All posts by webster@kennedyinfo.com

Majority of CVR shareholders favor Icahn offer; takeover battle to be decided at annual meeting

Featured, News

Billionaire investor Carl Icahn on April 3 announced that approximately 55 percent of the outstanding shares of CVR Energy’s common stock had been tendered pursuant to the offer by his affiliates to acquire the company. This amount, when added to the shares already held by the Icahn group, constitutes over 69 percent of the outstanding shares. The tender offer has been extended and will now expire at 5:00 p.m., New York City time, on April 30, 2012.

Icahn can only buy the shares if the CVR board of directors removes a poison pill, which the board has vowed not to do. As a result, Icahn must now lodge a proxy fight to oust the current board in favor of his own nine nominees. Icahn promises that once his own nominees take charge they will remove the poison pill, pay shareholders the $30 per share plus an eventual contingency, and then sell the company.

In the meantime, shareholders can withdraw their offer to sell to Icahn. So the question becomes – will the same shareholders who wanted the $30 per share also be willing to oust the current board in favor of Icahn’s nominees?

“Mr. Icahn acknowledges that he cannot at this time purchase any shares tendered in his offer, and such shares can be withdrawn at any time,” said the CVR board. “The real choice for stockholders will be at our annual meeting, where they will decide whether to elect Mr. Icahn’s hand-picked nominees in place of our qualified and experienced board of directors with their track record of delivering value.” The CVR board has chided the Icahn nominees as lacking refinery and fertilizer experience.

Icahn said there is a clear mandate in favor of his offer, and that it is the duty of the board to carry out the wishes of shareholders as quickly as possible. He called for a shareholder meeting in late April, instead of the one proposed by the board in mid-May. He said he stands willing to pay some $2.26 billion to purchase the shares that he does not currently own. Icahn already owned approximately 15 percent of the shares.

CVR has been willing to sweeten the pot for current shareholders somewhat by selling off shares of its majority-owned nitrogen company, CVR Partners LP, and returning much of that to them as a special dividend. As of April 2, CVR Partners adjusted its projected revenues from the sale to $301 million from an earlier $250 million. The company expects to sell up to 11.5 million units at a maximum price of $26.24. However, Icahn seeks to sell off all of CVR Energy Inc., as well as its 70 percent stake in CVR Partners LP.

CVR also issued a statement last week aimed toward employees, saying the Icahn news has no impact on CVR Energy’s immediate future. “It is important to note that this activity also has no impact on our day-to-day operations at CVR Energy, and nothing about your job changes as a result of this process. All of us here have worked hard to deliver results, and we will continue to pursue our successful strategy. We are confident that our shareholders will continue to support the management and our board at our 2012 annual meeting.”

Plant outages, an early season, and heavy demand drain N supplies, drive up prices

Featured, Midwest, News, Southern Plains, UAN

A number of plant outages, coupled with brisk demand that was coming much earlier than normal, left nitrogen inventories stretched very thin in the Midwest and Southern Plains regions in early April. Those factors also caused prices to ramp up quickly, prompting some to liken the rapid surge to the runaway markets of 2008.

CF Industries Holdings Inc. alerted customers late on April 4 that it will not be able to load anhydrous ammonia out of its Aurora, Neb., terminal until further notice. One day earlier, Koch Nitrogen sent out an alert that it has suspended UAN truck loading at Beatrice, Neb., until further notice. No other details were provided.

Those announcements followed a March 31 notice from CF that it had suspended loading of UAN-32 and UAN-28 at its Woodward, Okla., facility until further notice. No other details were available, but it was the second time in less than a month that UAN loading at Woodward has been suspended. Back on March 9, CF alerted customers that UAN loading at that location was suspended, but the company reported on March 12 that UAN loading had resumed there on an allocated basis (GM March 19, p. 1).

UAN capacity at Woodward is 825,000 st/y. The Woodward facility also produces 440,000 st/y of ammonia, but only 100,000 st of that is available for sale as a finished product, with the rest upgraded to UAN.

