Potash Corp. of Saskatchewan Inc. reports that its Allan mine in Saskatchewan will temporarily suspend operations from Feb. 5-March 3, 2012. Operations will resume March 4. The company said this is consistent with its practice of matching supply with demand. Other inventory adjustments were announced Dec. 8, 2011. Those include an 8 week shutdown at Lanigan Jan. 8-March 3 and a 6 week shutdown at Rocanville Dec. 25-Feb. 4.
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Mosaic 2Q earnings up 37 percent, eyes 3Q decline
The Mosaic Co. reported a 37 percent increase in net earnings for the second quarter ending Nov. 30, 2011, compared to the year-ago quarter, after excluding the year-ago gain from the sale of the Fosfertil business. Actual net earnings attributable to Mosaic were $623.6 million ($1.40 per diluted share) compared to the year-ago $1.02 billion ($2.29 per share). Mosaic had a year-ago after tax gain of $570 million from the Fosfertil sale.
Second quarter net sales moved up to $3 billion from the year-ago $2.67 billion.
“Our excellent results demonstrate the strength of underlying agricultural fundamentals combined with effective execution by our businesses,” said Jim Prokopanko, Mosaic president and CEO. “While we expect third quarter results to decline due to near-term macroeconomic uncertainty and cautious distributor purchasing behavior, we remain confident of the strong long-term demand prospects for our products. In this environment, we continue to focus on generating value by executing our strategy.”
For more details, see next Green Markets web-edition.
OCI announces demerger of business units
Orascom Construction Industries (OCI), Cairo, has announced that its board of directors has decided to file with the relevant authorities to start the process to effect a demerger of the company’s construction business from its fertilizer business. OCI will file an application with the Egyptian Financial Supervisory Authority (EFSA) in order to formally commence the demerger procedures. The contemplated demerger will result in OCI as the continuing company holding the fertilizer business, and the demerged company holding the construction business.
Upon the demerger becoming effective, OCI will continue to be listed on the Egyptian Stock Exchange (EGX) and expects that its Global Depository Receipts (GDRs) will continue to be listed and traded on the London Stock Exchange (LSE). The demerged company holding the construction business will also be listed on the EGX, and procedures will be initiated with the UK Listing Authority (UKLA) to list GDRs of the demerged company holding the construction business on the LSE. OCI will call for an extraordinary meeting of shareholders to authorize the demerger when permitted by EFSA. The demerger is expected to be completed during the first quarter of 2012.
The effect of the demerger for existing shareholders, GDR holders, and American Depository Receipt (ADR) holders of OCI would be that each would receive, free of charge, one share (or GDR or ADR) in the demerged company holding the construction business for every share (or GDR or ADR) held in OCI immediately prior to the demerger. In this way, the shareholder base of both companies immediately following the demerger would be identical to the shareholder base of OCI immediately before the demerger.
OCI Chairman and CEO Nassef Sawiris commented that "the demerger of our construction business from our fertilizer business will enhance the long-term value creation capabilities of both businesses. Each of the businesses will have a greater strategic clarity, enabling their respective management teams to make decisions and allocate capital to enhance their growth. The compensation and reward systems for management and employees will be clearly aligned to the performance of their respective businesses. Our focus is to deliver superior shareholder value, and this is the key driver behind our decision.”
Upon the successful completion of the contemplated demerger, each of the resulting companies will have an independent and separate board of directors compliant with prevailing corporate governance requirements. Sawiris is expected to serve as chairman and CEO of OCI as the continuing company holding the fertilizer business, and as chairman of the demerged holding company for the construction business.
Mosaic cuts phosphate production, cites NOLA barge supply and prices
The Mosaic Co. has announced a plan to reduce finished phosphate production by up to 250,000 mt through March 31, 2012.
"Isolated phosphate market spot prices have become disconnected with the underlying agricultural fundamentals. As dealers and distributors focus on the macroeconomic uncertainty and delay purchases for the North American Spring Season, near-term supply of phosphate barges on the Mississippi River has exceeded near-term demand. The current spot prices in this market do not reflect our outlook for the business, nor do we think they are sustainable. In response, we have decided to cut planned production by 250,000 mt over the next three months," said Jim Prokopanko, president and CEO.
Most sources last week were expecting the majority of the production cutbacks to occur at Mosaic’s Faustina, La., plant, which supplies the barge market and which also uses imported rock. Sources suspect any cutbacks in Florida would be less, as export and Central Florida prices have remained stronger than those at NOLA.
