa.
Northern Plains: Effective Nov. 4, Agrium’s red premium potash postings firmed to $510/st FOB North Dakota terminals at Colfax and Grand Forks; $515/st FOB Shakopee, Minn.; and $525/st rail-DEL in Minnesota and the Dakotas. Agrium also raised its potash prices at the mine on Nov. 4, with standard moving to $475/st and premium to $480/st FOB Vade, Sask.
Northeast: Sources said potash was still available on a spot basis for as low as $470/st FOB from resellers in western Pennsylvania last week, but others said any available tons from producers had firmed to levels north of $500/st FOB. On a rail-delivered basis, sources quoted the market at $520/st.
Effective Nov. 4, Agrium’s red premium potash postings firmed to $530/st rail-DEL in Pennsylvania, West Virginia, Maryland, Delaware, New York, New Jersey, Connecticut, Massachusetts, Rhode Island, Vermont, New Hampshire, and Maine.
Eastern Canada: Potash pricing had reportedly firmed to $590-$600/mt FOB at regional warehouses, depending on grade and location, with the low quoted by Ontario sources for 60 percent red granular potash and the upper end for 62 percent white granular.
The K-Mag market was tagged at $385-$401/st FOB in Ontario. Sulfate of potash (SOP) was quoted by Ontario sources at $645-$660/mt FOB.
Sri Lanka: The government closed a 24,000 mt MOP tender Nov. 12. Product is to be delivered by March 2011. Tender results follow.
| Offering Company | Quantity (mt) | US$/mt FOB | US$/mt CFR | ||
| Sight | 180 days | 270 days | |||
| ETA | 2×12,000 | 424.00 | 438.97 | 446.97 | 454.97 |
| Toepfer | 24,000 | 425.00 | 470.00 | 480.20 | 486.00 |
| Dragon Asia | 24,000 | 417.00 | 475.00 | 484.00 | 492.00 |
SULFUR
Tampa: Sulfur continued to be in strong demand from the phosphate industry, as well as metals and paint producers, tire manufacturers, and the chemical industry. All of that demand should also translate into a growing economy, which in turn will increase the demand for even more sulfur.
With demand high and supply low and likely to shrink during the winter months, suppliers were having a difficult time making arrangements for the coming year. Sources said Shell in Canada will have greater production next year and that oil-sands producer Syncrude will sell into the U.S., rather than blocking, both of which were positive developments for the customers in this country.
Mosaic has taken out insurance against the sulfur shortage and shipped about 400,000 mt to Galveston for re-melting and use at its phosphate plants.
Refinery rates bumped up a little last week – about 1.6 percent – to 84 percent from 82.4 percent of capacity in comparison to the previous week, according to the DOE. However, winter is the time of year when refineries perform turnarounds, and that will not help the situation.
Vancouver: Exporters in Vancouver were making more sales of prill sulfur for re-melting in the U.S. market, a source said. Any export tariff increase of 110 percent by China for phosphate was a serious concern for Canadian sulfur suppliers, while the opposite was true for the U. S. phosphate industry.
MARKET NOTES
Pakistan: The country’s largest province – Punjab, which is a large urea consumer – has urged the Federal Minister of Petroleum and Natural Resources, Syed Naveed Qamar, to expedite the government’s proposal for LNG imports to meet the energy demands of the industrial sector.
Bangladesh: The country’s urea industry, which has been hit due to short supply of natural gas to their plants, welcomed their government’s approval for setting up eight power plants, with a total capacity of 1,283 MW.
The Week in Fertilizer Stocks
| Producer | Symbol | Price | Week Ago | Year Ago |
| Agrium | AGU | 80.46 | 84.56 | 56.90 |
| CF Industries | CF | 120.25 | 127.75 | 86.29 |
| Intrepid Potash | IPI | 30.80 | 32.61 | 28.95 |
| Mosaic | MOS | 69.34 | 73.86 | 54.44 |
| PotashCorp | POT | 140.32 | 142.00 | 113.79 |
| Terra Nitrogen | TNH | 105.53 | 114.10 | 105.18 |
| Distribution/Retail | ||||
| Andersons Inc. | ANDE | 33.78 | 34.99 | 27.35 |
| Deere & Co. | DE | 77.28 | 78.79 | 51.46 |
| Scotts | SMG | 51.41 | 49.87 | 41.42 |
SPOT BARGE PRICES
PotashCorp amends complaint against BHP, says internal documents show misleading statements
PotashCorp filed an amended complaint for injunctive and other relief against BHP Billiton, citing internal documents that support its case that BHP made materially misleading statements and omissions in connection with its hostile takeover attempt of PotashCorp. PotashCorp asked that BHP’s tender offer be enjoined from closing on November 18, 2010.
