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Orica ready to start ammonia production

Ammonia, Breaking Industry News

Orica said Feb. 5 that it is now ready to resume the restart of its Kooragang Island ammonia plant after repairing one of the plant’s compressors. Earlier the company had said it might be several weeks before production resumed.

Orica’s CEO Graeme Liebelt said the safety of the community and employees was paramount during the restart. “The restart of a plant such as this is complicated and must be done cautiously. We will not compromise on this restart and if we need to again pause in order to assure its safety, we will do so. Our products are crucial to industries such as mining and electricity generation in New South Wales, and we are an important local employer. We look forward to the Kooragang Island plant returning to full production.”

Site Manager Sean Winstone said the performance of one of the plant’s compressors has been addressed. “Currently, we expect the restart of the plant will resume on Tuesday. Residents may see some steam coming from the plant on Monday as we warm up the plant and conduct standard equipment checks. Some of the most complex steps involved in restarting the plant, particularly the commissioning of the High Temperature Shift Catalyst, have already taken place. We will continue the restart at a cautious pace with a focus on safety,”

With the resumption of the restart, there remains the chance that gas from the vent stacks may ignite depending on atmospheric conditions. There is no risk to the community, the environment or the plant from gas flares from the vents. The byproduct of the gas flares is water.

The ammonia plant shut down last fall due to a leak. Earlier attempts to bring it back up were halted due to production problems. In the meantime, Orica has had to import ammonia for its ammonium nitrate plant.

CVR adopts stockholder rights plan

Breaking Industry News

CVR Energy Inc. announced late in the day Jan. 13 that its board of directors has adopted a Stockholder Rights Plan with a 15 percent threshold and declared, in conjunction with that plan, a dividend of one preferred stock purchase right for each current share of the company’s outstanding common stock, which will be distributed to stockholders of record on Jan. 23, 2012. CVR owns a major stake in CVR Partners LP, which owns a nitrogen plant in Coffeyville, Kan. Stockholders with existing positions above 15 percent will be grandfathered as discussed below.

The news comes soon after billionaire investor Carl Icahn increased his stake in CVR to over 10 percent (GM Jan. 16, 2012).

CVR said the plan is intended to ensure that all stockholders receive fair and equal treatment and maintain the ability to realize the long-term value of their investment in the company. It will also simultaneously protect against inadequate or coercive takeover attempts, or other tactics that might be used to gain control of the company without negotiating with the board or paying all stockholders a fair price for their shares. The board said the plan is not designed to prevent a takeover or an offer to acquire the company, but rather to allow the board adequate time to consider any and all alternatives that are presented.

The rights initially will trade with the company’s common shares, and will only become exercisable if a person or group acquires beneficial ownership in the company of 15 percent or more of its common stock in a transaction not approved by CVR Energy’s board. Any person or group holding existing positions of 15 percent or more at the time of the announcement of the plan will be grandfathered and exempt from the plan. However, any additional acquisitions of common shares (other than pursuant to a dividend or distribution paid or made by the company or pursuant to a stock split or reclassification) by such person or group will cause the rights to become exercisable. Under the plan, certain synthetic interests in the company’s common shares created by derivative positions — whether or not such interests are considered to be beneficial ownership of shares of common stock or are reportable for purposes of Regulation 13D of the Securities Exchange Act — are treated as beneficial ownership of the number of shares of the company’s common stock equivalent to the economic exposure created by the derivative position.

If the rights become exercisable, all rights holders (other than the person or group triggering the rights) will be entitled to purchase the company’s common stock at a discount. Rights held by the person or group triggering the rights will become void and will not be exercisable.

The plan will expire on Dec. 31, 2012, and may be redeemed at any time by the board prior to that date. The distribution of the rights is not taxable to stockholders. Additional details on the Rights plan will be contained in a Form 8-K to be filed with the U.S. Securities and Exchange Commission.

CHS 1Q earnings up 106 percent; wholesale fertilizer revenues up, volumes down

Featured, News

CHS Inc. reported a 106 percent increase in net income attributable to CHS for the first quarter ending Nov. 30, 2011. Net income was $416.2 million on revenues of $9.7 billion, versus the year-ago $201.7 million and revenues of $8.1 billion.

While all major CHS segments were profitable, the positive results were led by the cooperative’s Energy segment, which reported income of $397.3 million, up from the year-ago $57.2 million.

The Ag Business segment – which includes grain and fertilizer – while profitable, saw a decrease in income, to $121.4 million on total revenues of $6.45 billion, compared to the year-ago $154.7 million on revenues of $5.81 billion. The Corporate/Other segment also saw a decline, with income of $12.2 million from the year-ago $19.3 million.

