All posts by webster@kennedyinfo.com

CVR should be put up for sale, says Icahn

Breaking Industry News

Billionaire investor Carl Icahn, who recently bought over 10 percent of CVR Energy Inc., told CVR Chairman, CEO and President Jack Lipinski Feb. 13 that CVR shareholders would be better served if CVR put itself up for sale. CVR, in addition to a refinery at Coffeyville, Kan., owns control of CVR Partners LP, an adjacent nitrogen plant.

Icahn told Lipinski that it is his belief that there are three or four possible acquirers that could benefit from the synergies that could be realized from a combination with CVR, and that they are better able to hedge in the refinery business.

According to Securities and Exchange Commission filings, Lipinski said he would take the suggestions under advisement and discuss them with his board of directors.
Icahn has until this Friday, Feb. 17, to make proposals and nominate directors for the 2012 CVR shareholder meeting.

Agrium reports record 4Q, annual earnings

Featured, News, Potash Muriate

Agrium Inc. reported a 43 percent increase in consolidated net earnings, to $193 million ($1.20 per diluted share) on sales of $3.18 billion for the fourth quarter ending Dec. 31, 2011, up from the year-ago $135 million ($.86 per share) on sales of $2.4 billion.

Retail fourth-quarter gross profit was up, at $452 million on sales of $1.83 billion from the year-ago $351 million and $1.32 billion, respectively. However, EBIT was off at $37 million from $46 million.

Agrium said Retail crop nutrient sales reached $1 billion during the quarter, compared to the year-ago $827 million. It said the 25 percent sales increase was due to significantly higher nutrient prices and the addition of the Landmark business in Australia. This was partially offset by lower North American sales volumes, which were down 9 percent due to a shorter 2011 fall application season. Crop nutrient gross profits were up only slightly for the quarter, to $142 million from the year-ago $140 million.

Wholesale fourth-quarter gross profit was $556 million on sales of $1.45 billion, up from $340 million on sales of $1.2 billion. EBIT was $507 million, up from $315 million. Agrium cited higher realized prices and margins for all major nutrients and strong sales volumes despite global economic uncertainty.

The company particularly noted increased international nitrogen sales from its Profertil facility in Argentina, as well as increased ammonia sales in the U.S. Fourth-quarter Wholesale domestic ammonia sales were 377,000 mt at an average price of $638/mt, up from the year-ago 314,000 mt and $466/mt, respectively.

Nitrogen gross profit doubled to $322 million on sales of $595 million, up from the year-ago $160 million on sales of $397 million. Total tons sold were 1.06 million mt, up from 980,000 mt. The average price was $562/mt, up from $406/mt, while the margin per mt moved up to $304/mt from $163/mt.

Like other major potash suppliers, North American volumes were down during the quarter, while Offshore volumes were up. Domestic volumes were down 33 percent, to 177,000 mt from the year-ago 236,000 mt. The average domestic price, however, was still up at $581/mt from $444/mt. Potash gross profit was up at $121 million on sales of $188 million, versus the year-ago $96 million on sales of $158 million. Offshore volumes were 221,000 ($386/mt), up from the year-ago 181,000 mt ($292/mt). Total potash volumes were 398,000 mt ($473/mt), down from 417,000 mt ($378/mt). The average potash margin was $304/mt, up from the year-ago $228/mt.

Phosphate gross profit was up, at $89 million on sales of $232 million versus the year-ago $54 million and $165 million, respectively. Sales volumes were up at 285,000 mt with an average price of $813/mt and margins of $313/mt, compared to the year-ago 246,000 mt, $672/mt, and $218/mt, respectively.

Advanced Technology reported a fourth-quarter gross profit of $38 million on sales of $146 million, up from the year-ago $24 million and $99 million, respectively. However, EBIT was a negative $56 million due to a $61 million impairment the company took for its investment in Hanfeng Evergreen Inc. in China. Agrium said it no longer regards Hanfeng as being integral to its strategic growth plans; however, it says it plans to maintain its equity investment. The 2011 EBIT for the tech unit was $2 million.