"We continue to expect an above average application season in North America and record-setting global demand for both phosphate and potash in 2012," said Prokopanko. "We are confident strong farmer economics and agricultural fundamentals will ultimately prevail over the near-term cautious sentiment."
The company’s second-quarter results will be released after market close Jan. 4, 2012. Volumes and pricing for the second fiscal quarter were within prior guidance ranges for both phosphate and potash. The company will provide guidance for the third fiscal quarter in the Jan. 4, 2012, earnings release.
One Israeli ministry gives nod to PotashCorp request, Anti Trust Commission still to weigh in
Israel’s Finance Ministry has given its approval in principle to Potash Corp. of Saskatchewan Inc.’s request to increase its stake in Israel Chemicals Ltd. (ICL), according Ministry sources. They said the approval would allow PotashCorp to increase its stake from 13.9 percent to 25 percent. The Finance Ministry approval was necessary as the State Owned Corporations Authority still holds a golden share in ICL following its privatization in the 1990s.
“If the application is granted, it will give us one more option in our use of free cash flow when we are making investment decisions,” a PotashCorp spokesman told Green Markets. “It is not a foregone conclusion that we would acquire any additional shares, but we are seeking the flexibility to move beyond our current threshold.”
The Finance Ministry is not the final hurdle for PotashCorp. The request still needs to receive the approval of Israel’s Anti Trust Commission before it can increase its stake. The commission confirmed that PotashCorp’s request is under review.
Several Israeli agricultural organizations have come out against allowing PotashCorp to increase its stake in ICL. The Plant, Citrus, Vegetable and Fruit Councils jointly issued a statement opposing the move. They said they feared that such a move would enable ICL to further take advantage of its monopolistic position in Israel, and that this could have a detrimental impact on local food prices, as well as export prices for agricultural produce.
Israel Plants Production and Marketing Council Chairman Zvi Alon said in a letter to Finance Minister Yuval Steinitz and Attorney General Yehuda Weinstein that Israeli farmers purchase potash and all other fertilizers from ICL, which has been declared a monopoly. He noted that the granting of a sole license to ICL to produce potash and other fertilizers has created a reality of a total absence of competition, and restrictions have made it uneconomical to import fertilizers. Alon said that even though price controls were lifted on potash in 2006, prices have gone up by several hundred percent. Weinstein said that he feared the plight of local farmers could be even more adversely affected if PotashCorp is allowed to increase its stake in ICL.
Israel Corp. owns 52.3 percent of ICL, the country’s largest chemical company. A report in the Calcalist economic daily said that PotashCorp would acquire the additional shares from local investors and not from Israel Corp. Shares in ICL, which have been down dramatically this year, rose sharply on the Tel Aviv Stock Exchange on the news.
Last month, ICL reported a sharp increase in third-quarter revenues and net profits. Revenues rose by 36 percent to $1.9 billion, versus $1.39 billion in the corresponding quarter in 2010. Net profits were up by 80 percent, to $436 million compared to the year-ago $246 million.
In the past, PotashCorp has expressed interest in controlling ICL. However, back in 2006 Israel Corp. said that it was not interested in giving up control. There was some speculation in 2011 that the Ofer family, which owns Israel Corp., might change their mind, as two senior members of the family passed away in 2011.
The Week in Fertilizer Stocks
The Week in Fertilizer Stocks
| Producer | Symbol | Price | Week Ago | Year Ago |
| Agrium | AGU | 66.87 | 68.75 | 90.16 |
| CF Industries | CF | 143.99 | 142.74 | 134.85 |
| Intrepid Potash | IPI | 22.46 | 23.49 | 36.62 |
| Mosaic | MOS | 50.28 | 51.62 | 74.80 |
| PotashCorp* | POT | 41.21 | 42.63 | 50.47 |
| Terra Nitrogen | TNH | 163.70 | 157.14 | 97.00 |
| CVR Partners | UAN | 24.77 | 22.95 | N/A |
| Distribution/Retail | ||||
| Andersons Inc. | ANDE | 44.39 | 44.89 | 37.22 |
| Deere & Co. | DE | 77.59 | 77.76 | 83.31 |
| Scotts | SMG | 46.54 | 46.28 | 50.61 |
| * represents three-for-one stock split | ||||
Ammonia
U.S. Gulf/Tampa: There was nothing new to report by way of prices for Tampa or NOLA. There was some suggestion that NOLA might be under pressure since Mosaic would not be needing all of the ammonia being produced at Faustina due to its cutback in DAP production.