LSB Industries Inc. also gave an update last week on its Pryor, Okla., nitrogen plant, which was shut down March 15 for unplanned maintenance (GM March 26, p. 1). LSB reported that the ammonia plant resumed production March 22 and is currently producing at the rate of 625 tons per day, for sale directly into the fertilizer market.
However, the maintenance undertaken at the urea plant, which produces UAN, is not complete. As a result, the Pryor facility did not produce UAN during the month of March. LSB said it will announce when UAN production at Pryor has resumed, which it expects later this month.

LSB estimates that the maintenance downtime will result in approximately $4 million less operating income than otherwise would have been expected in March, and approximately $1.0 million less in April 2012.

In addition to the unplanned outages, industry contacts said that the reluctance of farmers and dealers to commit earlier to spring tons has left the distribution system vulnerable to outages, and the earlier-than-normal demand has tapped out supply. With USDA projecting nearly 96 million acres of corn, spring fieldwork starting a full three weeks ahead of normal in many locations, and unseasonably warm weather creating a frenzied pace that has allowed few interruptions to recharge inventories, sources reported difficulty sourcing UAN, ammonium nitrate, urea, and anhydrous ammonia out of many Midwest terminals in early April.

“It all stems from farmers not wanting to take risks, so dealers didn’t take the risk, and terminals didn’t have product in place,” said one industry source last week. Added another contact, “If we can’t get the farmer to give us any help on commitments, we can’t afford to take the risk.”

“There are days I think farmers would just prefer $3 corn if it meant removing these earthquakes in pricing and supply,” said one dealer.

“Irrational exuberance” and a “logistics train wreck” were phrases used by a number of industry sources last week to describe prices and supply dynamics that were changing daily, if not hourly. The NOLA urea market saw a more than $100/st increase from the beginning of the week to the end, and UAN was surging as well. Suppliers were also trotting out new and significantly higher postings out of regional terminals as the week advanced, provided the tons were there to sell.

Effective April 6, Koch reposted urea at $740/st FOB Enid, Okla., up $50/st from its April

Sulfur

Market Watch, Sulfur, Tampa, Vancouver

Tampa: Negotiations between phosphate producers and sulfur suppliers were underway last week for new second-quarter molten sulfur prices delivered to Tampa, but chances were that a settlement will not be reached until around the end of the month. That’s pretty normal.

Sources said sulfur suppliers were seeking an increase of $10-$15/lt above the first quarter level. That position was in line with world sulfur prices, which have risen about that much in recent weeks. However, the phosphate industry was looking for something closer to a rollover from the previous quarter.

Meanwhile, refinery capacity operating rates for the week were up last week, moving from 84.5 percent to 85.7 percent, an increase of 1.2 percent, according to the U.S. DOE.

Vancouver: Sulfur prices in China have risen to $210-$220/mt DEL, an increase of $10-$20/mt during the past couple of weeks. That price difference was being reflected in Vancouver for new spot sales. Negotiations for new contracts were also underway last week, and a source said some key contracts had been settled at $200/mt FOB.
West Coast: Spot prices for prill on the West Coast were tracking Vancouver last week.

Potash

China, Eastern Cornbelt, Market Watch, Potash Muriate, Southern Plains, U.S. Gulf, Western Cornbelt

U.S. Gulf: Barges were a tad weaker last week at $480-$490/st FOB. Sources said product is moving, but there is enough in inventory so that prices are flat to weaker.
Eastern Cornbelt: The potash market was reported at $525-$540/st FOB Eastern Cornbelt warehouses, depending on grade and location.

Western Cornbelt: Potash was pegged at $525-$540/st FOB most regional warehouses in early April.

Southern Plains: Potash was reported at $525-$535/st FOB Southern Plains warehouses. The potash market FOB Carlsbad, N.M., continued to be quoted in the $530-$535/st range, depending on grade, but sources said they were certain some deals could be had.

South Central: Most sources pegged the potash market solidly at the $525/st level FOB South Central warehouses, and product has been moving to the field. There were reports of some outages last week at regional terminals, but that was not confirmed.

Southeast: Rail-delivered potash pricing in the Southeast region was generally quoted in the $560-$580/st range, depending on grade and destination.