Within the Ag Business segment, the CHS wholesale crop nutrients business reported a quarter-over-quarter increase in earnings due to increased margins. Earnings from the unit’s wholesale fertilizer business were up $3 million from the year-ago quarter, with revenues up 18 percent, or nearly $100 million, but volumes down 10 percent. First-quarter wholesale fertilizer revenues were $658.8 million, up from the year-ago $558.9 million. Increased revenues were attributed to average higher fertilizer prices, which were up $123/st, or 31 percent over the year-ago quarter. Despite the increase, CHS did not see much movement in prices throughout the quarter, saying as of Nov. 30, 2011, prices affecting its wholesale and country operations retail business generally remained flat or decreased up to 5 percent, depending on specific products, compared to prices on Aug. 31, 2011.

Wholesale crop nutrient cost of goods sold was $627.8 million for the quarter, up from the year-ago $531.5 million. This would suggest wholesale income of $31 million for the recent quarter, up from the year-ago $27.4 million. CHS does not specify the exact amount of these earnings, only the amount of the increase – $3 million.

Lower fertilizer volumes were reflected by CHS purchase and sales contracts. As of Nov. 30, 2011, the company had 829,000 st in purchase contracts and 1.12 million st in sales contracts, compared to the year-ago 1.9 million st and 1.79 million st, respectively. As of Nov. 30, 2011, crop nutrient inventories were valued at $395.5 million versus the year-ago $164.3 million, which would in part reflect higher prices.

CHS said country operations earnings decreased $9.9 million versus the year-ago quarter.

Howard announces new North Carolina facility

Aurora, NC, Central Florida, Featured, News

Howard Fertilizer and Chemical Co. Inc., headquartered in Orlando, Fla., announced on Jan. 10 that it will open a new location this month near Charlotte, N.C. The company said the new facility expands its footprint along the East Coast and strengthens its coverage of key turf markets in the Southeast.

The new facility is a 10,000 square foot distribution warehouse that will handle both liquid and dry fertilizers, seed, and chemicals for the turf and ornamental markets. According to company sources, the facility will have three to five employees. The company has not yet announced who will manage the new site.

The North Carolina facility is the second expansion announced by Howard in as many months. In November 2011, the company reported that it is constructing a new dry fertilizer plant in Lake Placid, Fla. (GM Nov. 7, 2011). Operations in Lake Placid are expected to begin in September 2012, and projected first-year production at the plant is estimated at 100,000 tons of dry blended fertilizer. A liquid storage depot will also be located on the property, as will agricultural chemicals stored in additional space at the site.

Howard’s current Orlando plant will close when the Lake Placid construction is complete, but its corporate headquarters will remain in Orlando. Howard’s turf and ornamental plant in Groveland, Fla., will continue operations. The move from Orlando to Lake Placid puts the company’s dry fertilizer plant in “the heart of Florida’s citrus, sugar cane, and vegetable farmlands,” reported President and CEO Robert Howard Jr. in November.

Also last week, Howard announced that Mike Gregory has joined the company’s Southeast sales team as a golf and lawn care sales representative in North and South Carolina. Gregory has some 30 years of experience in the industry. The Southeast sales team’s core responsibilities include sales of chemicals, seed, fertilizer, and other supplies; their service areas include Florida, Georgia, Alabama, Tennessee, South Carolina, and North Carolina.

Family owned and operated for nearly 80 years, Howard specializes in blending custom fertilizers for the agriculture, commercial pest control, lawn care, sod grower, golf course, and ornamental markets. The company posted record fiscal year sales of $150 million in 2009.

In addition to its production facilities in Orlando and Groveland, the company also produces custom-blend liquid fertilizers at Florida locations in Immokalee, Quincy, and Orlando. The Orlando plant includes a separate organic certified production line, providing bulk and bagged products for agricultural and turf customers.

The new Charlotte facility joins a roster of Howard’s other distribution facilities, which are located in Florida sites at Orlando, Bowling Green, Homestead, Immokalee, and Delray Beach, and in Georgia at Alpharetta.

AMMONIA

Ammonia, Asia Pacific, Black Sea, Eastern Cornbelt, Market Watch, Middle East, Southeast, Southern Plains, Tampa, U.S. Gulf, Western Cornbelt

U.S. Gulf/Tampa: No new sales were reported in the markets last week, despite speculation that extra tons in the area should result in new spot sales. Instead, they may have resulted in trades or contract business. Mosaic has extra tonnage now that it has taken down phosphate capacity at Faustina, and the OCI North America plant officially began production at the Beaumont, Texas, facility in late November.