Eastern Cornbelt: Eastern Cornbelt sources continued to quote the prompt ammonia market in the $690-$710/st FOB range last week, with reports of spring prepay offers at the $725/st FOB level or higher, depending on location and supplier.
Western Cornbelt: The ammonia market remained at $670-$700/st FOB for prompt tons in the region, with reports of spring prepay offered at the $720/st FOB level out of Missouri shipping points. Delivered ammonia was tagged at the $650/st mark in the Missouri market from southern production points.
California: Anhydrous ammonia was steady at $820-$825/st truck-DEL in California, with aqua ammonia referenced at the $219/st FOB level in the state.
Pacific Northwest: Anhydrous ammonia pricing in the Pacific Northwest had reportedly fallen by roughly $100/st from last report, with sources quoting the market at $690-$715/st DEL in the region.
Western Canada: Anhydrous ammonia pricing was unchanged at $996-$1,005/mt DEL in Manitoba, $1,005-$1,014/mt DEL in Saskatchewan, and $1,014-$1,040/mt DEL in Alberta.
Middle East: A sale by Sabic to Transammonia just before Christmas provided evidence of a softer ammonia market in the region. The deal involved 18,600 mt at a reported price of $460/mt FOB. Sources say the netback price was derived from the actual sale to IFFCO in India at $520/mt CFR.
The drop in prices came as no surprise. It represents a level many had talked about but could not confirm because of the lack of a spot sale.
Until the Trammo deal, the sales from the region were under contracts, with both sides keeping the price closely held.
The market is expected to soften even more as Qafco 5 comes fully online later this month. The new facility will boost Qafco’s annual output from 2.2 million mt to 3.8 million mt. Even as the plant was preparing to come online in early December, sources reported that most of the new tonnage will be covered by contracts.
Early last week Mitsubishi signed an annual contract with Qafco to take 80,000 mt, with an option for an additional 40,000 mt. That amount – 10,000 mt per month – is just about the monthly demand from a major Mitsubishi client in Asia.
Two other deals – with Coromandel International and Paradeep Phosphates, both of India – put more sales in the Qafco order book. Coromandel will take 150,000 mt, with an option for an additional 50,000 mt. PPL will take 100,000 mt. Sources expect the rest of the tons to be snapped up for other long-term buyers.
One trader noted that there may still be some more softening in the market. For now, however, the regional market is pegged at $460-$470/mt FOB.
Black Sea: Output in the Yuzhnyy area is expected to drop below 200,000 mt this month as plants take turnarounds and as natural gas is diverted to consumer use.
The January price in Tampa and the recent Transammonia-Sabic deal show a continued decline in global ammonia prices.
The latest price estimate from the area is pegged at $485-$495/mt FOB.
Urea
U.S. Gulf: Granular barges initially appeared to slumber over the holidays in the $358-$360/st FOB range. However, soon after Christmas, sources said buyers started to express interest – only to see prices go up.
Observers argued that buyers waited too long for the market to find a bottom, and when they came forward to actually buy, prices went back up as supplies had been working their way down in recent weeks. Sources said buyers were being prompted by farmers, who were wanting to lock in late-year deals for taxes. In addition, sources cited a rally in corn prices as also adding an impetus to buy.
The run-up in prices was quick. Those calling the market $360/st FOB on Tuesday were calling it $385-$387/st FOB by late Thursday.
Nothing new was heard on prills over the holidays, leaving those prices at $380-$385/st FOB.
Eastern Cornbelt: Granular urea pricing appeared to be swinging upward as the week advanced, fueled by a similar shift in the NOLA barge market. Sources said spot pricing out of the Cincinnati market had firmed from $400/st FOB early in the week to $425-$430/st FOB by Thursday. Illinois sources tagged the urea market at the $410/st FOB level at midweek on a spot basis.
Western Cornbelt: The granular urea market was quoted at $400-$415/st FOB regional terminals at midweek, “and changing with every phone call,” according to one source. Both the upper end and lower end of the range were reported in the Missouri market on a spot basis, while an Iowa contact pegged the dealer market at the $410/st FOB level at midweek.
