All Posts from November 14, 2012

Explosion reported at Cherokee Nitrogen plant

There was an explosion that sent one worker to the hospital Tuesday evening at the Cherokee Nitrogen plant in Colbert County, Ala., according to local press reports. While local officials said it was a relatively small explosion, it was loud and heard for miles away. A high pressure line was reported to have ruptured as ammonia was being produced. The cause of the accident and extent of damage is still be accessed. Cherokee is owned by LSB Industries Inc., Oklahoma City, Okla.

For more details, see the Green Markets Web-Edition Nov. 16.

Weaker demand prompts Mosaic adjustment

In advance of upcoming investor conferences, starting today—Nov. 14, The Mosaic Co. announced updates of the near-term price and volume guidance, as well as an update of the company’s full year effective tax rate guidance. Since the company announced its fiscal second quarter guidance Oct. 2, 2012, international crop nutrient market demand has weakened, primarily as a result of distributors delaying purchases to avoid price risk. The company believes this demand is simply delayed, but that sales volumes may not pick up until calendar 2013.

"The long-term positive outlook for crop nutrient demand has not changed; high commodity prices are driving record farm returns and making our products more affordable than ever before. These strong fundamentals are expected to drive record global phosphate and potash shipments in calendar 2013," said Jim Prokopanko, president and CEO. "In the short term, however, we are seeing lower than expected shipments to the export market, in spite of very strong demand in North America for the fall application season. As a result, we have lowered our volume guidance for both the Phosphates and Potash segments in the second fiscal quarter of 2013 while also tightening the price forecasts to the upper end of the previously announced ranges."

In potash, the delay in signing long-term supply contracts with China and India has resulted in weakening price expectations, leading other international buyers to delay purchases to avoid price risk. The midpoint of the company’s previous guidance for second quarter potash volumes of 1.6 to 1.9 million mt already excluded shipments to China and India. The current guidance range of 1.3 to 1.4 million mt reflects lower near-term demand in other international countries as well. In part because of the decline in international shipments and changes in product mix, Mosaic’s realized price expectations are now at the high end of the prior range, at $435 to $450 per mt.

In phosphates, international distributors’ cautious sentiment with respect to potash is spilling over as buyers are avoiding phosphate price risk, and delaying purchases in spite of low reported producer inventories. The company has lowered second quarter volume guidance to 2.9 to 3.1 million mt from 3.0 to 3.4 million mt. Realized prices are expected to be in the upper end of the prior range, at $535 to $550 per mt.

Additionally, the company will decrease the amount of unrecognized tax benefits reported on the balance sheet by approximately $200 million in the second fiscal quarter, due to the resolution of tax audit activity. As a result, the company now expects its effective tax rate for full year fiscal 2013 to be in the mid-teens, including the impact of this benefit, and in the mid 20 percent range for the second half of fiscal 2013.

Mosaic continues to expect the gross margin rate for phosphates to be approximately flat with the first fiscal quarter. Assuming no benefit from foreign exchange in the potash segment cost of goods sold, low operating rates will continue to pressure the gross margin rate in the second quarter, currently expected to be in the low to mid 40 percent range.

All other guidance is unchanged.

PotashCorp announces inventory adjustments

Consistent with Potash Corp. of Saskatchewan Inc.’s practice of matching supply with market demand, notice has been given to Allan and New Brunswick employees of the following potash inventory adjustments:

Allan will not operate between Dec.16, 2012 and Feb. 9, 2013 (eight weeks).
New Brunswick will not operate between Dec. 30, 2012 and Feb. 23, 2013 (eight weeks).

LSB gives update on Cherokee

LSB Industries Inc. today announced that the facility of its subsidiary, Cherokee Nitrogen Co. suffered a pipe rupture causing damage to the heat exchanger portion of its ammonia plant. The company is determining whether damages extend beyond the area where the rupture occurred. No serious injuries, or environmental impact, resulted from the pipe rupture.

Management preliminarily estimates a three to five month outage at the ammonia plant, depending on lead times for repair parts. Until the ammonia plant is repaired, LSB believes that the Cherokee Nitrogen can produce, on a limited basis, nitric acid and ammonium nitrate solution to be produced from purchased ammonia.

LSB has notified its insurer of this event. The company’s insurance policy, which provides replacement cost coverage, has a $2.5 million deductible for property damage. The company’s business interruption insurance covering certain lost profits and extra expense has a 30 day waiting period.