All posts by webster@kennedyinfo.com

OVR nitrogen project gains air permit; CEO says could still break ground in 2013

Featured, News

Ohio Valley Resources LLC, Fairfield, Ill., announced Sept. 25 that is has received its air permit from the Indiana Department of Environmental Management for a major nitrogen plant to be located in Spencer County, Ind. OVR President and CEO Doug Wilson thanked the IDEM, the State of Indiana, and in particular the people of Spencer County for their continued support of OVR’s efforts to develop a commercial scale fertilizer facility.

Wilson also noted that in light of the recent rezoning of the proposed site for the facility and the granting of the air permit, only a few additional regulatory matters remain to be completed before OVR will be in a position to break ground. He told Green Markets that the plant could break ground as early as this year.

"It has been important to me from the beginning to make sure that this project was done right from the bottom up,” said Wilson. “The granting of the air permit today is just one more sign that our development strategy and our confidence in the State of Indiana are well founded. The economics of the fertilizer business remains healthy and we remain committed to developing one of the most efficient fertilizer facilities in the United States. We looking forward to serving the Tri-States’ agricultural and industrial communities in the near future."

Wilson said that earlier estimates that the project would cost $952 million are now likely the floor price. In addition, he said the company is still tweaking the approximate product mix for the plant but said that it would include both anhydrous ammonia and UAN. Initial projections for the 150-acre site, just north of Rockport, were for a 2,240 st/d ammonia and a 3,000 st/d UAN plant (GM March 4, p. 1, May 20, p. 10). Diesel exhaust fluid (DEF) has also been mentioned as a possibility. OVR selected the site based on its close proximity to two interstate natural gas pipelines (ANR and Midwest) as well as its close proximity to low-cost shale gas in the Marcellus and Utica shale plays. OVR also credited Indiana for providing incentives for the project.

While forthcoming announcements are expected regarding financing as the project advances, Wilson said he expects to remain as a long-term participant in the project.

OVR is still on tap to use KBR technology and has involved the company in front-end engineering and to develop a lump-sum, turn-key engineer, procure and construct price for the project.

Some 30 or more nitrogen plants have been floated for North America in the past few years, with analysts saying that number will be severely whittled down over time. Among those projects, OVR, lead by entrepreneur Wilson, has been an underdog, with most analysts expecting touting other projects to be built by large, established industry veterans such as CF Industries Holdings Inc. and Koch Nitrogen Co. At the same time, other industry giants such as Yara International ASA and Agrium Inc. have pulled back on building their own North American projects, further casting doubt on whether a significant wave of new nitrogen plants will actually be built. CF Chairman and CEO Stephen Wilson expects the U.S. to still be a large importer of nitrogen in 2017 after the current wave is built (GM Sept. 23, p. 1).

In the meantime, there is a competing project by Pakistan-based Fatima Group for Posey County, Ind. Governor Michael Pence earlier this year withdrew state support from the project citing Fatima’s less than cooperative behavior with the U.S. relating to terrorism in Pakistan and Afghanistan. However, Pence (GM June 24, p1), ultimately did not stand in the way of Posey County proceeding with the issuance of a $1.3 billion disaster bond to aid Fatima’s $1.8-$2 billion Midwest Fertilizer Corp. project.

Belarus moves Uralkali CEO to house arrest; Chinese firm takes 12.5 percent stake in Uralkali

Featured, News

Belarus last week moved OAO Uralkali CEO Vladislav Baumgertner from a prison to an apartment. While officially still under house arrest with KGB supervision, this was seen as a positive development leading to his eventual return to Russia. Baumgertner was arrested Aug. 26 after visiting with Belarus Prime Minister Mikhail Myasnikovich. This followed Uralkali’s July 30 exit from its export joint marketing venture with Belarus in the company Belarusian Potash Co.

Belarus has indicated that it would consider extraditing Baumgartner to Russia for trial for “abuse of power” and that it might release him if Suleiman Kerimov, who owns 21.7 percent of Uralkali, would sell his stake. Kerimov has reportedly been in negotiations to do so.

