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