China: The Arab Potash Co. Ltd. says it has agreed to supply China’s Sinochem Fertilizer Macao Commercial Offshore Ltd. with 250,000 mt of potash during the first half of 2012. The two parties agreed to keep the prices for this quantity unchanged. They also agreed on certain optional quantities, to be declared at a later time.

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: Finally, the Central Florida phosphate market was moving into balance with the NOLA DAP barge market last week. In fact, it was beginning to trail behind the river, which should be the case.

Nevertheless, it still wasn’t moving – either in terms of price or activity. Product being shipped from Central Florida last week was either based on what was ordered earlier, or was moving directly to warehouses and terminals, mostly owned by Mosaic.

That can’t last. The USDA estimated that nearly 96 million acres of corn will be planted this season, and that will take huge amounts of fertilizer, including phosphate. At the moment, though, nitrogen products were in the limelight and were casting a shadow over phosphate.

Inventories were still on the low side in Central Florida last week, and that was mostly due to export business. That will change as Mosaic returns to full production after somewhat curtailing it processing facilities during the first quarter.

Phosphate producers were in the early stages of negotiating with their major sulfur suppliers for new second-quarter molten prices for Tampa. After remaining relatively stable during the first quarter, world sulfur prices appeared to be up slightly during the past couple of weeks.

The Central Florida DAP price range was unchanged last week at $460-$465/st FOB. CF Industries was posted at the $460/st FOB mark, down from $465/st FOB. Mosaic was also at around $460/st FOB, depending on quantity. MAP was listed at a $20/st premium to DAP by Mosaic in Central Florida, about the same difference as from traders, and continued to be in short supply. PCS Sales was selling at prices comparable to the market.

U.S. Gulf: The bulls weren’t exactly running last week, but they were walking pretty fast – at least in the NOLA DAP barge market.

During the first week of April and the beginning of spring, NOLA DAP barge transactions began picking up speed in terms of both activity and price. The only thing that was surprising was that it hadn’t happened sooner.

Terminals were just beginning to get to work getting rid of some of those full bins of phosphate, and that was expected to gain speed during the next several weeks as more farmers get ready to plant.

One odd little twist was MAP. While DAP was moving, MAP was beginning to slide backwards and was not keeping pace. The price differential between DAP and MAP had been as great as $35/st FOB a month ago, but was down to as little as $3/st FOB late last week. The reason was not clear. It was not even attributable to domestic versus Russian, because neither was bringing a big price difference.

There was a big difference between prices for Russian and domestic DAP, however, with sources reporting as much as $38/st FOB more for domestic.

Of course, there was a big spread last week for domestic NOLA DAP barges as well. Between the beginning of the week and the end of the period, prices went up as much as $27/st FOB. Naturally, NOLA DAP barges in position – or at least on the water and moving – were commanding a higher price, but all prices were based on FOB NOLA. Toward the end of the week, even barges about to be loaded were coming in close to the top price in the week’s range.

By late last week, most terminals had either raised their phosphate prices or were planning to very soon due to the higher cost of NOLA DAP barges. Terminal prices moved to a higher range of $480-$515/st FOB, depending on location and when the bins were filled. Terminal prices were almost certain to increase this week.

Crop prices reversed the trend for the previous couple of weeks, and moved up across the board in early April. Prices for corn futures rose from $5.2925/bushel the previous week to $5.4725/bushel for December 2012. The corn price for Decem

Ammonium Sulfate

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

Eastern Cornbelt: Granular ammonium sulfate was pegged at $405-$415/st FOB in the region. Honeywell’s March 26 postings included $415/st FOB Danville, Ill., with mid-grade ammonium sulfate referenced at $385/st FOB Danville and Byron, Ill.

The ammonium thiosulfate market was quoted at $360-$380/st FOB in the region.

Western Cornbelt: Granular ammonium sulfate pricing had reportedly firmed to $405-$415/st FOB in the region. Honeywell’s March 26 granular ammonium sulfate postings included $415/st FOB Dubuque, Omaha, and St. Louis, with mid-grade ammonium sulfate referenced at $385/st FOB Omaha.

The ammonium thiosulfate market was pegged at $380-$385/st FOB in the Western Cornbelt.