On Sept. 24, Uralkali reported that Chengdong Investment Corp. (CIC) exercised an earlier option (GM Nov. 19, 2012, p. 10) to convert bonds into to a 12.5 percent stake in the company. CIC is China’s sovereign wealth fund. The shares were valued at US$2 billion. The bonds had been issued by Wadge Holdings Ltd., which is owned by Uralkali’s major shareholders, including Kerimov. Uralkali’s ownership is now Kerimov 21.75 percent, CIC 12.5 percent, Filaret Galtchev 7 percent, Anatoly Skurov 4.8 percent, and 53.95 percent free float.

While some headlines quickly heralded the CIC move as a boon to potash buyers and a “nail in the coffin” of the potash cartel, as it could give the Chinese leverage or insight in negotiating potash contracts going forward, others said there was nothing new as the optional bonds were issued almost a year ago. Potash Corp. of Saskatchewan Inc. Executive Vice President and CFO Wayne Brownlee said the CIC/Uralkali news was a “non-event.” He said PotashCorp fully assumed CIC would convert the bonds to stock. “I can’t imagine there would be any associated transactions with this thing that would impair the valuation of the remaining 85 percent.” He said it is clearly a passive investment at this stage. “I know there is some speculation that it might help them in future negotiations, but frankly I don’t think it is an issue and we are really not seeing it out there at this stage.” When the bond deal was initially struck, PotashCorp President and CEO Bill Doyle said it was a financial exercise. “I don’t think Mr. Putin is going to allow the Chinese to manage the Russian potash industry,” Doyle said at the time.

Ironically, PotashCorp owns 22 percent of China’s Sinofert Holdings Ltd., a major potash buyer and fertilizer distributor. PotashCorp sees the investment as a window into China and an opportunity should the government opt to sell a larger stake in the company.

Brownlee was speaking Sept. 24 at the Scotiabank Agriculture & Fertilizer Conference, and went on to say why people should not worry about excess world potash capacity. He said they need to remember whose hands that excess capacity is in, saying that some 42 percent of the new capacity coming on between 2012-2016 is in the hands of PotashCorp, with a significant component of the remainder being in the hands of its Canpotex Ltd. partners. “…the amount of incremental potash capacity that would really come onstream over the next ten years, is primarily in Canpotex hands and not a lot of other hands. So I know people get worried about when are we going to find supply/demand balance, but frankly it doesn’t need to be that long down the road for that to happen.”

Transammonia adds storage at two sites; Arkansas port poised for growth

News

Transammonia Inc. has new storage capacity at both the Port of West Memphis in Arkansas and in Fairless Hills Terminal in Pennsylvania. In both cases, Kinder Morgan Energy Partners runs the ports and built the storage. Opening ceremonies were held at both earlier this month.

The $5 million West Memphis facility includes a 30,000 square foot, 9,000 st warehouse. Product will be shipped in by barge, offloaded by boom crane, and transferred to truck for shipment. In particular, the facility is expected to supply urea-hungry rice country in eastern Arkansas. John McDowell is the facility manager.

In 2012, the Port of West Memphis received a $10.9 million Department of Transportation Tiger IV grant (Transportation Investment Generating Economic Recovery). The money is being used to increase the industrial and bulk shipping capabilities and will strengthen the current rail to allow for heavier cargo loads and extend existing rail spur by approximately 13,500 feet to the base of the St. Francis Levee. The grant opens up some 2,000 acres for rail-served development.

West Memphis is keen on development and is looking to make the port a logistics hub for imports and exports. It is particularly eyeing China as a potential customer. It is a deep water port on the main channel and has never closed due to lower water conditions, giving its tenants an advantage versus other ports in the region, including Memphis.

West Memphis uses a floating dock which consists of a heavy work barge permanently moored along the river, but it is free to rise and fall with the changing river level. Port officials say this can significantly cut the time for the offloading process, and that a barge that would require eight hours to off-load on a fixed dock can potentially off-load in less than three hours.

Kinder Morgan recently invested approximately $15 million to expand its Fairless Hills Terminal in Pennsylvania by adding two domes to handle dry fertilizers (phosphates and urea) and refurbished a 25,000 st tank to store liquid UAN for Transammonia.