In the meantime, ammonia producers continued to enjoy ever-decreasing natural gas prices. The Henry Hub NYMEX natural gas price continued to plummet last week. It closed Thursday at $2.697/mmBtu, which was the lowest price for a prompt month in 28 months.

Eastern Cornbelt: CF reposted anhydrous ammonia in the $650-$660/st FOB range in the Illinois and Indiana markets in early January. Sources quoted dealer pricing out of some regional terminals at the $670/st FOB mark for prompt tons last week.

Western Cornbelt: A long-overdue storm system blanketed much of the Western Cornbelt region with snow last week, and also sent temperatures plummeting from record highs to single-digit lows in the space of 12 hours. The wintry weather slowed fertilizer movement to the field, including some early applications of ammonia on rowcrop ground.

Ammonia pricing was down from last report, with sources quoting the market at $610-$650/st FOB regional terminals to the dealer. The lower numbers were reported out of Nebraska terminals, with the upper end quoted in the Missouri market. Ammonia pricing out of Iowa terminals was generally tagged in the $620-$640/st FOB range, depending on location and supplier.

Southern Plains: Several sources in the Southern Plains market reported a flurry of prepay activity since early January, as well as some steady preplant ammonia applications on corn ground in Kansas. One contact said the brisk business was kicked off when growers finally received their insurance checks from last year’s drought-damaged crops. “We didn’t get anything done in November and December, but this has been by far the busiest January we’ve ever had,” said one source.

The ammonia market was tagged at $580-$610/st FOB in the region, with the lower numbers out of some regional production points. Sources reported long lines at some terminals in early January, with reports that truck availability is getting tight.

South Central: Ammonia pricing out of South Central regional terminals was pegged in the $645-$655/st FOB range, with the upper end quoted for spring prepay tons out of the Memphis market.

Middle East: Once again, Sabic closed a deal that lowered the price of ammonia in the region.

As last year ended, Sabic sold product to Transammonia for India that dropped the public price more than $100/mt. Now, sources report another Sabic deal that takes the price even lower. Sabic sent 15,000 mt to a U.S. West Coast buyer for a reported price of $555/mt CFR. Once freight and handling are backed off, Asian sources peg the netback at $395/mt FOB.

Sources said Sabic was desperate to move material because of lower demand in Asia and India. Adding to the Sabic woes was the opening of Qafco 5 and the multitude of contracts signed to take advantage of the new ammonia output. Asian players noted that a lot of the production – but not all – of the Qafco facility will be dedicated to contracts rather than the spot market.

The Sabic deal drops the regional market to $395/mt FOB. Some sources said they think the market will continue to fall for a few more weeks. Others, however, see this latest deal as the bottom for the region. This latter group says the price could stabilize in the $390s/mt FOB and slowly climb back up by mid- to late-February.

UREA

Black Sea, Eastern Cornbelt, Market Watch, Middle East, Pakistan, Southeast, Southern Plains, U.S. Gulf, Urea, Western Cornbelt

U.S. Gulf: The granular urea market was building up some steam last week until the USDA numbers came out Thursday morning. By then, sources said prices had climbed to $413-$417/st FOB. However, they soon worked their way back down. What became $407-$410/st FOB was soon being called $400-$405/st FOB, with predictions that the next round of sales would be $395/st FOB – if not below.

In the meantime, the last done business in the thinly traded prill market was called $425/st FOB.

Eastern Cornbelt: Granular urea pricing in the Eastern Cornbelt was generally quoted in the $445-$450/st range FOB regional terminals last week.

Western Cornbelt: Granular urea continued to be quoted in the $435-$445/st range FOB regional terminals, with the low reported in southern Missouri and the upper end in the Iowa market.

Southern Plains: Granular urea pricing in the Southern Plains region was tagged in the $440-$450/st FOB range, with the low called the common dealer price out of the Tulsa market last week.

South Central: South Central sources pegged the granular urea market at $430-$445/st FOB most regional terminals, reflecting a slight increase from last report.

Southeast: The granular urea market was quoted at $435-$440/st FOB port terminals in the region. Those numbers were down from last report, but sources noted that the regional terminal market had not responded readily to the ups and down of the NOLA barge market in recent weeks.

Pakistan: The Jan. 9 purchasing tender did not go as planned. And for a while it looked as if the tender would be pushed back until the end of the month.

There were rumors as the year started that TCP would delay opening the tender until the end of the month. Those rumors led to concern that the global urea price would halt its tentative rebound. In the end, according to sources, the need for urea overruled any efforts to try to force the price down with a delay.