Agrium also reported losses from discontinued operations of $134 million related to its Australian assets – $85 million due to an inventory write-off, and $37 million related to an investment in Hi-Fert Pty. Ltd.

Full-year net income was up 93 percent to $1.37 billion ($8.68 per share) on sales of $15.5 billion, up from the prior year $713 million ($4.51 per share) on sales of $10.7 billion.

Retail full-year gross profit was $2.3 billion on sales of $10.3 billion with an EBIT of $600 million, versus the prior year $

TFI conference draws record crowd

California, Featured, News

Approximately 700 industry representatives gathered at the Manchester Grand Hyatt in San Diego Feb. 5-8 for The Fertilizer Institute’s 2012 Fertilizer Marketing and Business Meeting. The attendance figure bested last year’s record number by at least 40.

Although the volatile urea market and softening ammonia market were certainly topics of conversation at the event, most representatives described market chatter at the event as relatively quiet. “I didn’t learn anything here that I didn’t know already,” said one, referring to pricing and supply.

Delegates heard from two keynote speakers at the event. One focused on the current challenges facing agriculture in California, while the other offered a forecast for global economics that described ongoing financial struggles for Europe, an “extraordinary shift” of global economic power from the west to China and India, and an improving U.S. outlook that is being buoyed by strong corporate profits but hamstrung by “dysfunctional” politics, the fiscal deficit, and a poor post-recession jobs performance.

Robert Powell, senior editor with The Economist, warned conference-goers to “get used to the idea that economic and political power is shifting eastward.” Powell talked about the rise of the Chinese consumer, with wage growth in that country growing by more than 11 percent annually, compared with 0.8 percent in the U.S. and 0.6 percent in Europe. He also detailed the rapid urbanization that is taking place in China, noting that the country will have 15 cities with populations of 25 million or more by 2025, and fully 200 cities that top the 1 million mark by that date.

Powell called India “the next story,” noting that it has doubled its growth rate in the last decade. He also talked of substantial economic growth in Southeast Asia, and said that Africa “may be the new frontier.” He warned, however, that the Middle East remains “complicated and unstable,” and that the Arab Spring will continue.

Powell said Europe will be in recession for much of 2012, and continues to face “hardcore austerity” measures that will weigh down growth. He warned that the breakup of the Euro-zone is a potential crisis going forward, as large areas are “simply not competitive” and past rescue strategies have failed. He said Europe’s fate rests with Germany’s willingness to respond and with another injection of liquidity from the European Central Bank.

Powell also addressed the natural gas picture, noting that the U.S. is now likely to become a natural gas exporter due to shale gas recovery. He said there is high demand for natural gas in Asia, where prices are more than five times that of the U.S. Europe’s natural gas demand is long-term bullish as well, he said.

Paul Wenger, president of the California Farm Bureau Federation, told delegates that “the next big fight” in California will likely be over fertilizer use, as the state is adopting nutrient management plans within 12 months. “It’s all about nitrates. It’s all about ground water,” he said. “This is the next big issue.”

Wenger talked of California’s extraordinary agricultural output, noting that the state produces some 350 different ag commodities. That diversity represents a challenge for a general agriculture organization like the Farm Bureau, he said, but he stressed that cooperation is needed between all facets of agriculture to “reach out and educate folks.”

Wenger said the greatest challenge to agriculture in the U.S. is not the weather or the markets, but burdensome regulations. As an example he cited California’s Proposition 2, which was approved in 2008 and drastically changed confinement standards for the state’s pou

Yara eyes world-class N expansion in Canada; reports best full year so far

Ammonia, Featured, News, Urea

Fresh off acquiring the majority stake in Burrup Holdings Ltd. (BHL), now Yara Pilbara, (GM Feb. 6, 2012) Yara International ASA told analysts Feb. 7 that it is eyeing the construction of a world-class plant at its existing Yara Belle Plaine nitrogen complex in Belle Plaine, Sask. Yara told Green Markets that this could mean an additional 1.3 million mt/y of urea and 800,000 mt/y of ammonia to accommodate the urea production.