Agrium expects 3Q drop in NPK volumes; dividend boosted, long-term fundamentals cited

Featured, News

Citing slow customer demand, Agrium Inc. said on Sept. 23 that it expects third quarter 2013 Wholesale volumes to be off for all three major nutrients. Wholesale nitrogen sales volumes are expected to be down 20 percent and phosphate and potash about 30 percent, lower than normal for a third quarter.

Agrium said soft nutrient prices and lower sales volumes will lead to Wholesale’s EBIT being $200 million below third-quarter 2012. However, Agrium’s Retail EBIT is expected to surpass the third quarter of 2012 and is anticipated to be in-line with the strong results achieved in the third quarter of 2011.

Agrium said plant outages at its nitrogen facilities impacted volumes by approximately 100,000 mt this quarter, which also impacted costs. It said benchmark nutrient prices in the third quarter of 2013 are 20-30 percent below the same period last year. Retail nutrient inventories were low at the end of the spring season and Agrium said Retail is in a good cost position from an inventory perspective for its nutrient products overall.

Agrium Chief Operating Officer Chuck Magro said last week that there is a lot of uncertainty in the market, more than usual, which has put pressure on prices. “There is uncertainty in the size of the corn crop, the amount of urea exported by China, phosphate demand in India, and the Russian potash strategy,” he said speaking to attendees of the Scotiabank Agriculture and Fertilizers Conference Sept. 24. “However, most of the uncertainty is well reflected in the current pricing levels.” He said the bottomline is that growers across North America are in sound financial shape and still have strong incentives to maximize yields by optimizing their inputs," he said.

He noted that a lot of retailers have adopted a wait-and-see attitude and have not bought their fall needs. He said Agrium’s own Retail business has just started to fill up and has lower inventories than normal because it thought that prices were going to go lower, and it was right. He said he did not see further price depreciation to the point where Agrium would have to issue write-downs on product.

Asked what would happen should corn prices drop below $4.00 per bushel, Magro said growers would likely pull back first on higher-end portfolio applications and specialty fertilizers. However, he said the first sign of any change would be declines in cash land prices and equipment sales. “I think that you’d have a significant structural change before they pull back on inputs.”

Magro also cited specific pluses that Agrium enjoys in Wholesale NPK and Retail. As for potash, he said the company’s new 1 million mt/y of capacity should come up in late 2014, bringing capacity up to 3 million mt/y. And unlike its Canpotex Ltd. peers, he said Agrium can run at much higher operating rates as this can feed into its Retail business. On phosphate, he noted the company’s $140/mt regional in-market price advantage over Florida competitors. On nitrogen, he noted the company’s use of AECO gas which has about a $1.00/mmBtu advantage over NYMEX and that even at $300/mt urea, its margins are $150/mt. On Retail, he touted that the company has an 18 percent U.S. market share with only 12 percent of the actual physical facilities, as well as Agrium’s recent approval to acquire 210 Canadian outlets from Viterra Inc. Retail still continues to grow with a tuck-in strategy that has added 19 locations in the U.S. and Australia so far this year.

Citing long-term fundamentals and its annual strategic review process, Agrium said it has opted to increase dividends by $1.00 U.S. per common share to a total dividend of $3.00 U.S. per common share on an annualized basis. Based on the closing price of Agrium’s shares Sept. 20, this represents a dividend yield of 3.3 percent. The increased dividend is expected t

EPA ordered by federal court to get going on restrictions to improve waterways

News

Fertilizer suppliers and users could find themselves under stricter regulations sooner than later because of a federal court decision ordering the U.S. Environmental Protection Agency (EPA) to spend the next six months determining if it should set new limits to protect U.S. waterways including the Mississippi River Basin, the Gulf of Mexico and others throughout the country.

The U.S. District Court in Eastern Louisiana on Sept. 20 directed EPA to get on with deciding if there should be new restrictions on nitrogen and phosphate pollution, agreeing with the plaintiffs led by the Natural Resources Defense Council (NRDC), that the EPA’s refusal to provide a direct answer was unlawful. The lawsuit was filed on behalf of several conservation groups determined to break what they consider longstanding inaction by the federal government regarding pollution in the nation’s waterways.

