All posts by webster@kennedyinfo.com

Ammonia

Ammonia, Eastern Cornbelt, Great Lakes, India, Market Watch, Middle East, Northern Plains, Tampa, U.S. Gulf, Western Cornbelt

U.S. Gulf/Tampa: While June business may be a while off, sources last week speculated that increased gas outages in Trinidad would likely mean June Tampa prices are higher than the May $545/mt DEL.

Natural gas outages, which had diminished in recent months, were reported to be across the board at 20 percent last week, meaning all major producers were impacted. PotashCorp opted to take the cuts at its least efficient plants, #01 and #2, allowing its more efficient #03 and #04 plants to run full out, with no impact on urea production.

One observer noted that with extremely attractive gas prices in the U.S., Trinidad ammonia producers are under a lot of pressure to ink much improved gas contracts. Otherwise, they may be better served to debottleneck their U.S. production even more than they have to date.

PotashCorp is currently involved in bringing its Geismar, La., ammonia plant back to production, but also has possibilities at other domestic locations. And CF is eyeing up to $1.5 billion in the debottlenecking of nitrogen production facilities. Yara is expecting to make a decision soon on a new Belle Plaine, Sask., greenfield next door to its existing plant.

All of these would benefit from low priced North American gas. That said, forward month Henry Hub gas prices have actually been moving up in recent weeks, with June closing May 10 at $2.487/mmBtu. The forward month was below $2.00/mmBtu only about a month ago.

Eastern Cornbelt: Several sources said anhydrous ammonia prices had backed off slightly as inventories get restocked in the lull between planting and sidedress. Out of terminals in Illinois, the dealer market was quoted in a broad range at $690-$730/st FOB for prompt ship, depending on location. Sources quoted the Indiana market at the $740/st FOB level, although dealer postings remained as high as $760/st FOB at some locations.

As of May 6, growers in Illinois and Indiana had fully 84-89 percent of the corn crop planted, and Ohio was not far behind with 79 percent of the crop seeded by that date. Corn emergence was also trending well ahead of the five-year average at 64 percent in Illinois, 50 percent in Indiana, and 21 percent in Ohio. Soybean planting was ahead of the normal pace as well, with 48 percent of Indiana’s crop seeded by May 6, compared with 35 percent in Ohio and 21 percent in Illinois.

Western Cornbelt: Iowa and Nebraska contacts pegged the low end of the anhydrous ammonia market at $640-$650/st FOB for prompt tons last week. The upper end of the regional range was quoted at $680-$700/st FOB, depending on location.

As of May 6, Missouri growers had 84 percent of the corn crop seeded, compared with 64-74 percent in Iowa and Nebraska. Corn emergence was also ahead of normal at 60 percent complete in Missouri, and 23-25 percent in Iowa and Nebraska.

Soybean planting ranged from just 7 percent complete in Iowa to 16 percent in Nebraska and 29 percent in Missouri. Missouri’s cotton crop was 49 percent planted by May 6, also ahead of the normal pace, and Missouri’s rice crop was fully 81 percent emerged by that date, with 59 percent of the acreage rated as good or excellent.

Northern Plains: The anhydrous ammonia market in the Northern Plains was pegged at $670-$720/st FOB regional terminals and $775-$780/st DEL in North Dakota.
Dakota Gasification’s ammonia plant in Beulah, N.D., remained down last week following the April 14 fire that temporarily idled production, but a company source confirmed that repairs have been completed and the company was conducting hydrotests on the facility last week. The plant will likely restart in mid-May, but no specific date was reported.

Great Lakes: Wisconsin sources tagged the anhydrous ammonia market at $

PCS Sales – Management Briefs

Management Briefs

PCS Sales announced management changes May 10. Bernie Rock, senior vice president, fertilizer sales/Trinidad ammonia, has elected to retire effective May 31 after 27 years of service to PotashCorp.

Chris Reynolds is promoted to vice president fertilizer sales/Trinidad ammonia, effective June 1. After having worked for Agrow Australia Pty Ltd. since 1996, he joined PotashCorp in 2003 and has held several positions with increasing responsibilities, including his most recent position as vice president, international fertilizer sales/Trinidad ammonia.

Dandan Xiang is promoted to senior director international sales fertilizer and feed, effective June 1. She will have responsibility for the company’s international sales group. She is currently director, international sales, fertilizer and feed.

Whit Dhamer, currently international feed sales associate, will transfer to fertilizer sales as international fertilizer sales associate June 1.

Brian Mark, senior sales director, will assume additional responsibilities for India phosphoric acid sales June 1.

Marubeni pegged as Gavilon finalist

Midwest, News, News Briefs

Omaha — Major news reports last week had Japan’s largest grain trader, Marubeni Corp., as the finalist to buy U.S.based Gavilon Group LLC for approximately $5 billion,
including debt. Gavilon would allow Marubeni to expand its grain business into the U.S. Even so, sources cautioned that it was not a done deal, and the parties themselves had no comment on the matter. Marubeni issued a statement May 8 acknowledging the reports, but said they do not constitute official announcements by the company. It said no facts related to this matter have been confirmed, and that the company will promptly announce any matters that require disclosure. Other companies reportedly interested in earlier rounds of negotiations included two other Japanese giants, Mitsubishi Corp. and Mitsui & Co., as well as other Asian-based firms, Noble Group and Wilmar International Ltd.