Yara President and CEO Jørgen Ole Haslestad told analysts the expansion could be world-scale or smaller. He said the company has an excellent base infrastructure-wise, with the land and an existing plant. “We will be able to get gas and we have an area where we do have logistic advantages. So we are working on that full speed, and we will report on those expansions in the quarters to come.” The company said it already has the land, which would likely shave a year off the potential start-up time. Yara also noted the lucrative gas prices in the area, saying it has been traditionally partial to spot gas at Yara Belle Plaine, but would weigh other possible options, such as hedging.

Currently, Yara Belle Plaine capacity is 1 million mt/y urea, 700,000 mt/y ammonia, and 200,000 mt/y UAN.

In the meantime, Yara reported its best year so far for the year ending Dec. 31, 2011. Net income after non-controlling interest was up 38 percent to NOK 12,066 million on revenues of NOK 80,352 million, from the year-ago NOK 8,729 million on revenues of NOK 65,374 million. Earnings per share were NOK 41.99 versus the prior year NOK 30.24.

Fertilizer sales for the year were off 4 percent, to 19.52 million mt from 20.3 million, while industrial tons were up 7 percent, to 4.55 million mt from 4.25 million mt. Overall tons were down at 24.1 million from 24.53 million mt.

Fourth-quarter income more than doubled to NOK 3,386 million (NOK 11.84 per share) on revenues of NOK 20,730 million, up from the year-ago NOK 1,564 million (NOK 5.42 per share) and NOK 17,525 million. The company said the quarterly result was positively affected by the divestment of 16 percent of Yara Praxair that gave a net income of NOK 967 million. In addition, improved margins helped offset lower volumes.

Fertilizer sales were off 13.5 percent to 4.24 million mt from the year-ago 4.9 million mt, while industrial sales were up 5.5 percent to 1.15 million mt from 1.09 million mt.
Overall tonnage was down at 5.39 million mt from 6 million mt. Yara attributed the decline in volumes to concerns over the financial troubles of Greece and Italy, as well as a $150/mt drop in urea prices that caused buyers to sit on the fence.

Going forward, Yara says there is continued strong demand for is premium products, especially outside Europe. It noted good movement of urea to India and Brazil and cuts in exports from China and Egypt.

Yara expects the Lifeco nitrogen complex in Libya, which went down in February 2011 due to the Arab Spring, to start up in the third quarter, at marginal expense.
Yara expects Trinidad natural gas curtailments to continue in 2012, but supplies to improve gradually as the year progresses.

Shedding some more light on its recent purchase in Australia (GM Feb. 6, 2012), Yara said that Yara Pilbara’s natural gas price for many years to come will be significantly below a rumored $5.00/mmBtu. It said there was much more certainty with the new gas contract than with the former, and the company said it could not comment further, citing confidentiality agreements. A subsidiary of Apache Corp., Houston, both supplies the gas to Yara Pilbara and holds 49 percent of the company.

In addition, last week Yara released financial info regarding BHL showing a profit of NOK 310 million on revenues of NOK 1,171 million for the eight months ending Nov. 30, 2011. For the year ending March 31, 2011, BHL had a profit of NOK 88

Ammonia

Ammonia, Black Sea, California, Eastern Cornbelt, Market Watch, Middle East, Pacific N.W., U.S. Gulf, Western Canada, Western Cornbelt

U.S. Gulf/Tampa: Last week Mosaic bought a 23,000 mt cargo from Sabic for delivery to the U.S. Gulf at $400/mt CFR, down some $72/mt from the business concluded with Yara for February. The cargo is slated to load in February and be delivered in March. While some nattered over whether or not this was the true market, others said it is reality – regardless of whether it hits the shore in March or February, for all practical purposes it is the market.

In the meantime, numbers for recent NOLA barges sales have finally hit the market, with sources saying trades have occurred within the $430-$470/st FOB range for February loading.

Eastern Cornbelt: Anhydrous ammonia pricing in Eastern Canada was unchanged at $650-$670/st FOB terminals.

Western Cornbelt: Sources pegged the prompt ammonia market in the $600-$645/st FOB range in the Western Cornbelt in early February, with the upper end in Missouri and the low reported out of terminals in both Nebraska and Iowa on a spot basis.