The decision does not tell the EPA how to address the problem, only to make a decision on the issue. However, EPA has repeatedly acknowledged the severity of the situation and stated that federal intervention is appropriate because states are not doing enough to solve it. There are general concerns about detrimental algae fed by nitrogen and phosphate from sewage plants, urban stormwater systems and agriculture and choking out other aquatic life and threatening survival of fish and shellfish.

According to NRDC, the court gave EPA 180 days to respond to the question asked in the petition – whether EPA needs to step in and put limits on the algae-fueling pollution that is causing the dead zone and choking waterways around the nation with green sludge. NRDC boasted that "in the simplest terms, the court ordered EPA to remove its head from the sand and make a decision whether to be part of the solution or part of the problem. It’s a short and satisfying answer to a long and decidedly unsatisfying history of dithering inaction by EPA." NRDC has repeatedly charged that the nation’s waters have become increasingly polluted by nitrogen and phosphate. “One of the most devastating consequences of this pollution has been the emergence of the dead zone in the Gulf of Mexico – an area the size of Connecticut where algal growth has driven levels of oxygen so low that virtually nothing can live there," said NRDC.

Plaintiffs in the suit included Gulf Restoration Network, Waterkeeper Alliance, Environmental Law and Policy Center, Iowa Environmental Council, Missouri Coalition for the Environment, Prairie Rivers Network, Kentucky Waterways Alliance, Tennessee Clean Water Network, Minnesota Center for Environmental Advocacy, Sierra Club, and NRDC. Attorneys at the Tulane Environmental Law Clinic, NRDC, and the Environmental Law and Policy Center brought the case.

The Fertilizer Institute (TFI), the American Farm Bureau Federation (AFBF), the National Pork Producers Council (NPPC), Agricultural Retailers Association (ARA), and the National Corn Growers Association (NCGA), submitted a joint memorandum as interveners in opposition to the Gulf Restoration Network (GRN), et al (plaintiffs) and in support of the EPA.

The EPA was represented in the suit by the U.S. Justice Department whose spokesman would not comment on the decision. Those in industry indicated they needed more time and details to determine what impact the decision will have. "We intervened in EPA’s favor but right now we’ve got our legal team taking a look at it," said TFI spokeswoman Kathy Mathers. "We can’t provide any response until we get our experts to analyze and sift it out."

“ARA is disappointed in the court decision requiring the EPA to take further related to the plaintiffs’ petition,” said Richard Gupton, ARA senior vice president for public policy and counsel. “ARA joined several other agricultural organi

Ammonia

Ammonia, Asia, Black Sea, Eastern Cornbelt, India, Market Watch, Middle East, Southeast, Southern Plains, Tampa, U.S. Gulf, Western Cornbelt

U.S. Gulf/Tampa: Players waited until the last minute to pull the trigger on October business for Tampa. Most predictions were for a rollover or a slight increase over September’s $485/mt CFR. When the dust settled, October prices moved up $5/mt to $490/mt CFR.

October NYMEX natural gas settled Sept. 26 at $3.498/mmBtu, down from Sept. 19’s $3.720/mmBtu.

Eastern Cornbelt: With attention firmly focused on the region’s harvest activities, sources reported only minimal changes to the spot fertilizer markets last week.

The anhydrous ammonia market remained at $530-$540/st FOB regional terminals, with the low in Illinois and the upper end in the Indiana market.

As of Sept. 22, some 3-6 percent of the regional corn crop was in the bin, along with 1-4 percent of the soybeans. Ohio remained the region’s garden spot in mid-September, with good or excellent ratings assigned to 79 percent of the corn and 70 percent of the soybeans in the state.

The corn crop in Illinois and Indiana was 60-64 percent good or excellent last week, while soybeans in those two categories totaled 58 percent of the acreage in Indiana and 50 percent in Illinois.

Western Cornbelt: The ammonia market continued to be quoted at $505-$535/st FOB in the region, with the low reported in Nebraska and the upper end FOB Palmyra, Mo.

Record flooding was reported in parts of western and central Nebraska last week as flood waters from Colorado continued to swell the South Platte, North Platte, and Platte rivers.

