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Management Briefs – October 4, 2010

Management Briefs

Allana Potash Corp. has appointed Richard Lacroix, P.E., to the company’s board of directors. Lacroix, now retired, spent over almost 30 years with Potash Corp. of Saskatchewan, retiring as senior vice president of technical services. He holds a B.S. in Electrical Engineering from the University of Saskatchewan. Allana has granted Lacroix 100,000 stock options pursuant to the stock option plan of the company.

Lacroix replaces Rene Bharti, who tendered his resignation as a director.

Viterra Inc. has named James (Jim) Bell, LLM/MBA, as senior vice president, general counsel, and corporate secretary, effective Oct. 18, 2010. Viterra says he has over twenty years of significant international experience and that he will report directly to Viterra President and CEO Mayo Schmidt. He will be based in Calgary. Most recently Bell served as vice president, legal and associate general counsel, of Talisman Energy Inc., managing the legal function for International Operations West, which included overseeing transactions in the North Sea, Continental Europe, Africa, and South America. He also held senior leadership positions with Nova Corp.

Ostchem Group is pleased to announce the appointments of Ilya Motorygin and Victor Taratynkin to manage its fertilizer sales activities, effective Sept. 20, 2010. Motorygin has over 15 years of experience in international fertilizer trade spanning a range of products across the nitrogen, phosphates, and compound sectors. Taratynkin has over 20 years of experience in international fertilizer trading and has worked for Transammonia and Keytrade. Both Motorygin and Taratynkin will be based at Ostchem Group’s head office in Kiev, Ukraine. Motorygin’s contact information is telephone +380-44-586-4693; mobile +380-50-383-1979; and e-mail motorygin@fertchemy.com. Taratynkin can be reached via telephone at +380-44-586-4693; mobile +380-95-726-1107; and email taratynkin@fertchemy.com.

Market Watch

Ammonia, Ammonium Nitrate, Ammonium Sulfate, Bangladesh, Black Sea, California, Central Florida, China, Eastern Cornbelt, India, Indonesia, Market Watch, Middle East, Nitrogen Solutions, Pacific N.W., Pakistan, Phosphate, Potash, Sulfur, U.S. Exports, U.S. Gulf, Urea, Western Canada, Western Cornbelt

AMMONIA

U.S. Gulf: Yara has concluded October Tampa business with its major customers at $465/mt DEL, up some $40/mt from the $425/mt it achieved in September.

Eastern Cornbelt: The anhydrous ammonia market had reportedly firmed to a solid $675/st FOB regional terminals as the week advanced. One supplier reported taking limited orders in Illinois earlier in the week at $650/st FOB for fall and $675/st FOB for spring, but pulled those prices on Sept. 30, noting that some producers had also pulled their prompt and forward prices at all terminal locations last week.

Asked when the price escalation will plateau, one source said “so much hinges on how much gets moved this fall.” Tight supplies and expectation for heavy fall movement remain the clincher, however. “There’ll be outages everywhere, and people will have to pay up. There’s no way to avoid it,” he said. “It’s amazing what producers are bracing people for.”

Western Cornbelt: Sources said anhydrous ammonia pricing had firmed to $625-$650/st FOB regional terminals, up some $45-$50/st from the previous week. One source said the low end was doable for limited prompt tons early in the week, but that number was reportedly off the table as the week advanced.

Out of Oklahoma production points, sources said the ammonia market had firmed from $565/st FOB early in the week to $590-$600/st FOB as the week advanced.

California: Effective Sept. 30, Calamco moved its anhydrous ammonia posting up $50/st to $570/st truck-DEL in California, with aqua ammonia moving from $142/st to $155/st FOB. The increases were announced on Sept. 28, and buyers were reportedly booking tons at midweek in advance of the price increase.

Pacific Northwest: Effective Sept. 22, Agrium firmed its anhydrous ammonia postings to $615/st rail-DEL in Oregon, Washington, and northern Idaho; $635/st truck-DEL in northern Idaho, and in Oregon and Washington east of the Cascades; and $640/st rail-DEL in southern Idaho and Utah. Those levels were up $35/st from the company’s Sept. 13 postings in the region.

Western Canada: Anhydrous ammonia pricing was tagged at $710-$718/mt DEL in Manitoba, $718-$727/mt DEL in Saskatchewan, and $727-$754/mt DEL in Alberta, depending on location. Those levels reflected a nearly $100/mt increase from last report. Dealer postings ranged from $720-$764/mt DEL in the region last week, depending on location.

Middle East: The tightness of the global ammonia market is playing out in the region, but not yet at pricing levels producers would like. Even with the most recent sale of Iranian material to Mitsui for India at $420/mt FOB, sources in the area say the price should be higher.

The problem the Arab producers have in getting the price up is that most of their sales are on formula-based contracts. With few opportunities for spot sales to help set the tone for the formula, producers lament that the price is not moving up faster for them.

One trader noted that Mitsui regularly makes public its spot purchases from Iran to help move up the price in the region.

Another factor adding to getting higher prices is the return of FACT/India with seemingly regular ammonia tenders.

A tender that closed Sept. 1 had Arab Gulf producers offering their material at $413-$415/mt CFR. At the time Transammonia took the tender at $372/mt CFR, with tons coming from either Oman or Iran. The netback at that time was estimated in the mid-$340s/mt FOB. The price moved up steadily through the month.

The Mitsui deal last week was the latest indication that the market is in a steady upward trajectory. The market price is clearly in the low $400s/mt FOB. Specifically, sources say the new range is $410-$420/mt FOB.

Higher prices are expected in the FACT tender that closes Oct. 6.

A new dynamic in the region is taking place now that Iran is making regular contributions to the ammonia market.

Sources report Mitsui has a contract to sell 200,000 mt/y of Iranian ammonia. The customers appear to all be in India. The recent deal appears to be a spot sale to help set the contract rate, said one trader.

The move by Mitsui to supply Indian buyers from Iran ended a long-term arrangement with Arab Gulf producers to swap tons for different buyers.

One source noted, for example, that Mitsui would supply ammonia to an Asian customer of Sabic while Sabic covered a Mitsui customer in India.

Now, it appears fewer swaps are occurring.