California: The anhydrous ammonia market had reportedly slipped to $775/st truck-DEL in California, down roughly $50/st from last report. Aqua ammonia was referenced at the $206/st FOB level in the state.

Pacific Northwest: The anhydrous ammonia market in the Pacific Northwest was described as bearish. Dealer reference levels were holding at the $690/st DEL level in the region, but there was little new business to test the market.

Western Canada: The anhydrous ammonia market in Western Canada remained at $1,001-$1,010/mt DEL in Manitoba, $1,010-$1,019/mt DEL in Saskatchewan, and $1,019-$1,045/mt DEL in Alberta.

Middle East: Arab Gulf sources confirm a sale to Mosaic for the U.S. for March delivery of $400/mt CFR. The estimated netback keeps the price in the low $300s/mt FOB, said one source.

Sources say the lack of major interest from India and Southeast Asian buyers is putting pressure on several producers. While most of the ammonia moving out of the region is being done under contracts, sources say these shipments are not enough to match factory output.

At this point, said one trader, it does not appear as if any of the producers are ready to step back production to ease the supply side pressure.

Reports of loading difficulties in Yuzhnyy because of ice and bad weather prompted one trader to comment that the Arab Gulf suppliers might start receiving some additional spot material requests.

Black Sea: Bad weather and ice floes caused problems with loadings last week. The port was closed a couple of days last week. Sources say if the weather does not let up, additional closings may be necessary.

Limited cargoes of ammonia have been flowing from Yuzhnyy because of the global price and rising cost of natural gas.

The OPZ plant will remain shuttered until the market price improves, say Asian sources.

Without any major new sales to set a price range, sources say the market remains in the $390s/mt FOB.

Australia: Despite statements in late January that the Orica ammonia operation would remain offline for several more weeks, the company announced last week that it was slowly bringing the plant back up. In an announcement issued Feb. 5, the company said it was slowly restarting its Kooragang Island plant. “The restart of a plant such as this is complicated and must be done cautiously,” said Orica’s CEO Graeme Liebelt. “We will not compromise on this restart, and if we need to again pause in order to assure its safety, we will do so. Our products are crucial to industries such as mining and electricity generation in New South Wales, and we are an important local emplo

Urea

Asia, Black Sea, California, Eastern Cornbelt, India, Indonesia, Market Watch, Middle East, Pacific N.W., Pakistan, U.S. Gulf, Urea, Western Canada, Western Cornbelt

U.S. Gulf: Most last week put granular trades within the $395-$400/st FOB range, but said they were firming as the week ended to $405/st FOB. Prills were reported at $425/st FOB.

Eastern Cornbelt: Granular urea remained at $445-$450/st FOB in Eastern Canada.

Western Cornbelt: The granular urea market in the Western Cornbelt was quoted at $435-$445/st FOB in early February.

California: Sources tagged the granular urea market in the $525-$545/st FOB range in California last week.

Pacific Northwest: The granular urea market was pegged at $500/st FOB and $520-$525/st DEL in the Pacific Northwest in early February.

Western Canada: Although reference pricing for granular urea in Western Canada remained at $660-$680/mt DEL, sources said spot tons could be had in the low-$600s/mt DEL on a spot basis in early February.

Black Sea: Ice and bad weather last week caused delays in loadings. While the port at Yuzhnyy was declared open by the end of the week, Asian sources said reports of continued frigid weather could further delay loadings.

The material being loaded is primarily tonnage booked by Latin American buyers and the tail-end of the Pakistan tenders.

The major urea buyers are laying low. Indian buyers are not expected to start making inquiries until early- or mid-March, say sources. At the same time, Latin American buyers, while taking tons, are not making any large forward commitments. Without new deals to make the pricing expectations official, sources say the market remains in the $370s/mt FOB.

Middle East: To hear producers tell the story, they are sold out and prices should be picking up soon. Traders and buyers, however, have a different tale.

