All Posts from February 11, 2013

Governor takes credit for Fatima suspension; company says it was government’s fault

Incoming Indiana Governor Mike Pence in a statement Feb. 1 said that he made the decision to suspend state support for the nitrogen plant by the Fatima Group in Posey County (GM Feb. 4, p. 13) shortly after his inauguration Jan. 14. Pence said he instructed the Indiana Economic Development Corp. (IEDC) to halt the project with the Midwest Fertilizer Corp. of the Fatima Group pending further investigation. The action came immediately after the governor learned that the U.S. Department of Defense (DOD) considered Fatima less than cooperative with the department’s efforts to eliminate improvised explosive devices (IEDs) in Central and South Asia.

"Economic development is important, but the safety and security of our troops in harm’s way is more important," said Pence. "We’re in the process of making a careful evaluation of the appropriateness of Indiana’s involvement in this project with those priorities in mind."

The IEDC informed Fatima of the project’s deferment via a letter dated Jan. 15, 2013. The state also began actively investigating the situation in consultation with federal authorities and the DOD at that time. Despite this notice to Fatima by the IEDC, the company on Jan. 31 notified the Karachi Stock Exchange about its participation in the project.

"When Fatima initially approached the IEDC with their plans to create hundreds of new jobs and invest more than $1 billion in Indiana, we were thrilled,” said Eric Doden, IEDC president. “At the time, the DOD described the company’s level of cooperation addressing issues as supportive. However, as soon as we learned of the DOD’s significant change in position, the state paused the project until a thorough investigation can be completed."

Fatima is not currently listed on the federal government’s banned Entity List, and its executives are not prevented from travel to the U.S.

On Jan. 12, the IEDC learned that the DOD’s position had changed dramatically. The IEDC was informed of recent testimony from Lt. Gen. Michael Barbero, the director of the DOD’s Joint Improvised Explosive Device Defeat Organization, before a subcommittee of the U.S. Senate Foreign Relations Committee, where he testified that Fatima was less than cooperative with the department’s efforts in the region.

The Ports of Indiana and the Indiana Finance Authority have also been involved in the project, with the latter issuing some $1.26 billion in Midwestern Disaster Area Bonds to help finance the project (GM Dec. 17, 2012, p. 1).

Fatima last week told the Pakistani press that the charges in the U.S. were “baseless and damaging.” The company noted, as Lt. General Barbero had indicated, that Fatima has cooperated on some distribution measures. The main sticking point with Barbero was Fatima’s refusal to dye the product. However, Fatima said the government of Pakistan did not agree to that, so it was beyond Fatima’s control.

Congressman Duncan Hunter (R-Calif.), a leader in trying to stop IEDs, also recently weighed in on the matter. Hunter was quoted in The Washington Times as calling Fatima a “pseudo-terrorist organization that won’t comply with any of our requests.” He termed their being allowed to move into the American market and have tax exempt advantages as “absolutely nuts.”

Barge traffic resumes after Mississippi oil spill; rains bolster depleted river levels

Barge traffic resumed on the Lower Mississippi River in early February after a nearly week-long closure caused by an oil spill near Vicksburg, Miss.

A 16-mile stretch of the river at Vicksburg reopened to barge traffic on Feb. 2 after being closed for six days because of light crude oil spilling from a damaged barge (GM Feb. 4, p. 13). The barge was one of two that struck a railroad bridge near Mile Marker 436 at 1:30 a.m. on Jan. 27, causing crude to leak from the vessel’s 80,000-gallon hold.

The Coast Guard announced on Feb. 2 that north and southbound towboat traffic had resumed in the Vicksburg area, and that the safety zone had been reduced from 16 miles to one mile as cleanup efforts continued. As many as 71 towing vessels and 1,056 barges had been stalled by the closure as of Jan. 30, before the Coast Guard began allowing small tows to transit the area in scheduled intervals to reduce the backlog.

“The Coast Guard is no longer actively managing the flow of towboat traffic and we are minimizing the safety zone to a one-mile distance to ensure the safety of response crews still working on the MOC-12 barge,” Capt. William Drelling, federal on-scene commander for the Vicksburg oil spill, announced on Feb. 2.

The cause of the accident remains under investigation. Natures’ Way Marine LLC of Theodore, Ala., the owner of the towboat that was pushing the barges at the time of the accident, was named the responsible party, and as a result faces possible civil penalties under the federal Oil Pollution Act.