Pakistan needed 300,000 mt to be purchased as soon as possible. TCP had hoped to secure the full tonnage in the tender. Unfortunately for TCP, it was only able to pick up 50,000 mt.

Transfert had the lowest offer of $417.50/mt CFR. When the other companies were invited to match the Transfert price, they demurred. The big issue seemed to be the price gap between Transfert and the next lowest offer.

CHS and Koch each offered tons at about $432/mt CFR. The $15/mt difference was too large to close.

Once it was clear none of the other companies would match the Transfert award price, TCP called a follow-up tender to close Jan. 19.

The tally from the January 9 tender is shown below.

ART880989.jpg

The estimated netback on the Transfert deal showed softer markets in the Black Sea and Arab Gulf. Sources called the equivalent Arab Gulf price at $400/mt FOB. The Yuzhnyy/Black Sea equivalent was pegged at $365/mt FOB.

The new tender calls for a minimum of 50,000 mt per offer, but does not specify the full quantity desired.

Pakistan’s production of urea for the January to November 2011 period has been recorded at 4.5 million mt, down 4 percent from the year-ago period despite capacity enhancement of some 1.15 million mt (Engro and Fatima plants).

The Karachi-based brokerage and research house InvestCap attributed the fall in urea production to the acute shortage of gas to the urea factories, which has brought operating capacity utilization down to 82 percent. However, consumption of urea remained passive during the period and was recorded at 5.2 million mt, down 5 percent from the year-ago period.

NITROGEN SOLUTIONS

Eastern Cornbelt, Market Watch, Southeast, Southern Plains, U.S. Gulf, UAN, Western Cornbelt

U.S. Gulf: The market began the week with most players calling prices still in the $280-$290/st FOB ($8.75-$9.06/unit) range. However, as with urea, by mid-day Thursday players were also seeing lower numbers in the UAN market, saying it was down to at least $270/st FOB ($8.44/unit).

Eastern Cornbelt: UAN-28 continued to be quoted in the $294-$305/st ($10.50-$10.89/unit) range FOB Ohio terminals last week. Rail-delivered UAN-32 was confirmed at $335-$355/st ($10.47-$11.09/unit) in the Indiana, Ohio, and Michigan markets.

Western Cornbelt: Sources in the Western Cornbelt quoted the dealer market for UAN-32 in the $10.50-$10.78/unit range FOB regional terminals at midweek. One Iowa contact pegged the common dealer price from prompt tons at the $10.60/unit FOB mark at midweek.

Southern Plains: The UAN-32 market in the Southern Plains was quoted at $340-$350/st FOB ($10.63-$10.94/unit) regional terminals in early January.

South Central: Spot pricing for UAN-32 was quoted in the $320-$340/st ($10.00-$10.63/unit) range FOB South Central terminals last week, down again from last report.

Southeast: Several sources quoted the UAN market solidly at the $10.00/unit level FOB Norfolk, Va., and Wilmington, N.C., last week, but others maintained that UAN-32 tons of the Wilmington market could be had for as low as $305/st ($9.53/unit) from some suppliers. Those numbers were down significantly from mid-December pricing levels in the region.

AMMONIUM NITRATE

Ammonium Nitrate, Market Watch, Southeast, Southern Plains, U.S. Gulf, Western Cornbelt

U.S. Gulf: While sellers were seeking $350-$360/st FOB, sources said the most recent business was in the $330-$345/st FOB range.

Western Cornbelt: Ammonium nitrate was unchanged at $390-$400/st FOB Western Cornbelt terminals.

Southern Plains: Ammonium nitrate pricing was tagged in the $390-$400/st FOB range, with the low end reported out of the Tulsa market last week.

South Central: Ammonium nitrate pricing was up slightly from last report. Sources tagged the market at $380-$385/st FOB regional terminals, with the low reported out of Memphis.

Southeast: The ammonium nitrate market had reportedly ticked up to $390-$395/st FOB Tampa, with rail-delivered nitrate tons quoted at the $400/st mark in the Carolinas.

AMMONIUM SULFATE

Ammonium Sulfate, Eastern Cornbelt, Market Watch, Southeast, Southern Plains, Western Cornbelt

Eastern Cornbelt: Granular ammonium sulfate was steady at $365-$375/st FOB Eastern Cornbelt terminals.

Effective Jan. 13, Honeywell announced new ammonium sulfate postings for the Midwest. List prices for granular ammonium sulfate moved on that date to $385/st FOB Roseport, Minn., Amherst Junction and Prairie du Chien, Wisc., Dubuque, Iowa, Danville, Ill., and St. Louis, Mo.; and $390/st FOB Omaha, Neb. Midgrade ammonium sulfate postings from the company moved to $365/st FOB Red Rock, Minn., Byron, Ill., and Danville, and $370/st FOB Omaha.