All sides agree that Sabic is perhaps in the best shape of all the regional suppliers. Its contracts to Asia and the Americas, combined with the government-to-government deals with Pakistan, pretty much ensure Sabic will be shipping all it can produce for the next few weeks.

Other producers, however, are not so lucky. Sources report reserves are building up for other Arab producers.

One trader noted that Qafco is pushing back the date when its #5 facility comes fully online.

Sources say exports from Iran will most likely not be affected by the new sanctions placed on that country by the U.S. and Western Europe.

Buyers such as India, South Korea, and Taiwan will continue to buy fertilizer, ammonia, and petroleum from Iran.

For India, Iranian urea has become a major component of its buying program.

All in all, sources say prices have not shifted in the region.

India: Traders are beginning to speculate how soon India will re-enter the market. The best guess is that IPL will initiate talks with producers sometime during the first week of March. Others say those talks will not start until just after March 15.

A consensus is growing that a tender will be called near the middle or end of March for April delivery.

The Indian buyers will not be able to issue awards until after the new fiscal year begins April 1. That date, said one trader, pretty much means that a tender will not close until the last week of March.

Indonesia: Pusri is facing a problem, say sources. It did not use up its quota of urea for export in 2011. At the same time, its license to export has expired. Sources say the paperwork to renew the license for 2012 is moving through the government bureaucracy. In the meantime, the tonnage that could not be sold because bids were far below the target price set by the government and Pusri will most likely be used to jump start the domestic market.

Nitrogen Solutions

California, Eastern Cornbelt, Market Watch, Pacific N.W., U.S. Gulf, UAN, Western Canada, Western Cornbelt

U.S. Gulf: Prices continued to weaken, with most now calling the prompt market $260-$270/st FOB ($8.12-$8.44/unit), if not lower. Sources say inland inventories are well stocked, and that it will be quite a while before many will have to be replenished.

Eastern Cornbelt: UAN pricing was flat at $10.50-$10.89/unit FOB and $10.78-$11.09/unit rail-DEL in the Eastern Cornbelt region.

Western Cornbelt: The UAN-32 market in the Western Cornbelt was pegged at $335-$345/st ($10.47-$10.78/unit) FOB regional terminals last week.

California: The UAN-32 market in California was quoted in a broad range at $340-$365/st ($10.63-$11.41/unit) FOB, although dealer reference levels remained as high as $375-$378/st ($11.72-$11.81/unit) FOB. Rail-delivered UAN-32 was pegged in the $346-$360/st ($10.81-$11.25/unit) range in the state in early February, also down from last report.

Pacific Northwest: Regional sources quoted a softer market for UAN in early February. UAN-32 pricing to the dealer had reportedly slipped to $375-$395/st ($11.72-$12.34/unit) DEL in the Pacific Northwest.

Western Canada: The UAN-28 market was steady at $420-$435/mt ($15.00-$15.54/unit) DEL in the region, with the low reported in Manitoba and the upper end in the Alberta market.

Ammonium Nitrate

Ammonium Nitrate, California, Market Watch, Pacific N.W., U.S. Gulf, Western Cornbelt

U.S. Gulf: The market remains quiet, with $340/st FOB remaining the last number heard for a barge transaction.

Western Cornbelt: The ammonium nitrate market remained at $395-$400/st FOB in the Western Cornbelt, with the upper end quoted in the Iowa market and the low in Missouri on a spot basis.

California: No market was reported for ammonium nitrate in California.

CAN-17 was quoted at $305-$320/st FOB in California in early February. Effective Feb. 3, Agrium reposted CAN-17 at $310/st FOB Woodland and Helm, Calif. The AN-20 market was pegged at $315/st DEL in California.

Pacific Northwest: CAN-17 was unchanged at $291/st FOB Kennewick, Wash. No current prices were reported for ammonium nitrate in the region.

Ammonium Sulfate

Ammonium Sulfate, California, Eastern Cornbelt, Market Watch, Pacific N.W., Western Canada, Western Cornbelt

Eastern Cornbelt: Granular ammonium sulfate was unchanged at $375-$385/st FOB in the Eastern Cornbelt.