Southern Plains: Ammonium sulfate was also up from last report, and product was moving briskly for topdress demand. A Kansas source quoted the market at $375/st FOB at midweek. Effective April 2, postings FOB Plainview, Texas, firmed to $385/st FOB for granular, $375/st FOB for coarse, and $370/st FOB for standard.

Also effective April 2, American Plant Food Corp.’s granular ammonium sulfate postings in Texas firmed $20/st from March 1 reference prices, moving to $345/st FOB Freeport, $355/st FOB Galena Park, $370/st FOB Fort Worth, and $385/st FOB Littlefield. Coarse ammonium sulfate postings from the company moved to $335/st FOB Freeport, $345/st FOB Galena Park, $360/st FOB Fort Worth, and $375/st FOB Littlefield, and standard grade postings firmed on April 2 to $330/st FOB Freeport and $370/st FOB Littlefield. APF’s N-Pac Compacted posting firmed on that date to $360/st FOB Galena Park.

Ammonium thiosulfate was pegged at $315-$325/st FOB in the Kansas market.

South Central: The granular ammonium sulfate market had firmed to $360-$375/st FOB in the South Central region, with the low end reported out of Memphis and Arkansas terminals. Effective April 2, APF’s granular ammonium sulfate postings Fob Mermentau, La., firmed to $375/st.

The ammonium thiosulfate market was pegged at $365-$385/st FOB in the region, also up from last report.

Southeast: Ammonium sulfate pricing was up from last report. One source reported ordering granular tons out of Hopewell, Va., in late March at the $330/st FOB level, but new orders were not being accepted there in early April. DSM’s granular ammonium sulfate postings had firmed to $345/st FOB Augusta, Ga., $350/st DEL in the Carolinas, $360/st DEL in Alabama and Georgia, and $370/st DEL in Florida.

Ammonium Nitrate

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

U.S. Gulf: While some were still calling the last done business in the $360-$370/st FOB range, others said product was simply no longer available at any price.

Western Cornbelt: Ammonium nitrate was in tight supply in the Western Cornbelt, and sources said the dealer market had firmed to $440-$450/st FOB in the region in early April.

Southern Plains: Ammonium nitrate pricing had reportedly firmed to $430-$440/st FOB Catoosa, but finding tons for sale was another matter. Several sources said nothing was available at the port at midweek, while some were calling the market as high as $450/st FOB for limited tons on April 5.

South Central: Ammonium nitrate was virtually unavailable out of regional terminals in early April. Some had stopped taking new sales in order to take care of prepay orders, and others were simply out of product. “We have some tons coming in May, but for now it’s gone,” said one contact at midweek.

One source said the last ammonium nitrate price he’d heard out of Yazoo City, Miss., was $400/st FOB, but nothing was available there at midweek. Another quoted the last price out of Memphis, Tenn., at the $420/st FOB level, but none was for sale there, either.

Southeast: Ammonium nitrate pricing was firming in the Southeast, reportedly moving from $400/st to $420/st FOB Tampa in early April.

Nitrogen Solutions

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

U.S. Gulf: Like urea, UAN barges continued to move up last week. And with outages at various plants, pressure on UAN was heightened.

Barge trades were reported at $370-$390/st ($11.56-$12.19/unit) FOB, with quotes later in the week as high at $400-$405/st ($12.50-$12.66/unit) FOB. East Coast DEL on a vessel basis was called $400/mt.

Eastern Cornbelt: Sources reported a wide range of UAN prices in the Eastern Cornbelt last week due to a rapidly firming market and very tight supply. “UAN is about two or three weeks away from joining urea as a train wreck, and for the Eastern Cornbelt this will be a really big issue,” said one source at midweek.

UAN-28 pricing out of the Cincinnati market was pegged at $335/st ($11.96/unit) FOB on the low end for confirmed business, but sources said dealer postings there firmed to $345-$360/st ($12.32-$12.86/unit) FOB as the week advanced. Out of inland terminals in Ohio and Indiana, the UAN-28 market was quoted at $350-$370/st ($12.50-$13.21/unit) FOB last week.