Black Sea: The increase in price in Tampa confirmed a stronger Yuzhnyy market, even if the Tampa tons might not come from the Black Sea.

Sources indicate reports over the past couple of weeks of sales in the low $400s/mt FOB.

Once freight and costs are backed off the Tampa price, sources say the Yuzhnyy equivalent price is $405-$415/mt FOB.

Apparently demand in Russia and Ukraine is keeping more ammonia home and making less available for export.

Just a few months ago the lack of ammonia for export was because of soft global prices and shuttered plants. Now, say sources, the plants are working, but domestic demand is grabbing the lion’s share of the output.

India: FACT will close a tender for 7,500 mt Oct. 6. Delivery is slated for the end of October. The tender seems to put FACT back on track with monthly tenders.

Earlier this year FACT held a tender for 100,000 mt that was supposed to cover the company’s needs for the year. Sources are now unsure if the current wave of tenders by FACT means the company has increased its demand or if the earlier tender was scaled back to only cover a portion of the year.

FACT will have to prepare itself to pay substantially more in October than it did in its September tender. The last tender came in at $372/mt CFR from Transammonia. The netback to the Arab Gulf at the time was pegged in the $340s/mt FOB. The latest price from Iran is $420/mt FOB, with Arab producers expected to ask for even more.

Sources say Indian demand for ammonia remains strong. Besides taking tons from Iran, Indian buyers seem to be taking as many tons as possible from Arab producers as well.

UREA

U.S. Gulf: Most players last week were putting spot business at $340-$345/st FOB. However, prices as low as $335/st FOB for October were being heard, but sources were in disagreement as to the time frame. Some thought they reflected the after river close, while others said it made no difference, that with lower demand from buyers, any pre-river close premium had dissipated. Still others were calling the market as high as the low-$350s/st FOB – however, those were for upriver tons netted back to NOLA.

Sources said that tons in place inland are drawing a significant premium, with NOLA prices now under pressure. While some wondered what would happen to NOLA numbers between now and the spring season, others said that a strong international market is in place to underpin the market for now.

Sources gave several reasons for the price erosion, with most centering on a simple lack of buyers and others the river close. Still others pointed to a fair number of vessels coming in the near term, while several said some were getting the jitters over the run-up in both fertilizer and grain prices.

Eastern Cornbelt: Granular urea pricing was up from last report at $380-$405/st FOB regional terminals. The upper end of the range was quoted by Ohio sources FOB Maumee, while the dealer market FOB Cincinnati had reportedly firmed to the $395/st mark early in the week.

Western Cornbelt: Granular urea pricing had reportedly firmed to $385-$390/st FOB in the region. Out of the Enid and Inola market in Oklahoma, sources quoted the dealer price at a solid $385/st FOB last week.

California: Granular urea was pegged in a broad range at $385-$410/st FOB, with the upper end reflecting Sept. 27 postings from Simplot FOB French Camp and Hanford. Effective Sept. 13, Agrium’s granular urea postings firmed to $405/st FOB West Sacramento, Calif., $430/st truck-DEL in Central California, and $435/st truck-DEL in Northern California.

Pacific Northwest: The granular urea market was pegged in a broad range at $395-$425/st FOB and $375-$425/st DEL in the Pacific Northwest region, depending on location.

Effective Sept. 22, Agrium’s urea postings firmed to $415-$425/st DEL in Montana and Wyoming, depending on location; $430/st FOB West Woodburn, Ore.; $435/st FOB Idaho warehouses at Acequia and Pella, and Washington warehouses at Glade, Warden, and Wilson; $440/st DEL in Washington, Oregon, Idaho, and northern Nevada; $450/st DEL in northern and central Utah; and $455/st DEL in southern Utah. Those levels reflected a $20/st increase from Agrium’s Sept. 13 list prices in the region.

Western Canada: Urea pricing in Western Canada had firmed to $491-$516/mt DEL, up $20/mt from last report, with the low in Manitoba and the upper end in Alberta. Dealer reference levels for granular urea ranged from $500-$525/mt DEL in the region, depending on location.

India: Agents from MMTC sat down with trading houses following the closing of the Sept. 23 urea tender. The Indian government quickly gave up any hope of holding the line at $310/mt CFR and authorized MMTC to negotiate the best deal possible from as many suppliers as possible.

Late last week sources reported MMTC was ready to issue letters of intent to buy 600-610,000 mt in firm offers. Sources report the agreed-to prices are $346.90/mt CFR for east coast delivery and $348.50/mt CFR for west coast unloadings. The following companies are expected to have received the LOIs by the weekend.

Company Source Quantity ’000 mt – Firm Quantity ’000 mt –

Option
Transammonia China 100
Ameropa FSU-Open 60
Agora China 50
Quantum China 100
Amber China 50
Bary Chem China 50
Sinochem China 55
Dreymoor China 50-60 25-30
Helm China 60 25-50
Toepfer Open 25

Sources say coming into the tender, India needed about 1.5 million mt through Feb. 2011. If these deals hold, sources say another tender should be expected within 45 days.

The government remains under pressure from local political leaders to ensure plenty of urea is in the hands of local distributors.

Efforts to reduce the purchase of urea in favor of other nitrogen-based inputs, including changing the subsidy program, do not seem to have slowed down farmers’ desire for urea.

Indian media reported last week that a new government committee suggested more changes in the nutrient-based subsidy program. The program was designed to encourage farmers to use more balanced inputs by providing subsidies tied to the nutrient content, rather than to a particular type of fertilizer. Left out of the plan, however, was urea.

A new report to the government, however, now recommends that urea be included in the plan. One member even said different subsidies should be based on whether the urea came from coal or natural gas-based plants.

The Indian fertilizer producers welcomed the suggestion, according to press reports. The inclusion of urea in the Nutrient Based Subsidy (NBS) policy was hinted at when the plan was proposed two years ago, and again when the plan was implemented.

Another part of the proposal is to allow the private sector to begin importing urea for direct application. Right now, only state-owned companies such as MMTC, STC, or IPL are allowed to import urea that will be used for direct application. Sources say private blenders are allowed to import urea for their plants.

Middle East: Producers maintain that the published price is too low for their product. The offers made in the MMTC/India tender were indicators as to where they think the price should be.