The South Platte River rose to a record 14.36 feet in North Platte, Neb., on Sept. 23, and flood crests were expected in Kearney and Grand Island, Neb., as the week progressed. The flood surge created few problems in Nebraska, however, because of the diversion of water throughout multiple irrigation districts in the state. Authorities said they expected the diversion to continue for weeks as the flood crest ebbs.

The moisture comes at a good time for the state, as water is needed to recharge aquifers and ponds depleted by severe drought conditions. The dry weather has made for steady harvest progress in the region, but late developing crops continued to keep the pace trailing the five-year average.

As of Sept. 22, just 3-4 percent of the corn in Iowa and Nebraska was in the bin, compared with 16 percent in Missouri. The regional soybean harvest was only 1-3 percent complete by that date. USDA assigned good or excellent ratings to 59-63 percent of the corn and soybeans in Nebraska, compared with 34-37 percent in Iowa and 32-40 percent in Missouri.

Southern Plains: Brisk harvest activity was underway on corn, sorghum, and cotton in the region, although some areas saw heavy rains at mid-month.

Parts of Colorado were still recovering from torrential rains and flooding earlier in September. The flooding in Colorado’s Larimer and Boulder counties resulted from 7-18 inches of rainfall in an eight-day span beginning on Sept. 12. The flash floods claimed at least eight lives, with one still missing as of last week.

Isolated thunderstorms and windy conditions were reported in parts of Kansas last week. The previous weekend brought heavy rainfall to many parts of Texas, including 2-3 inches in the Dallas/Fort Worth area and up to 7 inches in Corsicana. Flood warnings were in effect over the weekend in Austin and Odessa.

Sources reported no change to the regional ammonia market. Anhydrous ammonia pricing was quoted at $460-$465/st FOB regional production points on the low end, with the dealer market out of pipeline terminals in Kansas reported at the $500-$510/st FOB level.

South Central: The Memphis, Tenn., ammonia market was pegged at $520/st FOB last week, w

Urea

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

U.S. Gulf: Prompt granular barges worked their way up last week. While some called them $290-$295/st FOB early in the week, others said they were $300-$305/st FOB by week’s end, as buyers were trying to fit in those last barges to beat the river’s close. Generally, late October to November barges were called $285-$290/st FOB.

The last done prills continued to be called $310-$313/st FOB.

Eastern Cornbelt: Granular urea pricing remained at $325-$345/st FOB regional terminals in the Eastern Cornbelt, with the low out of spot river locations and the upper end out of inland warehouses in the Ohio market.

Western Cornbelt: Granular urea pricing in the Western Cornbelt was slipping slightly, with sources quoting the dealer market at $320-$335/st FOB in the region, down $5-$10/st from last report. The low end of the range was reported in southern Missouri, with the upper end in the Iowa market.

Southern Plains: Granular urea was moving briskly out of the Tulsa, Okla., market. Urea was reported at $330-$335/st FOB Tulsa, with the Houston price quoted at the $355/st FOB mark.

South Central: The granular urea market remained at $325-$340/st FOB regional terminals, with the low FOB Memphis, Tenn., and the upper end out of the Little Rock, Ark., market.

Southeast: With no new business to test the market, granular urea pricing continued to be reported at the $390/st FOB reference price out of port terminals in the Southeast. There were reports at mid-month that some locations that have been out of product will be restocked in the near term.

Harvest delays were reported in southern Georgia, northern Alabama, and parts of central and southern Florida last week due to wet weather. Mid-month rainfall totals included 6.9 inches in Sarasota, Fla., and 4.79 inches in the Tampa area.

Just 1 percent of the Georgia cotton crop was in the bin by Sept. 22, but North Carolina growers had 74 percent of the corn crop harvested by last week.

Regional growers had just 4-5 percent or the peanuts harvested in Alabama, Georgia, and North Carolina by Sept. 22, compared with 13 percent in South Carolina and 26 percent in Florida.

India: The long-awaited MMTC tender closed Sept. 26. Earlier in the week, sources were speculated that some offers might dip below $300/mt CFR but that the bulk of the offers would not. They were wrong.

Of the 4.3 million mt offered, only 1 million mt were at $300/mt CFR or more.