On a rail-delivered basis, sources quoted the UAN-32 market at the $390/st level ($12.19/unit) for recent business, but list prices had reportedly moved up dramatically to $425-$435/st ($13.28-$13.59/unit) rail-DEL in the region in early April.

Western Cornbelt: The UAN-32 market was reported at $408-$425/st ($12.75-$13.28/unit) FOB Western Cornbelt terminals at midweek, up $40-$45/st from the previous week and some $100/st higher than regional UAN pricing in mid March. Some sources were speculating that $440-$450/st ($13.75-$14.06/unit) FOB would be the new dealer reference at some locations before the weekend.

Southern Plains: UAN-32 pricing in the Southern Plains was up dramatically from last report, and in very tight supply. The market was pegged at $380-$400/st ($11.88-$12.50/unit) FOB production points, but most sources were calling it a firm $395-$400/st ($12.34-$12.50/unit) FOB as the week advanced, provided you could find any tons last week. “If there’s a cheaper quote out there, they don’t have any,” said one contact at midweek. “You can hardly find any tons for sale.” The upper end of the range was tagged as high as $425/st ($13.28/unit) FOB out of terminals in Kansas on a spot basis.

South Central: The UAN-32 market was quoted in a broad range at $385-$425/st ($12.03-$13.28/unit) FOB regional terminals, and was described by one source as “the next big problem” due to unavailability and rapidly firming prices.

The low end of the regional range was quoted on a spot basis very early in the week, but by midweek there were no tons available at the $385/st ($12.03/unit) FOB level, and sources were talking of a minimum pricing level of $400/st ($12.50/unit) FOB. One contact quoted a firm terminal price of $415/st ($12.97/unit) FOB for limited tons on April 4, and another confirmed sales at the $425/st ($13.28/unit) FOB level on April 5, with speculation that the market will be at the $440-$450/st ($13.75-$14.06/unit) FOB level for the next round of sales.

Southeast: Sources pegged the UAN-30 market at $315-$325/st ($10.50-$10.83/unit) FOB Wilmington and Norfolk, Va., and moving up. There were reports of UAN-32 tons still in the $325-$330/st ($10.16-$10.31/unit) FOB range in Georgia at midweek, but sources there talked of spot prices “all over the board” as the week advanced.

Urea

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

U.S. Gulf: Urea prices led the way for other nitrogens last week, bolting out of the gate as good weather, good demand, and the prospects for 96 million acres of corn all took hold.

The market essentially ran up $100/st FOB, starting in the low $600s/st FOB near where it had left off the week before, and easily topping the $700/st FOB mark. A conservative read on the range was given as $620-$725/st FOB, with quotes and expectations of $730-$735/st FOB as the week ended.

Sources said most buyers were looking for prompt material ready to go in April. However, May product was reported to be moving up. May trades were increasing as the week progressed, with the range called $535-$615/st FOB.

Sources debated whether there would be enough product for the spring season, with one saying the Cornbelts would still require a lot more urea. Others said it would be very risky for importers to bring in more product now, as an early start to the season may also mean an early end to the season. As a result, any tons coming in later might find a completely different price and demand scenario.

Prills, though thinly traded and in short supply, were trying to follow, with sources reporting trades in the $550-$630/st FOB range. Others argued they should be trading closer to granular.

Eastern Cornbelt: Granular urea had firmed dramatically to $690-$740/st FOB in the region as the week advanced, but product was unavailable at some locations.

Western Cornbelt: The granular urea market was quoted in an incredibly wide range at $650-$750/st FOB Western Cornbelt terminals last week, depending on location, time of the week, and whether pricing had been adjusted to accurately reflect new replacement costs. Those at the low end of the range acknowledged that “prices have moved very fast and warehouse prices have not caught up yet,” but were “moving up about every day.” The upper end of the range was reported out of terminals in the Missouri market on April 5.

Southern Plains: The granular urea market was pegged at $690-$740/st FOB the port of Catoosa last week, reflecting a steady run-up in pricing as the week advanced. Sources confirmed brokered sales in the $700-$715/st range at the port midweek and “moving up with every phone call,” said one source on April 4.