K+S sells N business to EuroChem

News, News Briefs, Western

Kasel — Germany’s K+S Aktiengesellschaft has signed an agreement with EuroChem regarding the sale of K+S Nitrogen. The transaction, with an enterprise value of €140 million, is likely to be closed at the end of the second quarter. The effective economic date of the transfer is March 31, 2012. The sale is subject to a number of factors, including approval by the EU antitrust authority. For K+S, the sale will generate a book profit of around €70-80 million, depending on the net earnings of K+S Nitrogen generated by the time the transaction is closed, together with other effects. From now on, K+S Nitrogen will be stated as a “discontinued operation.” In financial year 2011, K+S Nitrogen generated revenues of €1,156.8 million and operating earnings EBIT I of €69.4 million. This fits into K+S Group plans to focus on its two main segments – Potash/Magnesium and Salt. It sold its COMPO fertilizer unit to Triton last year. K+S Nitrogen markets nitrogen fertilizers, with a focus on major customers in agriculture and special crops such as fruits, vegetables, and grapes. In addition to the fertilizers produced by EuroChem Antwerpen and delivered for it by BASF, K+S Nitrogen also markets the goods of other European fertilizer producers. The company is based in Mannheim, Germany, and employs about 180 people worldwide. EuroChem produces primarily nitrogen and phosphate fertilizers, as well as certain organic synthesis products and iron ore. It is vertically integrated, with activities spanning mining and natural gas extraction to production, logistics, and distribution. The company is currently developing two sizeable potash deposits in Russia with the Gremyachinskoe and Verkhnekamskoe greenfield projects.

K+S reports best 1Q for potash/mag

News, News Briefs, Potash Muriate, Western

Kasel — K+S Group reported the best ever first quarter for its Potash and Magnesium unit, with EBIT I (operating income) of €208.5 million on revenues of €580.1 million,
compared to the year-ago €202.2 million on revenues of €578 million. The company is sticking with earlier forecasts and believes the unit will achieve volumes of some 6.9 million mt for the year, similar to those of 2011. Nitrogen income was off slightly, at €32.2 million on revenues of €359.5 million from the year-ago €33.7 million on revenues of €328.1 million. Overall, K+S Group results were off for the quarter due to the very weak Salt business, which suffered through a warm winter. Company-wide income was €281.1 million on revenues of €1.44 billion from the year-ago €368.4 million on revenues of €1.63 billion. Salt income was only €45.5 million on revenues of €458.5 million, compared to the year-ago €139.1 million on revenues of €682.5 million.

Rentech Nitrogen 1Q income soars

California, News, News Briefs

Los Angeles — Rentech Nitrogen Partners LP, which owns a nitrogen plant in East Dubuque, Ill., reported net income of $19.4 million ($0.51 per diluted unit) on sales of $38.5 million for the first quarter ending March 31, 2012, compared to the year-ago income of $3.5 million on sales of $23.9 million. Operating income was $19.4 million, up from $9 million. EBITDA was $21.9 million, up from $10.5 million. Rentech Nitrogen GP LLC CEO D. Hunt Ramsbottom said the results exceeded expectations. “An early spring application window, strong nitrogen demand, strong plant production and on-stream time, and low natural gas prices contributed to the exceptional results we
reported today. During the quarter, we operated the plant at maximum capacity to take advantage of the strong market dynamics. We declared our first cash distribution of $1.06 per unit, which is better than anticipated. Based on current market conditions, we expect strong margins this year, which should enable us to achieve total cash distributions for the year in the range of $2.86 per unit.” The company projects 12-month EBITDA of about $120 million. During the quarter, Rentech delivered 30,000 st of ammonia at an average delivered price of $673/st, up from the year ago 20,000 st ($609/st). For UAN, it delivered 34,000 ($327/ st) versus the year-ago 30,000 st ($206/st). The company delivered 13,000 st of other nitrogens, up from the year-ago 12,000 st. Natural gas costs used in production were down at $4.21/mmBtu from $4.84/mmBtu. Overall, ammonia production was up, at 78,000 st from 75,000 st. The company upgrades much of its ammonia into UAN and other products, with the remainder available for sale. For 2012, Rentech expects to deliver 144,000 st of ammonia. As of March 31, 38 percent, or 55,000 st, of this had been locked in at $693/st. It expects to deliver 290,000 st of UAN, and as of March 31, 34 percent, or 99,000 st, of this was locked in at $361/st. It expects to buy 10.5 million mmBtus of gas, and as of March 31, 68 percent, or 7.1 million mmBtus, were bought at $3.78/mmBtu.