Honeywell’s rail-delivered ammonium sulfate postings moved on Jan. 13 to $395/st for granular and $375/st for mid-grade in Minnesota, Wisconsin, Iowa, Illinois, Missouri, Mississippi, and Arkansas.

Western Cornbelt: Granular ammonium sulfate was pegged at $360-$375/st FOB in the Western Cornbelt region, with the low end of the range reported in southern Missouri on a spot basis. Effective Jan. 12, Agrium’s granular ammonium sulfate postings in the Northern Plains region moved to $410/st rail-DEL in North Dakota, Minnesota, and Wisconsin.

Southern Plains: Granular ammonium sulfate was unchanged at $315-$355/st FOB Texas shipping points, with the low FOB Freeport and the upper end FOB Littlefield and Plainview.

South Central: The granular ammonium sulfate market was steady at $345-$355/st FOB South Central terminals to the dealer.

Southeast: Granular ammonium sulfate was steady at $305-$315/st FOB Hopewell, Va., and Augusta, Ga. Delivered tons were tagged at $320-$340/st in the Southeast region, depending on location.

PHOSPHATES

Central Florida, Di-Ammonium Phosphate, Eastern Cornbelt, Market Watch, Mono-Ammonium Phosphate, Southeast, Southern Plains, U.S. Exports, U.S. Gulf, Western Cornbelt

Central Florida: Producers, but not traders, said they had a big uptick in railcar business last week.

Traders, however, were looking to the river system – where prices were lower – to meet the needs of their customers, rather than their normal method of buying in Central Florida. Instead of using railcars to move the product they were buying, most were relying on trucks.

The markets continued to be out of whack last week, with NOLA DAP/MAP barges cheaper than railcars from Florida. Late in the week, the difference was growing rapidly, with Central Florida as much as $30/st FOB higher than the river price. Central Florida should be about $25/st FOB lower than the river system.

The Central Florida DAP price range leveled out last week to a flat $480/st FOB from the previous week’s $480-$500/st FOB range. Very large buyers may be able to get additional discounts, although that area was murky.

Both Mosaic and CF Industries were posted at the $480/st FOB mark. MAP was listed at a $20/st premium to DAP by Mosaic in Central Florida, about the same difference as from traders. MAP continued to be in short supply. PCS Sales was selling at comparable prices to the market.

U.S. Gulf: Some traders who took positions a few weeks ago when prices were extremely low decided late last week to liquidate what they had purchased. As a result, they were selling their NOLA DAP barges far below what the market was bringing only a day earlier.

Early in the reporting period, deals were done as high as $490/st FOB, which was the high of the previous week’s range. The market then drifted south a little, at least in comparison to the final prices during the period. On Thursday morning, they began to plunge. "The market is in a panic," one source said.

Reasons for the sudden drop may have included USDA’s crop report, which showed higher crop yields and production, and a slowdown in business earlier in the week. In addition, NOLA phosphate barges purchased a few weeks ago at low prices came on the market.

Prices began to rise the previous week due to cutbacks in production, first by Phoschem and then by OCP and Phosagro. India, which was experiencing a drop in the value of the rupee, was reducing the amount it was buying for import – and that sent ripples through the phosphate world. If the producers make good on the cutbacks, more than 500,000 mt would be pulled from the system during the first quarter of the year.

Mosaic earlier was buying low-priced barges, which had the effect of reducing supply. Mosaic was not the only one buying at the low end of the range at the time, when prices were as low as $425/st FOB. Late last week, with the market relatively quiet, some of the other buyers of those barges sold for as much as $40/st FOB below the high for the week.

The NOLA DAP barge price range was quoted at $450-$490/st FOB, with the lowest prices sales coming at the end of the reporting period. The market has yo-yoed from a $425-$450/st FOB range three weeks ago to $440-$490/st FOB the following week.

Eastern Cornbelt: The regional DAP market was pegged at $510-$525/st FOB, up some $15-$20/st from the prior week. The Cincinnati DAP market was quoted at the $520/st FOB mark at midweek, while MAP was reported at $545/st FOB. The 10-34-0 market was pegged at $740-$750/st FOB in the region for limited tons.

One Ohio contact said spreaders were rolling steadily on frozen ground early in the week, but activity was stalled by wintry weather as the week advanced. A powerful winter storm dumped up to eight inches of snow in northern Illinois, and more than a foot in parts of northern Indiana and northern Ohio on Jan. 12-13. Snow accumulation in east-central Illinois was expected to total two to four inches, while only light snowfa