Effective April 6, Koch reposted urea at $740/st FOB Enid, Okla., up another $50/st from its April 4 posting of $690/st FOB – $125/st higher than its March 24 list price, $145/st higher than its March 22 reference price, and a full $165/st higher than Koch’s March 7 urea posting at Enid and Inola/Catoosa.

South Central: Sources quoted the granular urea market in the $685-$690/st FOB range out of Arkansas and Tennessee terminals at midweek, but a surging NOLA market was prompting some pricing changes late in the week. One regional supplier said he had moved his terminal price to $750/st FOB on April 5, while others reported that they were not quoting urea due to tapped out inventories.

Southeast: Granular urea had reportedly firmed from $670/st to $690/st FOB Wilmington, N.C., for limited tons as the week advanced, with reports that most other locations were out of product last week. Those prices were up some $120-$130/st from levels reported in mid-March.

Indonesia: Pusri was able to sell half of the 60,000 mt it offered in its March 30 tender. Dreymoor walked off with the 30,000 mt with a bid of $470.10/mt FOB.

Pusri set the minimum price at $470/mt FOB. In the run-up to the tender, industry sources expected to see prices in the low $450s/mt FOB. The higher floor price set by Pusri indicates the producer is more bullish than many of the traders.

Ammonia

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

U.S. Gulf/Tampa: While there was nothing new to report on the Tampa and NOLA markets last week, they were among the few nitrogen categories to see no change. As nitrogen prices moved up at most price points, natural gas prices continued to weaken, settling at $2.089/mmBtu April 5 – less than a dime away from cracking the $2.00/mmBtu mark.

Eastern Cornbelt: Fieldwork continued at a frenzied pace in the Eastern Cornbelt in early April, with corn planting underway in some locations. One Illinois source estimated that spring fieldwork was at least two weeks ahead of normal in his location, but many growers are waiting until after Easter to start seeding corn due to the crop insurance date and concerns about the potential for frost damage.

As of April 1, USDA reported that fully 5 percent of the Illinois corn crop was planted, along with 1 percent of the crop in Indiana.

The anhydrous ammonia market had reportedly firmed to $700-$720/st FOB Eastern Cornbelt terminals, with the high in Indiana and the low reported for prompt tons out of Illinois terminals last week. Numerous locations were sold out last week, prompting one incredulous source to ask, “Where in the heck are they putting all this ammonia?”

Western Cornbelt: Although ammonia tons were being pulled for as low as $615/st FOB in Nebraska late the previous week, sources said the regional market had ticked up to $660-$690/st FOB last week, with the low quoted for very limited tons in the Iowa market and the upper end reported in Missouri.

Sources reported five-hour truck lines where tons were available, but many Iowa ammonia terminals were sold out as the week advanced, requiring dealers to cast a broad net. Tons were reportedly being shipped from the Oklahoma market to Iowa, Illinois, and Indiana in early April. “It’s being done if you can find the trucks,” said one source.

Fieldwork and planting activity continued at a “fast and furious” pace in the Western Cornbelt last week, according to one Missouri contact, with some sources estimating that progress is at least three weeks ahead of normal in their location.

Corn planting as of April 1 was 7 percent complete in Missouri and 1 percent complete in Nebraska, USDA reported. A Nebraska source said growers in his trade area will begin corn planting in earnest the week after Easter, but some were already seeding in early April.

Southern Plains: Ammonia movement in the Southern Plains region was winding down. Sources tagged the market at $570-$590/st FOB regional terminals, with delivered tons quoted at $610/st in northern Kansas. Effective April 4, Koch posted anhydrous ammonia at $565/st FOB Enid, Okla., $570/st FOB Dodge City, Kan., $580/st FOB Conway, Kan., and $585/st FOB Clay Center, Kan. On April 5, Koch’s postings at Conway and Clay Center firmed to $590/st FOB.

South Central: Anhydrous ammonia pricing to the dealer had firmed significantly in the South Central region, and suppliers were reportedly allocated at some terminals. The dealer market was pegged at $695-$700/st FOB last week, with the low reported at Memphis and the upper end FOB Henderson, Ky. There were reports that tons were sold out at Henderson as the week advanced.