The lowest offer came in at $294.99/mt CFR from Bary Chemicals. Other low offers came from Aries, Swiss Singapore, and Dreymoor. Combined, the four companies put forth about 900,000 mt.

Seven companies were separated by only 50 cents as their offers neared the $300/mt CFR level. Fertisul offered 120,000 mt at $299.45/mt CFR and Emmsons offered 220,000 mt at $299.95/mt CFR.

The complete tally follows:

MMTC Urea Tender September 26, 2013
Offering Company Quantity (‘000 mt)
 US$/mt CFR Discharge Port
Bary Chemicals 50-120 294.99 Krishn

Nitrogen Solutions

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

U.S. Gulf: The market remained quiet, continuing to be called $225-$230/st FOB ($7.03-$7.19/unit).

Eastern Cornbelt: UAN-32 market was pegged in a broad range at $275-$295/st ($8.59-$9.22/unit) FOB in Illinois, with UAN-28 pegged in the $250-$260/st ($8.93-$9.29/unit) range FOB Cincinnati, depending on the time of delivery.

Western Cornbelt: UAN-32 was pegged in a broad range at $260-$295/st ($8.13-$9.22/unit) FOB regional terminals in the Western Cornbelt, with the low reported in southern Missouri and the upper end in Iowa on a spot basis.

Southern Plains: The UAN-32 market was pegged at $265-$285/st ($8.28-$8.91/unit) FOB in the region, with the low out of Oklahoma production points and the upper end FOB Kansas terminals. The market out of terminals on the coastal bend of Texas was quoted at the $270/st ($8.44/unit) FOB level. Sources reported minimal UAN demand in the region.

South Central: UAN-32 pricing had reportedly fallen to $265-$275/st ($8.28-$8.59/unit) FOB terminals in the South Central region, with most locations at the upper end of that range.

Southeast: Sources quoted the UAN-32 market at the $260/st ($8.13/unit) level FOB Wilmington, N.C., and Norfolk, Va., down slightly from last report.

Ammonium Nitrate

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

U.S. Gulf: Barges continued to edge downward with recent trades called $270-$275/st FOB. There were reports that CF was taking care of excess inventories by exporting to Central America.

Western Cornbelt: Ammonium nitrate remained at $350-$365/st FOB in the Western Cornbelt, with the low quoted in the Iowa market on a spot basis.

Southern Plains: The Tulsa ammonium nitrate market was tagged at $360-370/st FOB Tulsa, down $10/st from last report.

South Central: Ammonium nitrate pricing was slipping in the South Central region. Sources quoted the dealer market at $345-$355/st FOB, down some $20/st from last report, with the low at Memphis and the upper end in the Kentucky market on a spot basis.

Southeast: The Tampa ammonium nitrate market remained at $355-$360/st FOB.

Ammonium Sulfate

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

Eastern Cornbelt: Granular ammonium sulfate remained at $270-$280/st FOB and $280-$290/st DEL in the Eastern Cornbelt.

Ammonium thiosulfate was steady as well at $345/st FOB in the region.

Western Cornbelt: Granular ammonium sulfate was pegged at $255-$270/st FOB in the region, with the low in southern Missouri and the upper end in Iowa.

Ammonium thiosulfate was unchanged at $310-$345/st FOB, with the low in Nebraska and the upper end in the Missouri market. An Iowa source pegged the common dealer market last week at $325/st FOB.

Southern Plains: Granular ammonium sulfate remained at $250-$285/st FOB shipping points in Texas, with the low at Freeport and the upper end FOB Littlefield and Plainview. Coarse grade prices were $10/st less than granular.

South Central: Granular ammonium sulfate pricing was down in the South Central region, with sources quoting the dealer market last week at $255-$275/st FOB regional terminals. The ammonium thiosulfate market was pegged at $335/st FOB Memphis.

Southeast: Granular ammonium sulfate was steady as well at $250-$255/st FOB Hopewell, Va., and $265/st FOB Augusta, Ga., with delivered tons pegged at $270-$275/st in the Carolinas, $280/st in Georgia and Alabama, and $285/st in Florida. Standard grade reference prices included $180/st FOB Augusta and $200/st DEL in Florida.