In the Southern Plains, the Inola, Okla., urea market had reportedly firmed from $380/st FOB early in the week to $410-$415/st FOB by Dec. 29, paralleling the strength reported in the NOLA barge market.
California: Urea prices in California had reportedly slipped some $20-$50/st from early December pricing levels, depending on supplier and location. Sources tagged the granular urea market in the $525-$565/st FOB range last week, with no current delivered prices reported.
“Nobody is really purchasing any product just yet, so the markets are very hard to pin down,” said one California contact last week. “We do know that fertilizer prices from a wholesale standpoint are under pressure and are falling. Where they settle out is yet to be determined. Brokers and traders are driving down prices as they want to relieve themselves of their inventory positions.”
Pacific Northwest: Sources reported that urea pricing had plunged in the Pacific Northwest during the final weeks of 2011, driven by the weak NOLA barge market. Urea pricing was pegged in the $475-$510/st DEL range in the region in late December, down roughly $100/st from pricing levels reported earlier in the month. The low end was confirmed in the Montana market, while truck-delivered urea was reported in the $490-$510/st range elsewhere in the region.
Western Canada: Reference pricing for granular urea in Western Canada remained at $655-$680/mt DEL, with the low end reported in Manitoba and the upper numbers in the Alberta market.
Sources reported minimal changes to the spot markets in late December, though sources speculated that deals could be negotiated “depending upon specific market influences.” While pricing to retailers was generally unchanged, some noted that the wholesale market was starting to react to the softening trends for urea and DAP.
“Dealers have remained reluctant to build inventories and continue to only place orders when farmers do the same,” said one contact.
Pakistan: Late last week, TCP called a tender to close Jan. 9. The tender call is for an indeterminate amou
Nitrogen Solutions
U.S. Gulf: Most were calling the NOLA UAN market $270-$280/st FOB ($8.44-$8.75/unit), though some were speculating prices might even be lower if you calculated new delivered business back to NOLA.
Correction: The UAN U.S. Gulf NOLA barge price in short tons for the Green Markets issue dated Dec. 19, 2011, was $295-$300/st FOB as was reported in the text on page 7. The short ton price on the price scan on page 4 was incorrect and should be changed to reflect $295-$300/st FOB.
Eastern Cornbelt: Trying to pin down the terminal market for UAN was a difficult task as the year came to a close, but spot levels were continuing to erode, according to sources. “We’re still waiting for the markets to be established,” said one contact. “Every time, you hear something a little different.”
UAN-28 pricing out of the Cincinnati market had reportedly fallen to $294-$305/st ($10.50-$10.89/unit) in late December. One Illinois contact said prepay offers for UAN-32 were reportedly circulating for as low as $325/st ($10.16/unit) FOB from one supplier the week before Christmas, but those deals were limited and were apparently off the table last week. He tagged the UAN-32 market at the $355/st ($11.09/unit) FOB level, and another Illinois source quoted a $360/st ($11.25/unit) FOB prompt market for UAN-32 last week.
Western Cornbelt: The UAN-32 market was pegged at $355-$380/st ($11.09-$11.88/unit) FOB Western Cornbelt terminals, down some $15-$20/st from mid-December pricing levels. Iowa sources quoted the low end for limited prepay offers, while the upper end of the range reflected new reference levels for prompt tons out of spot Missouri terminals.
California: UAN postings were unchanged from last report in the California market, but sources said offers were in the $380-$390/st FOB ($11.88-$12.19/unit) range in late December. “Quotes are all over the place from brokers, with nobody really purchasing product yet,” said one source. No rail-delivered UAN pricing quotes were confirmed last week.
Pacific Northwest: UAN-32 pricing had reportedly slipped to $395-$405/st ($12.34-$12.66/unit) DEL in the Pacific Northwest. Those numbers were down some $25-$30/st from pricing levels reported in early December.
Western Canada: The UAN-28 market was steady at $417-$432/mt ($14.89-$15.43/unit) DEL in Western Canada, with the low reported in Manitoba and the upper end in the Alberta market.
Ammonium Nitrate
U.S. Gulf: The most recent business was called $340-$350/st FOB, with sellers working hard to move prices back to the $360/st FOB range.
Western Cornbelt: Ammonium nitrate was tagged at $390-$400/st FOB Western Cornbelt terminals, down slightly from last report.
California: CAN-17 was pegged in the $310-$322/st FOB range in California. No pricing information was reported for ammonium nitrate in the state.
AN-20 was referenced at $328/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.