The Andersons reports record Q1 results

Midwest, News, News Briefs

Maumee, Ohio — Fueled by increased earnings from its Grain, Rail, and Plant Nutrient divisions, The Andersons Inc. reported record net income of $18.4 million ($0.98
per diluted share) on revenues of $1.1 billion for the first quarter ending March 31, 2012, compared with $17.3 million in net income ($0.93 per diluted share) on $1 billion in revenues in last year’s first quarter. The Plant Nutrient Group posted operating income of $5.8 million on revenues of $175 million for the quarter, compared with $5.1 million and $124 million, respectively, in last year’s first quarter. The income improvement was attributed entirely to increased volumes following good application weather this March and pent-up demand that carried over from a wet fall season. Margins for the group were down slightly from the prior year due to lower price appreciation. While acknowledging the good first-quarter performance, CEO Mike Anderson cautioned that “the second quarter will be challenging, primarily due to the expectation of a significant drop in wheat space income in the Grain Group.” Anderson also said lower margins are expected during the second quarter in both the Ethanol and Plant Nutrient groups. “We do believe, however, that these factors will be partially offset by significantly increased performance in Rail. Overall, we expect 2012 to be our second best year ever,” he said. CFO Harold Reed told analysts the company has seen little forward buying of fertilizer tons. “It’s quite hand-to-mouth,” he said. “We’re not interested in carrying too much more product than we figure we’re going to use here in this busy spring. We’re going to try to regroup in the summer and see what prices do.” Given the early crop, however, Reed said the Plant Nutrient Group “could see a pretty good sized fourth quarter” in terms of fertilizer applications. “It will be an interesting equation between probably lower corn prices and probably larger demand to put fall nutrients down,” he said. “So it’ll be a balance for the fall, but it’s hard to tell about prices right now.” As for the 2012 crop mix in the company’s trade area, Reed said there has been virtually no shift from corn to soybeans. Anderson added, however, that the earlier-than-normal spring may result in more double-crop soybeans planted after the winter wheat harvest.

Scotts sales up, earnings not

Midwest, News, News Briefs

Marysville, Ohio — Scotts Miracle-Gro Co. net sales were up 4 percent in the second quarter ending March 31, 2012, to $1.17 billion, up from the year-ago $1.13 billion;
however, net income was off 28 percent to $127.2 million ($2.05 per diluted share), compared to the year-ago $177.6 million ($2.63 per share). Adjusted EBITDA was off 11 percent, to $236.7 million from $267.3 million. “We are well positioned as we conclude the peak weeks of the lawn fertilizer season and move into the peak of gardening activity,” said Jim Hagedorn, Scotts chairman and CEO. “We have seen strong consumer engagement across the U.S. whenever the weather has cooperated, as evidenced by the 20 percent increase in consumer purchases for the second quarter.” Hagedorn said the company is on track to deliver full-year sales growth of 6-8 percent and earnings per share of $2.65-$2.85. He stressed to analysts that the company makes all of its money in the second half of the year, and that the company is ahead of internal targets. Six-month earnings were off 51 percent, to $53.3 million ($0.88 per share) on sales of $1.38 billion from the year-ago $109.7 million ($1.66 per share) on sales of $1.36 billion. Adjusted EBITDA was off 21 percent, to $152.1 million from $192.3 million. Wall Street was not impressed. Scotts shares fell 16.1 percent to close at $46.14 on May 8, the day of the earnings announcement, to a four-month low. It closed May 7 at $55.00. The company said demand in the last two weeks in March was “explosive,” and Hagedorn said the company was “barely hanging on” in order to meet demand. He said the company incurred some higher than expected distribution expenses to meet the early spike in demand. The company also saw disproportionate growth of some of its lower margin products, like mulch. He said the first week of May was the second biggest week in company history.

Acquisition costs lower Chemtrade 1Q earnings

Eastern Canada, News, News Briefs

Toronto — Chemtrade Logistic Income Fund’s acquisition of Marsulex Inc. in 2011 served to boost its revenues in the first quarter, but charges due to the deal lowered income. First-quarter net income was C$4.2 million ($0.10 per diluted unit) on revenues of $227.9 million, down from the year-ago $13.4 million ($0.41 per unit) on revenues of $169.6 million. Revenues also benefited from increased volumes and higher sulfuric acid prices. Earnings were impacted by higher levels of depreciation and amortization from the acquired assets, as well as a non-cash loss of $8.6 million from the appreciation of Chemtrade’s convertible unsecured subordinated debentures. Finance costs were also higher.

Leaks impact Orica 1Q

Ammonia, News, News Briefs

Melbourne — Orica Ltd. reported a 4 percent drop in net profit after tax for the first quarter ending March 31, 2012, to A$253.3 million from the year-ago $263.8 million. Revenues were up 12 percent, to $3.29 billion from the year-ago $2.95 billion. Ammonia and related leaks at the Kooragang Island facility cost the company some $90 million of operating income during the quarter. Orica said the ammonia plant successfully returned to production in February, and the company continues to work on improving its engagement with the community. Globally, Orica said ammonium nitrate volumes were up 8 percent on strong demand in Australia, Asia, Latin America, and the Nordics, which more than offset weaker demand in the U.S., which was impacted by lower demand for coal due to the mild winter. In other news, Orica said its new ammonium nitrate plant in Bontang, Indonesia, started production in April.