But without any spot deals on hand – other than Iranian business – there is little the producers can do to get the price up.

Reportedly, right now the producers are basing their pricing ideas on the growing demand for material from the Americas. Rising prices in the U.S. should reflect higher netbacks over the next few months, said one trader.

Sources report that just about every producer is committed to send out panama-sized cargoes to the U.S. from September through November.

And leftover tons are being booked for Latin America.

Reported deals at $365-$375/mt CFR to Brazil translate back to a netback of $315-$325/mt FOB. Producers quickly point out that the material sold at those levels was booked by traders some time ago and is only now being shipped.

Producers also point out that some urea from the Black Sea is being held back for domestic use, and that Chinese exports are likely to be down in the last half of the year.

All told, producers say the dynamics are in place for a substantial rise in price. Until then, however, sources say the price remains in the $340s/mt FOB.

Egypt remains a strong supplier to Europe. Prices out of Egypt have softened after sources reported sales at $400/mt FOB.

Black Sea: With China dominating the Indian business and Egypt taking more European business, the price from Yuzhnyy has softened. Sources now peg the market at $325-$330/mt FOB.

Producers are able to move more of their material inland as domestic demand appears to be picking up. But even that is not enough to keep prices in the area dropping.

Indonesia: The rash of selling tenders in the past few months seems to have emptied most of the export duty allotments, say sources.

Kaltim may have some tonnage still available for export and could call a tender later this month.

Pusri and PIM have reportedly already sold their 2010 allotments and are asking for export quotas to bridge the fourth quarter of this year and the first quarter of next year.

Bangladesh: Tenders keep flowing from BCIC. The state buying house will close a tender Oct. 4 for 100,000 mt each of granular and prilled urea.

In the meantime, BCIC closed a tender Sept. 28 for 25,000 mt each of prilled and granular urea. Sources say the tender was called to fill gaps created when a previous tender did not draw sufficient support for the country’s demand.

BCIC asked for companies to make offers for delivery to Chittagong and Mongla.

The tally of the granular offers follows.

Offering Company Source Quantity (mt) US$/mt CFR Bagged – Chittagong US$/mt CFR Bagged – Mongla
Desh Open 12,500 401.20
415.20
Neete Construction China 12,500 407.17
12,500 411.17
Poton/CNAMPGC China 12,500 409.40
12,500 414.40
Wilson Open 12,500 419.52

Sources report that Neete came in the lowest in the prill tender at $378/mt CFR bagged into Chittagong.

Overall, the tally reflects softer prices for Chinese tons into Bangladesh from the previous tender.

The Bangladesh fertilizer industry received a setback when a urea manufacturing plant had to shut down on technical grounds again on Sept. 23. The Ashuganj Fertiliser Factory, a unit of BCIC, again stopped production for the fourth time in a month. Usman Gani, factory managing director, told reporters that the factory stopped operation on Sept. 23, only two days after it had started regular urea production. He added that the plant might be down another seven days. The last production halt, on Sept. 18, was due to a leakage in the plant’s high-pressure carbonate condenser. The factory resumed production on Sept. 21 after the fault was repaired.

The factory, which has a production capacity of 1,400 mt urea per day, is unlikely to meet the 380,000 mt/y production target fixed by BCIC due to the frequent production interruptions.

In related news, the Bangladesh fertilizer industry has welcomed the government’s decision to reopen fertilizer units shut down for quite some time owing to the short supply of gas. Plants to reportedly return to production soon include Chittagong Urea Fertiliser Ltd., (CUFL), Karnaphuli Fertiliser Company Ltd. (KAFCO), and Jamuna Fertiliser Company Ltd.

China: The country will be pretty much closed from Oct. 1-8 to celebrate China’s National Day. While the Chinese government is giving the country a week off to encourage people to travel and spend money, the move is designed to help build a stronger domestic economy instead of relying on exports for economic growth.

Exports will resume Oct. 16 – once the duty drops back to 7 percent. Sources expect to see the ports filled with ships waiting for product destined for India and Bangladesh. Unfortunately, said one trader, the ports will be so congested some buyers may have to wait for their cargoes. Prices out of China continue to remain strong.

Granular is now being reported at $350/mt FOB, with prills trailing by $10.

Sources in Asia say the pressure on China to bring its currency in line with the rest of the world is causing some of the increase.

Pakistan: According to a report of the National Fertilizer Development Centre (NFDC) and keeping in view the available quantity and imports in process, the supply of urea seems to be satisfactory in the upcoming Rabi season and the country will not need to import urea between October to March 2011 to supplement requirements in Rabi 2010-11. Total available urea would be 4.076 million mt, which includes an opening balance of 916,000 mt and 3.160 million mt of domestic production. This also includes the production of new Engro plant. The expected consumption of urea is 3.130 million mt, and a balance of 946,000 mt urea would be forwarded for next season.

Meanwhile, the report pointed out that consumption of urea in August 2010 was badly affected due to heavy floods that inundated much of the country’s agricultural land.

Pakistan consumed 5.450 million mt of urea between July-June (2010-11), compared to 6.545 million mt in the corresponding period last year, showing a record decline of 16.7 percent in consumption.

NITROGEN SOLUTIONS

U.S. Gulf: Unlike urea, UAN barge price ideas did not appear to be retreating. Sources were calling the market $270-$275/st FOB ($8.44-$8.59/unit).

Eastern Cornbelt: Sources pegged the UAN-28 market at $280/st ($10.00/unit) FOB Cincinnati, while Illinois sources quoted UAN-32 in the $315-$320/st ($9.84-$10.00/unit) FOB range last week. Those numbers reflected another sizable jump from the previous week.

Western Cornbelt: UAN-32 was tagged at $310-$320/st ($9.69-$10.00/unit) FOB regional terminals, up significantly from last report. Sources said dealer pricing out of production points in Oklahoma and Kansas had firmed to $295-$315/st ($9.22-$9.84/unit) FOB.

California: The UAN-32 market had firmed significantly, with sources quoting the dealer market at $305-$315/st ($9.53-$9.84/unit) FOB in California. The upper end of the range reflected new postings from Simplot and Yara, with Simplot also referencing $320/st ($10.00/unit) FOB El Centro as of Sept 27.