The Coast Guard reported on Feb. 6 that the oil cleanup effort at Vicksburg was complete, with no injuries or impacts to wildlife reported. Coast Guard personnel were joined by representatives from the Departments of Environmental Quality in Louisiana and Mississippi to perform extensive shoreline assessments. The Coast Guard said 5,300 feet of boom was deployed and some 159 workers brought to the scene to respond to the accident, with approximately 2,300 gallons of oil-water mixture recovered during the cleanup operation.

Commercial navigation was also improving on the Middle Mississippi, thanks to rock removal work and recent rains that have replenished drought-depleted river levels between St. Louis, Mo., and Cairo, Ill.

The U.S. Army Corps of Engineers on Feb. 5 announced that it had temporarily suspended rock removal work in the navigation channel at Grand Tower and Thebes, Ill., because rainfall had caused river levels there to rise, making it difficult for contractors to continue excavation. The Corps said rock removal will resume as river levels fall.

Grand Tower and Thebes lie within the problematic 200-mile stretch between St. Louis and Cairo, where the Corps has been working since December to maintain a 9-foot navigation channel amid severe drought conditions and historically low river levels. The low water threatened to suspend barge traffic on the Middle Mississippi in December and January, but commercial navigation has been able to continue thanks to the Corps’ rock removal efforts and to recent rain-fed rises in river levels.

The low water has been a source of concern for the fertilizer and other industries, particularly before the busy spring planting season. Those concerns were mostly allayed last week, however. “We have nothing to complain about as far as water,” one river terminal contact told Green Markets at midweek.

The Corps also announced last week that it has wrapped up its extended dredging season, which was mobilized in early July 2012 to combat the low river levels. The Corps said dredging operations in the Middle Mississippi went “well beyond the normal dredge season, which usually ends in early December,” and had removed more than 8 million cubic yards of sediment during the last six months.

The Corps said that amount is “

Potash producers conclude deal with Indian buyers

Major potash producers last week inked new trades with India, putting to rest the question of when the country would make a commitment. Belarusian Potash Co. (BPC), which markets product for Uralkali and Belaruskali, started the week by finalizing a deal with Indian Potash Ltd. for 1 million mt for Feb. 2012-Jan. 2014 at $427/mt CFR.

The last done business to India during the 2011-2012 timeframe was at $490/mt CFR; however, recent trades to China were $400/mt CFR, down from $470/mt CFR.

Canpotex Ltd. said Feb. 7 that it had reached agreement with its government and private sector customers in India to supply approximately 1.1 million mt of potash for shipment up to January 2014 at a price of $427/mt.

Steven Dechka, Canpotex’s president and CEO, said the agreement demonstrates the continued importance Canpotex places on the Indian market and on supporting its loyal and long-term customer base in that market. "We are very pleased to sign supply contracts with our long-term Indian customers, and to continue our history of being a leading supplier to this important market,” he said. “We look forward to meeting India’s future growing potash needs in collaboration with our Indian partners.”

Word from India was that the country will likely take 3.5 million mt in 2013, with the other suppliers – K+S Ag, Israel Chemical Ltd. (ICL), and Arab Potash Company (APC) – lining up for the remainder.

The news came sooner than some had expected, as some North American producers had been expecting it to come as late as March, while propaganda from India was that the country could hold out as late as June.

One industry observer last week commented that the news was good in that it meant closure. The industry no longer had the big international contracts hanging over their head.

Others were fearful producers might soon try to boost North American warehouse prices back to their December/January price ideas of $470/st. Those prices had drifted down to the $460-$465/st FOB range. Likewise, NOLA barge prices have eroded down to $425-$430/st FOB in recent weeks.

Another source was not concerned, saying that domestic potash does not have any legs. For now, the North American industry appears to be more focused on nitrogen.

In the meantime, Israeli analysts are looking for price stability for the first half, with a possible slight rise in the second half. However, one analyst said buyers in Brazil and Southeast Asia are resisting current levels and looking for prices to decline. This at the same time that BPC is trying to increase prices in Brazil.

Analysts see an average FOB potash price for ICL’s Dead Sea Works (DSW) of $423/mt, down from 2012’s $458/mt. They noted that the recent $427/mt price to India represents a slight premium over the recent $20/mt differential between China and India. The two countries are critical to DSW as it sells a much higher percentage of its total volume in those markets than do other major producers.