PotashCorp provides new information in four categories: what it calls BHP’s false and misleading information about its intention to build the Jansen potash mine, which adversely impacted PotashCorp’s share price; BHP’s information about its plans for PotashCorp’s businesses; BHP’s information about the background of the offer; and BHP’s statements about the nature, condition, and uncertainties in the tender offer.
As early as 2006, PotashCorp says BHP current CEO Marius Kloppers and current Chief Commercial Officer Alberto Calderon recommended that BHP buy PotashCorp at a price of $13 billion, but the proposal was rejected by then BHP CEO Chip Goodyear. However, according to the filing, BHP did engage third parties to perform various assessments of PotashCorp and internal documents raised the question of whether “it is better to build or/and buy [PCS] or other established capacity in Canada.” BHP documents also said Kloppers instructed Calderon to “stalk [PCS] with intent.”
In 2009, BHP’s President, Diamonds and Specialty Products, Graham Kerr, in a “fireside chat” with the BHP board, said that an acquisition of PCS was “a logical choice to accelerate delivery of our strategic goals,” in light of the time and money needed to build a “Top 3 global player” in potash. According to the filing, BHP considered a bid for PotashCorp in 2009, but other factors intervened, as well as the need to develop a plan to sell PotashCorp’s nitrogen and phosphate assets. PotashCorp cited other internal documents indicating that it was BHP’s plan all along to shed those assets, with a presentation to the BHP board in March 2009 noting that “N&P assessed and not for us.”
By early 2010, the PotashCorp acquisition was deemed “Project Porcupine.”
PotashCorp argues that by March 2009, BHP had devised a plan to depress PotashCorp’s stock price through a series of actions. According to the filing, BHP’s executives realized that BHP had a “big advantage” because its “balance sheet means [it is] a major threat to the stability of the existing club of players.” BHP officials agreed that it not contact PotashCorp just yet, but “be very noisy about what [it has], [its] future plans and [its] disruptive influence on the current state of affairs.”
Thereafter, according to the filing, it appeared that BHP touted the Jansen project and the impact that an 8 million mt/y mine, running flat out, would have on the potash market. BHP inroads into the potash industry Anglo American, Athabasca, etc. were timed to coincide with positive news to be released by PotashCorp. PotashCorp noted that when its share price hit an all-time high on June 23, 2008, Kloppers forecasted that BHP could invest billions in potash over the next decades.
PotashCorp pointed to several analysts’ opinions that detailed the perceived impact of BHP’s announcements on PotashCorp stock.
PotashCorp also pointed to documents that suggest the 8 million mt/y Jansen pronouncements were simply a ruse to degrade PotashCorp’s stock. It noted that BHP did not waste a chance to tout the project, while internally downplaying the project. While BHP announced $240 million for capital expenditures on the project on Jan. 20, 2010, PotashCorp said BHP failed to disclose that Kerr “had instructed the Jansen project team to freeze work on the go forward case and review the alternative phasing options for Jansen” in light of the “significant increase in capital estimates … to complete an 8 million mt per annum facility.” In February, 2010, the filing says, Kloppers instructed Kerr and Chief Executive Non-Ferrous Andrew Mackenzie to tell the development team that “if you build everything you want up front – we will not build anything at all.” The filings said Kerr reported that Kloppers wanted to do no more than a 2 million mt mine and to do “baby steps,” and that Kloppers told Kerr that “[a]t this stage, he could not imagine the GMC/Board approving a capital request greater than (redacted) for a new asset in a new industry” and thus “for the first investment” BHP was not going to do more than put “a toe in the water.”
By July 27, 2010, the filing said Kloppers saw the scaleddown mine as offering little chance for approval. “There is little doubt in my mind that we will not get this project over the line as envisaged at the moment. I want to be very clear on this element – lest there is any misunderstanding later. Simply put – I do not see how we take the step on the sinking of the shaft based on what we know today (even in a non-[PCS] world).” He then warned Mackenzie that “[e]ither the team makes a very dramatic step change or they get shut down in due course. That is the simple brutal truth.”
Still, BHP continued to tout the Jansen project. However, by October 2010, Jansen was not put forward for consideration by the BHP board though Kerr had argued that it should be as it would help with showing that “Jansen is not a smokescreen.” PotashCorp argues that it is unclear when, if ever, the project will go forward.