Effective Sept. 23, Agrium’s UAN-32 postings firmed to $313/st ($9.78/unit) FOB Sacramento, $335/st ($10.47/unit) truck-DEL in Central California, and $340/st ($10.63/unit) truck-DEL in Northern California. Those levels reflect a $30/st increase from the company’s Aug. 13 postings.

Pacific Northwest: IRM reposted UAN-32 on Sept. 23 at $320/st ($10.00/unit) DEL in eastern Oregon and Washington from terminals in those two states. Agrium’s UAN-32 postings also firmed on that date to $320/st ($10.00/unit) rail-DEL in Washington, northern Idaho, and Oregon excluding Malheur County; $325/st ($10.16/unit) rail-DEL and $330/st ($10.31/unit) truck-DEL in Nevada, southern Idaho, and Oregon’s Malheur County; and $330/st ($10.31/unit) DEL in Montana and northern Wyoming. Agrium’s UAN-28 posting firmed on Sept. 23 to $289/st ($10.32/unit) DEL in Montana and northern Wyoming.

Western Canada: UAN-28 was quoted at $294-$310/mt ($10.50-$11.07/unit) DEL, up nearly $35/mt from last report, with the low again reported in Manitoba and the upper end of the range in Alberta. Dealer reference levels in the region moved up to $304-$320/mt ($10.86-$11.43/unit) DEL in late September, depending on location.

AMMONIUM NITRATE

U.S. Gulf: The most recent prompt trades continue to be called in the high $290s/st FOB, with November being quoted at $300-$305/st FOB.

CF is reportedly posted at $300/st FOB Yazoo City for railcars and $310/st for trucks.

Western Cornbelt: Ammonium nitrate was quoted at $310-$325/st FOB in the region.

California: No market was reported for ammonium nitrate in California. CAN-17 was unchanged at $242-$255/st FOB in the state. Effective Sept. 30, Calamco’s AN-20 posting moved to $245/st truck-DEL in California.

Pacific Northwest: Ammonium nitrate had reportedly firmed to $430/st DEL in the region. No current pricing was reported for CAN-27 in the region.

AMMONIUM SULFATE

Eastern Cornbelt: Granular ammonium sulfate remained at $210-$220/st FOB in the region.

Effective Sept. 27, Honeywell’s warehouse prices for granular ammonium sulfate moved to $220/st FOB Danville, Ill., and Amherst Junction and Prairie du Chien, Wisc. Midgrade ammonium sulfate postings moved on that date to $210/st FOB Byron, Ill. The company’s rail-delivered postings moved to $230/st for granular and $220/st for mid grade in Illinois, Wisconsin, Arkansas, and Mississippi. Honeywell said product is “very limited,” and new rail orders will ship after Nov. 1.

Western Cornbelt: Granular ammonium sulfate was steady at $210-$220/st FOB regional terminals last week. Effective Sept. 27, Honeywell’s warehouse prices for granular ammonium sulfate moved to $220/st FOB Roseport, Minn., Dubuque, Iowa, St. Louis, Mo., and Omaha, Neb. Mid-grade ammonium sulfate postings moved on that date to $210/st FOB Roseport and Omaha. The company’s rail-delivered postings moved to $230/st for granular and $220/st for mid grade in Minnesota, Iowa, and Missouri. Rail-delivered postings were not published for Kansas and Nebraska.

California: Ammonium sulfate remained at $220-$247/st FOB, with the low for standard and fluid grade and the upper end for granular product in desert locations.

Pacific Northwest: Granular ammonium sulfate was pegged at $245/st FOB and $250-$255/st DEL in the region. Effective Sept. 13, Agrium’s granular ammonium sulfate postings firmed to $245/st FOB warehouses in Washington, Oregon, Idaho, Nevada, and Utah, and $250/st DEL in those states plus Montana and Wyoming. IRM’s Aug. 23 postings for granular and regular grade ammonium sulfate were also at the $245/st FOB and $250/st DEL levels in Washington, Oregon, Idaho, and Montana.

Western Canada: Granular ammonium sulfate pricing in Western Canada was pegged at $315-$320/mt DEL, up $25/mt from last report. Dealer reference levels ranged from $325-$330/mt DEL in the region.

PHOSPHATES

Central Florida: The hurricane season does not officially end until late November, but the most dangerous period is October, when the winds shift and begin to move from west to east. A downgraded tropical storm or low-pressure system was expected to cross the southern end of the state this coming weekend or week, but should not be a threat to the phosphate industry.

Very little phosphate was available for sale in Central Florida last week, but a trader took advantage of a quick deal and agreed to sell his entire allotment of DAP at $525/st FOB. The transaction included at least one railcar to be shipped by rail on Oct. 1.

Mosaic was in the process of negotiating with the Sierra Club and other opponents in an effort to iron out differences over the mining of wetlands in the 10,000-plus acre expansion of its South Fort Meade Mine. If an arrangement is agreed upon and the federal judge approves it, rock will begin flowing from the mine again.

CF posted a price of $515/st FOB for prompt shipments, but had nothing to offer. Mosaic will have nothing to offer for the prompt market until at least the beginning of the first quarter. Inventories remain low.

After trailing the domestic markets for about a month, the offshore export market was beginning to show some activity at higher prices last week. Prices were in the same approximate range as Central Florida, but still lower than the Gulf’s NOLA market.

Phosphate producers were just beginning to think about negotiations with sulfur suppliers on new prices for the fourth quarter, which will likely rise, although the amount was uncertain. In addition, they will have to pay more for ammonia in October, which was up $40/mt to $465/mt. Some predict sulfur may rise as much as $50/lt for the fourth quarter.

Based on actual sales and posted prices, the Central Florida DAP price range moved from $505-$512/s FOB the previous week, to $515-$525/st FOB last week. Prices will probably stall somewhat this week, say sources. Neither Mosaic nor CF had anything available for prompt delivery this month, and probably will not until January. CF posted a price of $515/st FOB for DAP. Mosaic had no posted prices, but was loading railcars for customers under contract and charging the market rate. PCS was making sales at “competitive prices.” Agrifos was asking $545/st FOB for DAP trucks and $540/st FOB for railcars. It had no MAP available for sale.

U.S. Gulf: After a flurry of activity the previous week, NOLA DAP barge transactions continued last week, but at a slower pace. In addition, forward sales were coming in at prices below the current market range.