Western Cornbelt: The granular ammonium sulfate market remained at $370-$385/st FOB in the Western Cornbelt.

California: Ammonium sulfate pricing remained at $350-$385/st FOB in California, with the upper end reported in desert areas of the state. The ammonium thiosulfate (12-0-0-26) market was quoted at $305/st FOB distribution points in the state, with rail-delivered tons reported as low as $290/st in early February.

Pacific Northwest: The ammonium sulfate market in the Pacific Northwest remained at $360-$380/st FOB and $370-$390/st DEL, depending on grade and location.

Western Canada: Granular ammonium sulfate was pegged at $470-$480/mt DEL in Western Canada in early February.

Phosphates

California, Central Florida, Di-Ammonium Phosphate, Eastern Cornbelt, Market Watch, Mono-Ammonium Phosphate, Pacific N.W., U.S. Exports, U.S. Gulf, Western Canada, Western Cornbelt

Central Florida: Farmers in Florida should begin planting their spring crops very soon, but that won’t be enough to get the phosphate market rocking and rolling – although it will help. Dealers in Florida don’t store large quantities because the supply is so close it is easier and cheaper to send a truck to pick up a load on an as-needed basis.

The next to start up should be Georgia and Alabama, where they have already put down lime in preparation for phosphate and other fertilizers. Still, product does get stored there in larger quantities than in Florida, so it will be awhile longer.

For most of the rest of the South and East served by Florida, the weather and the ground have been too wet to get started, and they will have to wait until conditions are more favorable and dealers’s warehouses begin to empty before ordering begins.

In terms of prices, not much has changed during the past week. The Central Florida DAP price range continued last week at a flat $480/st FOB. Both Mosaic and CF were posted at the $480/st FOB mark. MAP was at a premium of $20/st FOB in comparison to DAP by Mosaic in Central Florida, about the same difference as from traders. MAP was in short supply. PCS Sales was selling at prices comparable to the market.

U.S. Gulf: At the beginning of the reporting period a week ago Friday, traders began buying NOLA DAP barges to use for the export market, and the sagging market picked up somewhat. Around the same time, Mosaic was out buying NOLA DAP barges and was paying around $440/st FOB, which was around the top of the previous week’s range. The barges Mosaic bought will be used to make up the shortfall it will have from curtailing production at Donaldsonville. Sources said traders paid between $438-$440/st FOB for an estimated 13 barges for export. The price of the export sales, to Mexico and to either Uruguay or Ecuador, came in between $510/mt FOB and $515/mt FOB. Although that was below the previous week’s range for export DAP, they were still profitable arrangements. Similar export deals appear likely until the NOLA DAP barge market picks up steam.

Almost all of that buying took place before the beginning of the week on Monday, and the number of NOLA DAP barges still available was greatly diminished.

The Fertilizer Institute’s conference at San Diego did not result in any large transactions – and perhaps not even any small ones. The mood was said to be either neutral, pessimistic, or optimistic, depending on the source. Most believe spring will be very good, if it starts relatively early – or at least not too late. That was because not a lot of product went on the ground in the fall, and considering the amount of corn acres to be planted and the price, farmers will want to maximize yields as much as possible.

However, if the crop does not get into the ground until May or later, the amount of phosphate sold, as well as other fertilizers, will be down, because there will be no way to get it to where it will be needed in time. A logistical nightmare. Most agree that dealers will not begin reordering until they know their bins will be running out.

Prices for corn futures moved down last week compared to the previous week, falling from $5.7675/bushel to $5.69/bushel for December 2012. The corn price for December 2013 was $5.5425/bushel, down from $5.625/bushel the previous reporting period. Soybeans for November 2012 improved at $12.4375/bushel from $12.225/bushel the previous week, and beans for November 2013 were up a little at $12.0875/bushel from $12.0325/bushel the previous week. Wheat for July 2012 retreated to $6.6875 from $6.975/bushel a week earlier. Wheat for July 2013 was listed at $7.305/bushel last week, down from $7.53/bushel a week earlier.

Warehouse prices were down a little, but still profitable considering NOLA phosphate barge pric