PotashCorp also reiterated BHP’s mixed signals on Canpotex Ltd., noting the concurrence of Saskatchewan Energy and Resources Minister Bill Boyd, who on Oct. 4, 2010, was quoted as saying, “The CEO [Kloppers], to be frank, he’s been a little bit all over the place. At one point in time they were talking about a completely outside of Canpotex model, then they said they would consider it, now they’re saying they like to quote unquote, ‘Stand before the customer.’ ”
PHI 3Q earnings up; November turnaround expected to bring normal operating rates
Phosphate Holdings Inc. (PHI), which owns Mississippi Phosphates Corp., reported net income of $2.5 million ($.30 per diluted share of common stock) for the third quarter ending Sept. 30, 2010, compared to the year-ago earnings of $700,000 ($.09 per diluted share of common stock).
PHI CEO Robert Jones told analysts Nov. 11 that absent mechanical problems at its Pascagoula plant, EBITDA should have been $13 million instead of the $7.3 million that was achieved for the quarter. Year-ago EBITDA was $3.8 million. In the third quarters of 2010 and 2009, EBITDA was favorably impacted by litigation settlements, net of related costs, of $800,000 and $3 million, respectively.
Miss Phos began a $6.5 million turnaround Nov. 1 to take care of all known mechanical issues, according to Jones. All problems are expected to be fixed by the end of November, with the facility to run at normal operating rates starting in December. After the turnaround, Jones expects the plant to produce 2,000 st/d of DAP. Work will be done on both sulfuric acid plants, the DAP plant, and the phosphoric acid plant, which will get a new digester. Most of the downtime is in the sulfuric acid plants, with DAP already complete, according to Jones.
“We are pleased to report positive third-quarter results despite the significant carry-over impact of operational issues, which first arose during our second fiscal quarter,” said Jones. “In the face of steadily deteriorating instantaneous production rates, our operating and maintenance personnel at Pascagoula did an admirable job of keeping our sulfuric acid plants online. We also did a good job of controlling overall spending for the quarter. As a result of these efforts and improving market fundamentals, we were able to bounce back from a very difficult second fiscal quarter of 2010. Our third-quarter EBITDA of $7.3 million represents an increase of nearly $12 million over our second-quarter 2010 EBITDA level of negative $4.6 million.”
The November turnaround will impact production. “For the quarter, we are projecting DAP production of approximately 140,000 to 150,000 st,” said Jones.
“Shifting to the near-to-intermediate-term industry outlook,” Jones added, “the balance of 2010 and the first half of 2011 look promising. Since mid-summer, grain and other crop prices have increased substantially, driven by strong demand and lower expectations for the 2010 global harvest. This has created favorable expectations for crop economics, planted acreage, and fertilizer demand. During the fourth quarter to date, DAP prices have remained firm domestically, while international prices have strengthened. Given the current tight phosphate supply/demand balance in the U.S., the outlook for the 2011 spring planting season is positive.”
PHI said domestic sales have been at a premium, as much as $40/st. As a result this has attracted imports, and the company expects them to continue until the two prices converge. As for raw materials costs, PHI expects Tampa ammonia prices may see some softening in December, by as much as $25-$40/mt, whereas sulfur supplies remain tight, with suppliers again expected to seek higher prices in the first quarter. PHI said it will have sufficient sulfuric acid available to it through next June. The company is also confident of its phosphate rock supply, though it notes that changing market conditions may change that pricing.
As of Nov. 11, PHI said it has $3.5 million available under its revolver and $2.5 million in cash.
Total net sales for the third quarter of 2010 were $70.4 million, a 67 percent increase from total net sales of $42.1 million for the third quarter of 2009. The average sales price of DAP during the quarter was $455/st, a 70 percent increase from the prior-year period average sales price of $267/st. During the third quarter, the company sold 152,500 st of DAP, all into the domestic market.
The company recorded operating income of $3.9 million for the third quarter of 2010, compared to operating income of $900,000 for the prior-year period.
For the third quarter, the company’s sulfuric acid production was approximately 187,000 st, or 77 percent of originally planned levels. Reduced sulfuric acid production had a corresponding unfavorable impact on DAP production, which was approximately 156,000 st.
PHI reported nine-month net income of $211,000 ($.03 share) on sales of $192.5 million, compared to a year-ago loss of $10.7 million ($1.40 per share) on sales of $139.1 million. Nine-month operating income and EBITDA were $1 million and $9.9 million, versus the year-ago losses of $17.3 million and $9 million.
CF upbeat on near-term nitrogen, domestic phosphates, long-term DEF
CF Industries Holdings Inc. President and CEO Stephen Wilson told analysts Nov. 5 that CF will continue with the diesel emissions fluids (DEF) business, which it acquired when it bought Terra Industries Inc. earlier this year. He said the business is continuing the way that the Terra Environmental Technologies team had planned.
Soon after buying Terra CF had said it would review the DEF business, leading some industry watchers to speculate that CF might opt to shed the fledgling unit perhaps to Yara International ASA, the dominant international player in the DEF industry.