Farmers were in a good mood and were apparently willing to take the plunge on buying fertilizer – even at somewhat higher prices. That, of course, was because they will do very, very well when they sell their crops at prices far higher than they had anticipated.

The ban Russia placed on its own grain export sales has been responsible for the run-up in corn prices here. In addition, a vessel of Russian DAP was being sold here, as well as phosphate from Morocco and China.

Forward sales of NOLA DAP barges for November until January were bringing less than current prompt deals. A source said sales were done in the $530-$535/st FOB range last week. Those prices were not included in this week’s NOLA DAP barge range because they were not considered prompt, which is normally within two weeks.

The Mississippi River closes the middle of October, so barges in place or very near St. Louis will probably bring a premium during the next week or so – otherwise, the price will likely be less than the current range.

Terminals feeding dealers were doing a bang-up job last week, at least in most areas. That should continue well into October. Warehouse prices were in the $585/st FOB range last week and will probably not rise much more this season, say some sources.

Based on sales last week, the NOLA DAP barge price range moderated from $540-$560/st FOB the previous week to $550-$555/st FOB last week. Prices for NOLA DAP barges will probably not rise – or not much – in the near future, according to most observers. MAP was bringing a premium of about $10/st FOB last week.

Eastern Cornbelt: DAP had reportedly firmed to $580-$600/st FOB regional warehouses, with the low end confirmed out of spot river locations earlier in the week. MAP was $15/st higher than DAP, where available. 10-34-0 pricing was tagged at $440-$460/st FOB, also up significantly from the previous week.

Western Cornbelt: DAP was pegged at $580-$600/st FOB regional warehouses, with MAP roughly $15-$20/st higher. Sources described inventories as very tight, with pricing “going up by the hour.” The 10-34-0 market was quoted at $430-$450/st FOB in the region.

Simplot announced that its Midwest phosphoric acid postings were going up Oct. 1, from $8.65/unit to $9.25/unt DEL for both SPA and MGA. Agrium also reposted its SPA and MGA postings on Oct. 1 to $925/st rail-DEL in Iowa, Nebraska, Minnesota, the Dakotas, Wyoming, Colorado, Kansas, Oklahoma, New Mexico, and Texas.

California: Effective Sept. 17, Agrium’s MAP postings in California and Arizona firmed to $605/st FOB or rail-DEL, up $30/st from the company’s Sept. 13 postings in those two states. Simplot moved its DAP and MAP postings to the $605/st DEL level on Sept. 22, up $35/st from the previous level.

16-20-0 was pegged at $389-$396/st FOB, up some $30-$40/st from last report. 10-34-0 was pegged at $380-$400/st FOB in the state, also up from last report.

Phosphoric acid remained at $8.75/unit DEL for both SPA and MGA through Sept. 30. On Oct. 1, however, Simplot moved its SPA and MGA postings up $0.50/unit, to $9.25/unit DEL in California. Simplot’s MGA postings FOB California warehouses firmed on Oct. 1 from $8.95/unit to $9.45/unit. Agrium also reposted SPA and MGA on Oct. 1 to $925/st rail-DEL in Arizona and California.

10-34-0 moved up on Oct. 1 as well, to $406-$411/st FOB in California. 11-37-0 was quoted at $425-$435/st FOB El Centro as of Oct. 1.

Pacific Northwest: Simplot’s DAP and MAP postings firmed on Sept. 22 to $600/st DEL in Washington, Oregon, and Nevada, $595/st DEL in Idaho and Utah, and $590/st DEL in Montana. Agrium also announced another MAP increase on Sept. 17, moving to $595/st FOB and $600/st DEL in Washington, northern Idaho, and Oregon excluding Malheur County; $595/st DEL in southern Idaho, Utah, Nevada, and Oregon’s Malheur County; and $590/st DEL in Montana and northern Wyoming. Those levels were up $30/st from the company’s Sept. 13 phosphate postings.

16-20-0 was quoted at $376-$386/st DEL in the region, up $20-$30/st from last report, with the low reported in Utah, Idaho, and Montana, and the upper end in Washington and Oregon.

Phosphoric acid postings from Simplot moved up $0.50/unit on Oct. 1, to $9.25/unit DEL in the region for both SPA and MGA. Agrium also reposted SPA and MGA on Oct. 1 to $925/st rail-DEL in Idaho, Montana, Nevada, Oregon, Utah, and Washington.

10-34-0 was quoted at a firm $425/st FOB in the region, up $30-$35/st from last report – and in short supply. Simplot was referencing 11-37-0 at $420-$423/st FOB in the region, but had not yet announced new 10-34-0 prices at press time.

Western Canada: The MAP market had reportedly firmed to $697-$702/mt DEL in Manitoba, $702-$712/mt DEL in Saskatchewan, and $707-$732/mt DEL in Alberta, depending on location. Those levels reflected a $40/mt increase from last report. MAP postings ranged from $705-$740/mt DEL in the region last week.

10-34-0 was pegged at $520-$540/mt DEL in Western Canada last week, up roughly $20-$25/mt from last report.

U.S. Export: The export market awakened last week after taking a long nap. Both PhosChem and Transammonia made the sales. PhosChem made two sales, one into Central America and the other into Australia. The Central American deal was for 6,000 mt at $570/mt FOB, and the Australian sale was for 20,000 mt, also at a price of $570/mt FOB.

Transammonia sold a small lot – 6,000 mt or less – into Central America at $575/mt FOB.

Agrifos was solicited to make export sales last week, but rejected offers and was holding out for $600/mt FOB.

Based on those deals, the export DAP price range last week was $570-$575/mt FOB, which was up from the previous range of a flat $530/mt FOB. Export DAP prices will likely increase on the next sale.

Pakistan: Pakistan would need to import 150,000 mt of DAP between October to March 2011 to meet its requirements for Rabi season 2010-11. According to a report of the National Fertilizer Development Centre (NFDC), the available quantity of DAP in Rabi 2010-11 would be 951,000 mt, which comprises 506,000 mt of opening inventory, 300,000 mt of domestic production, and 145,000 mt of imported supplies. The expected consumption of DAP is 735,000 mt.