Wilson noted that the Woodward, Okla. 500,000 st/y UAN expansion, which is expected to come online in the fourth quarter, will also include modifications that will add 30 million gallons of DEF capacity. “We expect to embark on projects at other facilities in the future,” said Wilson. “Our customers know they can count on us for reliable supply and for leadership in this growing market.
“This is a business that has tremendous upside potential, but it is a very new business that we are nurturing,” said Wilson. Putting it in perspective, Wilson said for the first nine months of 2010, even though sales of DEF have moved up rapidly, it has only consumed the equivalent of 5,000 tons of granular urea. “And if you look at our release in the third quarter (GM Nov. 8, p. 12), we shipped 713,000 st of granular urea in the third quarter alone, and almost 2.2 million tons in the first nine months of this year.” So as for CF’s product mix at this point, Wilson said DEF is insignificant.
Wilson outlined several positives for the nitrogen market. Near-term, he said colder temperatures have allowed agricultural ammonia use to get underway earlier than normal in the upper Midwest. He is also upbeat about the U.S. Environmental Protection Agency’s approval of E15 ethanol blends for model year 2007 and newer cars, and expects a decision on 2001-2006 cars this month. For the 2011 fertilizer year, Wilson is projecting increased plant acreage and higher nutrient application rates to lift nitrogen demand to over 13 million nutrient tons, the second highest on record.
Despite CF’s earlier announcement that it has cut some industrial ammonia contracts, CF Vice President of Sales and Marketing Bert Frost told analysts that it is still a valuable part of CF’s mix. “We’re working to improve that section, whether it’s through pricing or logistics that improve our returns, but we do need to utilize those customers for our system.”
“We manage our book of business on a dynamic basis, and there will be times when industrial is very attractive to us, and times when it’s not so attractive,” added Wilson. “Our objective with all of our products is we aim to put it to the highest and best use. So we don’t have an aversion to industrial business. We’re not totally wed to ag business. We want the highest margin business that we can make on a sustained basis.”
Wilson said the company is producing all the ammonia that it can produce. Upgrading in recent years has been a no-brainer, he said. “We get value on our upgrading and we get value from the ammonia that we sell as direct application.”
Wilson said it now has more options for ammonia coming out of legacy Terra locations. “Terra did not have the extensive ammonia distribution system that legacy CF had and limited storage at the plant sites. And so now, we have the flexibility to move that ammonia in more directions and for a greater variety of uses.”
Industry sources noted that CF was simply making less margins on industrial contracts and that it is much more profitable right now to be selling spot ammonia for direct application.
As for other parts of its business, CF said its GrowHow venture in the United Kingdom is performing well and is benefiting from an extremely strong nitrate market. It said the Trinidad ammonia plant has become a great partner for its CF phosphate operations in Florida.
As for phosphate, Wilson said a strong domestic DAP market will make it less likely to export in the near term. On phosphates, the company said it is closely watching for any changes that China might make to export duties, as well as reported delays of Saudi Arabia’s Ma’aden project to late 2011 or 2012.
CF sees hurdles for Peruvian project;
Orica seeks to partner with CF
CF’s proposed nitrogen project in Peru is still awaiting the resolution of major infrastructure issues, i.e., the building of natural gas pipelines, which are a prerequisite for the facility. While Wilson said the project is still “interesting and intriguing,” he said CF is currently spending the minimum amount necessary on it right now.
Ironically, Orica Ltd. Managing Director and CEO Graeme Liebelt is a little more upbeat on the project, telling analysts last week that Orica is seeking to partner with CF. He said CF wants to pursue the project and that they are very enthusiastic. Liebelt went on to say that CF is preoccupied with its acquisition of Terra Industries Inc. and has probably pushed back its plans by three to six months. Liebelt said the project still looks viable and Orica is highly interested. “We think we’ve got the best project for an expansion in Latin America presently, and so we’re pursuing it with all our energy.”
CF said Nov. 12 that it had no further comment on Peru. In the past, CF was Orica’s competitor for a gas contract so as to develop a nitrogen plant (GM Nov. 26, 2007). CF won. Orica’s partner at that time was Terra Industries Inc., which CF has since acquired. Back in 2007, had Orica and Terra won they were looking toward a $1 billion nitrogen plant at the southern port of Pisco, perhaps improving the construction timeline and costs by bringing in idled plants from Terra’s Donaldsonville complex.
Back in 2009, CF gave rough cost estimates for the project in San Juan de Marcona of between $1.5-$2 billion, with further study expected to produce a more precise estimate (GM Oct. 19, 2009). The expected capacity was 910,000 mt/y of anhydrous ammonia and 1.3 million mt/y of urea. Most of the ammonia would be used to produce the urea, but a smaller portion would be available for sale to third parties.