Pakistan consumed 1.216 million mt of DAP between July-June (2010-11), compared to 1.535 million mt in the corresponding period last year – showing a record decline of 20.8 percent in consumption.

POTASH

Eastern Cornbelt: Potash remained at $430-$440/st FOB regional warehouses, with most sources touting the upper end of that range as the common dealer price last week. Rail-delivered postings were at the $450/st level in the region.

Western Cornbelt: Potash was tagged at $420-$440/st FOB regional warehouses, with the upper end reflecting producer postings to the dealer.

California: Potash was quoted in a broad range at $440-$487/st DEL in the state, depending on grade and supplier. Potassium nitrate remained at $929-$996/st FOB, with the low for bulk tons and the upper end for bagged product.

Sulfate of potash (SOP) was quoted at $620-$630/st FOB for bulk tons. Great Salt Lake Minerals Corp. announced a $20/st increase in the selling price of all SOP specialty fertilizer products effective with shipments on Nov. 1, 2010, or as contracts allow. The company said the increase will apply to both standard and granulated products shipped to all locations worldwide.

One dealer said SOP postings will move to $640-$660/st FOB in California as a result of the Nov. 1 increase, depending on grade. He said buyers hoping to beat the hike must place orders by Oct. 15 or tons shipped by the end of October.

Pacific Northwest: Washington sources quoted delivered potash at $450-$468/st, depending on grade and location. Agrium firmed its red premium potash postings for the Sept. 13 through Dec. 31 order and shipping period. New reference levels include $450/st FOB and $460/st rail-DEL in southern Idaho, Utah, and Oregon’s Malheur County; $455/st FOB and $465/st rail-DEL in Washington, the Idaho panhandle, and Oregon excluding Malheur County and the Willamette Valley; and $460/st FOB and $470/st rail-DEL in Oregon’s Willamette Valley.

Intrepid Potash’s potash postings FOB Moab and Wendover, Utah, firmed on Oct. 1 to $375/st for 60 percent standard and $380/st for 60 percent granular. Those levels will move up another $30/st on Nov. 1.

Western Canada: Potash was firm at $471-$502/mt FOB regional warehouses, depending on grade and location. Sources tagged the market FOB Saskatchewan mines at $462-$471/mt FOB to Canadian customers, depending on grade and location. The low end of both ranges reflected pricing for 60 percent muriate, with the upper end for 62 percent.

Indonesia: Canpotex said Sept. 30 that it has signed a five-year Memorandum of Understanding (MOU) with an Indonesian buying consortium for volumes totaling 3.75 million mt of potash.

On Sept. 20 Canpotex said that a 13-member Indonesian delegation led by Wilmar Trading Pte Ltd. and comprising representatives of PT. Petrokimia Gresik, PT. Pupuk Kaltim Kalimantan Timur, and PT. Pupuk Sriwijaya visited the Canpotex head office in Saskatoon to sign the five-year MOU, which covers the period from Jan. 1, 2011, to Dec. 31, 2015, and represents the largest MOU signed with Canpotex’s Indonesian customers.

SULFUR

Tampa: Negotiations – or at least conversations – about new prices for fourth quarter sulfur delivered to Tampa were just getting underway last week, and will continue into this week. However, a final resolution will probably take several more weeks, according to a source close to the talks.

In the third quarter, prices for molten sulfur to Tampa dropped $50/lt, and sulfur suppliers want at least that much back for the fourth quarter. A source said the $50/lt hike was the bottom line for sulfur producers and that they were seeking more.

Much of that was based on the world market, which was running $150-$160/mt FOB – was far higher than the current Tampa price of $95/lt DEL. Considering the cost of transportation was about $25/lt, sulfur suppliers were getting only about $70/lt.

If sulfur suppliers were to send their sulfur to prill plants on the Gulf, they could get significantly higher prices. However, the prill plants cannot realistically handle all the sulfur produced by refineries, so the threat of diversion was tempered.

Mosaic, the largest consumer, has already positioned itself for its fourth-quarter sulfur, regardless of what direction the negotiations take. The company has stored sulfur not only at Tampa, but at Galveston as well.

Meanwhile, sulfur supplies were considered very tight last week, as sulfur was in demand not only by phosphate producers, but by industry as well.

MARKET NOTES
Pakistan: The Gas Pipeline Framework Agreement (GPFA) for the Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas
pipeline was reportedly signed Sept. 20 in Ashgabat, Turkmenistan, by dignitaries from the four countries. The TAPI gas pipeline project is being planned to bring natural gas from Turkmenistan through Afghanistan to Pakistan and India.

Turkmenistan, Afghanistan, and Pakistan signed an Inter Governmental Agreement (IGA) for joint oil and gas pipeline projects among the three countries in 2002. India joined the project in 2008 and a revised GPFA was initialed for the induction of India, thus changing the project from TAP to TAPI. The ADB-sponsored pre-feasibility study, conducted in 2004, indicated that the 1680 km pipeline project was economically and financially viable, with an estimated cost of US$3.3 billion (revised to US$7.6 billion in 2008). The pipeline would be designed to carry 3.2 BCFD of gas from Turkmenistan, delivering 0.5 BCFD to Afghanistan and 1.35 BCFD each to Pakistan and India. Pakistan would be able to produce 6000 MW of electricity using 1.35 BCFD gas.

The project had seen no progress since 2008. Next on the agenda is ironing out a gas sales purchase agreement.

The Week in Fertilizer Stocks

Fertilizer Stocks
Producer Symbol Price Week Ago Year Ago
Agrium AGU 74.99 72.89 49.79
CF Industries CF 95.50 98.68 86.23
Intrepid Potash IPI 26.07 26.09 23.59
Mosaic MOS 58.76 61.35 48.07
PotashCorp POT 144.04 145.37 90.34
Terra Nitrogen TNH 90.67 98.45 98.41
Distribution/Retail
Andersons Inc. ANDE 37.90 38.82 35.20
Deere & Co. DE 69.78 71.19 42.92
Scotts SMG 51.73 50.18 42.95

Terra to no longer store ammonia at Blytheville; Kinder Morgan considers converting NH3 capacity to UAN

Featured, News

Kinder Morgan Energy Partners LP last week reportedly told Terra Industries Inc. that it will not be renewing Terra’s anhydrous ammonia storage contract at the Blytheville, Ark., terminal. As a result, according to industry sources, Terra will no longer store ammonia at the Blytheville terminal as of the end of this year.

Kinder Morgan told Green Markets that it does not comment on customer contracts, but confirmed that it “is reviewing options to convert the tanks to UAN service.” Terra also leases UAN storage at Blytheville, and industry sources said that contract will not be affected.

Terra sold the Blytheville assets to Kinder Morgan in 2005 (GM July 18, 2005) through its subsidiary, Terra Nitrogen Co. LP (TNCLP). Kinder Morgan then leased the ammonia and UAN storage capacity at the site back to Terra. Kinder Morgan lists capacity at the Blytheville terminal at 45,000 tons ammonia, 40,000 tons dry bulk, and 14,000 tons liquid. Other commodities handled at the site include UAN, specialty chemicals, alloys, coal, and grains.

Kinder Morgan paid TNCLP $5 million for the Blytheville terminal assets in 2005. Terra then signed an exclusive lease with Kinder Morgan through the end of 2010 for all the facility’s anhydrous ammonia and UAN terminal assets, with renewal options. Terra used the anhydrous ammonia and UAN terminal assets to store and distribute nitrogen products from its manufacturing facilities and import distribution assets.

The Blytheville facility was originally a production site for Terra, with 430,000 st/y of ammonia capacity and 480,000 st/y of urea capacity. Terra announced in 2004 that it was permanently discontinuing production at Blytheville due to high natural gas costs (GM April 5, 2004), and that it would use the facility storage and distribution assets as a terminal for ammonia produced at Terra’s Verdigris, Okla., facility or obtained from other sources. Blytheville’s ammonia and urea capacities at the time of the plant’s closure in 2004 represented 14 and 73 percent, respectively, of Terra’s North American ammonia and urea capacities.

Terra became a wholly-owned subsidiary of CF Industries Holdings Inc. in April of this year (GM April 19, p. 1) following a year-long merger battle that also involved Agrium Inc. and Yara International ASA. In addition to Terra, CF now owns the approximately three-fourths of TNCLP that was formerly owned by Terra Industries. TNCLP’s major assets include the large ammonia (1,050,000 st/y) and UAN (1,925,000 st/y) plant at Verdigris, Okla., and terminals in Blair, Neb. and Pekin, Ill.

According to Kinder Morgan information, the Blytheville terminal sits on 731 acres and is serviced by truck, rail, and barge, with access to the Mississippi River, the BNSF railroad, and Interstate 55. The facility is less than an hour away from Memphis, Tenn., and has five scales – two liquid, two dry bulk, and one rail.

Industry upbeat in San Francisco

Featured, News

The fertilizer industry that met at the TFI World Conference in San Francisco last week was upbeat about the prospects for the upcoming North American fall and spring seasons. While not everyone may have been happy with higher fertilizer prices, they said higher crop prices will mean good volumes going to the field and plentiful acres planted, particularly corn, soybeans, and wheat. One source said with $4.40 and above corn prices, the industry cannot help but be happy.

Higher fertilizer prices continued to be in vogue, with N, P, and K all seeing either higher trades or postings.

More attendees showed up for sunny San Francisco this year, with an attendee count of 718 on the afternoon of Sept. 13, versus the year-ago 673 when the conference was held in Washington, D.C. Next year’s meeting will return to Chicago, Ill., for the first time since 9/11.

Keynote speaker Ram Charan, a prominent business author and advisor, told attendees that their companies have to design and drive their own destinies ?Çô or someone else will. He said they must be in the bridge of information.

Charan did not have good news for North America, saying that growth is being divided between the North and the South on the 31st parallel. Countries to the North can expect little growth, defensiveness, recession, and psychological malaise. Those in the South will see high growth. He said there will be a transfer of technology from the North to the South. Charan said there will be a fight for jobs, with trade in the South increasing over the next 20 years. He predicted the U.S. will have a trade deficit for the next 10 years.

Charan asked if companies are allocating resources to the whole globe where things are going to happen. He said people see the world from where they sit, and warned that we are building our own competitors.

Another trend Charan noted was companies competing with countries. He gave iron ore for an example, where BHP Billiton, Rio Tinto, and Vale S.A. control 80 percent of production, while China is the largest buyer. He added that cheap money drives monopolies, and that $40 billion is nothing. Charan said the last thing companies with a lot of money want to do is give it to their shareholders, as this is a sign that they cannot find opportunities. He noted companies such as Vale, which is planning to put aside $12 billion to expand into fertilizer.

Perhaps one telling question he asked the audience was who the U.S. Secretary of Commerce is. There was silence. The answer is Gary Locke, former governor of Washington State. Charan said the U.S. has been focused on things other than commerce.

He added that differential protectionism is here to stay.

Pioneer Hi-Bred President Paul Schickler noted the things in common between the seed and fertilizer industries, including the need to raise more food for a growing population. He said the world population will grow to 8.4 billion in 2050, up from today’s 6.4 billion, with most of the increase coming in Asia and Africa. With this will come increased income and more demand for better food, including meat.

South Fort Meade shut down, says Mosaic; again asks Court to rule

News

The Mosaic Co. told the U.S. District Court for the Middle District of Florida at Jacksonville last week that it has shut down the South Fort Meade phosphate rock mine, and that its 60-day WARN notice has expired. Mosaic said that approximately 60 employees out of the 221 who received WARN notices have been laid off to date and are no longer on Mosaic’s payroll as of Sept. 13, 2010. Earlier indications from Mosaic were that this number would be 140. The company told Green Markets last week that it is continually working to place employees in temporary assignments, and that the numbers shift as it identifies temporary assignments and then places the employees.

Mosaic said in an effort to mitigate harm to employees, it has placed the remaining South Fort Meade employees in temporary positions outside the South Fort Meade mine. However, it says these positions are expected to be limited in duration, and that additional employees will be laid off in subsequent phases should the mine remain closed.

Mosaic again asked the court to allow it to mine its South Fort Meade expansion for four months in an area where wetlands have already been disturbed (GM Sept. 13, p. 1). (The district court this summer had issued an injunction to prevent impacts to federal wetlands on the Hardee County extension – GM Aug. 9, p. 1.) Mosaic had already asked the court for this relief back in August and renewed its efforts Sept. 14, after the U.S. Court of Appeals for the Eleventh Circuit denied Mosaic’s motion for a limited stay pending appeal and/or an expedited appeal without prejudice. Mosaic said the Eleventh Circuit is awaiting the district court’s ruling on this issue before addressing the requested stay.

Mosaic noted that the Army Corps of Engineers approves Mosaic’s four-month plan. Mosaic has had to carry the weight of the case since the plaintiff environmentalists filed it June 30, 2010, and the district court issued the injunction. The Corps just last week, on Sept. 13, filed its official answer to the environmentalists’ complaint.

Crop prices, positive prospects for fall season driving enthusiasm, says PotashCorp

News

PotashCorp Executive Vice President and CFO Wayne Brownlee told attendees at the Credit Suisse Chemical Ag Science Conference last week that the drought in Russia and problems in other parts of the world are moving commodity prices for most key crops well above their 10-year averages, and quickly causing concerns about food inflation.

“Coffee is now more than double its 10-year average,” said Brownlee. “Sugar and palm oil are 70 percent above the average. Prices for corn, soybean, and wheat, key North American crops, are around 40 percent above the 10-year average. This is creating a very positive environment for our farmers, and we believe a strong incentive to maximize crop production.

“They’re going to be able to get the crop off early this year because it was in the ground early and it matured quickly, and so they’re going to have lots of time to replant for the fall season, and that is showing up in a fair bit of enthusiasm and exuberance that we’re seeing through our dealer network.”

Brownlee noted the U.S. Department of Agriculture’s Sept. 10 projection of 2010-2011 corn prices at $4.40 per bushel, based on expectations of the U.S. corn crop stocks-to-use ratio declining to the lowest level since 1995. “With this price assumption, U.S. corn farmers are expected to generate record returns this year, and we believe this will lead to strong applications starting with the fall planting season.”

Brownlee noted that the world population has gone from 4 billion in 1970 to near 7 billion today and is growing at a rate of 75 million per year, with much of this happening in China and India. He added that these two nations are expected to see big annual increases in GDP – China at 9 percent, and India and other Asian countries at 7 percent.

As for potash, Brownlee said China has been buying in recent months, and PotashCorp expects the country to re-engage at much more significant levels in 2011.

Brownlee declined questions about BHP Billiton’s offer to acquire PotashCorp.

CF boosts 2011 corn estimate; says great time to be a North American fertilizer producer

News Briefs

CF Industries Holdings Inc. has boosted its estimate of corn plantings for 2011 to 92 million acres, up from 91 million acres. CF Senior Vice President and CFO Tony Nocchiero told analysts at the Credit Suisse Chemical Ag Science Conference last week that this would be the second-highest planting in the modern era.

Nocchiero presented slides at the meeting showing what he said were the reasons ag input providers who were seen at the conference “have smiles on their faces. It’s really a great time to be a North American producer of fertilizer, and especially a producer of nitrogen fertilizer.”

Nocchiero said the average expected returns over variable costs are $435 per acre for corn and $308 per acre for soybeans. He added that the company also expects higher winter wheat plantings as well, which should increase fall fertilizer demand.

Fertilizer prices have moved up strongly over the last two and a half months, and strong demand has collided with a tight global supply, said Nocchiero. He went on to tout CF’s network of storage facilities, variety of nitrogen products, transportation cost advantages versus imports – $35-$65 per ton – and North America’s abundant supply of natural gas. On the latter, he compared North American production at $4.00/mmBtu and a 33 mmBtu conversion rate, versus that of swing producer Ukraine at $7.00/mmBtu and a 38 mmBtu conversion rate.

Nocchiero said the company was initially more conservative about prospects for the fourth quarter, thinking there might be some oversupply in urea. However, he said he thinks the market will be much tighter now due to production issues in Russia, Ukraine, and Iran, and strong demand from India, Pakistan, and Brazil, with this being offset somewhat by exports from China.

Proposed N plant receives second permit renewal; financing still lacking; backers eye 2011 groundbreaking

News, Nitrogen

For the second time, the Power County Planning and Zoning Commission in American Falls, Idaho, has agreed to extend a permit renewal for Southeast Idaho Energy’s (SIE) Power County Advanced Energy Center. The latest renewal came on Sept. 7.

The $1.5 billion industrial complex is designed to produce up to 500 st/d of anhydrous ammonia, up to 1,800 st/d of granular urea, and up to 1,600 st/d of UAN, using clean coal gasification technology. SIE has decided against producing diesel fuel or generating electricity at the site as originally planned.

SIE officials sought the latest permit renewal from Power County to give themselves more time to work with investors to finance the project. Officials said credit lending has tightened significantly as a result of the nation’s economic downturn.

Kimberly Clinger, a community relations representative for parent Refined Energy Holdings of New York, said available financing is insufficient, but that SIE hopes to begin construction in 2011. She said circumstances were beyond the company’s control. No specific date has been set for a groundbreaking.

A pipeline to pump carbon dioxide off-gas for use in enhanced oil recovery from aging Wyoming wells is still planned, but it would be a separate project that would follow construction of the fertilizer complex, said Clinger. About 90 percent of the plant’s CO2 would be removed.

In November 2009, the Idaho Department of Environmental Quality (IDEQ) issued a revised air quality permit for the fertilizer project that imposed new limits (GM Dec. 7, 2009) on carbon dioxide emissions, setting a nationwide precedent for regulating “greenhouse gases.” However, while IDEQ agreed to include the enforceable carbon dioxide limits in the permit, officials said they do not intend to include such limits in future air quality permits until federal regulations have been finalized.

About 450 acres in a heavy industrial zone two miles southwest of American Falls have been designated for the complex. Up to 1,350 construction workers would be employed during a three-year construction phase, and as many as 150 employees would be hired to operate the plant. Engineering work has been underway in recent weeks.

The plant is expected to use coal, petroleum coke, or a blend of the two. In the past SIE estimated it would need to import about 2,000 st of coal daily, mostly from Colorado. The IDEQ agreement would permit 756,000 st of carbon dioxide to be emitted – 60 percent less than what a typical fertilizer plant discharges.